RAYTHEON COMPANY 333 Also in July 2001, the Company was named as a nominal defen- dant and members of its Board of Directors and several current and former officers have been named as defendants in another pur- ported shareholder derivative action, which contains allegations similar to those included in the WGI Complaint and further alleges that the individual defendants breached fiduciary duties to the Company and failed to maintain systems necessary for prudent management and control of the Company’s operations. In June 2002, the defendants filed a motion to dismiss the complaint. In September 2002, the plaintiff agreed to voluntarily dismiss this action without prejudice so that it can be re-filed in another jurisdiction. In May 2003, two purported class action lawsuits were filed on behalf of participants in the Company’s savings and investment plans who invested in the Company’s stock between August 19, 1999 and May 27, 2003. The two class action complaints are brought pursuant to the Employee Retirement Income Security Act (ERISA). Both lawsuits are substantially similar and have been con- solidated into a single action. The complaints allege that the Company and certain members of the Company’s Investment Committee breached ERISA fiduciary and co-fiduciary duties by allegedly failing to (1) disseminate necessary information regarding the savings and investment plans’ investment in the Company’s stock, (2) diversify the savings and investment plans’ assets away from the Company’s stock, (3) monitor investment alternatives to the Company’s stock, and (4) avoid conflicts of interest. Although the Company believes that it and the other defendants have meritorious defenses to each and all of the aforementioned class action and derivative complaints and intends to contest each lawsuit vigorously, an adverse resolution of any of the lawsuits could have a material adverse effect on the Company’s financial position and results of operations. The Company is not presently able to reasonably estimate potential losses, if any, related to any of the lawsuits.  In addition, various claims and legal proceedings generally inci- dental to the normal course of business are pending or threatened against the Company. While the ultimate liability from these pro- ceedings is presently indeterminable, any additional liability is not expected to have a material adverse effect on the Company’s finan- cial position or results of operations. The Company is involved in various stages of investigation and cleanup related to remediation of various environmental sites. The Company’s estimate of total environmental remediation costs expected to be incurred is $119 million. Discounted at 8.5 percent, the Company estimates the liability to be $72 million before  U.S. government recovery and had this amount accrued at December 31, 2003. A portion of these costs are eligible for future recovery through the pricing of products and services to the U.S. government. The recovery of environmental cleanup costs from the U.S. government is considered probable based on the Company’s long history of receiving reimbursement for such costs. Accord- ingly, the Company has recorded $47 million at December 31, 2003 for the estimated future recovery of these costs from the U.S. government, which is included in contracts in process. The Company leases certain government-owned properties and is gen- erally not liable for environmental remediation at these sites, there- fore, no provision has been made in the financial statements for these costs. Due to the complexity of environmental laws and regu- lations, the varying costs and effectiveness of alternative cleanup methods and technologies, the uncertainty of insurance coverage, and the unresolved extent of the Company’s responsibility, it is difficult to determine the ultimate outcome of these matters, however, any additional liability is not expected to have a material adverse effect on the Company’s financial position or results of operations.  The Company issues guarantees and has banks and surety companies issue, on its behalf, letters of credit and surety bonds to meet various bid, performance, warranty, retention, and advance payment obligations. Approximately $1,316 million, $890 million, and $389 million of these guarantees, letters of credit, and surety bonds, for which there were stated values, were outstanding at December 31, 2003, respectively and $1,614 million, $1,227 mil- lion, and $458 million were outstanding at December 31, 2002, respectively. These instruments expire on various dates through 2007. At December 31, 2003, the amount of guarantees, letters  of credit, and surety bonds, for which there were stated values,  that remained outstanding was $90 million, $146 million, and $283 million, respectively, related to discontinued operations and are included in the numbers above. Additional guarantees of project per- formance for which there is no stated value also remain outstanding. In 1997, the Company provided a first loss guarantee of $133 million on $1.3 billion of U.S. Export-Import Bank debt through 2015 related to the Brazilian government’s System for the Vigilance of the Amazon (SIVAM) program.  The following is a schedule of the Company’s contractual obligations outstanding (excluding working capital items) at December 31, 2003: Interest payments include interest on debt that is redeemable at the option of the Company.  Less than 1–3 4–5 After 5 (In millions) Total 1 Year years years years Debt $ 6,564 $ 15 $1,208 $1,709 $3,632 Subordinated notes  payable 863 — 863 — — Interest payments 7,031 395 740 592 5,304 Operating leases 1,477 294 507 349 327 IT outsourcing 392 68 131 128 65 Equity security unit  distributions 156 65 91 — — Pension contributions 635 320 315 — — Total $17,118 $1,157 $3,855 $2,778 $9,328 Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) 3333333333333