INVENTORIES

Inventories consist of the following:



	At December 31,
	2018		2017
In thousands
Merchandise for resale	$	162,985	$	151,520
Raw materials	15,939		18,871
Contracts in process:
U.S. Government, net of progress payments of $0 and $10,810 in 2018 and 2017, respectively¹	6,030		75,448
Commercial and other government contracts	49,471		55,510
Other work in process (including certain general stock materials)	41,524		40,445
Finished goods	18,963		25,643
Total	$	294,912	$	367,437

¹ As a result of the adoption of ASC 606, progress payments were included in contract assets for the year ended December 31, 2018.

The decrease in contracts in process U.S. government was primarily attributable to the adoption of ASC 606.

Previously contractually recoverable general and administrative costs were adjusted within the cumulative effect to retained earnings and are no longer amortized into earnings after January 1, 2018. General and administrative costs charged to inventory by Aerospace segment operations during 2017 were $14.7 million. The estimated amount of general and administrative costs remaining in contracts in process at December 31, 2017 was $10.6 million. This estimate was based on the ratio of such costs to total costs of production.

The Company had inventory of $5.1 million and $5.2 million as of December 31, 2018 and 2017, 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 $0.5 million and $4.4 million at December 31, 2018 and 2017, respectively. As a result of ASC 606, $4.3 million of claims in inventory at December 31, 2017 were reclassified to contract assets as part of the cumulative effect adjustment on January 1, 2018.

At December 31, 2018 and 2017, $34.7 million and $25.5 million, respectively, of K-MAX® inventory, including inventory associated with the new build aircraft, was included in contracts and other work in process inventory and finished goods on the Company's Consolidated Balance Sheets. Management believes that approximately $18.1 million of the K-MAX® inventory will be sold after December 31, 2019, based upon the anticipation of additional aircraft manufacturing and supporting the fleet for the foreseeable future.

8. INVENTORIES (CONTINUED)

At December 31, 2018 and 2017, $5.4 million and $6.2 million, respectively, of SH-2G(I) inventory was included on the Company's balance sheet in contracts and other work in process inventory. Management believes that approximately $5.0 million of the SH-2G(I) inventory will be sold after December 31, 2019. This balance represents spares requirements and inventory to be used in SH-2G programs.