$766 million or 4.8 percent of sales in 2001. Excluding goodwill amortization, operating income was $1,100 million or 6.9 percent of sales in 2001. The changes in operating income by segment are described below in Segment Results. P23 RAYTHEON COMPANY Interest expense from continuing operations was $537 million in 2003, $497 million in 2002, and $696 million in 2001. In 2002 and 2001, the Company allocated $79 million and $18 million, respectively, of interest expense to discontinued operations. The Company did not allocate interest expense to discontinued opera- tions in 2003 as described below in Discontinued Operations. Total interest expense was $576 million in 2002 and $714 million in 2001. The decrease in interest expense in 2003 was due to a lower weighted-average cost of borrowing. The decrease in 2002 was due to lower average debt and a lower weighted-average cost of borrowing due, in part, to the interest rate swaps entered into in 2001, described below in Capital Structure and Resources. The weighted-average cost of borrowing was 6.0 percent in 2003, 6.7 percent in 2002, and 7.1 percent in 2001.  Interest income was $50 million in 2003, $27 million in 2002, and $36 million in 2001. The increase in interest income was due to interest on long-term receivables brought onto the Company’s books as part of the buy-out of the Aircraft Receivables Facility in the fourth quarter of 2002, described below in Financial Condition and Liquidity. Other expense, net was $67 million in 2003, $237 million  in 2002, and $6 million in 2001. Included in other expense, net in 2003 was a $77 million charge related to the Company’s repur- chase of long-term debt, described below in Capital Structure and Resources, and $20 million of equity losses related to Flight Options ® LLC, offset by an $82 million gain from the sale of the Company’s investment in its former aviation support business, both described below in Major Affiliated Entities. Included in other expense, net in 2002 was a $175 million charge to write off the Company’s investment in Space Imaging, Inc. and accrue for a related credit facility guarantee which the Company paid in 2003, described below in Major Affiliated Entities. Other income and expense also includes gains and losses on divestitures and equity losses in unconsolidated subsidiaries, as described in Note S, Other Income and Expense of the Notes to Consolidated Financial Statements. The effective tax rate was 29.8 percent in 2003 and 29.7 per- cent in 2002, reflecting the U.S. statutory rate of 35 percent reduced by ESOP dividend deductions, foreign sales corporation tax credits, and research and development tax credits applicable to certain government contracts. The effective tax rate was 98.0 per- cent in 2001, reflecting the U.S. statutory rate of 35 percent reduced by foreign sales corporation tax credits and research and development tax credits applicable to certain government con- tracts, increased by non-deductible amortization of goodwill. Excluding the effect of goodwill amortization, the effective tax rate was 29.3 percent in 2001. At December 31, 2003, the Company had net operating loss carryforwards of $1.4 billion that expire in 2020 through 2023. The Company believes it will be able to utilize all of these carryforwards over the next 3 years. Income from continuing operations was $535 million or $1.29 per diluted share on 415.4 million average shares outstanding in 2003, $756 million or $1.85 per diluted share on 408.0 million average shares outstanding in 2002, and $2 million or $0.01 per diluted share on 361.3 million average shares outstanding in 2001. Excluding goodwill amortization, income from continuing operations was $307 million or $0.85 per diluted share in 2001. The increase in aver- age shares outstanding in 2003 was due primarily to benefit plan- related activity. The increase in average shares outstanding in 2002 was due primarily to the issuance of 14,375,000 and 31,578,900 shares of common stock in May and October 2001, respectively. The loss from discontinued operations, net of tax, described below in Discontinued Operations, was $170 million or $0.41 per diluted share in 2003, $887 million or $2.17 per diluted share in 2002, and $757 million or $2.10 per diluted share in 2001. Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS No. 142). This accounting standard addresses financial accounting and reporting for goodwill and other intangible assets and requires that goodwill amortization be discontinued and replaced with periodic tests of impairment. In accordance with SFAS No. 142, goodwill amortization was discon- tinued as of January 1, 2002. In 2002, the Company recorded a goodwill impairment charge of $360 million related to its former Aircraft Integration Systems business (AIS) as a cumulative effect of change in accounting principle. Due to the non-deductibility of this goodwill, the Company did not record a tax benefit in connec- tion with this impairment. Also in 2002, the Company completed the transitional review of the other businesses for potential good- will impairment in accordance with SFAS No. 142 and recorded a goodwill impairment charge of $185 million pretax or $149 million after-tax, which represented all of the goodwill at Raytheon Aircraft, as a cumulative effect of change in accounting principle. The Company also determined that there was no impairment of good- will related to any of the defense businesses beyond the $360 mil- lion related to AIS. The total goodwill impairment charge in 2002 was $545 million pretax, $509 million after-tax, or $1.25 per diluted share. Net income was $365 million or $0.88 per diluted share in 2003 versus a net loss of $640 million or $1.57 per diluted share in 2002 and a net loss of $755 million or $2.09 per diluted share in 2001. Excluding goodwill amortization, the net loss was $422 mil- lion or $1.17 per diluted share in 2001. 333 333