6. INVENTORIES AND WARRANTIES:

Inventories consist of the following:



(In thousands)	September 30, 2012		December 31, 2011
Raw materials and purchased parts	$	7,536	$	6,893
Work in process		1,728		1,007
Finished goods		3,005		3,152
Total inventories	$	12,269	$	11,052

Warranty costs:

We provide for the estimated cost of product warranties at the time revenue is recognized, generally for one year. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of component suppliers, warranty obligations are affected by product failure rates, material usage and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage or service delivery costs differ from our estimates, revisions to the estimated warranty liability would be required. Our warranty liability is included as a component of accrued expenses. At the end of each reporting period we revise our estimated warranty liability based on these factors.

A reconciliation of the changes in our estimated warranty liability is as follows:



	Nine Months Ended September 30,
(In thousands)	2012		2011
Balance at beginning of period	$	985	$	702
Accrual for warranties		616		944
Settlements made during the period		(779)		(752)
Balance at end of period	$	822	$	894

Deferred warranty revenue:

The current portion of our deferred warranty revenue is included as a component of advance customer payments. A reconciliation of the changes in our deferred warranty revenue is as follows:



	Nine Months Ended September 30,
(In thousands)	2012		2011
Balance at beginning of period	$	806	$	787
Revenue deferrals		181		342
Amortization of deferred revenue		(336)		(350)
Total deferred warranty revenue		651		779
Current portion of deferred warranty revenue		(462)		(574)
Long-term deferred warranty revenue	$	189	$	205