United Technologies Settles Pentagon Litigation

United Technologies Corp., whose subsidiaries include Sikorsky and Pratt & Whitney, has entered into a $283 million settlement of government contract accounting matters with the U.S. Department of Defense. The agreement ends litigation over Pratt & Whitney’s cost accounting for engine parts on commercial engine collaboration programs from 1984 through 2004. Since January 1, 2005, Pratt & Whitney has used an alternative method approved by the US government for allocating overhead costs, which is based on the value added by Pratt & Whitney in the manufacturing process.

UTC reports that reserves relating to these matters exceeded the settlement amount by approximately $0.05 per share, and the company anticipates restructuring charges over the course of 2006 will equal or exceed this difference. UTC reaffirmed guidance of earnings per share in the range of $3.50 to $3.60. See corporate release.