Good day, ladies and gentlemen, and welcome to The Toro Company Second Quarter Earnings Conference Call. My name is Clarissa and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today’s conference, Mr. Kurt Svendsen, Managing Director of Corporate Communications and Investor Relations for The Toro Company. Please proceed, Mr. Svendsen.

Thank you and good morning. Joining me this morning for our second quarter earnings call are Mike Hoffman, Chairman and Chief Executive Officer; Renee Peterson, Chief Financial Officer; Tom Larson, Vice President and Treasurer; and Blake Grams, Vice President and Controller. We begin with our customary forward-looking statement policy. During this call we will make certain forward-looking statements which are intended to assist you in understanding the company’s results. You are all aware of the inherent difficulties, risks and uncertainties in making predictive statements. Safe Harbor portion of the Company’s earnings release, as well as SEC filings detail some of the important risk factors that may cause actual results to differ from those in our predictions. Our earnings release was issued this morning by Business Wire, a copy can be found in the Information section of our investor site, thetorocompany.com. I will turn the call over to Mike.

Thank you Kurt and good morning to all our listeners. Favorable weather conditions across much of the United States helped fuel the retail and continued the shift in momentum we reported during our first quarter call. We achieved record second quarter revenues and earnings per share. Net sales for the quarter grew 9.5% with earnings per share up 20%. For the first six months, net sales increased nearly 10% while earnings per share rose 21%. Renee will discuss our financial and operating results in more detail later in the call. As reported in our earnings release earlier this morning, the strength of our second quarter and year-to-date performance led to our raising guidance for the year. In addition, the board has declared a two for one stock split. This is the third stock split declared by our board since we launched five by five, the first in a series of corporate initiatives to focus the enterprise on driving growth and efficiencies and thus add shareholder value. That effort continues with our current initiative, destination 2014. Domestically while the economy still prevents mixed signals, the unseasonably warm weather and ample moisture are driving end user purchases across our residential landscape and golf businesses. In fact, we are enjoying strong results around the world with exception of Europe where economic conditions have slowed sales. Golf courses across the United States are enjoying a resurgence of player activity. The National Golf Foundation or NGF's latest report shows rounds played in March grew by 30%, raising the 2012 calendar year to date growth rate to over 20%. Most regions in United States are reporting increased sales with the most significant growth coming from the large core markets of California, Arizona, Florida and the Carolinas which were all hard hit by the economic downturn. The…

Thank you Mike. As mentioned earlier, net sales for the quarter grew 9.5% to $691.5 million. We delivered net income of $68.8 million or $2.26 per share compared to $1.88 last year. Year-to-date net sales were up 9.9% to $1,115.3 billion. We achieved net earnings of $88.7 million or $2.91 per share. Our professional segment sales were up 9% for the quarter to $456 million. Year-to-date sales were up 9.3% to $739.8 million. The Professional segment net earnings for the quarter totaled $98.7 million, 15.3% increase over last year. For the first six months, Professional segment earnings were $140.8 million up 14% compared to the same period last year. Our Residential segment sales for the quarter were up 10.6% to $231.9 million. Year-to-date, sales grew 11% to $369.5 million. Net earnings in the Residential segment for the quarter, totaled $28.5 million up 7.5% from last year. For the first six months, Residential segment earnings were $41 million, up 8.5% from the prior period. Now to our key operating results. Second quarter gross margin expanded 20 basis points to 34%, a favorable comparison for the first time in several quarters due to manufacturing efficiencies and price increases on some products. Year to date gross margins late last year by 20 basis points to 34.3% due to unfavorable mix issues and higher material cost. The good news is we're trending in a positive direction. For the full year, we expect continued gross margin improvement. SG&A expense as a percent of sales improved by 40 basis points for the quarter and by 90 basis points for the first six months due to higher sales volumes. We expect SG&A as a percentage of sales to finish the year similar to last year, factoring in the additional investments in the recent acquisition of Astec and…

Thank you, Renee. So, Toro is off to a strong start for the season. While we are cognizant of the economic realities and unpredictability of mother nature, we have a number of good reasons to move forward with confidence and these include golf customers who are optimistic due to the season's strong early start. We look for the grounds business to enjoy a boost in large rotary unit sales as the end of June municipal spending cycle and the new budgeting cycle approaches. Residential retail partners, who made significant gains due to the early spring, anticipate incremental sales opportunities from an extended selling season. The domestic irrigation business is similarly poised for a strong finish to the year as planned installations of new systems come to fruition. Our unique lighting business strategy of developing relationships by providing thorough training for contractors and packaging our product offerings as comprehensive systems continues to win congress to our align. The Abtech and Stone Equipment acquisitions closed in the second quarter have helped us round out a rock solid offering for the growing rental and construction markets. The use of micro irrigation is on the fast track around the globe, presenting an ever growing opportunity for our tape and drip products. And while only time will tell when European markets will regain their edge, the level of interest that customers in the region have shown for our products, suggest we are well positioned to capitalize on the eventual recovery. With all of that said, I want to remind you of our statement during our last call that in light of last winter's unfavorable weather, we anticipate a sluggish start to the upcoming snow season. As you know, snow is a small portion of our overall business. We closely manage our position in order to…

(Operator Instructions). And your first question comes from the line of Eric Bosshard of Cleveland Research. Please proceed.

Good morning. Two questions. First of all, I know that it's hard to totally you know, but curious on your sense of your market share performance share revenues up 10% or US revenues 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?

It's a good question and since there are certain areas where we have pretty solid information or data. There is other areas where it maybe a little more anecdotally, but as I would look across the portfolio, I would say we feel our golf market share both equipment and irrigation is trending in the right direction trending favorable. I would say the same thing is true for our 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 with really the number three competitor working our way back to two and one. So, I guess I would say overall we feel really good about our market share that we don't know any category that's under severe pressure. Regionally, we're always are looking at that around the world, but even there I think overall we feel good about our market share.

And then secondly, the sales in the first half look like they are 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 my math is right. What would you see within that; you've got some visibility into what your customers are doing and what distributors are doing. You obviously got some visibility in that a lot in the month of May as well. Can you just explain a little bit your thinking within how the revenues think to the balance of the year?

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 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 with come off in '11 and '12 snow season that was very, very soft. And as you know the snow business is kind of the tale of two stories, if you will, the appreciation which is very forecastable based on the previous season and then the wildcard that 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 appreciation will be soft. We are counting on a better in-season this year and we'll comp favorably against that, but that's more an F '13 question.

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?

I'll have Renee comment to the currency piece in just a minute. The Europe is less than 15%. It's 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 and last year at this time, Japan came to a halt because of the tsunami and that recovery is well underway and so, that's helping largely to offset the China part of the business. Two other pieces of international, Canada and Australia; I guess, Australia will be the second largest piece of our international portfolio. Both are doing well. 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.

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.

And your next question comes from the line of Michael Worley. Please proceed.

Good morning. How are you? I was just wondering if you could explain the margins in the resi-business and why they were down this quarter. Was that a mix issue?

Yes, when we look at residential, really from a year-to-date standpoint, if we would have 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 sales has helped us from an absorption standpoint, so our operations are operating at good capacity level. We do feel we realized price that offsets our material cost and we continue to focus on productivity and cost reduction efforts, so we do expect to see continued margin improvement.

So did you see that price did offset material cost in the quarter?

Overall, yes.

Okay, and then on micro irrigation, is that new plant or mainly is that running at full capacity yet?

No, not yet. It's as you start-up a plant, you go through a bit of a learning curve, but it is running and it is making our product available for the Eastern European customers and it certainly has helped us with more capacity, so that overall as we look at the micro irrigation business, we're not having to ship stuff as far previous years we had to ship stuff across the oceans in some case and there is cost associated with that, so it's on strategy.

Okay and then is there any impact to either that plant or the micro irrigation because of the issues in Europe or is Eastern Europe not really seeing that maybe the impact?

Yes 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.

Okay and then the last question I have is just on the M&A pipeline. You guys have made, you have made a couple of smaller acquisitions in the rental space 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.

Our M&A strategy continues to be as we have stated before so the focus is more professional than residential, in some ways the focus is more international that domestic. With that said we will look at all opportunities or 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 the process. There is no doubt there are fewer larger deals and more mid-sized deals and lot of little deals. Most of what we have done are smaller ones but they are good fit with the strategy and I think we will give some spring board opportunity looking forward to in particularly to the rental business 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.

Okay. Is there a critical mass in that rental business that you can start expanding organically as well by a new product introduction and such?

There are certainly is. In fact, you would argue that the recent history, our expansion in the rental 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 has 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.

And your next question comes from the line of Sam Darkatsh of Raymond James. Please proceed.

This is Josh filling in for Sam. Congrats on the quarter. A couple of housekeeping questions for me. First, you talked about $0.15 to $0.20 of impact on the full year from integration charges. What was that impact in 2Q?

Josh, we had very minimal impact in Q2. The way we look at the acquisition and integration expenses for the tier is we had Astec which we communicated $0.10 to $0.15 for the year really did minimal impact on Q2. We'll see more significant impact in Q3 and Q4 related to Astec and we expect to have roughly that same impact next year in 2013 as well. The Stone acquisition added about $0.05 of acquisition integration expenses, and we will see that occur in the second half of 2012. That will not repeat in 2013, so minimal impact in the quarter for either of those acquisition.

And just to be clear that Astec, $0.10 to $0.15, coming in the second half this year and repeating in the first half of next year or how would the cadence speaks about it?

It will probably occur – spread over all of next year.

And can you talk a little bit about how the integration of those businesses are progressing? Are there any things that have been of surprise so far?

Well, I don't know that we have been surprised. We always learn some things that I suppose when you go through these. Astec, we are continuing towards the process of transitioning the product from down in Tennessee into one of our manufacturing plants in Wisconsin; that process is going well. I think that's because of that change. It's a more significant change to Rene's point that will take a little longer, which is why we have some impact on the ability to produce product in '13 as we go through that transition plan. So, we are kind of building out the product there down in Tennessee and then we will make that transition later into our Wisconsin plant. The Stone plant that's, I guess, a little smaller business operation. We actually went out at to New York and the plant that was there and reopened it and have one of our retired operation leaders managing that for couple of months as we build out some product and then transition those products into our Beatrice, Nebraska operation. Both are actually going quite well. We haven't had any bumps that are a great cause for concern, but we continue to learn.

Okay. And then I noticed you've spent about $50 million or so on share repurchase this quarter, what annual share counts baked into your new guidance?

This is Tom. Basically we're looking at about the same share reduction as what you saw last year in average shares outstanding which is about 1.7 million to 1.8 million last year. We are coming to that same sort of reduction this year.

And your next question comes from the line of Leah Villalobos of Longbow Research. Please proceed.

I was wondering if there is, I know that weather was clearly a big driver here in the quarter and I'm wondering if there is any way to kind of quantify the impact of any shift in demand from the third quarter into the second quarter.

That’s a good; I guess I will answer that more qualitatively than quantitatively. There is certainly the spring as we said so many times we will take an early warm like spring almost over anything else relative to weather even more so than snow. So it clearly pulled up -- from a retail standpoint, it pulled up the peak if you will, but with that said I'll come back and say as we sit now here near just approaching the end of May, the retail continues to be very solid, very strong. It did low a little bit as we entered the month and again some of that was related to the different parts of the country and maybe more than anything moisture. So I guess, to what degree, well, I think that's factored in our guidance for the year and we've always state to you folks that you need to look at the Company in a year of context because of the nature of the variability in the quarters. Field inventories are up slightly but that's all very manageable, retail continues at a robust pace ahead of that.

Okay that’s helpful. And then I guess with the very strong demand that you saw in the quarter were there any cost associated with expediting products out to your customers?

There is always some of those the more the ability to anticipate. It was maybe less against core products. We did bring as I mentioned earlier in the call, we did bring a couple of new products out and the excitement that they generated is a good example of the TimeMaster 30-inch walk behind mower. The excitement that generated caused us to have to accelerate production and certain components that we don't source everything here; obviously we source a lot of components in Asia and other parts of the world. And so we did spend a little bit on premium freight, we always do to some degrees, it's not probably materials, but it's all factored into the numbers.

It's a couple of things that probably – the first thing as you look at it year-to-date, it is more about snow being soft versus some of the other products and again mix moves around any given quarter, we may shift some stuff a little earlier or a little later, but overall, as Renee talked little earlier, we think the residential business is on the right trajectory and we will see continued improvement there.

And your next question comes from the line of Robert Kosowsky, Sidoti & Company. Please proceed. Robert Kosowsky - Sidoti & Company : I'm just trying to figure out how good of a spring this has been and kind of what it means for maybe the comp for next year. I guess how strong or how favorable has weather been? Do you see some demand still being suppressed because of housing starts still being as low as they are, just kind of trying to get a sense of how tough of a comp this is going to be for next year?

It clearly goes on the positive side of the ledger or the positive side of the bell curve as we talk about spring weather. So, it will be potentially a little harder comp next year, that's one of those it will dependent and even as we have the discussion, you're going to have the peak part of the season whether that’s in March, April or May. When you have it earlier, you'll get the potential for a longer selling season and that's what we are seeing this year. So, we'll probably answer that question better or more precisely a quarter or two from now. As always, it's not just weather, it's the economy, it's our ability to bring some exciting new products to the market and all those will be a factor as we get to next year. But if you said, will it be a more is the probability higher or lower of having a spring better than this one next year put it on bell curve, it's probably slightly more downside. Robert Kosowsky - Sidoti & Company: But the other end of spectrum is that it could potentially be better just based on housing or …

We would expect it would be and then I will throw a snow in there and say the probability accompanying favorably on snow in fiscal '13 is significantly higher. Robert Kosowsky - Sidoti & Company: That's helpful. Then as far as the Professional segment margin expansion, can you kind of tease out how much was volume, just kind of fixed op leverage on volume versus productivity initiatives you are doing relative to Destination 2014 and also just mix?

Robert, it's really all of those factors that are driving the margin. So, it's strong sales as I said helping us from an operational perspective, price offsetting, material costs, and then continued focus on cost reduction. But really I would say that they are all driving improvement in the margins; not one more than the other. Robert Kosowsky - Sidoti & Company : Okay that's helpful then finally, Mike as you look at the construction business, what was in rental for you? What else can get you very excited about it? Is it something where you're just buying assets that are presumably at a cyclical trough, so that you can enjoy some potential upturn or is it kind of the margin profile that you ultimately see, kind of, any thoughts on that?

It's a good question. At the starting point, we have that discussion obviously with the management team and with our Board. The point I would start is if you look at kind of our strategic map and as we look at rental how we could serve our rental customers more broadly, you would have seen the products we purchased like the Stone products on the map in the considered set, why we really shouldn't be in this business. It makes sense for us to be in this business. So, while we are not a major player in the construction, these are more niche products, they are very important niche products to our rental customers, and they were excited by Toro buying the Stone assets and being able to not only continue to be a source of supply for some of those mixers or haulers or some of the concrete tools, but also excited about knowing Toro will innovate around these spaces and bring them even more expanded portfolio. So, it is a good fit on the map before it even came about.

Your next question comes from the line of Jim Barrett of CL King & Associates. Please proceed. Jim Barrett - CL King & Associates : Mike, when you look at the domestic golf market and who are buying the equipment, is it becoming a market of haves and have not in terms of those who can afford it and those who haven't is that, can you discuss if that's so what are the implication of that?

Yes. It's a good question, Jim. In fact, I just had the opportunity to attend the National Golf Foundation conference a couple of weeks ago and I'd answer it this way, certainly the stronger clubs financially whether that's a private club or daily (inaudible) club that is may be higher profile making more money. Is it easier for them to kind of reinvest in capital equipment and projects? The answer is certainly yes. With that said, so that other tier of clubs again, whether that's private or public or even resort, we saw that part of the business be more impacted in the '09 downturn, but if you look at the curve, it’s very much on the upward swing as they are investing in that recovery as well now. So, it is not and I don't think it's have and have not the public courses that have good play are doing well and weather certainly has been a factor, but as the head of the National Golf Foundation say, it wasn't just that golfer confidence is up, markets that were less impacted by the weather they are seeing rounds played up and some of that just ties back to the general economy there. People are more confident and the golfers are more confident, they are subset of the economy. Jim Barrett - CL King & Associates: Right well that's encouraging and then secondly on a separate note, the 9% growth in professional could you discuss the relative growth between golf and professional landscaping/non-golf irrigation how should we look at that?

I guess the way I would answer that is because what you're looking at their growth is that it's obviously growth in shipments, but as we look across the golf, it's largely golf and the landscape contractor and then obviously micro-irrigation in there. Both businesses are very strong, the golf retail is very strong; landscape contractor retail is very strong. So this indicates where one is really pulling the other and I would add to that now the micro-irrigation continues at a robust pace. The only other business of significance in that portfolio is the residential commercial irrigation and that maybe more connected to the housing starts but I'll come back and say what the innovation that team has demonstrated out there and the steady recovery in housing we are seeing the benefit from both the market recovery and the share position in residential commercial irrigation.

And you have a follow-up question from the line of Sam Darkatsh of Raymond James. Please proceed.

This is folks this is still Josh. Just wanted to see if I could get around a sense of the tone of business and weather impacts in other way, could you talk about the sales growth trends by months for the second quarter?

I guess I don't have that precisely, so it wasn't, if your concern is whether robust and then get a slow way down, the answer that is, no. And as I commented earlier in the call, while, as we kind of wrapped up April from a retail standpoint and we're in organization that puts a lot of focus on retail. If you take care of retail, everything else will take care of itself. So that's much looking in our shipments as you're looking at the retail market. And so, in early May retail slowed a little bit, but I would tell you that even regionally this week and some of that is related to moisture in that. It's moving very nicely in the right direction. So how long that will continue, we'll see, but it's not as though if you plotted (ph) this you've got a downward slope, if you will.

And there are no further questions. At this time, I'd like to turn the call over to Mr. Mike Hoffman for closing remarks.

Thank you, Teresa. And just to conclude the call, let me take a moment to thank 5,000 plus members of the Toro team and our channel partners for these strong results. And let me also thank all our participants and listeners for your questions and interest in Toro. We look forward to talking with you again in August to discuss our third quarter results. So, we wish all of our U.S. listeners a great Memorial Day weekend and holiday and thank to you to all and good day.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.