RAYTHEON COMPANY 333 Notes to Consolidated Financial Statements (Continued) 33333333333333333333333333333333333333333333 At December 31, 2003, the Company had commitments under an agreement to outsource a significant portion of its information technology function requiring minimum annual payments as follows: additional liability is not expected to have a material adverse effect on the Company’s financial position or results of operations.  Environmental remediation costs expected to be incurred are: 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 mil- lion, $1,227 million, 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 discontin- ued operations and are included in the numbers above. Additional guarantees of project performance 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.  Defense contractors are subject to many levels of audit and investigation. Agencies that oversee contract performance include: the Defense Contract Audit Agency, the Department of Defense Inspector General, the General Accounting Office, the Department of Justice, and Congressional Committees. The Department of Justice, from time to time, has convened grand juries to investigate possible irregularities by the Company. Except as noted in the fol- lowing paragraphs, individually and in the aggregate, these investi- gations are not expected to have a material adverse effect on the Company’s financial position or results of operations. In 2002, the Company received service of a grand jury sub- poena issued by the United States District Court for the Central District of California. The subpoena seeks documents related to the activities of an international sales representative engaged by the Company related to a foreign military sales contract in Korea in the late 1990s. The Company has cooperated fully in the investiga- tion including producing documents in response to the subpoena. The Company has in place appropriate compliance policies and procedures, and believes its conduct has been consistent with those policies and procedures.  In connection with certain aircraft sales, the Company had offered trade-in incentives whereby the customer will receive a pre- determined trade-in value if they purchase another aircraft from the Company. The difference between the value of these trade-in incentives, the majority of which expire by the end of 2005, and the current estimated fair value of the underlying aircraft was approxi- mately $34 million at December 31, 2003. There is a high degree of uncertainty inherent in the assessment of the likelihood and value of trade-in commitments. The Company self-insures for losses and expenses for aircraft product liability up to a maximum of $10 million per occurrence and $50 million annually. Insurance is purchased from third parties  to cover excess aggregate liability exposure from $50 million to $1.2 billion. This coverage also includes the excess of liability over $10 million per occurrence. The aircraft product liability reserve was $15 million and $12 million at December 31, 2003 and 2002, respectively. 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. govern- ment. 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. Accordingly, 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 generally not liable for environmental remediation at these sites, therefore, no provision has been made in the financial statements for these costs. Due to the complexity of environmental laws and regulations, the varying costs and effectiveness of alternative cleanup methods and tech- nologies, the uncertainty of insurance coverage, and the unre- solved extent of the Company’s responsibility, it is difficult to determine the ultimate outcome of these matters, however, any (In millions) 2004 $68 2005 67 2006 64 2007 64 2008 64 Thereafter 65 (In millions) 2004 $25 2005 14 2006 11 2007 9 2008 7 Thereafter 53