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On Thursday, Toro Company (NYSE:TTC) reported its second quarter earnings and discussed the following topics in its earnings conference call. Here’s what executives shared.
Eric Bosshard – Cleveland Research: Two questions. First of all, I know that it’s hard to totally know, but curious on your sense of your market share performance, your revenue is up 10% or U.S. revenue is up materially more than that. Do you have a sense of how you’re performing relative to the market here in the first half of the year?
Michael J. Hoffman – Chairman and CEO: It’s a good question and I think there are certain areas where we have pretty solid information or data. There is other areas where it’s a little more anecdotally, but as I would look across the portfolio, I would say we feel golf market share both equipment and irrigation is trending – in the right direction trending favorable. I would say the same thing is true for walk power mowers and riding z products where we have strong shares and the same thing, largely true in the landscape arena. The residential, commercial, irrigation business we don’t have a precise data there, but I would tell you with all the innovation that we’ve brought to the market and certainly that industry has gone through a significant challenge with the economic downturn and slow housing issue, but that continues to recover and again we think we are gaining share there to against, we’re really the number three competitor working our way back to two and one. So, I guess I would say overall we feel good about our market share that we don’t know any category that’s under severe pressure. Regionally, we’re always looking at that around the world, but even there I think overall we feel good about our market share.
Eric Bosshard – Cleveland Research: Then secondly, the sales in the first half look like they up around 10% and the full year revenue guidance is 7%, 8%, suggest the back half is up more like 6% I guess, up 10% in the first half, up 6% in the second half, if that math is right. What will you see within that, you’ve got some visibility on what your customers are doing and distributors are doing, and obviously, you got some visibility in that a lot of the month of May as well, can you just explain a little bit your thinking within how the revenues came to the balance of the year?
Michael J. Hoffman – Chairman and CEO: Sure. I think it’s fair to say, and Renee mentioned earlier, retail has been strong in that pulled inventory into the channel. We think that will continue to be strong and we’ll see if to the degree it is that – to what degree the season will be extended, maybe remains an opportunity there. Probably the most significant headwind against that back half, if you will, is the snow products. So we expect a significant reduction in snow shipments in primarily the fourth quarter, but to some degree the third quarter, because we can’t just come off in ’11 and ’12 snow season that was very, very soft. The snow business is kind of the two stories, if you will, the preseason which is very forecastable based on the previous season and then the wildcard (which is) in-season piece that takes place based on the snowfall you get in the months of November, December, January and February. So we know the preseason will be soft. We are counting on a better in-season this year and we’ll comp favorably against that, but that’s more in F ’13 question.
Eric Bosshard – Cleveland Research: And then one last question if I could. On international, two things, one, can you remind us of the split of how that international shapes out by region of by country. And then also talk about what you are seeing there and also highlighting what the currency impact was and how that changed versus the first quarter?
Michael J. Hoffman – Chairman and CEO: I’ll have Rene comment to the currency piece in just a minute. Europe is less than 15%. It is between 10 and 15% of our business, closer to 15%, obviously that’s the market that’s under the most pressure. It’s also had some challenge with early spring weather over there. So that would be of the international markets under the most pressure; Asia, a smaller part of the portfolio. What’s been going on in China slowed year-over-year, although we see signals of that starting to move back in the right direction. Last year this time, Japan came to a halt because of the tsunami and that recovery is well underway. So, that’s helping largely to offset the China part of the business. To other pieces of international, Canada and Australia; I guess, Australia will be the second largest piece of our international portfolio. Both are doing well. Of internationally, primarily Europe is where the pressure is, we think where we have obviously the concern about just to what degree will the environment change there, so many of those countries are now formally into a recession to a degree. Will that recession play out, hope it is mild, we are not looking at a (step) change there, but only time will tell.
Renee J. Peterson – VP, Finance and CFO: From a currency standpoint, we have a hedging strategy, so we do not tend to see a lot of volatility within a particularly quarter related to currency. The impact on Q2 was modest. It was less than a point or half a point of favorable impact to sales for the quarter, so a minimal impact.
Michael Worley: I was just wondering if you could explain the margins in the resi business and why they were down in this quarter. Was that a mix issue?
Renee J. Peterson – VP, Finance and CFO: When we look at residential, really from a year-to-date standpoint, if we’ve had the same mix year-over-year, our margins would be consistent year-over-year, so it really is a mix that’s driving residential margin. If we look forward, we do expect to see margin improvement for the year. Our strong sale has helped us from an absorption standpoint, so our operations are our operating at the capacity level. We do feel we’ve realized price that offset for a material cost and we continue to focus on productivity and cost reduction efforts, so we do expect to see continued margin improvement.
Michael Worley: So did you say that price did offset material cost in the quarter?
Renee J. Peterson – VP, Finance and CFO: Overall, yes.
Michael Worley: On a micro irrigation, is that – new plant in Romania is that running at full capacity yet?
Michael J. Hoffman – Chairman and CEO: No, not yet. When you start-up a plant, you go through a bit of a learning curve, but it is running and it is making product available for the Eastern European customers and it really has helped us with more capacity, so that overall as we look at the micro irrigation business, we’re not having to shift stuff as far previous years we had to shift stuff across the oceans in some case and there is cost associated with that, so it’s on strategy.
Michael Worley: Is there any impact to either that plant or the micro irrigation because of the issues in Europe or as Eastern Europe not really seeing that maybe the impact?
Michael J. Hoffman – Chairman and CEO: Yeah, certainly there is – as you know, we have a plant also in Italy. I think while the micro irrigation business is not immune the pressure to be more precise with water management and to grow more food helps insulate that a bit if you will, and so those businesses are doing relatively better.
Michael Worley: Then the last question I have is just on the M&A pipeline. You guys have made – you’ve made a couple of smaller acquisitions in the rental space and I was just wondering if there is any larger assets in that space or if that’s still kind of a focus of the M&A going forward?
Michael J. Hoffman – Chairman and CEO: Our M&A strategy continues to be as we’ve stated before, so the focus is more Professional than Residential, in some ways the focus is more international than domestic. With that said, we’ll look at all opportunities there and all potential candidates if you will, but as you know with M&A you don’t want to force it because that results in premiums that are tough to make up. So, we continue to work with the process, there is no doubt there are fewer, larger deals and more mid-sized deals and a lot of a little deals and most of what we’ve done, I hope you understood are smaller ones, but they are good fit with the strategy, and I think it will give us some springboard opportunity looking forward in particular to your point to the rental business, it’s actually with the Stone and Astec Construction, but add to those a year before the Praxis and the Lawn Solutions, we really have strengthened the rental portfolio in such a way that we are becoming a much more significant player there, but we’d look across all of our businesses and adjacent. The Astec acquisition obviously has been adjacent to market, but a good thing that we think with what we have in terms of things we do well and so that what took us into that arena.
Michael Worley: Is there a critical mass in that rental business that you can start expanding organically as well by a new product introduction and such?
Michael J. Hoffman – Chairman and CEO: There are certainly is. In fact, you would argue that the recent history, our expansion in round market has come largely from organic until the last year where we’ve added some of these acquisitions. So, the organic development of a walk-behind trencher which has become a market leading trencher, the organic development of a tracked stump cutter which is become a leader in that space too have really helped again both – have helped solidify our position there and then now you couple the acquisitions on to that and our position is getting robust.
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