INVENTORIES

Inventories consist of the following:



	At December 31,
	2016		2015
In thousands
Merchandise for resale	$	158,618	$	161,691
Raw materials	20,592		24,721
Contracts in process:
U.S. Government, net of progress payments of $28,824 and $28,812 in 2016 and 2015, respectively	85,779		88,345
Commercial and other government contracts	81,420		61,197
Other work in process (including certain general stock materials)	22,096		26,588
Finished goods	25,309		23,205
Total	$	393,814	$	385,747

General and administrative costs charged to inventory by Aerospace segment operations during 2016 and 2015 were $13.0 million and $15.8 million, respectively. The estimated amounts of general and administrative costs remaining in contracts in process at December 31, 2016 and 2015, were $11.0 million and $13.5 million, respectively. These estimates are based on the ratio of such costs to total costs of production.

The Company had inventory of $6.4 million and $6.5 million as of December 31, 2016 and 2015, respectively, on consignment at customer locations, the majority of which is held by Distribution segment customers.

Inventories include amounts associated with matters such as contract changes, negotiated settlements and claims for unanticipated contract costs, which totaled $3.6 million and $7.1 million at December 31, 2016 and 2015, respectively. The reduction in this balance is due to the resolution of the of the AH-1Z claims as discussed further in Note 16, Commitments and Contingencies.

K-MAX® inventory of $15.9 million and $14.9 million as of December 31, 2016 and 2015, respectively, is included in contracts and other work in process inventory and finished goods. These amounts exclude the inventory associated with our new build aircraft currently under contract. Management believes that a significant portion of this K-MAX® inventory will be sold after December 31, 2017, based upon the anticipation of additional aircraft manufacturing and supporting the fleet for the foreseeable future.

At December 31, 2016 and 2015, $7.2 million and $9.0 million, respectively, of SH-2G(I), formerly SH-2G(A), inventory was included on the Company's balance sheet in contracts and other work in process inventory. Management believes that approximately $3.8 million of the SH-2G(I) inventory will be sold after December 31, 2017. This balance represents spares requirements and inventory to be used in SH-2G programs.

At December 31, 2016, backlog for the A-10 program with Boeing was $5.3 million, representing 11 shipsets, and total program inventory was $12.8 million, of which $8.7 million is associated with nonrecurring costs. Through December 31, 2016, the Company has delivered 162 shipsets over the life of the program. During 2016, the U.S. Air Force ("USAF") indicated that they would delay the retirement of the A-10 fleet due to its vital close air support, search and rescue capabilities and the lack of a suitable replacement. The Company continues to monitor the defense budget and understands that despite this positive indication, the future of this program could be at risk without the continued support of Congress. The Company has not received any orders for additional shipsets in 2016; however, the customer has not given any indication that this program will be terminated. Production and deliveries under this contract have been extended through the first quarter of 2017. Tooling and nonrecurring costs on this program are being amortized over 242 shipsets, the number of shipsets under the program of record. These nonrecurring costs may not be recoverable in the event of a significant break in production or contract termination prior to the completion of the 242 shipsets.