Inventories

9 Months Ended

Sep. 30, 2020

Inventories consisted of the following:


	As of
	September 30, 2020		December 31, 2019
Parts and work-in-process	$	119	$	153
Finished goods	104		91
Total inventories	$	223	$	244

Parts and work-in-process include parts for gaming machines, lottery terminals and instant lottery ticket materials, as well as labor and overhead costs for work-in-process associated with the manufacturing of instant lottery games and lottery terminals. Our finished goods inventory primarily consists of gaming machines for sale, instant products primarily for our Participation arrangements and our licensed branded merchandise.

During the three and nine months ended September 30, 2020, we recorded $15 million and $45 million, respectively, in inventory valuation charges (recorded in Cost of product sales) related to inventory in our Gaming business segment. Our Gaming leadership team continues to improve and expand upon the strategic plan initiated in the first half of the year. This strategic plan includes revising product roadmaps and an assessment of how many and which platforms we will support, when we end service on legacy platforms and when we stop selling on such platforms in conjunction with new product launches. This plan, combined with the rapid demand reduction that took place at the beginning of the year through the remainder of the year, our increased focus on our go to market approach in LATAM (both largely as a result of the COVID-19 disruptions), and our view on certain markets and customers, requires us to reassess our inventory valuation, including whether we had excess or obsolete inventory based on this new strategic plan, a reduction in demand for legacy platforms, and plans for disposition of the related inventory. In addition, the continued closures in the LATAM region make it difficult to execute our previous strategy of shipping legacy platforms into that market. The combination of these factors led to the $15 million and $45 million inventory valuation charges recognized in the three and nine months ended September 30, 2020, respectively. Our policy is to continue to review and assess these and other factors, especially during the COVID-19 disruption periods, and if such factors or our outlook changes, we would record adjustments to the valuation of inventory.