(8) Inventories

Inventories consist of the following:

	October 31, 2011	July 31, 2011
Raw materials and components	$ 55,030,000	53,678,000
Work-in-process and finished goods	33,984,000	34,299,000
Total inventories	89,014,000	87,977,000
Less reserve for excess and obsolete inventories	14,314,000	13,316,000
Inventories, net	$ 74,700,000	74,661,000

At October 31, 2011 and July 31, 2011, the amount of total inventories expected to be used for long-term contracts (including contracts-in-progress) was $3,001,000 and $8,041,000, respectively.

At October 31, 2011, $716,000 of our long-term contract inventory relates to our BFT-1 contract. Our BFT-1 contract is known as an "indefinite delivery/ indefinite quantity" type contract; thus, the U.S. Army is not obligated to purchase any additional products or services from us in the future. Almost the entire long-term BFT-1 inventory relates to BFT-1 orders already in our backlog. The remaining portion is expected to be used for incidental purchases and customer repairs. If we are left with inventories of unusable parts, we would likely have to write-off the remaining balance in the period that we make such determination.

At October 31, 2011 and July 31, 2011, $948,000 and $1,339,000, respectively, of the total inventory balance above related to contracts from third party commercial customers who outsource their manufacturing to us.