(8) Inventories

Inventories consist of the following:

	January 31, 2012	July 31, 2011
Raw materials and components	$ 56,919,000	53,678,000
Work-in-process and finished goods	33,460,000	34,299,000
Total inventories	90,379,000	87,977,000
Less reserve for excess and obsolete inventories	15,172,000	13,316,000
Inventories, net	$ 75,207,000	74,661,000

At January 31, 2012 and July 31, 2011, the amount of inventory directly related to long-term contracts (including contracts-in-progress) was $2,871,000 and $8,041,000, respectively.

At January 31, 2012, $320,000 of our long-term contract inventory relates to our BFT-1 contract. Our BFT-1 contract is known as an "indefinite delivery/indefinite quantity" type contract; thus, the U.S. Army is not obligated to purchase any additional products or services from us in the future. Almost the entire long-term BFT-1 inventory relates to BFT-1 orders already in our backlog. The remaining portion is expected to be used for incidental purchases and customer repairs. If we are left with inventories of unusable parts, we would likely have to write-off the remaining balance in the period that we make such determination.

At January 31, 2012 and July 31, 2011, $1,043,000 and $1,339,000, respectively, of the total inventory balance above related to contracts from third party commercial customers who outsource their manufacturing to us.