INVENTORIES

6 Months Ended

Jun. 25, 2023

Inventories consisted of the following (in millions):


	June 25, 2023		December 31, 2022
Materials, spares and supplies	$	599	$	599
Work-in-process	2,720		2,297
Finished goods	179		192
Total inventories	$	3,498	$	3,088

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 determine that 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). These advanced procurement costs are generally incurred in order to enhance our ability to achieve schedule and certain customer milestones. 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 June 25, 2023 and December 31, 2022, $1.0 billion and $791 million of pre-contract costs were included in inventories. The increase in pre-contract costs as of June 25, 2023 is primarily driven by our Aeronautics business segment (primarily F-35 program and classified contracts).