Good morning. My name is Amanda, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Second Quarter 2018 Results Conference 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.
Thank you. Ms. Maria Lee, you may begin your conference.
Thanks, Amanda. Good morning, everyone, and thanks for joining us. I am joined today by our Chairman, President and Chief Executive Officer, Dave Nord and our Senior Vice President and Chief Financial Officer, Bill Sperry. Hubbell announced its 2nd quarter results for 2018 this morning. The press release and earnings slide materials have been posted to the Investors section of our website atwww.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 the earnings slide materials. Now let me turn the call over to Dave.
Okay. Thanks, Maria. Good morning, everybody. Thanks for joining us. You can see from our press release that we had a strong quarter performance for Hubbell, and that's obviously reflected in our results.
It was just a couple of months ago at EPG, we said we remain confident in our ability to meet or exceed our expectations for the full year. And I'll tell you, we're even more confident today, as you can see in the Q2 results, and the guidance raised for the full year, which we'll walk you through a bit later. Bottom line today is we continue to feel good about the overall markets and our ability to deliver on our commitments. Before Bill gets into the details on our results, I just wanted to spend a few minutes on what we see as some of the really key takeaways from the Q2 performance. It's starting on Page 3.
First, our end markets continue to trend positively. Not only are all of our end markets growing, but they're each growing at the high end of the range we previously laid out. We're taking our overall end market growth assumption up from 2% to 4% to 3% to 4%. Price material cost, in line with expectations. We continue to trend well overall.
Certainly saw a little bit more headwind from material cost than previously anticipated, but that's more than offset by the additional pricing actions, which we're seeing good traction on in the marketplace. On Aclara, we continue to see strong execution in the largest acquisition in Hubbell's history, with results trending ahead of expectations on better sales and integration performance. Our free cash flow was strong in the quarter, And the good news is we're back on track for the year after a softer Q1, and we continue to expect to deliver in excess of 100% of net income for the year. And finally, we're raising our 2018 adjusted EPS guidance, reflecting our increased confidence in our underlying business performance. We note that this guidance raise is inclusive of the impact of some of the tariffs that have been put in place, specifically Sections 301 on List 1 and List 2.
We're doing that through offsetting mitigation actions and including price increases. And also that guidance absorbs the previously disclosed Aclara accounting change. Remember where we talked about we had to reclass some of our previously thought of as CapEx to R and D expense. So we think that the ability to raise guidance while absorbing these items is certainly reflective of the strong performance of the business. So before I turn it over to Bill, as I'd like to do, I want to just highlight a couple of the key accomplishments for the team in the quarter.
I think, first of all, our construction and energy team received a quality award from a key customer from 6 consecutive months with no product defects in the gas business, which is a great accomplishment for the team, shows they're focused on executing for customers while simultaneously delivering high levels of growth and strong operating performance. And we also had a chance to travel to our Vega Baja plant in Puerto Rico, part of Darren's Commercial and Industrial Group, to check-in and see how everyone's doing. You recall that they were severely impacted last fall with Hurricane Maria. There was certainly a tremendous amount of destruction to the island. But I can tell you from firsthand talking to the people, it takes a lot to crush their spirits.
I heard stories about people showing up at the plant the day after the hurricane wanting to go to work. Of course, the plant had no power, so we had to make alternate arrangements. They're all back working despite the personal loss, and we'll do all we can to help ease their burden. But the level of commitment that, that team shows is just a great testimony to the culture in Hubbell and the commitment that our team throughout the organization has, and I compliment them. It was great to see it firsthand.
Obviously, in
the other part
of the Electrical business, lighting, Kevin and his team have been doing a great job getting their cost in line, getting price discipline and continuing to build on the improvements that they had last year. And you see that in their margin performance for sure. Lastly, on the Power side, I mean, the big focus for the Power team is obviously the integration of Aclara, which we said is doing quite well. The revenue is above plan. Their meter business is up over 25% in the second quarter.
They're diversifying their portfolio with some international orders coming from South America, the Caribbean, Europe, Asia Pacific. Orders in the Q2 were above target and they continue to work on innovation. They announced in the Q2 ZoneScan, which is a water AMI product, and they took an order for Synergize RF, which is an electric AMI. So all good news, the integration is on track and we are very pleased with the performance and Bill will get a little more into that in detail in just a minute. So I think all in all, a good start to the year and let me turn it over to Bill to get into more details.
Thank you, Dave, and thank you, everybody, for taking time to join us. Hubbell's performance 2nd quarter was very strong and the engine of that performance was the top line. You see sales of $1,170,000,000 representing organic growth of 5%. That 5% really is coming from very constructive end market backdrop, broad and consistent end markets contributing to that organic growth. In addition, we've successfully invested in inorganic growth.
As you see, the acquisition is adding another 18% to our top line story. For OP, we executed very well. We saw 20 basis points of margin expansion to 14.4%, really using productivity and volume to help overcome the price cost headwinds that we are facing. And the outcome of that margin expansion and sales growth is earnings growth to $1.9738 percent increase from prior year, very strong earnings performance there and all of that driving solid cash flow performance as well. And we'll talk more about that and the importance of cash flow to executing our business strategy.
Let's start with the engine of this success, which is the sales growth. I'm on Page 5. The 23%, obviously largely driven by the acquisitions, but 5% from organic and you'll see a lot of green arrows there, very consistent and strong end market support. We're enjoying very supportive conditions here, obviously. On the non res side, we first separate between public and private.
The private non res market much more important to us, And they're still 10% below the prior peak and in the 7th year of expansion. When you look at the leading indicators in terms of starts and momentum, it appears that there is continued growth out there for non res. On electrical transmission and distribution, both sides are strong. For transmission, really small to midsized projects are powering the growth there. On the distribution side, also strong.
We're seeing spending on system hardening caused by some of Mother Nature's influence, California fires and storms in the Southeast, but also general good weather has been supportive of construction as well for distribution there. On industrial, in particular, we're seeing a very nice rebound on the heavy side, very welcome volume coming back to us there as industrial is growing. Oil and gas, oil has been more mid single digits, but gas has been in the double digits. And as you all know, similar
to our power business.
And resi has been strong as well. So, similar to our power business. And resi been strong as well. So a very, very supportive end market picture underlying our sales performance. So as we look at operating profit, we will break down on Page 6 between the gross and the S and A and you will see gross profit growing 20 percent from $296,000,000 to 355 dollars The margin was a little bit below last year as they're absorbing Clari coming on at lower margin and price material headwinds of about a point.
But as you can see on the right on where we have selling and administrative expense, you see the benefit of being efficient and having larger revenue base as we saved about 100 basis points in terms of F and A expense as a percentage of sales. So as that translates into operating profit on Page 7, You'll see $34,000,000 of new operating income to $168,000,000 You see 20 basis points of margin expansion, dollars representing a 25% increase. Again, you see both the volume of organic and the inorganic coming through to help drive that. And as that kind of flows through to earnings, you see 38% increase in earnings per share from $1.43 to 1.97 dollars very healthy increase in earnings. While we had lower tax rates, which were very helpful, we did have higher interest expense offsetting some of that because of the acquisition.
So it's really an operating story that's driving that earnings improvement. So we had the sales growth and margin expansion driving earnings. We will kind of break that down now amongst the 2 segments. I'll start on Page 8 with the Electrical segment. Very, very strong quarter for each of the three businesses that comprise our Electrical segment.
We saw 5% organic growth and we saw 200 basis points of margin expansion to 13.3%, with all three groups contributing to that margin expansion. So within the sales growth, that's all organic at 5%. Highest growers were gas in the double digits and industrial in the high single digits. So good consistent growth across the board. For our lighting business, they had modest volume growth with about a point of price drag, creating a very flat volume story, but their margins improved impressively as their cost management and benefits of all the restructuring are really starting to pay off.
So important strategy there of the lighting team to not chase the unproductive volume and try to be as disciplined on the price front as we can. But for the Electrical segment here, you see very strong incrementals and a very positive story there for the segment. On Page 9, we'll switch to Power. And you see a 64% increase in sales to $478,000,000 for the quarter, also a strong 5% organic underlying that. Transmission and distribution, as we've discussed, both supportive.
And the acquisitions providing really the lion's share of the growth there. For the operating income, you see a 26% increase in income to $76,000,000 The margins are down as a result of Aclara coming on and having lower margins and you still see the price cost headwind less than 2 points, so an improved position since the Q1. They did have higher, as David referenced in his comments, they did have higher material costs, but they had an increase in pricing and starting to set up for a better second half as they manage that price cost headwind there in Power. So free cash flow was a very important part of our performance for the Q2. You can see in the top half of the chart a very strong improvement to prior year, dollars 127,000,000 of free cash flow.
It was very important for us to have a good second quarter. I think you'll recall from the Q1, we had essentially a breakeven quarter. And on top of that, we had about $25,000,000 of one timers coming out of tax reform and Aclara transaction costs. So essentially, this second quarter gets us in line year to date at 105,000,000 dollars to support the year that we have promised you of having free cash flow ahead of net income. And within that $105,000,000 we had about $47,000,000 of CapEx for the year to date.
So we're spending about half of what we expect for the year and that $152,000,000 of operating cash flow is supportive of the amount of operating cash flow we expect for the full year. We also wanted to show you EBITDA on Page 11, not something we've talked about consistently over the years, But given a lot of the changes that we've had in the portfolio, we thought it would be quite a useful measure to show what's growing in the business. So you see both the quarter on the top and the year to date on the bottom, very healthy double digit growth rates of EBITDA. And for the year to date, the burden between interest and taxes are largely offset. So this measure is quite a good indicator of both net income growth as well as the non cash amortization that's burdening that to really show what the cash earnings comment on Page 12 on the capital structure.
Thanks, Bill. I'm going to ask Maria to comment on Page 12 on the capital structure.
Thanks, Bill. On the capital structure, we ended the Q2 with $195,000,000 of cash, approximately 90% of which was held outside of the U. S. As for the decrease in cash from year end, we repatriated about $210,000,000 of international cash and used it to pay down debt, both commercial paper and some term loan. While CP looks like it's been flat at $63,000,000 for the 6 month period, it had actually increased pretty significantly in Q1 as a result of borrowings to fund the Aclara acquisition in February.
So a lot of hard work from the team went into reducing that balance from the Q1 levels. You can also see we started paying down the amortization of our $500,000,000 pre payable term loan, which we issued in connection with the Aclara acquisition. We also have 4 tranches of long term senior notes, all with rates in the low to mid-3s. And we have a $750,000,000 credit facility that backs our commercial paper program and is fully available. Reducing our leverage is one of our capital allocation priorities.
Our net debt to total capital is just under 50%, and we remain on track to reduce our debt to EBITDA ratio by about half a turn to approximately 2.7 times by year end 2018. And with that, I'll hand it back to Bill.
I think I'd also kind of comment more largely on capital allocation as Maria mentioned. So we've been growing the CapEx, as I mentioned, at $47,000,000 halfway through. We announced our dividend on Friday. We bought back about 10,000,000 worth of shares in the quarter and anticipate doing more through the rest of the year. Maria mentioned some debt pay down, and I think we got the balance sheet here poised to be able to invest in small acquisitions as well.
So all of that cash flow and the state of this balance sheet, I think, are very supportive of us continuing our capital allocation strategy to support the profitable growth of the business. Page 13, Dave highlighted the end market outlook and the fact that essentially each of our markets was performing closer to the top end of the range rather than the midpoint. So what we've done here is essentially raised the bottom point. So starting at noon, transmission and distribution was previously at 2% to 4%. We're raising that to 3 to 4 here.
Resi was 2 to 4. We're actually seeing positive performance here. So we raised that 5 to 6. Non res was formerly at 1 to 3, raising that to 2 to 3. Industrial was 2 to 4, raising that 3 to 4.
Oil and Gas was 5% to 7%, raising to 6% to 7%. So the effect of raising effectively all those bottom ends takes the end market growth expected for the year from 2% to 4% up to 3% to 4%. So again, not necessarily acceleration that we're seeing in the second half, but a recognition of strength that we experienced in the first half that we see really carrying through. So on Page 14, we wanted to revisit the price material cost that Dave had spent time at EPG in May discussing with you all. And we thought it was a pretty clear picture of the fact that in the Q2, the material cost headwind did increase on us, but you can really see the traction that our price increases had in the quarter and maybe more importantly, the traction that we're anticipating those having to go into the second half to really create the price cost tailwind that we need to reverse the headwind we've had in the first half.
And you see the mention that we've excluded tariffs from this picture, and it's worth discussing tariffs with you all. So when you start with Section 232, the direct impact on us was Page 14. And that, as you can see here, we're offsetting essentially with price. What we see with 301, List 1 essentially impacts our Power Systems business and our Commercial and Industrial business. The SKUs are switches and connectors and other areas.
List 2 is largely affecting GFCI, which is in our commercial and industrial business. We're reacting to those primarily with 2 levers. 1 is price and the second is supply chain realignment. In supply chain, you'll see everything from us that we're already in process of implementing from switching from China to other Asia,
from China to
Mexico and from China to and we are remediating those both of the impacts of those lists. Right now, I would say we are anticipating having order of magnitude of about a nickel impact in each of the 3rd and 4th quarters, and we're striving very hard to reduce those impacts. But we are absorbing that impact in the guidance that Dave shared with you. List 3 is still something we're spending some time analyzing. It affects our lighting business notably And the impact of price, using price as a remediation lever there will be particularly interesting as one of the factors influencing lighting has been lower cost Chinese imports.
So it will be interesting to see if that's a more constructive environment in order to raise price to offset that. So tariffs in short from List 12 hurting us by about a nickel a quarter. We're absorbing that in our guide. And our objective for List 3 is to offset those impacts as well. So with that, I was going to switch back to Dave to talk about our outlook for the balance of the year.
All
right. Great. Thanks, Bill. Yes, so let me just highlight how we see the remainder of the year on Page 15. Obviously, with the end market growth uptick that Bill went through as well as the performance of Aclara to date.
We're taking up the low end of our sales growth. It was 15% to 20 We think it's more of 18% to 20%. Still some new product development driving some modest market outperformance in there. But the big drivers are clearly acquisitions, specifically Aclara and the better end markets. As I mentioned earlier, we're raising and tightening the EPS range, diluted EPS of $6.25 to $6.55 and adjusted EPS of 7.05 dollars to $7.35 We're raising the bottom on the adjusted by $0.10 as we go through the year.
Lot attributing to that, the improved operational performance for sure. As Bill mentioned, we've got the impact of 232301 List 12. And List 3 is early, but I think everyone, I can assure you that the whole team is focused on the actions necessary to mitigate that. I can tell you from my recent industry experience in Washington, I think there's still a view that not all of this will ultimately survive, but we can't operate on that uncertainty. We're operating on the basis that it's here, it's going to continue, and we need to operate accordingly to do what's necessary to mitigate it.
So that's how we're working on it. And obviously, free cash flow greater than net income. I think the Q2 certainly demonstrates that we can do that with a disciplined attention and getting through some of the getting back some of the noise from the Q1 that we were dealing with. So if you turn to Page 16, this is just an update on the waterfall we showed you last quarter. Key changes here, certainly the core performance is better, as we already talked about, and a little bit lower amortization from Aclara, dollars 0.05 lower amortization.
So let me summarize what you've heard how we see things. Certainly, the first half of twenty eighteen is done. The year so far is shaping up solidly, trending in line with our expectations. We're certainly well positioned to continue to benefit from the strong end markets, continuing to benefit from a lot of the difficult restructuring actions that are paying off. Certainly, we continue to do more, and we will, but just part of our normal day to day operations.
We're seeing positive tailwinds from tax reform, both lower rates and balance sheet flexibility that's allowed for some of the repatriation that Maria mentioned earlier. And of course, we our key focus is on the successful integration of the largest acquisition in our history. That's all the good news. We continue to have to battle the commodity inflation as a headwind. But I think we the organization is clearly on top of that.
We've seen the traction and that is we've seen that start to turn. We keep getting more thrown at us in the ways of tariffs and others, but I think that the process is in place to keep that at bay. So we raised our guidance based on our strong second quarter performance. Certainly, it was a little stronger than we expected. It may have been a lot stronger than the market expected.
We just needed to demonstrate that we could do what we were planning to do and get caught up on price, which I think we are well on track to do. So our priorities for the rest of this year, we're going to continue to capitalize on that market growth. We're going to continue to get price from our differentiated products and our service. We're going to spend appropriately on the actions supporting long term growth, whether that's on acquisitions, R and D, share repurchase. We're going to do that because we're going to continue to focus on generating cash and integrate Aclara.
We laid out our vision for 2020 at our Investor Day in March and provided you some additional details on our objectives a couple of months ago at EPG. And I can tell you, we're certainly on track to deliver on those commitments. And they believe we believe that those commitments will represent a differentiated earnings growth for our investors. And I'm confident we're doing the right thing to make this vision a reality. So with that, let me open it up to questions.
Amanda?
Your first question comes from Christopher Glynn with Oppenheimer.
Thanks. Good morning. Congratulations on the electrical margins there.
Thanks, Chris.
Hey, on electrical, I think long term seasonality 2Q to 3Q is usually some seasonal lift. It wasn't exactly the case the last couple of years. But any reason that notion of seasonality doesn't hold as the base case for this year with the better macro fundamentals?
No. I think, Chris, we would anticipate typical seasonality.
Okay. And anything on electrical book to bill in the second quarter?
In the second quarter, I mean, I think all our businesses were book to bill over 1. So I think we saw strength in the Q2.
Okay. And on lighting, couple of quick ones. Any early indications of the price increases by all the majors that were announced starting to stick? And then secondly, I think the trade groups are working on making headway versus the offshores and the seemingly accepted assumption that the dynamic that's taken place with that demographic is tantamount to product dumping?
Yes. So start with your pricing question. I think it's maybe a little too early to really see things, but we had about a point of drag and that's a little bit better than what we've been doing and but was kind of in line with expectations. And so I think it's still a little early to tell and I'm not sure, Dave, if we have much comment on the concept of dumping or not.
No. But I think Bill made reference to particularly on List 3, big impact on List 3 is around lighting products. And so I think that that's one of the areas that in absolute terms, there could be a cost associated with it, but then there could be a competitive advantage because that would effectively if in fact, there is evidence of, as you referred to, dumping, then you would make the pricing more cost competitive, make the U. S. Manufacturers at least on even par.
So that remains to be seen how that plays out, Chris, a lot more to go on that, but that's where I think a lot of that is playing.
Okay. And if I could sneak in one more on Aclara. There's obviously pretty exceptional growth this year. How do we think about that as you pivot to 2019? Are the run rates kind of does that have to take kind of a pause here or is the backlog and the pipeline suggesting otherwise?
Well, certainly the backlog in the pipeline is still solid. I mean, we've talked about a $1,000,000,000 backlog, more importantly, a $3,000,000,000 qualified pipeline. And that pipeline continues to be significant, and we continue to get our fair share of that pipeline. So I think it bodes well for continued strong performance, the magnitude of year over year improvement. It is only July, so.
Your next question comes from Rich Kaloft with Wells Fargo Securities.
Hi. Good morning, everyone. Good morning, Chris. Hi, Rich. On Lighting, just back on that.
So in terms of the stuff that would be affected, my understanding is it would be the lower cost stuff, the stuff where the Chinese imports have really made some hay residential stock and flow like commercial. What percentage of the production you do is sourced from China or Asia versus what's done in Mexico or on the continent? Is there a way to think about that because that's going to
Yes. So our supply chain for lighting, broadly speaking, for residential has a lot a large percentage coming in from China. In terms of the commercial and industrial business, some of the componentry does, but really the manufacturing is done in Mexico and U. S. And so we want to keep analyzing List 3, Rich, and try to really understand its impact before giving out too many of those pieces, I think.
But it would be fair to think that you would have capacity that you could utilize here to bring
it back in house if you had to bring it back to the continent, right, on some of the residential stuff?
Yes. If you're saying is supply chain realignment an available lever, we would say that it that's something we're evaluating, yes.
Okay. All right. And then on Power, so the margin on the legacy business was a little bit better in Q1 year over year, but how should we think about the second half of the year? I mean, you indicated it's going to be better, but how to in the context of being price cost positive
Yes. So power, with that red and blue chart where we showed price cost, it shows the second half as having the price larger than the material costs. With Power, that's really going to take until the Q4 for that traction to catch up, Rich. So I still think there's going to be in the Q3 a little bit of price cost headwind still within power, even though with electrical you'll see that
flipping. But so negative in Q3 for power and then when should we think of it neutral by the Q4?
Yes.
Okay. All right.
And then last one, Bill, on tax rate, what's the updated guide have for tax rate for the year? Is it still 24% to 26% and then now you've had 6 months to look at tax reform? Yes. And how do we see the opportunities?
Yes. I think $24,000,000 probably is feeling more in the range now that we've got the first half in the barn here. So there will still be puts and takes, obviously, but I think 24 is a good expectation for us.
And then longer term, any thoughts on opportunity to bring that down further?
Yes. We sort of were happy with that first 600 basis point move, but yes, we'll keep looking for
opportunities. All right, real quick, just lighting. Did you say lighting was lighting revenue flat year over year? You said that about volume and price, I just wasn't clear.
Yes, the volume was modestly positive. The price was a point negative and so you had basically flat sales for us for lighting. But we did much better on the profit side of that. So that equation, I think it's better for us to be not maxing out on volume and instead being focused on where we can get the most constructive price.
On. And
your next question comes from Steve Testa with JPMorgan.
Hey, guys. Good morning. Good morning, Steve. So just on the free cash flow, anything abnormal seasonally here as we think about it through the rest of the year or what happened here in the first half?
Yes. I'd say the first half, the abnormality really was some outflows related to tax reform in the Q1 and paying some Aclara transaction costs. So I'd say we were burdened by maybe $25,000,000 of sort of one timers. But for us, the seasonality of cash flow when you cut it by quarter, we have a very strong back end orientation, a lot of that around collecting receivables at the end of the year and managing inventories down after the sales peak in Q3. And so this is shaping up, Steve, in it feels similarly.
So we're talking target wise of getting to $500,000,000 of operating cash flow and $100 ish or so of CapEx to get those targets we feel are seasonally supported by where we are, but it was important for us to have this strong second quarter to get there.
So I guess I'm just kind of like doing the math and I guess everybody does seasonal math differently using a certain amount of time, but it just simple back of the envelope gets me higher than 365 you talked about at EPG. Am I doing the right math on that?
Yes. Yes. I think so.
I'm getting somewhere in the kind of $380,000,000 to $3.95,000,000 ish range. Is that about right for this year?
Yes, I think that's right, Steve. I think that's right.
That's well on the way to 500 plus, I guess. Plus is actually meaning something here. That's good to hear. And then just lastly on the T and D side, what specifically is kind of happening there? Is that just some of this pent up pipeline coming through and anything in particular driving that?
Yes. I think on the transmission side, it's these small and medium sized projects, which is really good business for us. I think our brand is very well set up to support our customers doing that. And I think on the D side, it's much more there has been some construction supported by some decent weather, but a lot of it is kind of O and M and system hardening. It seems to be the word of the day to kind of strengthen those last mile networks.
Right. Okay. But for us to be growing kind of 5% organic is very healthy for T and D, as you know. So that's good news.
Yes, absolutely. Well, great cash flow and looking forward to seeing how it all ends up. Thanks.
Okay. Thanks, Steve.
And your next question comes from Jeffrey Sprague with Vertical Research Partners.
Thank you. Good morning. Good morning. Morning. Hey, just picking up on T and D, obviously, you're saying you're benefiting from good weather, getting some work done.
How do you think about the hurricane comps and the like? I mean assuming kind of a normal storm season, it seems that you feel like you can kind of just power right through those comps and grow nicely just based on what you're seeing in the pipeline. Is that correct?
Yes. I assume there is no pun intended there, but I do think that you're saying it the same way we're looking at it, that We will power through based on but you are right, there is some headwind from some big volume comps last year. But certainly, the way we're analyzing backlog and looking at some of the pent up demand, we power through those comps.
And I think also on power, you were suggesting there was just more customer resistance to price than you were seeing in your electrical businesses. And I mean, I guess they're still resisting, but you're finding a way to overcome that or is something changed in the market, perhaps more of this investments going into CapEx instead of OpEx, for example, and anything like that, that would kind of make it easier to get price as we're looking forward?
Well, I think one of the things, Jeff, from certainly the Q1 is the material cost headwind being more broad based across and affecting all the participants in the industry. So it just became commonplace. I think early on, there were some participants who thought they might be able to hold price and gain share. And I think that lasted about 2 weeks until the reality of that material cost headwind hit. And then all of a sudden, it was okay.
We're all in this. And I think that's true across all of industry. But I think the utility side early on had a little bit more resistance, as you recall. I've talked about some people wanting to benefit from tax reform and all kinds of other interesting ideas. But I think the demand is out there.
The reality of these cost headwinds is out there. And so it's been I'm cautious to say this because Gerber would kill me, but it has been a little easier to get it than we certainly felt 90 days ago.
Right. And perhaps you could elaborate a little bit on what impressive margin execution in Lighting meant in terms of year over year improvement or sequential improvements or kind of how you're run rating in that business?
Yes. Just last year around this time, we were kind of dealing with some cost inefficiencies as a lot. And that certainly caught up with our operating performance, service, etcetera. And that's all been remediated, corrected itself and we're sort of operating at what feels to us very sustainable and predictable cost rates that have benefited now from those restructuring actions. So the margin expansion was attractive in lighting and very welcome to come back.
And then just one last one from me. Just the actual underlying margin performance at Aclara itself, trying to kind of pick apart all these price cost and mix issues and everything else? How is Aclara underlying margin execution actually playing here?
Yes. So they we were talking on Steve's question about seasonality. Aclara, we anticipate will have similar seasonality to Hubbell, namely very strong Q3 and better second half in terms of margin performance. We are anticipating for the year that they are doing sort of in towards the mid teens of EBITDA DA for the year. For the Q2, they were helping us with double digits of OP.
And of the $0.54 that we added at earnings per share, Jeff, Aclara, net of the interest expense that we took on, contributed $0.11 of that $0.54 So their margins are lower than powers, but good contributor to our growth in our earnings.
Great. Thank you.
And your next question comes from Nigel Coe with Wolfe Research.
Thanks. Good morning.
Hi, Joe. Good to hear from you.
Yes. Thanks. Good to be back. So just wanted to kind of like latch on to Jeff's question on Aclara there. So if I understood the answer correctly, dollars 0.11 of the EPS growth came from Aclara.
I think you got $0.50 in the full year guidance. So just maybe just talk about how you feel about that $0.50 which is unchanged from last quarter, about that $0.50 for the full year. How much more confident do you feel in that number?
Yes. I think now we've got really 5 months under our belt, Nigel, and that feels better. So I think one of the drivers for them, we have talked about how good their volumes are. That's been skewed, as David mentioned, to meters. If I were being real picky, I'd rather have that volume be skewed to comps from a margin perspective.
But given that underlying strength, we feel good about what they will give us for the year.
Okay. And what was the overall organic growth for Aclara in the quarter?
Well, we don't have we didn't own it last year, so it's not contributing anything but in that 18% of incremental acquisition growth. But compared to it prior to our ownership, they had double digit growth for the quarter.
Right. Okay, great. And then switching to industrial and obviously you took up the low end of your full year guide for industrial by a point. I think you said high single digit growth in industrial for the Q2. So it implies a little bit of a give back or a little bit quite a lot of deceleration in the back half of the year.
Is that concealism? I mean, I understand to have a comp, but is there anything that would lead to that?
Sorry, the mid the high single digit comment was to heavy industrial. So the light industrial, which is a higher portion of total industrial is smaller. So I do think that that heavy industrial piece is margin rich for us. So we kind of watch it even though it's a smaller percentage. But for us, this is a nice solid recovery out of 2015, 2016 Q1 2017 of how industrial was performing.
So we're very pleased to see it doing what it's doing.
Okay. And then just one quick just a quick one on light industrial. Any positive weakness in that light industrial bucket? And I'll ask the question that we have had some weakness in food and beverage, for example. Any thoughts of weakness you've put out there?
We've been not seeing that. So for us, and I think we have a pretty broad cross section there, but I'd say it's been growing just fine from our perspective.
Okay. Thanks, Lucas.
And your final question comes from Joseph Osha with JMP Securities.
Hey, Amedda. Good morning. Hey, good morning, Jeff.
Just to drill down on Aclara again a little bit, if I look at what's implied by the year on year inorganic number, it would appear to imply that this business is a good deal bigger than that $500,000,000 run rate that you talked about last December. Can you maybe help me a little bit to understand what sort of run rate I should be thinking about? And then secondly, I am hearing from a couple of the other metering companies that certain components, especially passive components, are really, really hard to get. And I'm wondering how that might be impacting that business, especially on the electrical side. Thanks.
Yes. So starting on the top line,
double digit growth it should get you 550 or better this year. So that's straightforward. I think on the component side, we are seeing the same thing and it's lengthening out lead times for sure and it's made vendor relations important, it's made forecasting important and managing inventory in anticipation of demand has all become more important skills. But we have seen those components impacting lead time on the supply side for sure.
Okay.
And so the $550,000,000 then, would that imply that the business weakened seasonally in the second half of the year? Or is my math off on Aclara?
Yes, we are anticipating a strong Q3. So we will have to check the math.
It's offline. Okay. All right. All right.
Thanks very much.
Okay. Thanks, Joe.
And now I'd
like to turn it back over to Ms. Maria Lee for any final closing comments.
All right. Thanks everyone for joining us and the IR team will be available for questions.