Inventory

3 Months Ended

Mar. 31, 2022

Inventory consists of raw materials used in the production process, work-in-process, which is direct material, direct labor, overhead and purchases, and capitalized preproduction costs. Raw materials are stated at lower of cost (principally on an actual or average cost basis) or net realizable value. Capitalized pre-production costs include certain contract costs, including applicable overhead, incurred before a product is manufactured on a recurring basis. These costs are typically amortized over a period that is consistent with the satisfaction of the underlying performance obligations to which these relate.


	March 31, 2022		December 31, 2021
Raw materials	$	311.2	$	301.4
Work-in-process(1)	992.9		999.1
Finished goods	58.7		56.9
Product inventory	1,362.8		1,357.4
Capitalized pre-production	25.0		25.2
Total inventory, net	$	1,387.8	$	1,382.6

(1)Work-in-process inventory includes direct labor, direct material, overhead, and purchases on contracts for which revenue is recognized at a point in time as well as sub-assembly parts that have not been issued to production on contracts for which revenue is recognized using the input method. For the periods ended March 31, 2022 and December 31, 2021, work-in-process inventory includes $379.1 and $381.2, respectively, of costs incurred in anticipation of specific contracts and no impairments were recorded in the periods.

Product inventory, summarized in the table above, is shown net of valuation reserves of $57.6 and $54.9 as of March 31, 2022 and December 31, 2021, respectively.

Excess capacity and abnormal production costs are excluded from inventory and recognized as expense in the period incurred. Cost of sales for three months ended March 31, 2022 and April 1, 2021 includes period expense of $49.8 and $67.6, respectively, for excess capacity production costs related to temporary B737 MAX, A220 and A320 production schedule changes. Cost of sales also includes abnormal costs related to temporary workforce adjustments as a result of COVID-19 production pause, net of the U.S. employee retention credit and U.K. government subsidies for the three months ended March 31, 2022 and April 1, 2021 of $9.5 and $2.1, respectively.