United Tech Settles Pentagon Issues

It over-reserved.
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United Technologies

will pay the Defense Department $238 million to settle allegations it misaccounted for overhead costs when building engines for the government over two decades.

The settlement ends litigation involving United Tech's Pratt & Whitney unit. According to the company, the dispute centered on the allocation of overhead costs between commercial and government programs for work done between 1984 and 2004.

United Tech said a previously recorded reserve for the settlement exceeds the agreed-to amount by 5 cents a share. The company reaffirmed 2006 earnings guidance of $3.50 to $3.60 a share, however, because it expects restructuring charges will "equal or exceed the difference."

Analysts surveyed by Thomson First Call are expecting the company to earn $3.63 a share this year.

The stock gained 50 cents, or 0.8%, to $61.95 early Tuesday.