Inventories

Inventories consist of the following:



	September 30, 2015		December 31, 2014
Raw materials	$	14,606	$	16,712
Work in progress	23,915		22,960
Manufactured and purchased components	20,016		21,296
Finished goods	29,253		32,403
Product inventory	87,790		93,371
Capitalized contract costs	31,087		20,908
Total inventories	$	118,877	$	114,279

Inventories include capitalized contract costs relating to programs and contracts with long-term production cycles. The Company believes these amounts will be fully recovered over the life of the contracts. Anticipated losses on contracts are recognized, when required, and reported as a reduction of related contract costs recorded in inventory or accounts receivable and as additional cost of sales or as a reduction to revenue. The company is engaged in a contract accounted for using the cost to cost method where estimated costs exceed the total contract revenue. A provision for the remaining estimated loss on this contract of $121 and $0 was reported as a reduction of accounts receivable in the Condensed Consolidated Balance Sheet at September 30, 2015 and December 31, 2014, respectively.

In January 2015, the Company signed an agreement with a key customer to form a strategically aligned partnership. This agreement extended the performance period of the statements of work for certain contracts with the customer and gives the Company preferred supplier status on certain future contracts. In accordance with the contract terms, the Company made cash consideration payments of $4,800 in January 2015 and $1,700 in June 2015. The payments were recorded as an increase to capitalized contract costs and are being amortized as a reduction to revenue over the life of the associated contracts.