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United Technologies Settles Suit

The company will pay the government $283 million.
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United Technologies

(UTX) - Get n.a. Report

reached an agreement to pay the Defense Department $283 million to settle a lawsuit over how the company's Pratt & Whitney unit used to account for costs.

The Hartford, Conn., company said Tuesday that the deal will end the litigation, which dealt with Pratt & Whitney's accounting for engine parts on commercial-engine collaboration programs from 1984 through 2004. The disagreement had centered on the allocation of overhead costs between commercial and government programs.

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Since Jan. 1, 2005, Pratt & Whitney has used an alternative method for allocating overhead costs. That method is approved by the federal government and is based on the value Pratt & Whitney adds in the manufacturing process.

United had recorded reserves for the lawsuit, but they exceeded the actual settlement amount by around 5 cents a share. The company said restructuring charges over the course of this year will equal or surpass the difference. United also reaffirmed its earnings guidance of $3.50 to $3.60 a share for the year.

Shares of United were gaining 95 cents, or 1.6%, to $62.40 in premarket trading.