Harris Corp. [HRS] on Tuesday reported a net loss in its second quarter due to a write down in one of its businesses that supplies communications systems to the reeling oil and gas sector.

A non-cash $328 million after-tax charge at the CapRock business drove net income to a $152 million, $1.23 earnings per share (EPS), loss versus $139 million ($1.32 EPS) in net income a year ago. The write down of goodwill and other assets was due to the downturn in the energy market and its impact on customer operations, Harris said.

Harris Corp.  Chairman, President and CEO William Brown. Photo: Harris
Harris Corp. Chairman, President and CEO William Brown. Photo: Harris

A $17 million (14 cents EPS) loss in discontinued businesses contributed to the overall net loss in the quarter. Harris soon plans to divest its Aerostructures business that was part of its acquisition last year of Exelis. William Brown, the company’s chairman, president and CEO, said on Tuesday’s earnings call that the company has received “considerable interest from potential buyers” and is narrowing the list down to a select few. He also said that Harris continues to review its portfolio to see which businesses “are strategically aligned and which are not.”

Excluding the write down and discontinued operations, adjusted earnings from continued operations were $187 million ($1.49 EPS), beating consensus estimates by 14 cent per share.

Sales in the quarter increased 52 percent to $1.8 billion from $1.2 billion a year ago, driven by growth in all four of the company’s operating segments. Organic revenue was down 14 percent, Brown said.

 Free cash flow in the quarter was a strong $298 million.

Brown said the ongoing integration of Exelis is expected to reap between $140 million and $150 million in annual savings, up from a previous estimate of about $120 million. He also said that Harris has begun additional restructuring actions, mainly in CapRock, to further lower costs and improve operating performance.

Harris lowered its sales guidance by $100 million for the rest of the fiscal year to between $7.6 billion and $7.7 billion to account for a greater than expected decline in organic revenue. To account for the charge at CapRock, the company lowered its earnings guidance from continuing operations to between $2.80 and $2.90 EPS from a prior outlook of between $5.25 and $5.45 EPS. Excluding the charge, acquisition items, and restructuring and other charges, adjusted income this fiscal year is expected to range between $5.70 and $5.89, up a dime on the low end of the prior estimate due to the extension of the federal research and development tax credit.