INVENTORIES

Inventories consist of the following (in thousands):



	September 30, 2011		December 31, 2010
Merchandise for resale	$	115,691	$	113,841
Contracts and other work in process	199,070		184,210
Finished goods	12,803		18,848
Total	$	327,564	$	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 September 30, 2011 and December 31, 2010, respectively. Of the inventory associated with claims, $3.2 million relates to the FMU-143 matter. See Note 11, Commitments and Contingencies, for further discussion of this matter. 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 $19.7 million and $23.7 million as of September 30, 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 K-MAX® unmanned aircraft systems. Management believes that a significant portion of this K-MAX inventory will be sold after September 30, 2012, based upon the anticipation of supporting the fleet for the foreseeable future.


8.	INVENTORIES (CONTINUED)

SH-2G(I), formerly SH-2G(A), inventory of $52.7 million and $53.7 million at September 30, 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 September 30, 2012, based upon the time needed to market the aircraft and prepare them for sale.