INVENTORIES

9 Months Ended

Sep. 25, 2022

Inventories consisted of the following (in millions):


	September 25, 2022		December 31, 2021
Materials, spares and supplies	$	609	$	624
Work-in-process	2,312		2,163
Finished goods	192		194
Total inventories	$	3,113	$	2,981

Costs incurred to fulfill a contract in advance of the contract being awarded are included in inventories as work-in-process if we determine that those costs relate directly to a contract or to an anticipated contract that we can specifically identify and contract award is probable, the costs generate or enhance resources that will be used in satisfying performance obligations, and the costs are recoverable (referred to as pre-contract costs). Pre-contract costs that are initially capitalized in inventory are generally recognized as cost of sales consistent with the transfer of products and services to the customer upon the receipt of the anticipated contract. All other pre-contract costs, including start-up costs, are expensed as incurred. As of September 25, 2022 and December 31, 2021, $931 million and $634 million of pre-contract costs were included in inventories. The increase in pre-contract costs as of September 25, 2022 is primarily driven by our Aeronautics business segment (primarily F-35 program and classified contracts).