Inventories

9 Months Ended

Sep. 30, 2011

Inventories [Abstract]

Inventories

Note 4 – Inventories

Inventories consisted of the following:

	September 30 2011			December 31 2010
Long-term contracts in progress	$	14,581		$	14,400
Commercial aircraft programs		33,376			26,550
Commercial spare parts, used aircraft, general stock materials and other		7,027			5,788
Inventory before advances and progress billings		54,984			46,738
Less advances and progress billings		(24,491	)		(22,421	)
Total	$	30,493		$	24,317

Long-Term Contracts in Progress

Long-term contracts in progress included Delta launch program inventory that will be sold at cost to United Launch Alliance (ULA) under an inventory supply agreement that terminates on March 31, 2021. At September 30, 2011 and December 31, 2010, the inventory balance was $1,085 and $1,385. At September 30, 2011, $897 of this inventory related to yet unsold launches. ULA is continuing to assess the future of the Delta II program. In the event ULA is unable to sell additional Delta II inventory, our earnings could be reduced by up to $62. See Note 9.

Inventory balances included $236 subject to claims or other uncertainties relating to the A-12 program as of September 30, 2011 and December 31, 2010. See Note 15.

Capitalized precontract costs of $1,279 and $527 at September 30, 2011 and December 31, 2010, are included in inventories.

Commercial Aircraft Programs

As of September 30, 2011 and December 31, 2010, commercial aircraft programs inventory included the following amounts related to the 787 program: $14,423 and $9,461 of work in process (including deferred production costs), $1,775 and $1,956 of supplier advances, and $1,770 and $1,447 of unamortized tooling and other non-recurring costs. As of September 30, 2011, included in work in process were deferred production costs related to the 787 program totaling $9,699.

Higher production costs are experienced at the beginning of a new or derivative airplane program. Units produced early in a program require substantially more effort (labor and other resources) than units produced later in a program because of volume efficiencies and the effects of learning. Deferred production costs represent actual costs incurred for production of early units that exceed the estimated average cost of all units in the program accounting quantity. We expect that these deferred costs will be fully recovered when all units included in the accounting quantity are delivered as the expected unit cost for later deliveries is below the estimated average cost of all units in the program. At September 30, 2011, $8,246 of 787 deferred production costs, unamortized tooling and other non-recurring costs are expected to be recovered from units included in the program accounting quantity that have firm orders and $3,223 is expected to be recovered from units included in the program accounting quantity that represent expected future orders.

Commercial aircraft programs inventory included $98 of deferred production costs at September 30, 2011 and $903 and $879 of unamortized tooling costs for the 747 program at September 30, 2011 and December 31, 2010. At September 30, 2011, we reclassified $1,934 of previously recorded reach forward losses on the 747 program from Accrued liabilities to Inventories, net of advances and progress billings.

Commercial aircraft programs inventory included amounts credited in cash or other consideration (early issue sales consideration) to airline customers totaling $2,585 and $1,970 at September 30, 2011 and December 31, 2010.