Inventory

Capitalized pre-production costs include certain contract costs, including applicable overhead, incurred before a product is manufactured on a recurring basis. Significant statement of work changes considered not reimbursable by the customer can also cause pre-production costs to be incurred. These costs are typically amortized over a certain number of shipset deliveries. Capitalized pre-production may be amortized over multiple blocks. See the contract block and deliveries table noted below.

Deferred production includes costs for the excess of production costs over the estimated average cost per shipset, and credit balances for favorable variances on contracts between actual costs incurred and the estimated average cost per shipset for units delivered under the current production blocks. Recovery of excess-over-average deferred production costs is dependent on the number of shipsets ultimately sold and the ultimate selling prices and lower production costs associated with future production under these contract blocks. The Company believes these amounts, net of forward loss provisions, will be fully recovered over the contract block quantities noted in the contract block and deliveries table below. Should orders not materialize in future periods to fulfill the block, potential forward loss charges may be necessary to the extent the final delivered quantity does not absorb deferred inventory costs. Sales significantly under estimates or costs significantly over estimates could result in losses on these contracts in future periods.

Capitalized pre-production and deferred production inventories are at risk to the extent that the Company does not achieve the orders in the forecasted blocks or if future actual costs exceed current projected estimates, as those categories of inventory are recoverable over future deliveries.

Forward loss provisions on contract blocks are recorded in the period in which they become evident and included in inventory with any remaining amount reflected in accrued contract liabilities.

Inventories are summarized as follows:



	September 28, 2017			December 31, 2016
Raw materials	$	314.6		$	281.9
Work-in-process	760.4			790.7
Finished goods	34.1			30.9
Product inventory	1,109.1			1,103.5
Capitalized pre-production⁽¹⁾	85.4			103.5
Deferred production⁽²⁾	657.6			717.4
Forward loss provision⁽³⁾	(488.9		)	(409.1		)
Total inventory, net	$	1,363.2		$	1,515.3

For contract blocks that have not closed, the following non-product inventory amounts were included in the inventory table above:


(1)	For the period ended September 28, 2017, includes $73.6 and $7.9 on the A350 XWB and Rolls-Royce BR725 programs, respectively. For the period ended December 31, 2016, includes $83.7 and $15.2 on the A350 XWB and Rolls-Royce BR725 programs, respectively.


(2)	For the period ended September 28, 2017, includes $629.1 and $126.3 on the A350 XWB and Rolls-Royce BR725 programs, respectively. For the period ended December 31, 2016, includes $657.2 and $114.6 on the A350 XWB and Rolls-Royce BR725 programs, respectively.

(3)

For the period ended September 28, 2017, includes ($263.1), ($139.4), and ($76.9) on the A350 XWB, Rolls-Royce BR725, and B787 programs, respectively. For the period ended December 31, 2016, includes ($255.8) and ($140.8) on the A350 XWB and Rolls-Royce BR725 programs, respectively. The forward loss charge recorded on the B787 program in the second quarter of 2017 exceeded the program's inventory balance. The excess of the charge over the program's inventory was classified as a contract liability and reported in other current liabilities on the balance sheet in the amount of $275.9 as of September 28, 2017. Includes a $2.1 reclassification between Work-in-process and Forward loss provision as of December 31, 2016.

Significant amortization of capitalized pre-production and deferred production inventory has occurred over the following contract block deliveries and will continue to occur over the following contract blocks:

Current Block Deliveries

Contract Block
Quantity

Rolls-Royce BR725