3. Inventories

Inventories consist of the following:


	September 30, 2015			December 31, 2014
	(in thousands)
Raw materials	$	18,972		$	16,865
Work in process		4,781			4,584
Finished goods		3,320			4,232

Gross inventory		27,073			25,681
Less: allowances		(2,372	)		(2,084	)

Inventories, net	$	24,701		$	23,597

During the third quarter of 2015, the Company elected to change its method of valuing inventory held at two of its manufacturing facility’s reporting within our SL Montevideo Technology, Inc. (“SL-MTI”) subsidiary from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method. The Company believes that the FIFO method is preferable as it better reflects the current value of inventory reported in the Company’s consolidated balance sheet, provides a better matching of cost of goods sold with revenue, provides consistency across all of our operations, and FIFO is the method used by the Company’s management to monitor the financial results of SL-MTI. The cumulative effect of the change was a $160,000 increase to gross margin and a $107,000 increase to net income from continuing operations, which was recorded in the third quarter of 2015. The change was not applied retrospectively to prior periods, as the effect of the change was immaterial to the consolidated financial statements of all prior periods, including interim periods.