David Strauss: Great. And Greg, could you just comment on the interiors business, how that’s doing? Is that €“ if you’re starting to see a pickup there from the widebody side? Thanks.
Greg Hayes: Yes. It’s €“ David, it’s one of those things, it is probably the slowest recovery of all of the Collins businesses to your point because it is primarily widebody. And as the airlines were conserving cash for these last couple of years, we saw sales down significantly. We don’t expect a recovery in the interiors business, literally over the next three years. So it gets better, but it’s still not back to what it was pre-pandemic. It’s €“ it will remain a challenge.
Operator: Thank you. Our next question comes from the line of Cai von Rumohr of Cowen. Your question please, Cai.
Cai von Rumohr: Yes. Thank you so much. So cash flow €“ in the fourth quarter, you had a $900 million uptick in payables, a huge uptick in contract liabilities and yet inventory where you normally get a benefit in the fourth quarter were actually up a bit. Maybe comment on some of those trends and how that translates to a flat year in 2023.
Neil Mitchill: Thanks, Cai. Good morning. Let me start on 2022 and where we ended the year. You’re right, the inventory was up. I would say most of that was at Pratt and Collins as you think about the backlog, the growth rates we just talked about on the commercial aerospace side and the supply chain issues that we’re all working to overcome. We were pretty strategic in our thinking around making sure we’re bringing the materials and so that we can deliver and meet the customer commitments. You pointed out the accounts payable growth there. So not all, but a large portion of that inventory growth was sort of offset by the payables to kind of go along with that. On the advances side or the contract side, really that was driven by some €“ a couple of large international advances that we received in December.
That contributed to our overdrive of free cash flow, which was about $500 million relative to our expectations. That will be a drag on working capital as you get into 2023. And as I look at the 2023 free cash flow, we see a little bit of headwind on the working capital, in part because of some of the advances that we got at the end of 2022. And I’d say in part because we’re going to continue to be pretty strategic about making sure that we bring in parts and materials where we need them and where there’s constraints and bottlenecks in the supply chain value stream right now. So on balance, we’re always targeting to take that inventory balance down, but we want to be smart and make sure we have the products so we can deliver it. We will be seeing improved velocity through our factories as we go through 2023.
So I’d expect the turns to improve here. But all eyes on the inventory management for sure, and then managing through the collections as we get into 2023 at our international customer sites.
Cai von Rumohr: Thank you very much.
Neil Mitchill: You’re welcome.
Operator: Thank you. Our next question comes from the line of Kristine Liwag of Morgan Stanley. Your question please, Kristine.
Kristine Liwag: Hey, good morning everyone.
Greg Hayes: Good morning.
Kristine Liwag: Greg and Chris, hey, following up on the supply chain what issues did the same versus 2022 versus what issues are different, I mean considering the strengthening visibility on demand, I would have assumed that we’ve seen a lot more improvement by now. So what’s the root of the problem? And can you provide more details on the actions you’re taking to get this resolved by the second half of the year?
