RAYTHEON COMPANY 333 P43 333 claims prior to the settlement and the project owners assumed responsibility for all post-settlement obligations, including complet- ing the construction of the projects, and all punch list and warranty obligations. The Company believes that the obligations retained on these projects are not material. The loss from discontinued operations, net of tax, related to RE&C was $151 million, $645 million, and $752 million in 2003, 2002, and 2001, respectively. Assets and liabilities related to RE&C consisted of the following at December 31: The Company recorded charges of $176 million in 2003, $796 million in 2002, and $814 million in 2001 related to the Massachusetts projects. The charges resulted from delays, labor and material cost growth, productivity issues, equipment and sub- contractor performance, schedule liquidated damages, inaccurate estimates of field engineered materials, and disputed changes.  In addition to the Massachusetts Projects, the Company has or had obligations under Support Agreements on a number of other projects. In several cases, the Company has entered into settle- ment agreements that resolve the Company’s obligations under the related Support Agreements. In connection with a number of other projects on which the Company has obligations under Support Agreements, the Company is continuing to undertake the final stages of work, which includes warranty obligations, commercial closeout, and claims resolution. In 2003, the Company recorded charges of $6 million primarily related to the settlement of warranty claims on one of these projects. In 2002 and 2001, the Company recorded charges of $53 million and $210 million, respectively, for various issues in connection with these projects, including but not limited to, punch list items, start-up costs, reliability testing, and turbine-related delays. Finally, there are projects with Support Agreements provided by the Company on which WGI is continuing to perform work, which could present risk to the Company if WGI fails to meet its obligations in connection with those projects.  In performing its obligations under the remaining Support Agreements, the Company has various risks and exposures, includ- ing delays, equipment and subcontractor performance, warranty closeout, various liquidated damages issues, collection of amounts due under contracts, and potential adverse claims resolution under various contracts and leases. In addition, the Company’s cost esti- mates for these obligations are heavily dependent upon third par- ties, including WGI, and their ability to perform construction management, cost estimating, and other tasks requiring industry expertise that the Company no longer possesses. In 2003, the Company recorded charges of $49 million for legal, management, and other costs related to RE&C versus $38 million in 2002 and $30 million in 2001. In 2002 and 2001, the Company allocated $79 million and $18 million, respectively, of interest expense to RE&C based upon actual cash outflows since the date of disposition. Since the projects were nearing comple- tion, the Company did not allocate interest expense to RE&C in 2003. In addition, in 2001, the Company recorded a charge of $71 million to write off certain assets and liabilities as a result of the WGI bankruptcy filing. The income (loss) from discontinued operations related to AIS, including the $212 million after-tax loss on the sale, was as follows: In 2003, the Company recorded charges related to AIS of $17 million related to cost growth on the BBJ program and $13 million as a result of continued difficulty the Company has been experiencing liquidating the BBJ-related assets. In 2002 the Company recorded charges of $66 million, which included  a $23 million write-down of a BBJ-related aircraft owned by  the Company, a $28 million charge for cost growth on one of the two BBJ aircraft not yet delivered, and a $10 million charge to write down other BBJ-related assets to the then estimated net realizable value, offset by a $13 million gain resulting from the finalization of the 1999 claim, described above. The write-down of the BBJ- related aircraft resulted from the Company’s decision to market this aircraft unfinished due to the environment of declining prices for BBJ-related aircraft at the time. The Company was previously mar- keting this aircraft as a customized executive BBJ.  In 2002, the Company sold its Aircraft Integration Systems business (AIS) for $1,123 million, net, subject to purchase price adjustments. The Company is currently involved in a purchase price dispute related to the sale of AIS. There was no pretax gain or loss on the sale of AIS, however, due to the non-deductible good- will associated with AIS, the Company recorded a tax provision of $212 million, resulting in a $212 million after-tax loss on the sale of AIS. As part of the transaction, the Company retained the respon- sibility for performance of the Boeing Business Jet (BBJ) pro- gram. The Company also retained $106 million of BBJ-related assets, $18 million of receivables and other assets, and rights to a $25 million jury award related to a 1999 claim against Learjet. At December 31, 2003, the balance of these retained assets was $45 million.  (In millions) 2003 2002 2001 Net sales $ — $ 202 $850 Operating expenses — 196 845 Income before taxes  — 6 5 Federal and foreign income taxes — 2 10 Income (loss) from  discontinued operations — 4 (5) Loss on disposal of discontinued  operations, net of tax — (212) — Adjustments, net of tax (19) (34) — Total $ (19) $(242) $ (5) (In millions) 2003 2002 Current liabilities $ 37 $ 319 Total liabilities $ 37 $ 319