INVENTORIES

Inventories consist of the following:



	April 1, 2016		December 31, 2015
In thousands
Merchandise for resale	$	158,275	$	161,691
Raw materials	25,016		24,721
Contracts and other work in process	184,948		176,130
Finished goods (including certain general stock materials)	23,534		23,205
Total	$	391,773	$	385,747

Inventories include amounts associated with matters such as contract changes, negotiated settlements and claims for unanticipated contract costs. These amounts are as follows:



	April 1, 2016		December 31, 2015
In thousands
Contract changes, negotiated settlements and claims for unanticipated contract costs	$	7,697	$	7,137

K-MAX® inventory of $15.0 million and $14.9 million as of April 1, 2016, and December 31, 2015, respectively, is included in contracts and other work in process inventory and finished goods. Management believes that a significant portion of this K-MAX® inventory will be sold after April 1, 2017, based upon the anticipation of additional aircraft manufacturing and supporting the fleet for the foreseeable future.

At April 1, 2016, and December 31, 2015, $8.6 million and $9.0 million, respectively, of SH-2G(I) inventory was included on the Company's Condensed Consolidated Balance Sheet in contracts and other work in process inventory. Management believes that approximately $4.8 million of the SH-2G(I) inventory will be sold after April 1, 2017. This balance represents spares requirements and inventory to be used on SH-2G programs.

Long-term Contracts

For long-term aerospace contracts, the Company generally recognizes revenue and cost based on the percentage-of-completion method of accounting, which allows for recognition of revenue as work on a contract progresses. The Company recognizes revenues and cost based on either (1) the cost-to-cost method, in which sales and profit are recorded based upon the ratio of costs incurred to estimated total costs to complete the contract, or (2) the units-of-delivery method, in which sales are recognized as deliveries are made and cost of sales is computed on the basis of the estimated ratio of total cost to total sales.

Revenue and cost estimates for all significant long-term contracts for which revenue is recognized using the percentage-of-completion method of accounting are reviewed and reassessed quarterly. Based upon these reviews, the Company records the effects of adjustments in profit estimates each period. If at any time the Company determines that in the case of a particular contract total costs will exceed total contract revenue, the Company will record a provision for the entire anticipated contract loss at that time. For the three-month fiscal period ended April 1, 2016, there was a net decrease in the Company's operating income attributable to changes in contract estimates of $1.0 million. This was primarily a result of cost growth on the Boeing 767/777 program. There was a net increase in the Company's operating income from changes in contract estimates of $1.8 million for the three-month fiscal period ended April 3, 2015. This increase was primarily a result of improved performance on the JPF program.