Frank Blake – Chairman, Chief Executive Officer Craig Menear – Executive Vice President, Merchandising Carol Tomé – Chief Financial Officer, Executive Vice President, Corporate Services Marvin Ellison – Executive Vice President, U.S. Stores Mark Holifield – Senior Vice President, Supply Chain Diane Dayhoff – Executive Vice President, Investor Relations

Chris Horvers – JP Morgan Matthew Fassler – Goldman Sachs Scot Ciccarelli – RBC Capital Markets Deborah Weinswig – Citigroup Gary Balter – Credit Suisse Alan Rifkin – Bank of America Merrill Lynch Greg Melich – ISI Group Michael Baker – Deutsche Bank Michael Lasser – Barclays Capital Eric Bosshard – Cleveland Research Company Dan Binder – Jefferies Peter Benedict - Robert Baird Budd Bugatch - Raymond James & Associates

Good day everyone and welcome to today’s Home Depot Third Quarter 2010 Earnings conference call. Today’s conference is being recorded. If you’d like to ask a question during today’s call, please press the star key followed by the digit one on your touchtone phone. Please note that any prompts entered before this time may not have registered in our system. Beginning today’s discussion is Ms. Diane Dayhoff, Vice President of Investor Relations. Please go ahead, ma’am.

Thank you and good morning to everyone. Welcome to the Home Depot Third Quarter Earnings conference call. Joining us on our call today are Frank Blake, Chairman and CEO of The Home Depot; Craig Menear, Executive Vice President, Merchandising; and Carol Tomé, Chief Financial Officer and Executive Vice President, Corporate Services. Following our prepared remarks, the call will be opened for analysts’ questions. Questions will be limited to analysts and investors and as a reminder, we would appreciate it if the participants would limit themselves to one question with one follow-up, please. This conference call is being broadcast real time on the Internet at earnings.homedepot.com. The replay will also be available on our site. If we are unable to get to your question during the call, please call our Investor Relations department at 770-384-2387. Before I turn the call over to Frank, let me remind you that today’s press release and the presentations made by our executives include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties. These risks and uncertainties include but are not limited to those factors identified in the release and in our filings with the Securities and Exchange Commission. Today’s presentations also include certain non-GAAP measurements. Reconciliation of these measurements is provided in the financial statements included with our earnings release. Now let me turn the call over to Frank Blake.

Thank you, Diane, and good morning everyone. Sales for the third quarter were $16.6 billion, up 1.4% from last year. Diluted earnings per share were $0.51. This was the fourth quarter in a row of positive comps for our business and the third quarter in a row of positive comps for the U.S., which had a comp of 1.5%. In the U.S., over 80% of our Top 40 markets positively comped. Compared to prior quarters, the variability of performance has narrowed so that we see less dramatic swings on the positive and on the negative side. For example, in the third quarter of 2009 the spread between the best and worst of our Top 40 markets was about 35 percentage points. This year that spread is cut almost in half to about 18 points. Our Gulf region is now exiting its year-over-year storm comparison so its negative comps have turned slightly positive. We saw strength in key markets, particularly in our central and mid-Atlantic regions, and we continue to see positive results in Florida and California. So from an overall perspective, we see a stabilizing business; and as the business stabilizes, we continue to improve our operational performance. We are exercising good control over our expenses but we’re also investing in the business to drive improvements across customer service, merchandising, and our supply chain. Let me give one recent example. Our technology and operations teams have developed and implemented a new technology for our store associates. We call it the First Phone because its core purpose is to reduce tasking time for our associates so that they can instead focus on customer service. It is a handheld device that provides several functions – inventory management, product location, sku category, and class performance analytics; a phone, a walkie-talkie, and a mobile checkout. What makes the First Phone worth discussing are two general points: it was developed through close cooperation with our store operations and IT teams, perhaps the best collaboration we’ve ever had on a project like this; and we see it as a foundational element of improving our service for our DIY and pro customers, putting knowledge and communication closer at hand to our associates on the floor of the store. Similarly, we are continuing the development of our new merchandising tools. As an indicator of that, we had another quarter of improved inventory turns for the Company. Our rollout of rapid deployment centers, or RDCs, remains on track to reach 100% of our U.S. store base by the end of the year; and we are continuing the significant ongoing complementary work designed to get additional leverage from our supply chain. Beyond the supply chain, we are building out a new set of analytical tools for our merchants across assortment planning, pricing, and customer analytics. We’ll discuss those at some greater length at our upcoming investor and analyst conference in December. But just as we have a goal to better enable our associates to deliver great customer service, we also have a goal to better enable our merchants to drive category growth in our business, and in both instances technology is a critical enabler. As Craig will detail, we’ve seen continued growth in our transactions. This quarter marks the fourth straight quarter of comp transactions growth. This provides some evidence that our market is steadying as customers focus on basic repair and maintenance activities. Average ticket continues to be a challenge just as the macro housing environment remains under pressure. We have often referenced private fixed residential investment as a percent of GDP as an indicator of the overall health of the housing related market. This past quarter saw another tick down and another record 60-year low as the ratio is now 2.2%. While our comp performance has disconnected from this metric, at least directionally we still think this presents a picture of continued pressure in our market. On the international front, our Mexican business continues to deliver positive comps. This is the 28th quarter in a row of positive comps. Not only is our Mexican business an important source of growth for the Company but also increasingly an important source of talent. For example, we have a district manager in Texas who began as a store manager in Mexico, and we have comparable examples of the Mexican team being a source of talent throughout our organization. Our Canadian business, as expected, experienced weakness in the quarter with a negative of 5.6% in local currency as we began to anniversary the impacts of the Canadian government’s home renovation tax credit. The difficult year-over-year comparisons will continue through the fourth quarter. At the end of the third quarter, 76% of our stores are eligible for success sharing, our bonus program for our hourly associates. Our associates are working hard to improve our business. We’re proud of the progress we’re making while recognizing that we are just at the start of a long-term process; and we look forward to discussing our longer term plans with you in December. And with that, let me turn the call over to Craig.

Thanks, Frank, and good morning everyone. The third quarter represented our fourth quarter in a row of positive comp growth. We saw positive comps in eight departments during the quarter and were pleased with the sequential comp improvement we saw in the U.S. from the second to the third quarter. The departments that outperformed the Company’s average comp were lumber, garden, electrical and lighting. Flooring and hardware performed in line with the Company comp. Plumbing, paint, and kitchen and bath showed positive comps, while comps in millwork and building materials were negative for the quarter. As measured by consumer surveys, we gained consumer U.S. market share in units in nine out of our 13 departments during the quarter. Our strategy remains focused on driving value and innovation in our stores, and we see customers responding favorably to our efforts through increased transactions. Comp transactions were up 2.2% in the quarter. As expected, we have not yet turned the corner on average ticket. Comp average ticket was down 0.8% or $0.43 to $51.46 for the quarter. Smaller ticket purchases were strong during the quarter while the big ticket purchases remained under pressure. Transactions for tickets under $50, roughly 20% of our business in the U.S., were up 2.7% year-over-year. Transactions for tickets of $900 and above, also approximately 20% of U.S. sales, were down 3.4% in the third quarter. The main drivers behind our small ticket performance were our maintenance and repair, seasonal, and outdoor project businesses. As we’ve shared in past quarters, maintenance and repair continues to be an area of strength as customers spend money to maintain the investments in their homes. For example, categories such as sealers, plumbing repair, fasteners, water heaters, and cleaning all had strong comp performance in the third quarter. The seasonal business came late in the quarter as record heat across much of the U.S. in August and September kept many DIY gardeners indoors. In contrast, October presented an opportunity for fall planting and lawn repair. We took advantage of this opportunity and used the flexibility that we’ve built into our business through tools and process to delay our holiday sets and deliver to drive our outdoor business through the end of October. We saw specific strength in seed, chemicals and live goods. For example, our live goods business swung from a low single digit negative comp in the second quarter to a positive comp in the third quarter driven by a double digit comp in the month of October. Additionally, we saw strength in outdoor project categories such as landscape, fencing, exterior paint and windows during the quarter. Finally, we saw continued momentum in paint, hardware, tools, electrical, and plumbing in the third quarter. We’ve been working hard to improve our offering in these areas with a focus on our maintenance and repair customers, and our efforts are paying off. On the other hand, we continue to see pressure in big ticket. The largest drivers of this big ticket pressure in the third quarter were softness in building materials and discretionary spend areas like kitchens, as well as tough compares in roofing as we lap last year’s heavy storms. We continue to execute our portfolio strategy and drive results from our investments in merchandising category resets, new product introductions, and the implementation of everyday great value. Let me share a few examples of this. During the quarter, we had an outstanding bath event called Vanity Insanity. We saw great results and terrific project selling from our associates during this event. We also introduced exciting new products such as additional LED bulbs in our EcoSmart brand which can save customers up to 80% on their electric bills—or lighting bills. Water savings products have also resonated well with our customers such as our Glacier Bay dual flush toilets and the HydroRight dual flush conversion kit. And for our décor customers, we introduced Martha Stewart Kitchens, which is off to a fast start in our stores. Looking ahead to the fourth quarter, we are well positioned to drive sales with a great seasonal lineup of heaters, fireplaces, and snow removal equipment. We will also be rolling out several new product introductions including the expansion of our Klein tools for professional electricians, USG’s lightweight drywall that is 30% lighter than regular drywall panels, and a new line of epoxy grouts from Custom Building Products that do not require sealing. Additionally, we leaned into the holiday season this year and increased our buys. Holiday décor is an inexpensive way for our customers and feel good about their homes. We have enhanced our offering with the Martha Stewart coordinated décor items and launched the EcoSmart LED lighting which features exclusive new technology, including fully water resistant continuous-on lights so that if one breaks or comes loose, the rest stay lit. We also have outstanding values in our gift centers this year, as well as an incredible Black Friday lineup. The early results from these categories have been strong and we’re confident they will continue to drive customers to Home Depot stores. And with that, I’d like to turn the call over to Carol. Carol Tomé: Thank you, Craig, and hello everyone. In the third quarters, sales were $16.6 billion, a 1.4% increase from last year. Comps for same store sales were positive 1.4% for the quarter with positive comps up 0.7% in August, positive 1.1% in September, and positive 2.9% in October. Comps for U.S. stores were positive 1.5% for the quarter wit positive comps of 0.6% in August, flat comps in September, and positive comps of 3.5 in October. Our gross margin was 34.3% for the quarter, an increase of 26 basis points from last year. Our U.S. business contributed 20 basis points of margin expansion in the quarter driven by the following factors: first, 5 basis points of expansion came from lower deferred interest due to a lower penetration of private label credit card sales; second, approximately 5 basis points of expansion was due to commodity price inflation. Finally, through our portfolio approach and leveraging our newly developed analytics, we enjoyed another 10 basis points of net gross margin expansion, with some departments like hardware and plumbing reporting margin growth, and some departments like kitchen and bath reporting margin contraction. Our international businesses, principally Canada, contributed 6 basis points of gross margin expansion in the quarter due primarily to a change in the mix of products sold. Operating expenses as a percent of sales decreased by 74 basis points to 25.5% and total operating expense dollars were $61 million less than last year. Our operating leverage reflects positive same store sales as well as lower expense in the following areas: first, depreciation expense was $28 million under last year due to a lower asset base arising from fully depreciated assets; second, medical expense was $20 million under last year due to a number of items including a lower number of enrollees; third, we settled several real estate matters for a net $20 million benefit; and finally, we had a number of other expenses under last year offset by expense increases in categories like credit card discounts. These items net to a $7 million increase in expense from last year. At the end of the second quarter, we told you that we expected to see strong expense leverage in the back half of the year. Year-to-date on an adjusted basis, our expense growth equaled approximately 30% of the growth in our sales. As we look to the fourth quarter, we expect continued expense leverage such that for the year, expenses will grow at less than 30% of the growth in our sales. Interest and other expense for the third quarter totaled $142 million, down $22 million from last year, reflecting lower levels of outstanding indebtedness. Our income tax provision rate was 36.1% in the third quarter. For the year, we expect our effective tax rate to be approximately 36.5%. Earnings per share for the third quarter were $0.51, up 24.4% from last year and reflects about two pennies of benefit arising from our share repurchases. Now moving to our operational metrics, at the end of the third quarter we were operating 2,244 stores and selling square footage was 235 million. Reflecting the sales environment, total sales per square foot for the third quarter were $281, up roughly 1.7%. Now turning to the balance sheet, we continued to effectively manage our inventory. At the end of the quarter, inventory was approximately $11 billion, up $176 million from a year ago. About half of that increase is attributable to foreign exchange rate fluctuations. Inventory turns were 4.3 times, up from 4.2 times a year ago. We ended the quarter with $41.7 billion in assets, including $1.4 billion in cash. Year-to-date this reflects cash generated by the business of approximately $3.9 billion offset by $2 billion used for share repurchases, $1.2 billion used for dividends, and approximately $700 million of capital expenditures. Note that for fiscal 2010, we expect our capital expenditures to be approximately $1.1 billion. Now on the capital structure front, a few items of note. First in the third quarter, we repurchased $800 million or 26.3 million shares of outstanding stock. Second during the quarter, we repaid $1 billion of senior notes that came due on August 15 and subsequently refinanced them on September 7 for a weighted average maturity of 20 years with an average coupon of approximately 4.7%. Finally, computed on the average of beginning and ending long-term debt and equity for the trailing four quarters, return on invested capital was 12%, 250 basis points higher than the third quarter of fiscal 2009. Given that we’ve got nine months of performance behind us, we’re going to tighten up the sales and earnings guidance we gave you at the end of the second quarter. Looking ahead, we are projecting positive comp sales in the low single digit area in Q4. Remember that we guide off of GAAP. We are calling for fiscal 2010 sales to increase by approximately 2.2% with earnings per share from continuing operations increasing by approximately 25% to $1.94. Within this guidance, we expect our operating margin to be approximately 8.4% for the year. This guidance includes the benefit of our year-to-date share repurchases but doesn’t include the impact of any additional share repurchases. It is our intent, however, to use excess cash to repurchase shares throughout the remainder of fiscal 2010. We look forward to covering our business prospects, including our thoughts on 2011, at our investor conference on December 8. We thank you for your participation in today’s call and we’ll be happy to take your questions. So Abdullah, we are now ready for questions.

Thank you. Once again, please press star, one on your touchtone telephone to ask a question today. That’s star, one on your touchtone telephone. We ask that you depress your mute button to allow your signal to reach our equipment. And we’ll pause for just a moment. And we’ll take our first question from Chris Horvers with JP Morgan. Chris Horvers – JP Morgan: Thanks and good morning.

Morning. Chris Horvers – JP Morgan: Given that—I know it’s a couple weeks into the quarter, but we do always get a lot of questions on how November’s looking so far. You had some events on LED light bulbs and focusing on everyday value; so I was just curious how the quarter is shaping up so far, albeit early. And then secondly on the gross margin, can you talk about whether RDCs have been a drag or kind of neutral to merchandise margins this year; and then if so, are we still thinking maybe 30, 40 basis points of potential gross margin expansion in ’11? Thank you. Carol Tomé: Well on the sales front, as you point out, it is early days but we’re very pleased with our sales through November. And on the gross margin front, the RDCs have been pretty much neutral to our gross margin performance this year; and as we look to 2011, and we’ll share more details with you at our investor conference, but as we look to 2011 we expect to see benefit from coming from the RDC. Chris Horvers – JP Morgan: Okay. Fair enough. Thank you.

Thanks, Chris.

And we’ll take our next question from Matthew Fassler with Goldman Sachs. Matthew Fassler – Goldman Sachs: Thanks a lot, and good morning. My first question relates to credit and your credit cards. Can you talk about the impact of your ability to use your percent financing as a lever and also just consumers’ appetite for credit, be it from your proprietary card or from other sources, and how you think might tie into the big ticket side of the business and some of the soft trends you’re seeing there. Carol Tomé: Yeah well, it’s interesting. As we look at our private label credit card, we saw about a 300 basis point contraction in terms of the penetration of our private label card, dropping from about 26% last year to about 23% this year. And of that 300 basis point contraction, about 150 basis points was in the deferred financing fees; in other words, for any purchases over $299 where everyday we offer a deferred financing option. So what we are seeing is a change in how consumers are using credit, and we think a lot of it is a headset change because of the Card Act, which as you know, Matt, was enacted back in February. Before the Card Act, our everyday value proposition was if you spent $299 in our stores, it was no interest, no payments for six months. It’s now no interest, minimum payment. The customers are looking at that minimum payment and albeit it’s a small payment, but they’re looking at that minimum payment and saying hmm, I’m not sure that value proposition works for me anymore and so they’re switching out to bank cards, and we’ve seen an increase in our bank card penetration accordingly. But if you step back from it, if you look at the savings rates in the country, you know that the savings rates now are over 4%, and historically the savings rates in the country were around 2%, so consumers have definitely deleveraged. We continue to look at our private label card as a way of driving sales. The approval rates for our card is north of 70%, so that’s pretty good. The average line that’s being approved is over $5,000. The average line for the existing cardholders is close to $6,000, but there’s only 25% utilization so it goes back to this sort of savings mentality that we see with consumers in our country. They’re just delevering. So that’s a long-winded answer to your question but hopefully that’s helpful. Matthew Fassler – Goldman Sachs: And I guess I’ll ask my follow-up on the same topic. Are you able to map the trends that you’ve seen in big ticket in some of the categories that you’ve cited as being under pressure - like, for example, the kitchen category – to the deferred financing dynamics in particular; and if so, I know the Card Act was passed in February. When do you cycle those changes in your business? Carol Tomé: We see some of the pressures, surely, in our big ticket items like kitchens and appliances as a result of this lower penetration of the deferred financing. We will lap the Card Act in February. Matthew Fassler – Goldman Sachs: Got it. Thank you so much. Carol Tomé: You’re welcome.

And we’ll take our next question from Scot Ciccarelli from RBC Capital Markets. Scot Ciccarelli – RBC Capital Markets: Good morning guys. How are you?

Good morning. Scot Ciccarelli – RBC Capital Markets: In the past, and I know it’s been a while, but you had given us some information regarding the difference in sales performance in various geographic areas based on kind of foreclosure activities, but now that you guys are seeing more uniform performance kind of across the country and positive comps in 80% of your regions, is there anything you can point to as kind of a common denominator in your best markets and in your softest markets? Carol Tomé: Well as Frank pointed out, private fixed residential investment as a percent of GDP dropped to a historic low of 2.2%, so we would say that housing’s grip on the economy is as loose as it has been in 60 years. So it’s really interesting as we look at the drivers of private fixed residential investment – for example, housing turnover. When we do our regression analysis, we see the r-squared between housing turnover and our sales at 0.58. That’s not a strong correlation, and there’s about four percentage points standard error in that calculation. So housing metrics are becoming less relevant as a measure for our sales, and as we look at it we’re sensing that GDP is more relevant. And that is, I think, one reason why we’re seeing less—the spread has narrowed in terms of the performance across the country. And Frank--?

Yeah, no I think that’s exactly right. And Scot, that was a bit to my point of the variability among the markets kind of compressing, so that you see, just as Carol said, the more general economic impacts going across our business rather than the particularization around either a foreclosure rate or housing crisis in a particular market as we’ve seen in the past. Scot Ciccarelli – RBC Capital Markets: You think it’s more of an employment issue at this point, or consumer confidence issue?

Well I think, again, just as Carol said, I think we’re seeing some broader economic things. It’s how we track to GDP, unemployment, savings rate. The more general economic environment seems to be a better predictor. Scot Ciccarelli – RBC Capital Markets: Okay. Thanks a lot, guys. Carol Tomé: Thank you.

And we’ll take our next question from Deborah Weinswig with Citi. Deborah Weinswig – Citigroup: Thanks so much. So just a few questions focusing actually on growth. So number one, can you update us on your thoughts on HomeDepot.com and social media and how you are using them for holiday and also mobile in your stores?

It’s a great question, Deborah, and we’ll be spending some time on that in December at our conference. HD.com is a very important part of our business. It’s not just—and you know, we really don’t—the sales part of it is obviously something we focus on but even more important, we know that customers—in some categories as much as 70% of our customers research the categories online before coming into the stores. We have a variety of things underway on our social media including our own Home Depot community now that we’re very proud of, where we’ve actually taken associates from our stores and they work for a couple of days online answering questions from associates on a how-to basis. We’re very pleased with the reaction to that. So yeah, it’s growing importance across our business, what we’d call interconnected retail – how we stitch all those things together from our bricks and mortar to the dot-com to the social media. Deborah Weinswig – Citigroup: And also continuing my focus on growth, with the growth in customer transactions, is that more foot traffic from existing customers or gaining new customers?

So I’ll be honest. I’m not sure we have a very good way of dialing into that right now. I mean, it’s a great question but we really don’t have a metric that looks at, hey, this is a brand new customer and we feel confident that it’s a brand new customer. Deborah Weinswig – Citigroup: Because you’re devoting more of your labor hours to customer-facing activities, so wouldn’t that speak to improving customer service and—

You know, I think it’s worth keeping in mind that our typical customer visits a Home Depot, what, four times a year. So every single visit is an opportunity to increase frequency and get the conversion. And Marvin, you might want to comment on that as well.

Yeah Deborah, as we’ve said in the past, we have a real simple equation of compelling value from the merchants, improved services from the associates in the store on the engagement piece, and we think that creates transactions which turn into dollars. And for this past quarter, our net promoter score increased 580 basis points, and that’s on top of a 500-plus basis points improvement last year to the same time frame. And again, when we get excited in the stores around products and around great offerings, our associates are just focused on service in a much more aggressive way. And as we have noted in the past, we have this philosophy of transferring our payroll hours from task to service, and we’re on this mission to get a greater percent of our payroll on service, and we’ll end this year at roughly 50/50. And we’ve never been there before but our goal is to have significantly more hours dedicated to the service component versus the back office tasking part of the business. So we’re good progress but we still have a lot of work to do. Deborah Weinswig – Citigroup: Okay, and then last question – given the importance of the pro customer to your business, what trends are you seeing with that customer right now?

So as we’ve said in the past, Deborah, a couple of comments on the pro. The first is we changed our way of measuring it, so as we would have previously measured it which would be on our credit card or sales through the pro desk, we’re seeing better than Company growth from the segment. As we got a more refined look at it, though, we actually saw that that pro customer shopping across the store, as measured by shopping behavior, was actually down and it looks to be—you know, we’re in the flattish range now. But it’s still not the engine of growth for us. Deborah Weinswig – Citigroup: Great. I appreciate the color, and best of luck over the holidays.

Thank you.

And we’ll take our next question from Gary Balter with Credit Suisse. Gary Balter – Credit Suisse: Thank you. These are, I guess, mostly follow-ups or just expands on some things you talked about. But Carol, you talked about the 58%--or 58 r-squared number to go with the housing turnover. Could you talk about or just remind us again of your mix of business in terms of how much is maintenance and repair, and how much is dependent on housing turnover, etc.? Carol Tomé: You know, Gary, there’s no bright line here, and there never has been a bright line. Gary Balter – Credit Suisse: Right. Carol Tomé: Because our customers, regardless of they’re a pro or DIY or they shop across the store.

Yeah, the last time we took a look at it, and we get the question enough that probably we ought to do a deep dive again, but the last time we looked at it we were about 25% driven by turnover, 25% that was strictly had to repair kind of spend, and then 50% that you’d put in the discretionary bucket. But the last time I want to say was kind of in 2006, and so odds are that 25% that was turnover relate has gone down significantly and the percentages would look quite different. Gary Balter – Credit Suisse: Okay, with the repair probably up.

Yes, exactly. Exactly. Gary Balter – Credit Suisse: Could you talk about the Durbin Amendment impact on your business, or how you see that playing out? Carol Tomé: Well, yes. The Durbin Amendment gives the right to the federal reserve to set the fee for debit cards, as I think you all will recall. And as we looked at it when the Durbin Amendment was passed as part of the Dodd-Frank bill, we modeled well, if the Fed follows what other countries like Australia or New Zealand have done, it should be a benefit for us in 2011 and we estimated it could be as much as $30 million. What we’re hearing, Gary, is that the Federal Reserve is struggling with how to go about this. So as we build our plans for next year, we’re not building any benefit in today because we need more clarity. Gary Balter – Credit Suisse: Okay. Okay. Thank you.

Thanks.

And we’ll take our next question from Alan Rifkin with Bank of America. Alan Rifkin – Bank of America Merrill Lynch: Thank you very much. With the RDC program now essentially over and certainly it looks like your (inaudible) at the corporate level have certainly benefited from that. Can you maybe provide some color on the impact of the RDC program on the stores supported earlier in the program versus later? And then I have a follow-up.

So the first comment, and then Mark Holifield is here and I’ll ask him to address that; but the first comment would be the RDC program—I mean, there’s the building the physical assets. The build of the physical assets will be over by the end of this year, but truly that’s sort of the start of the overall process because you have to ramp up the amount of product that’s going through the RDC. There are continual improvements, and Mark can talk to this, of where we’re backporting mechanization into existing RDCs, and Mark and his team continue to improve just the internal operating rhythm of the RDC, so our work on the RDC is really just—I mean, we’re not at the starting line but we’re early on into the race. And I’d say just as a general comment for our stores, it would be—you know, we have been very pleased as the program has rolled out in terms of the benefits our stores are seeing in our in-stock rate because along with the improvements in the inventory turns that we call out, what we don’t call out at every call but is the case – we are at a record high performance in terms of in-stocks, and so we’re very pleased with how the RDCs are impacting our stores. Mark, I don’t know if you want to add some comments, or Marvin, to that?

Yeah, sure. It’s Mark Holifield. We will be wrapping up the RDC program in January. We’ve got two openings coming in December and one in January. As Frank said, we certainly are in the early days of these RDCs. If you think about it, at this point only 6 of our 16 open RDCs have been open more than a year, so it’s still very early in the history there. Lots of opportunity to continuously improve our operations. We’re at about 41% of cogs going through the RDCs at this point. We think ultimately about half of our cogs will roll through there. The results that we’ve seen are the continuing improvements in in-stock that Frank has talked about. Our RDC-served store sku combinations get back in stock quicker once there is an out of stock, and we are seeing lower inventory levels to maintain that in-stock level at the stores. But as we say, just getting rolling, really an immature network but we’ve got lots of opportunity for upside as the years go on.

Alan, this is Marvin from a store operation perspective. Eighty percent of the product that we order from RDC goes directly to the shelf. So from a payroll productivity standpoint in stores, that’s a big deal. You think about in the past, product went from receiving to the overhead, then it had to be taken from the overhead to the shelf which takes up hours away from customers, and it takes productive payroll and turns it into non-productive payroll of tasking. Now 80% straight to the shelf, which means you have more time to serve customers and more time to use payroll from a more productive perspective, so it’s been a big win for us in the stores. Alan Rifkin – Bank of America Merrill Lynch: Okay, and one follow-up if I may for either Carol or Frank. I know that you’ve said that you will continue to use excess cash to buy back stock. Our cash flow projections would suggest that there’s a capacity to buy back 3 billion for the year, which would leave $1 billion in the fourth quarter alone. Is our line of thinking in that much stock in the fourth quarter alone could potentially be bought back if your projections are met? Carol Tomé: The way we’d like you to think about this is that we’ll buy back in the fourth quarter about what we bought back in the third. Alan Rifkin – Bank of America Merrill Lynch: Okay, thank you, Carol. Carol Tomé: You’re welcome.

And we’ll take our next question from Greg Melich with ISI. Greg Melich – ISI Group: Hi, thanks. Congrats on the quarter. I have two questions – one is the inflation and what that did to the comp. I think you gave us the gross margin impact but do you have the comp number?

It’s about 19 basis points of comp was impacted from copper, so copper was really the driver behind comp inflation in the third quarter, so a pretty significant ramp there. Greg Melich – ISI Group: Okay, and as you go forward, we would—just given what you’re seeing today, that should continue and even accelerate in the fourth quarter? Carol Tomé: Copper prices are running, aren’t they?

Yeah. Carol Tomé: We don’t know where they go.

Who knows where they go, but yeah. At this point we’d say it probably continues. Greg Melich – ISI Group: Great. And then Carol, you said the CAPEX guidance at one point, 1 billion, but that would imply about 400 million in the fourth quarter. How should we think about that? Is the 400 million sort of a new run rate for CAPEX as we go into next year, because I know there’s been some moving around in terms of the timing of CAPEX. Carol Tomé: We’re going to give you a lot more color on our capital plan for our 2011 when we get together in December. Right now, we’re looking at a capital plan next year of around 1.3 billion, but I will tell you there’s $100 million of that, more or less, that’s unallocated at this point. So you can model it however you want. Greg Melich – ISI Group: Got it. And then a last one, sort of bigger picture, Frank. If you look at the stabilization, that spread going from 35 to 18% over the past year, is it the traffic that’s really been the stabilization factor or has it been the people that are in the market being able to spend a more consistent amount? So really, is it all traffic driven or is there some ticket stabilization as well?

Traffic, clearly, for us has been the significant thing that’s happened over the last several quarters, is the growing traffic. Greg Melich – ISI Group: And as you look forward, is there anything you would say, you know, that you cycle that? You’re not concerned that there’s any sort of one-offs that made that traffic shift, anything other than a good building trend?

Greg, I think when you look at—as I mentioned, when we look at our paint department, our hardware department, our plumbing, our electrical – kind of the core center of the store – we’ve continued to see improvement in those businesses as we’ve worked on them, and I think that’s the real foundational base that’s helping us drive the core business overall in the traffic growth. Greg Melich – ISI Group: And it sounds like that’s true even in the housing markets that might still have down turnover and sloppy pricing. Is that fair?

Yes. Yes, it is. Greg Melich – ISI Group: Great. Thanks a lot.

And we’ll take our next question from Mike Baker with Deutsche Bank. Michael Baker – Deutsche Bank: Thank you. So I wanted to focus quick on the sales. So the full year sales guidance plus 2.2, I think on the last quarterly call you said full year sales up 2.6. Sounds like you did a pretty good third quarter here and trend is good, so why the downtick? That’s the first question. And then the second question is I know you guys do benchmark some of your sales results against the government sales statistics – building material and gardening equipment and supply stores, No. 444, where that actually trended more positive in the third quarter versus the second quarter; whereas your comps didn’t show the same acceleration. So any explanation for that would be helpful. Thanks.

Yeah. Mike, the first thing is—to be honest, if you look at the NIACS numbers through the year, they’ve been stronger than ours; and we know that they changed their way of measuring it. We don’t know exactly what it is. It’s—your comment’s right. We don’t have a lot of insight into exactly what’s going on with that number and our comparison to it. We did—we felt in the spring that it was driven heavily by the lawn and garden business. That seemed to be the case on the numbers that we saw in NIACS. Less clear in the fall – we just don’t have that breakout yet, but that seems to be the case. Carol Tomé: And on the sales question, we were pleased with our performance in the third quarter, but Canada was softer than we had projected. Now, Canada relative to the competitors did very well, but relative to our plan was softer; and if you look to the fourth quarter, we know we’re up against tough comparisons so we’ve just tightened up our guidance accordingly. Michael Baker – Deutsche Bank: Okay. So the biggest change sounds like Canada. That makes sense. If I could ask one more question on the SG&A. I think historically you’ve said expenses growing at 50% of sales. You’re obviously going to do a lot better than that this year. Looking ahead, how do we think about that? Was there something specific in 2010 that has enabled you to beat that, or is that sort of the new run rate, closer to 30 or less percent?

Again, we’ll have an opportunity to talk to you about this in December and give you—you know, every year is its own plan and, frankly, we want to be able to lay out for you in a coherent fashion what we see as our headwinds and issues and how we’re going to be addressing them in 2011. Michael Baker – Deutsche Bank: Okay, we’ll look forward to that. Thank you. Carol Tomé: Thank you.

And we’ll take our next question from Michael Lasser with Barclays Capital. Michael Lasser – Barclays Capital: Good morning. Thanks a lot for taking my question. So the home improvement market is becoming less connected to key housing metrics and more connected to broader economic factors. Does that change the competitive set with Home Depot potentially competing more against traditional retailers such as the mass merch?

No, I wouldn’t put it that way, Michael. I’d say it’s more—and this is just, I mean, we have a theory of the case, and this is the theory of the case, is that if you look at some of the traditional guideposts in our market like housing turns, and you see that that doesn’t correlate as closely with our results anymore, a theory is as Carol was saying, that’s now such a small number overall that the larger economic forces are really the stronger driver on the correlation. But it doesn’t change our competitive set. Michael Lasser – Barclays Capital: Okay. I guess the composition of the business is changing with a greater proportion of sales coming from small ticket items. Does that alter how you think about your promotional stance with the possibility of being more aggressive on those small ticket items and less aggressive on the big ticket stuff, which are proving to be somewhat inelastic, perhaps?

No, that’s not really how we’re thinking about it. We’re working to drive, obviously, the basics around what the customer needs to maintain their homes and businesses, so that maintenance and repair is really, really important. But the customer still is doing the core updates; it’s just not at the rate that they were doing them before. And we focused a little bit on smaller projects – as I mentioned, our Vanity Insanity event, a great way for a customer to update the bathroom in their home. They’ll take on that project maybe before they take on a kitchen project. So we’re just making slight tweaks and adjustments as to how we’re going to market. Michael Lasser – Barclays Capital: Okay, one quick last question. Carol, on the D&A, how much further is there to go to benefit from that? How much of the asset base is fully depreciated at this point? Carol Tomé: We’re working through that model right now. We’ll give you a new D&A forecast for 2011 when we get together in December. Michael Lasser – Barclays Capital: Sounds great. Look forward to seeing you soon. Carol Tomé: Yeah, thanks so much.

Thank you.

And we’ll take our next question from Eric Bosshard with Cleveland Research Company. Eric Bosshard – Cleveland Research Company: Good morning.

Good morning, Eric. Eric Bosshard – Cleveland Research Company: Can you talk a bit about your thinking and strategy in terms of promotions and what you’re bringing in, and the events you have planned for 4Q? It seems like you’ve done a good job of managing inventories on a rational promotional environment in a sluggish sales environment this year. How are you thinking about those variables as we move into 4Q?

Well Eric, I obviously can’t go into detail in terms of what we’re doing later in the fourth quarter. Don’t want to educate the world on that; however, what I will tell you is we’re continuing to focus on trying to shift our business to everyday great value for our customers. As I’ve mentioned in several occasions in the past, we’re not bright there by any means. There’s still activity out there promotionally that takes place that we have to address in the market. As I look in the fourth quarter, again, we’re focused on bringing new product introductions to market. We do work with our suppliers and it’s been historically something we’ve done to create great special buys where we can leverage the productivity in the factories, pass those savings on to our customers, so we feel really good about the buys that we’ve made for the holiday gift season, the Black Friday events as I mentioned. So I think—you know, we feel that we’re well positioned to compete in the marketplace. We do believe that we’ve gained ground in things like holiday décor and the seasonal businesses around fireplace and snow removal in the northern sector of the country over the past couple years, and we’ve worked hard to position ourselves well for that in the fourth quarter. So we think we’ve got a great offering for our customers coming up in the fourth quarter to keep driving traffic to our stores. Eric Bosshard – Cleveland Research Company: Strategically as you look at your effort, I think the flyer last week was a bit—or was meaningfully aggressive year over year in appliances. I’m trying to get a sense of are you—are you trying to stay at the same level in terms of promotional intensity? Was that just a category or is that reflective of a bit of step to a more aggressive level for 4Q?

I mean, when we look at our appliance business, we’re roughly kind of doing what we did last year. We obviously assess our value offering for the customer and try to make sure that we’re competitive and driving business in the market. Eric Bosshard – Cleveland Research Company: Okay. Very good. Thank you.

Thanks, Eric.

And we’ll take our next question from Dan Binder with Jefferies. Dan Binder – Jefferies: Hi, good morning. Now that you’re seeing the business stabilize and you look at new business opportunities, I’m just curious what’s at the top of mind? You’ve mentioned MRO quite a bit for home and business. I’m curious – is that an opportunity to go after that more aggressively, not just within store but out of store type prospecting? And then how the stabilizing environment change the way you think about store growth as well going forward?

So it’s stabilizing is the word. I think the way we think about our business is really driven off of the portfolio strategy, and there are areas that are important for us to continue dynamic, be the absolute destination and other areas that we deemphasize; but this isn’t, if I understood kind of the context of the question, it’s not like we’re saying okay, now. We’re all set – now let’s go launch a new effort in some other area. This is we’re going to keep doing what we’ve been doing and hopefully do it better and better. Carol Tomé: And as you know, our economic engine is driven by productivity and efficiency. And if you look at our return on invested capital up 250 basis points year on year to now 12%, our store deployment strategy is working. This year we’re opening seven stores; next year maybe 10. So we are going to continue to drive the productivity in our existing boxes. Dan Binder – Jefferies: Yeah, I guess what I was trying to drive at is now that you’re seeing some stability and that adds confidence to the type of investments you’re making, are there other types of opportunities outside of the core stores that would make sense to you?

It’s still our—I mean, we are focused on our core business. Dan Binder – Jefferies: Okay, great.

There’s several billion dollars out there over the past two years that we gave up that we need to go get. Dan Binder – Jefferies: Great. Thank you.

And we’ll take our next question from Peter Benedict with Robert Baird. Peter Benedict – Robert Baird: Hey guys. A couple quick ones. First, can you remind us what percentage of the business is the installed sales business, and how has that been trending? Any regional color, particularly out in California and places like Florida? Carol Tomé: Install business is a pretty small piece of our business. It’s less than 10%. And if we look at the performance in the third quarter, it was down just slightly.

And I don’t know that we have a regional— Carol Tomé: We don’t. Peter Benedict – Robert Baird: Okay. And then Carol, just on the leverage ratio, leverage cap. You’ve been saying 2.5 times. I know you’re running below that, about 2.1 at this point. What do you need to see to kind of trend yourself back towards that 2.5 ratio? Carol Tomé: Well, Frank used the choice word – stabilizing. Stabilized would be good; stabilizing—you know, we’re just early in the recovery, Peter, so we’re just watching the business pretty carefully. Obviously things are going in the right direction. We’re pretty opportunistic and we look at the interest rate environment, which is really attractive, of course; but our point of view is that interest rates will remain low for a long period of time, so there’s no hurry for us to go and lever up to buy back more shares. Peter Benedict – Robert Baird: Okay, fair enough. Thank you.

We have time for one more question, Abdullah.

And we’ll take our last question from Budd Bugatch with Raymond James & Associates. Budd Bugatch – Raymond James & Associates: Good morning. Thank you and congratulations as well. Just a quick question, if you would. The kitchen area has been an area of difficult performance all throughout this situation, particularly with housing and all of that issue. What are you thinking, Craig, about the way to maybe generate some better performance out of the kitchen business, out of the cabinet side of it?

Well, I mean, you’re right, Budd. The industry over the past several years has been in dramatic decline. And so we’re really focused on making sure that we can address all the customers’ needs in that area for those customers that actually are looking at cabinets. So we’ve worked hard to improve our overall assembled cabinet business for those customers that want to get going and do it right away. We have the capability of redoing the fronts of the cabinets. It’s a program that actually is doing well for us. We obviously can replace the customer’s cabinets. We’ve worked on expanding our offering in our countertops, so if the customer wants to make an update without changing out their cabinets, we’ve got a greater offering there. And of course we’ve added the Martha Stewart line into our kitchen cabinet business that is off to a terrific start. So there’s a number of things that we’re doing to drive productivity in that area. While the industry has been shrinking, the numbers that we are able to look at shows that we’re actually gaining share in the category. Budd Bugatch – Raymond James & Associates: And I’m seeing some indications at the upper end are starting to see some more at least rumblings of business to come. Are you seeing that as well? Are you getting more potential customers to lay out plans for?

Well, we just added the Decora line in about 600 of our stores. It’s pretty early. We really don’t have a clear read on that yet. Budd Bugatch – Raymond James & Associates: Okay. And final question just if you could, is do we know the actual net promoter score? I heard 580 basis point improvement. What’s the score in the third quarter? Carol Tomé: I’ve got it. Just a second here and I’ll give it to you. The net score was 71.6. Budd Bugatch – Raymond James & Associates: Okay. Congratulations.

Thank you, Budd.

Well thank you everyone for joining us today, and for most of you we’ll be talking to you on December 8 in Boston. Those that cannot join us, you can actually listen to us on the web. And those who just listened to our earnings call, we’ll be talking to you at the end of the fourth quarter. Thank you very much.

This does conclude today’s conference. We thank you for your participation.