Inventories

9 Months Ended

Sep. 30, 2022

Inventories are valued at the lower of cost or net realizable value. Cost is determined by the first-in, first-out (“FIFO”) method. We establish an allowance for excess and obsolete inventories based on product line changes, the feasibility of substituting parts and the need for supply and replacement parts.

The components of inventories and related changes in the allowance for excess and obsolete inventories account are as follows:


	September 30, 2022		December 31, 2021
	(in thousands)
Raw materials	$	171,230	$	124,480
Work in process	2,739		3,049
Finished goods	5,984		4,528
Total, gross	179,953		132,057
Less: Allowance for excess and obsolete inventories	(3,065)		(1,787)
Total, net	$	176,888	$	130,270


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Allowance for excess and obsolete inventories:	(in thousands)
Balance, beginning of period	$	1,871	$	2,726	$	1,787	$	3,261
Provision for (recovery of) excess and	1,232		86		1,380		378
obsolete inventories
Inventories written off	(38)		(520)		(102)		(1,347)
Balance, end of period	$	3,065	$	2,292	$	3,065	$	2,292

During the third quarter of 2022, management made the decision to no longer produce our small packaged geothermal/water-source heat pump units consisting of the WH Series horizontal configuration and WV Series vertical configuration (see Note 1). Management has identified some related components and parts that cannot be used in other production or sold through our parts business; therefore, we have increased our provision for excess and obsolete inventory, within cost of sales on our consolidated statements of income, by approximately $1.0 million during the three and nine months ended September 30, 2022.