NOTE 2 – INVENTORIES

Inventories are stated at the lower of cost, determined by the last-in, first-out (LIFO) method, or market.

Inventories consist of the following:


	September 30,			December 31,
In Thousands of Dollars	2013			2012
Raw materials	$	19,869		$	26,013
Work-in-process		26,776			22,309
Finished goods		90,704			88,750

Total		137,349			137,072
Adjust to LIFO cost		(64,736	)		(73,416	)
Lower of cost or market adjustment		—			—

Inventory, net	$	72,613		$	63,656

LIFO pools are established at the end of each fiscal year. During the first three quarters of every year, LIFO calculations are based on the inventory levels and costs at that time. Accordingly, interim LIFO balances will fluctuate up and down in tandem with inventory levels and costs.

During the first quarter of 2013, the Company liquidated a portion of the layer established in 2011. During the second and third quarters of 2013 that layer was replenished. As a result, under the LIFO method, this inventory layer was replenished at historical costs that were higher than current costs, which positively impacted net income for the third quarter of 2013 by $903,000, offsetting the $903,000 negative net impact from the liquidation in the first six months of 2013. During the first six months of 2012, the Company liquidated a portion of the layer established in 2011. During the third quarter of 2012, this layer was replenished. As a result, under the LIFO method, this inventory layer was replenished at historical costs that were higher than current costs, which positively impacted net income for the third quarter of 2012 by $383,000, offsetting the $383,000 negative impact from the liquidation in the second quarter of 2012.