NOTE 3: INVENTORIES

Inventories at December 31 are as follows:


in thousands	*2012*		2011

Inventories
Finished products ¹	$	262,886		$260,732
Raw materials		27,758		23,819
Products in process		5,963		4,198
Operating supplies and other		38,415		38,908
Total	$	335,022		$327,657

Includes inventories encumbered by the purchaser’s percentage of a volumetric production payment (see Note 19), as follows: December 31, 2012 — $8,726 thousand.

In addition to the inventory balances presented above, as of December 31, 2012 and December 31, 2011, we have $35,477,000 and $19,726,000, respectively, of inventory classified as long-term assets (Other noncurrent assets) as we do not expect to sell the inventory within one year. Inventories valued under the LIFO method total $267,591,000 at December 31, 2012 and $251,978,000 at December 31, 2011. During 2012, 2011 and 2010, inventory reductions resulted in liquidations of LIFO inventory layers carried at lower costs prevailing in prior years as compared to current-year costs. The effect of the LIFO liquidation on 2012 results was to decrease cost of goods sold by $1,124,000 and increase net earnings by $688,000. The effect of the LIFO liquidation on 2011 results was to decrease cost of goods sold by $1,288,000 and increase net earnings by $776,000. The effect of the LIFO liquidation on 2010 results was to decrease cost of goods sold by $2,956,000 and increase net earnings by $1,763,000.

Estimated current cost exceeded LIFO cost at December 31, 2012 and 2011 by $150,654,000 and $140,335,000, respectively. We use the LIFO method of valuation for most of our inventories as it results in a better matching of costs with revenues. We provide supplemental income disclosures to facilitate comparisons with companies not on LIFO. The supplemental income calculation is derived by tax-effecting the change in the LIFO reserve for the periods presented. If all inventories valued at LIFO cost had been valued under the methods (substantially average cost) used prior to the adoption of the LIFO method, the approximate effect on net earnings would have been an increase of $5,990,000 in 2012, an increase of $10,050,000 in 2011 and a decrease of $3,890,000 in 2010.