Vehicle component maker Eaton Corp. said second-quarter earnings dropped due to settlement costs of $644 million concerning cases with Meritor Inc. and Triumph Group.
Eaton’s net income for the quarter dropped to $172 million, or 36 cents a share, from $497 million, or $1.04, a year earlier.
Net sales increased 3% to $5.8 billion, Eaton said in a July 29 statement.
Operating income, which excludes litigation costs, was $529 million, a 2% increase, the company said.
Sales in the vehicle segment increased to $1.03 billion from $1 billion the same time last year, and operating profit in the first quarter was $155 million, down 10% over the second quarter of 2013.
“During the second quarter, several unusual items impacted our earnings,” Eaton Chairman and CEO Alexander Cutler said in a statement
“First, we closed the divestiture of two small aerospace businesses for a pretax gain of $156 million. Second, we settled two long-standing litigations, one with Meritor and one with Triumph, as well as related litigation, for a pretax cost of $644 million. Factoring in these unusual items, operating earnings per share in the second quarter were reduced by $0.70 after tax.”
The company previously said the settlement is a permanent solution to the antitrust case with Meritor.
“It is in the best interests of Eaton shareholders to settle this matter,” Cutler said in June. “The settlement results in a permanent resolution of the matter and removes the uncertainty of a trial and a lengthy appeal process.”
Cutler said the company is lowering its 2014 guidance to $4.50 to $4.70 earnings per share, on lower margins in its electrical systems and services segment.