Good morning. My name is Prince, and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter 2019 results call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Mr. Dan Innamorato, you may take it from here.
Thank you, operator. Good morning, everyone, and thank you for joining us. I'm joined today by our Chairman and CEO, Dave Nord, and our Executive Vice President, CFO, Bill Sperry. Hubbell announced its second quarter results for 2019 this morning. The press release and earning slide materials have been posted to the investor section of our website at www.hubbell.com. Please note that our comments this morning may include statements related to the expected future results of our company and are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Therefore, please note the discussion of forward-looking statements in our press release and consider it incorporated by reference into this call. In addition, comments may also include non-GAAP financial measures. Those measures are reconciled to the comparable GAAP measures and are included in the press release and earning slide materials.
Now, let me turn the call over to Dave.
Okay. Thanks, Dan. Morning, everybody, and thanks for joining us this morning. Appreciate the time. We know it's a busy day. You can see from our press release that it was another quarter of strong earnings growth and particularly strong free cash flow generation. Continue to feel confident about our market position and our ability to deliver differentiated results over the short and long term. Now, before I get into the results for the quarter and a little more color on that, obviously a few things, updates since the last time we spoke to you a quarter ago, particularly organizationally. First, you heard Dan leading off this call. As many of you know, Maria Lee had another opportunity outside of Hubbell, so she moved on, but one of many things that she accomplished was building a good team.
We're fortunate that we had Dan join our team a little over a year ago. He's had a year to get very familiar with Hubbell and all that we have to offer, and I know some of you have interacted with him. He's obviously had some great training in the market before coming here, so we're glad to have him on the team. We also named a new VP General Counsel, Katie Lane. Katie is also evidence of the strong team that we've built over the last 14, 15 years. She joined us a little over 14 years ago, and had worked in a number of positions in the organization, including as general counsel for the commercial industrial business, and then came up as the assistant general counsel. We welcome Katie into the senior management team here.
More significantly, you noted that we promoted Gerben Bakker to President and Chief Operating Officer. Obviously, Gerben's done a great job leading our power segment over the last four years, and as I tell the team regularly, the reward for success is higher expectations. We took Gerben into a role to help us drive some of the things that we are really starting to get traction on around our operating performance. Certainly, his experience and the results that he's demonstrated within the power segment are going to be very valuable at the Hubbell level. His responsibilities include oversight of the four group presidents, as well as our operations more broadly. Some of you have met our VP of Operations, Susan Huppertz, and her role hasn't changed. She remains focused on our Footprint Optimization Initiative, where we're making strong progress.
As I've told Susan, she now has another strong advocate in the senior ranks to support what we're doing there. Obviously, Gerben moving out of power segment was big shoes to fill, so we appointed Allan Connolly to replace Gerben as the president of the power segment. As many of you recall, Allan joined us as part of the Aclara acquisition, he played an instrumental role in building Aclara up and executing on their strategy over the four years prior to our acquisition, as well as in our successful integration and performance over the past year. We're excited for Allan taking on the broader role at Hubbell and continue executing on our T&D strategy, where you'll see from the ongoing strong performance here, we continue to build on that strong competitive position. A lot happening within the organization.
A lot of good things, all setting us up for continued success in the future. Let me turn to the second quarter now and some of the highlights from my perspective, and I'll start on page three on the slide deck. Obviously, our T&D stands out as being stronger than our initial expectations, with acceleration in demand as the years progressed and strong performance. The electrical side, things are a little more mixed, with some markets performing strongly, others softer, which we'll talk about specifically in a couple slides. Certainly on the margin front, continue to actively manage price cost across the portfolio and navigating effectively through somewhat uncertain environment. Free cash flow remains a critical aspect of our story, and we're tracking above our initial expectations for 2019, driven by continued working capital improvement, particularly around inventory reduction. We continue to make strong progress on this initiative.
We've ramped up our footprint consolidation efforts in the second quarter, with more to come in the second half. We laid out at the beginning of the year, this is a multi-year story. We're anticipating driving visible earnings contribution and free cash flow generation regardless of the macro environment. We also continue to aggressively improve our operational capabilities, talent, and processes. Finally, our strong first half results position us well to tighten our full-year EPS expectations. We're slightly more cautious around top-line trends, at least in our electrical business, than we might have been a quarter ago. We certainly have solid visibility into continued strength in our power business in the second half, and we're executing well on margins across the portfolio. This gives us confidence to tighten our full-year commitments, and we remain confident in our ability to deliver on them.
I'd like to add a couple of other operating accomplishments in the quarter. We won four of 12 annual awards given out by a key distributor partner. The gas business won an award for market development excellence, lighting won an award for service excellence, Power won two regional awards for supplier of the year. That's just with one key distributor partner. Power won the Diamond Excellence Award from a key customer for their support during the worst storm in that customer's history. The construction and energy team won an award for exceptional efforts with the United Way in raising donations, some of our efforts in community service. The commercial industrial new product launches position us as the supplier of choice in the key entertainment vertical. Just a couple of key highlights.
Obviously off to a good start, but let me turn it over to Bill and he can give you a little more detailed color on the results. Bill?
Thank you, Dave. Good morning, everybody. Good to be with you all. I'll start on page four and echo some of Dave's comments. Strong financial performance by Hubbell in the quarter, evidenced by double-digit growth in earnings and double-digit growth in free cash flow generation year to date. I think the two most standout drivers underlying the performance were, number one, solid execution, and number two, strength and balance in the product portfolio. On the execution side, you saw really good price-cost management, which allowed us and led to expanded operating profit margins. You saw increased investment in restructuring, which we think sets us up for margin expansion next year and beyond. You saw strong inventory management, which really helps underline some of what Dave said about the organizational design changes, as well as what can really help us get free cash flow generating.
The strength and balance in the portfolio was really evidenced. We'll talk about some of the markets on the next page. You saw some weak oil, but strong gas. That strong gas is the result of some business development work that we've done over the last several years, where we've really built an impressive main-to-meter business and attractive market that we didn't have before. Where commercial might have had some weakness, we have the utility strength that Dave was talking about. Good balance in that portfolio. The result financially is that our model is working and deploying operating leverage throughout the system. You see 3% sales growth driving 5% OP growth, driving 11% earnings per share growth. We like when the model works that way. On page five, let's talk a little bit about some of that mix in markets that Dave talked about.
You see 3% growth overall to $1.2 billion of sales. Most of that is price. It's reasonably flat outside of the price. You see some real trade-offs. Notably, you see in the oil and gas in the middle there, you'll see some weak oil. There was some lumpiness of projects that weren't implemented in the second quarter, leading to some softness there. I will say we've got some backlog and expect some second half improvement from the oil business. The counterbalance gas really experienced some very strong demand from the gas utility customers and the need to put in last mile components in the distribution infrastructure. On the non-res side, you can see how the reno and relight is reasonably flat. New construction growing modestly.
We think we experienced some of our businesses slightly less well than that, where we had evidence and saw evidence of some de-stocking throughout the channel. We have some instances where we have insight into point-of-sale data, and we can see where that de-stocking happened throughout the second quarter. We expect that condition to improve a little bit in the second half. As Dave highlighted, the electrical transmission and distribution markets really gave us some robust growth. On the distribution side, we certainly see our utility customers improving their performance of their grid networks through capital programs. On the transmission side, we saw some of our larger customers implementing projects that helped drove that. The net result of all that with price and some mixed markets there was an organic growth of 3%. On page six, you'll see adjusted operating income rose 5% to $185 million.
There's 40 basis points of margin expansion in there, which is quite welcome news. The margin expansion really being driven by the price cost management that the team implemented. It's worth noting that we absorbed about 40 basis points of footprint optimization cost there. Had we chosen to just harvest, I think you'd have seen more margin expansion, but it underlines how important we feel it is to take advantage of some of that footprint investing, and we'll talk about that in a couple of pages. On the earnings side, you'll see 11% growth to $2.31 adjusted earnings per share. While taxes did contribute to that, as you'll see, our effective tax rate moved from the high 23s last year to about 22% this year, with some discrete items helping. Really, about two-thirds of that profit improvement came from the operating side of the business.
Good contribution there from the core. Starting on page seven, I wanted to switch and break down our performance between our two segments, and we'll start with the electrical. You'll see sales of $688 million, modest organic growth that was offset by some FX with a strong dollar. Price was quite good in the quarter, you can see the result where units were soft. Some of the softer areas included the oil, which we mentioned, the weakness that we saw there. Again, with some backlog, we're expecting that to improve a little bit in the second half. The commercial businesses were reasonably soft as well, but we talked about some of the de-stocking we thought that was contributing to that may improve a little bit in the second half slightly as well. The operating income declined 50 basis points. You see 13.6%, $94 million.
The increased footprint expense more than drove that. Again, x the restructuring, we would have seen margin expansion in Electrical despite the very flat sales because of the effective price cost management that we've been pulling through there. Page 8, we switch to the Power segment. Really nice quarter by our Power Systems team. You can see 6% growth to $508 million of sales. Importantly, there's balance there between our legacy Power Systems business and Aclara, each contributing 7% organic to that performance. We really do have a lot of things going right in the Power Systems segment here. Number one, there's market demand. We think the utilities are upgrading their systems and implementing transmission projects. We think we're very well-positioned given that demand with our SKU breadth, our reputation for high-quality products, and having the right price.
It feels to us that we're getting our fair share of that market demand, given that our value proposition fits very well with supporting our customers and providing safe, reliable, and affordable power to their customers. The sales side is quite good, and you can see the operating leverage again down in operating income, where operating profit increased 16% to $91 million and margin expansion of 150 basis points, where you really have both levers working nicely. One is you've got the higher volumes leveraging the fixed cost, and you've got price cost benefit, where the team is making up for getting a little bit behind last year based on the inflation they were experiencing. The result is quite attractive incremental margins and a nice high-growth quarter. Good performance by Power.
Page nine, we get to the free cash flow generation for the year-to-date period, the first six months of the year. You can see about a 50% increase to $162 million. That performance was really driven with higher income and as well working capital improvement you saw both on the receivable side and the inventory side. We're quite happy with this cash flow performance. We feel like it puts us ahead of schedule in reaching our 2019 full year targets. In fact, we had set out a 2020 target for you all a while ago that some of you have mentioned recently, which was getting to $500 million of free cash flow in 2020. You may remember that we did about $420 million last year.
It would be really good to try to push here and get halfway between and get up to $450-$460 of cash flow this year. You'll see that we've talked about free cash flow typically, historically, in terms of a conversion ratio of reported net income. Our reported net income this quarter was burdened by a non-cash pension charge. That conversion ratio went up without actually generating any more cash flow. We felt it was a little more insightful maybe to tie it to adjusted net income, and we think we'll do better than 100% of adjusted net income. Really, this cash flow is helping our balance sheet lever. As you all know, we took on some acquisition debt in February of last year. We had debt to EBITDA of over 3 times back in February then.
We've got it down now to 2.5 times. We've also built up our cash position. Our net debt to EBITDA is at around 2 times. I think this puts us squarely back in the balance sheet position to support the acquisition program that you all, I think, got to know us pretty well for, namely, adding on those $40 million-ish, $50 million-ish acquisitions, and do a few of those each year. I would expect us in the second half of 2019 to return to that program. On page 10, I wanted to add a little context to the footprint optimization. Dave talked about Susan's and Gerben's partnership here. We're talking about it over this year and next year, investing about $60 million. We expect 30 of that to be invested this year.
The idea would be to take out about 1 million square feet or roughly 10% of our footprint of manufacturing and warehouse space. This year, you can see we've got 10 active projects on the list, trying to get about halfway to that million square foot, two-year goal, get about 500,000 out this year. Really, the four largest projects are pretty indicative. Two of them are closing out high-cost Northeast facilities. The other two are subscale facilities. We're able to take advantage where we have common competencies and processes in other facilities. We can utilize the square footage that we've already got and have the effect of getting our sales per square foot up and our gross margins up. We still think we have runway here. In fact, we continue to build projects that we think have really attractive paybacks.
I feel like this program will likely continue beyond 2020 as well. With that discussion of the second quarter, I was going to hand it back to Dave to give you comments on our outlook.
Okay. Thanks, Bill. Turning to page 11, as we've talked about throughout, we're seeing some mixed end markets. Net, our overall market growth is tracking in line with our initial expectations overall. We've tweaked down our growth expectations across a few of the electrical end markets, we now see stronger growth for the full year in T&D. This is driven primarily by our legacy power business. Aclara is still expecting to be in the mid-single digits for the year. Going around the horn, electrical T&D now 3.5%. You recall it was 3%-5%. It was 2%-4%. Non-res, 1%-3%, which is the same as prior. The industrial, 1%-3%, down a little bit with some softness there.
Oil and gas, 1%-3%, down a little bit as we've seen the weakness in the first half. Residential, 0%-2%, same as the prior. When we look at our outlook, we just said earlier, we are reaffirming our net sales growth of approximately 4%-6%, with our end market growth of 2%-3%. The wraparound impact of Aclara in the over a month beginning of the year, adding 1%. No additional acquisitions contemplated in that. Of course, the benefit of higher price realization. We've tightened our adjusted diluted earnings per share to $7.85-$8.15, and that includes $0.40 of restructuring and related investment. As Bill talked about, we're raising our expectations for full-year free cash flow conversion to 100% of adjusted net income. Certainly feel confident in our ability to continue generating strong cash flow. Turning to page 13.
You put this all together in graph form. Continue to expect strong growth from operations. With what we refer to as non-fundamental headwinds, incremental restructuring and a higher tax rate, still driving us to our outlook of $7.85 to $8.15. Certainly off to a solid start in the first half, puts us well on track to achieve our full year commitments. We're well-positioned with differentiated results, focusing on execution in the near term, while at the same time positioning us for future long-term success. With that, let me open it up to Q&A.
Thank you. At this time, if you want to ask a question, please press star then the number one on your telephone keypad. We'll wait for just a moment to compile a Q&A roster. Your first question comes from the line of Christopher Glynn from Oppenheimer. Your line is now open.
Hey, thank you. Good morning.
Morning, Chris.
Hey, Dave. On the electrical comments on the channels, just wondering if you could comment on what you think is there between the impact of channel adjustments versus end demand, and also your conviction on or maybe not conviction, but comment that the second half de-stocking should improve versus view that maybe demand softening a little bit yet.
I think that with some point-of-sale data, Chris, we can see where end customers are buying the product and the channel's not restocking it. That happened with some cross-sectional data that we had. We could see that throughout the second quarter, a steady diet of that. If you look, for example, at July orders in some of those lines of business, you can see a pick-up there. That's kind of the basis, I would say, for us thinking that improves slightly. I'm not talking about a market inflection at all, Chris. A little bit cautious about overall growth, but it feels like that dynamic will help us a little bit with a little bit more electrical growth in the second half.
Okay. Thank you for that. On the power margins, obviously a nice performance and up nicely year-over-year versus the first quarter was down a few points year-over-year. Did mix or price cost really swing versus the first quarter?
Yeah, I think you saw a combination, less of mix, but more of price cost kicking in, as well as you really do see the incrementals from higher growth in that business, right? That really helps contribute.
Got it. Thank you.
Next question comes from the line of Deepa Raghavan from Wells Fargo Securities. Your line is now open.
Hi, good morning, everyone.
Good morning, Deepa.
Hey, couple of questions from me. Curious on your second half outlooks and what's baked into the guide. It looks like the quarter outpaced your expectations, at least power-wise, there were puts and takes elsewhere. Add to that, the Q1 performance that was better than what you had expected, your guide really hasn't moved. What are some of the incremental risks you're baking into second half that makes you keep the guide closer at the midpoint?
One of the things, Deepa, to keep in mind as a starting point is that our restructuring spend is a little more back-end loaded. I think we spent $0.16 in the first half. That means we've got $0.24 to read our target of $0.40 in the second half. We thought it might be a little more ratable throughout the year, but to make sure that we're going to execute effectively, some things get deferred. That's part of it. Bill, you want to comment on that?
Yeah, I think that is the single largest factor. I think other than that, Deepa, there is maybe a little bit of caution on the electrical volume side, and that is offset by some of the confidence we have in power. But there's no inflection or headwinds or risks or things like that that we see.
Got it. With regards to non-res and res outlooks, obviously you didn't change it overall, but I have to assume, just given your electrical commentary, there's probably a little bit of puts and takes in there. My question is more, does it feel like those end markets move more towards the high end or low end of range, and how is it different versus what you thought earlier?
Yeah, I think the way when Dave went through the pie, he kind of showed that we kind of kept the overall 2-3. That's really supported by a stronger utility transmission distribution than we originally thought, and potentially at the lower end of both industrial oil and gas, as well as some of the non-res. The kind of nature, the contributors to the pie changed a little bit, but retained kind of the same level.
Yeah, I would add, Deepa, that I would say probably when we started the year versus now, I think we felt that those two markets in our outlooks had a bit of conservatism in them. Now I don't think it has quite the same level of conservatism. I think those are still solid outlooks, I think they're probably more predictable of what we expect to see as the second half shakes out. It hasn't changed, the bias is probably more to the midpoint than at the high end.
Got it. My final question is, price cost, I think last quarter you offered a 50 basis points margin impact, I mean, margin benefit from positive price cost. What is it this time in Q2 versus the 50 basis points from last quarter?
Yes, similar half point, Deepa.
All right. Thank you very much. That's it. I'll pass it on.
Thanks.
Next question comes from Robert McCarthy from Stephens. Your line is now open.
Good morning, everyone.
Rob, welcome back.
Yeah. Well, 10 years, give or take.
You good?
I was going to actually ask about that M&A charge from 2006 that was never disclosed. Was that with you and Thomas & Betts, or did we open Alcatel's vault?
Deja vu all over again.
Still not going to talk about it. Okay.
Yeah.
You know I like pie. Let's go back to the pie.
Okay.
The first I would ask is, as you think about the non-residential overall low single digit, is there anything that's giving you pause to just thinking about the prevailing macro and looking at institutional in terms of your relative mix of the portfolio that gives you pause, that perhaps we could be seeing a topping out here in 2020, and there's some concern over the longer term?
I would say as we parse through it, you start to see some strength in some of the public areas versus private, Rob, and really the growth in non-res has been propelled by private. That is a little bit interesting. We don't feel we have exposures specifically between institutional and commercial that kind of swing us either way. I think the expansion is getting in the later innings. The spending is still not at passing prior peaks, and so it doesn't have the feel to us of a rollover as much as maybe some uneven low single-digit growth. We think it's part of why we're putting some effort into taking fixed costs out of our system to make sure we can get profit growth off of a low single-digit environment.
That's fair. The second question is just around lighting over the longer term. How do you think about whether you're going to continue to invest in that business? Do you think you have to think about being a net seller? Do you have to think about exiting, JV-ing, or do you think it's a core business that you want to grow over the longer term?
Well, Rob, I think we certainly made a lot of progress in this business through some heavy lifting over the last few years. We think there's still more opportunity to go in that business. Obviously, the market is sometimes not supportive of that. I think right now it is, and we're certainly committed to continue to drive improvement in that business. It's been an important part of our portfolio and part of our strategy in being important to our channel partners. That said, that, like all of our businesses, always under review as its long-term fit in our portfolio. I think we've put a lot of effort into it, and I think they've been performing, and we certainly can see more opportunity on the upside for improvement in performance in that business.
We saw, just to add some detail underneath that, Rob, we experienced some modest growth in lighting in the quarter. It was really price, so quite modest volume. The volume was even shifted a little towards resi and away from C&I. The business got price above material cost, which is a second quarter in a row of that, and a good sign of what Dave's kind of describing in terms of general health of the business and maybe running a lower volume, higher margin kind of business there.
The last question is on power. Obviously, good news story, particularly today and the performance. How do you think about your cash generation there versus the overall company over the longer term, and what are some of your targets to even improve that cash generation? Give me some sense of how you expect conversion to kind of play out there over a longer period of time.
Yeah. The power business is a good cash generator. They're actually quite efficient in inventory days. They've got some high-turning product.
Some made to order, made to engineer product, and an efficient footprint. Their CapEx tends to be in line and generates a lot of productivity, so the yield on the CapEx is very good. I would say within the power business, besides the margins and sales growth that you saw, the cash generation is quite good, too.
Thanks for your time. Appreciate it.
All right. Thanks, Rob.
Next question is from Jeff Sprague from Vertical Research. Your line is now open.
Hey, good morning, guys. It's Brett jumping in for Jeff here.
Hey, how are you?
Good. Just want to come back to the restructuring. A big quarter in terms of investment. How does that spend feather through the balance of the year? Similar on savings, how much of that $30 million drops in 2019, and how that looked in Q2 and for the balance of the year?
As Dave was doing in cents, if I did it in dollars, we're going to spend $30 million this year. We've invested $11 million of the $30 million, we still have two-thirds, as Dave was describing it, as back-end loaded. Those projects that will do that spending have already started and initiated, it's not a question of things on the planning board. The savings are coming through in the sum of the projects kind of in the two-year range. You'll see that we would expect of the $30 million we're spending this year, we're anticipating getting $15 million of savings. Maybe not all in 2020. That might be spread into 2021, we would have a similar profile of savings for the next $30 million that we would spend in 2020.
I'd also say, to the extent if Rob's question around is there somehow some softening coming that's a little more pronounced, I do think we would probably respond with some more restructuring and take more cost out if that kind of market condition were to prevail.
Then just as a follow-up specific to the actual investment, how does that layer through Q3, Q4, just in terms of modeling purposes?
About $10 million a quarter. I think you can split it about evenly.
Okay. All right. Just shifting over to Aclara. What are the expectations for the balance of the year in terms of revenue? In terms of the returns on that investment, how are those trending as you look at your anniversary here in the first quarter?
Yeah. I would say that the first thing to note in the quarter was the balanced growth between Aclara and legacy Hubbell Power Systems, both at 7% organic. To us, that's a very good sign of customer acceptance and the view that the Hubbell power segment is providing a broader set of SKUs now to our utility customers. We think that that's quite good news. The margins coming out, we would expect that to continue for the second half of the year. The margin since we've owned Aclara have been double digits versus you see the legacy business is high double digits, that's been dragged down by the fact that we've had some difficult installation contracts and by the fact that our mix has been skewed more towards meters and away from the communications devices.
As you talk about returns, where we're going to see really positive equity story type returns will come as the smart grid communications sales cross over from the traditional Aclara customer, which has been the muni and co-op customer, into the investor-owned utilities, that's the core Hubbell Power Systems. That sales cycle is going to take us a couple of years to get there. Having those kind of outsized equity returns, I think is still in front of us, awaiting that kind of sales cycle to come to fruition. I would say as we monitor that sales cycle, we're quite encouraged by the meetings that we get. We're quite encouraged by the customer feedback that we get. The product that we've got seems to be our expectations are quite high for what'll happen as we go forward.
Okay, great. I'll leave it there. Thanks, guys.
Next question comes from Steve Tusa from JP Morgan. Your line is now open.
Hey, guys. Good morning.
Morning.
Morning.
Can you just talk about the non-resi environment that you're seeing out there? There's been talk of a few project push-outs, and the economy's a bit choppy, so anything on that front that's surprised you to the downside at all?
No, I'm certainly not going to use that word that you used. I've banned it. I think we have seen certainly some project delays. I think that's created a little bit of volatility in the order book or the release of orders. Certainly for the rest of this year, it seems like things are pretty solid. Again, not at the same growth levels, the high end of growth levels that we might have anticipated going into the year. It's too early to determine what that means beyond this year, for sure. As Bill mentioned, we're certainly not at peak levels. While we may be in the later innings, there's a question about how much longer, and we don't see any storm clouds out there, if you will.
Okay. Lastly, just on price cost. I don't know if you guys talked about this. I missed the first part of the call. What are you thinking for the second half in price cost?
Yeah. We think the pricing environment stays intact. We've got a couple points there of price. It's interesting as the second half comes, Steve, one of the more important commodities for us is steel, as you know. We're starting to see, and expect some tailwinds from steel. Yet we still have an inflationary materials expectation. A lot of our components are still experiencing inflation, some of the resin side and others. As some of those pricing increases that we pulled start to get lapped, I think instead of that being a headwind, we're going to get helped by the commodity tailwind that'll fill that back in. I think you'll see a steady contribution from price cost, even though the components are a little bit different.
Okay, great. Thanks for the color.
Again, to ask a question, please press star then one on your telephone keypad. We have Nigel Coe from Wolfe Research. Your line is now open.
Hey, good morning, guys. This is Bhupender here sitting in for Nigel.
Morning.
Morning. Just want to touch on Steve's question here on price cost. Could you give some color on electrical versus power? I believe you gave some color on the lighting business here within for the price cost. Could you give some color on electrical and power business, Steve? Thanks.
Yeah. Power was a little bit above the half point we cited in the quarter, and Electrical a little bit below that. The first quarter was actually the opposite dynamic. Electrical contributed a little bit more. I think for the second half, we'd expect Power to be at the higher end of the half point we talked about, and Electrical a little bit below that as well.
Okay, got it. Just moving on to the pie chart here, the end market stuff you talked about. What actually drove the T&D strength? Could you talk about if that's sustainable in the second half?
Yeah, we think it is sustainable. We think that for our addressable markets, the largest contributor is the distribution, that last mile. That spending was the strongest. It tends to be systems hardening and upgrades. They tend to be in CapEx capital projects. As we look at orders and we look at backlog and we talk to customers, that does feel sustainable throughout the second half. The transmission side is a little bit smaller than the distribution. That's being driven by the fact that some of our largest customers are doing some projects, so that's helped move the needle, and the visibility on those projects also is pretty good. The second half feels very sustainable. That's why we really raised on the pie, why we raised the T&D growth outlook.
Okay, got it. My last question here. Dave, you mentioned about the, I think you gave some color on the orders here for the non-resi side. You believe there are some delays here. Could you just give us some kind of guidance through the quarter, in terms of order and what you're thinking or seeing in July, in terms of daily order patterns here? Thanks.
Orders in the electrical segment overall have been lumpy. It depends, and it's hard to really determine what's underlying demand over a short period of time because you've had this issue of inventory in the channel and a little bit of destocking. In some of the businesses, you might've seen a weak June, May-June, and then it turns back up in July. I think that from our standpoint is evidence of some of that destocking coming into play and timing. On the other side, if you're on a project business, some of those project businesses have some lower order rates until those projects release. All indications are that they're going to release, it's just that they've been pushed out a bit. Obviously, there's always the risk that they don't, but we're not seeing that, we're not hearing that right now.
Are you seeing those in the oil and gas? Oil was weak in the quarter. Is that something you would point to?
Yeah, I think those projects that Dave's word of lumpy is even quite applicable there, where some of the backlog we think will get spent there in the second half.
Okay, got it. Thank you so much.
To ask a question, please press star then the number one on your telephone keypad. I'm showing no further questions. I would like to turn the call back over.
Thanks, operator. That concludes today's conference call. We'll be around for the rest of the day if you have any questions, and we'll be available for calls. Thanks for joining us.
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