INVENTORIES

Inventories consist of the following (in thousands):



	July 1, 2011		December 31, 2010
Merchandise for resale	$	117,748	$	113,841
Contracts and other work in process	186,343		184,210
Finished goods	14,450		18,848
Total	$	318,541	$	316,899

Inventories include amounts associated with matters such as contract changes, negotiated settlements and claims for unanticipated contract costs, which totaled $9.9 million and $10.4 million at July 1, 2011 and December 31, 2010, respectively. The Company records costs associated with these matters in inventory only when recovery can be estimated reliably and realization is probable.

K-MAX® inventory of $20.9 million and $23.7 million as of July 1, 2011 and December 31, 2010, respectively, is included in other work in process and finished goods. The decrease in this balance reflects inventory being used on our contract for the K-MAX® unmanned aircraft systems. Management believes that a significant portion of this K-MAX inventory will be sold after July 1, 2012, based upon the anticipation of supporting the fleet for the foreseeable future.

SH-2G(I), formerly SH-2G(A), inventory of $52.9 million and $53.7 million at July 1, 2011 and December 31, 2010, respectively, is included in contracts and other work in process inventory. Management believes that a significant portion of this inventory will be sold after July 1, 2012, based upon the time needed to market the aircraft and prepare them for sale.