Diane Dayhoff - Vice President, Investor Relations Frank Blake - Chairman and CEO Craig Menear - Executive Vice President, Merchandising Carol Tome - Executive Vice President, Corporate Services and CFO Marvin Ellison - Executive Vice President, U S Stores Mark Holifield - Senior Vice President, Supply Chain

Gary Balter - Credit Suisse Christopher Horvers – JPMorgan Brian Nagel – Oppenheimer Dan Binder - Jefferies Matthew Fassler - Goldman Sachs Aram Rubinson - Wolfe Research Budd Bugatch - Raymond James Dennis McGill - Zelman & Associates Keith Hughes - SunTrust Kate McShane – Citigroup Michael Lasser - UBS Greg Melich - ISI Group Scot Ciccarelli - RBC Capital Markets Eric Bosshard - Cleveland Research

Ladies and gentlemen, please standby. Good day, everyone. And welcome to today's Home Depot Third Quarter 2013 Earnings Conference Call. Today's conference is being recorded. (Operator Instructions) Beginning today's discussion is Ms. Diane Dayhoff, Vice President, Investor Relations. Please go ahead.

Thank you, and good morning to everyone. Joining us on our call today are Frank Blake, Chairman and CEO of The Home Depot; Craig Menear, Executive Vice President, Merchandising; and Carol Tome, 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. 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 that could cause actual results to differ materially from our expectations and projections. 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 included in the release and is provided on our website. Now, let me turn the call over to Frank Blake.

Thanks you, Diane, and good morning, everyone. Sales for the third quarter were $19.5 billion, up 7.4% from last year. Comp sales were positive 7.4% and our diluted earnings per share were $0.95 per. Our U.S. stores had a positive comp of 8.2%. From a geographic perspective, sales were strong across the U.S. All of our U.S. regions posted positive comps in the quarter as did 39 of our top 40 markets. The only exception was New Orleans, which anniversaried the impact of Hurricane Isaac from last year. Our Mid-South, Southeast and Pacific North regions had our strongest comp performance with double-digit gains. During the quarter, we saw a strong growth in both transactions and ticket. We have now had 10 consecutive quarters of transaction and ticket growth, which we view as an encouraging sign of the balance in the growth of our business. We are also able to achieve operational improvement across key elements of our business with improvement in inventory turn, shrink performance and continued expense leverage. Our Merchandising as Craig will detail, the core categories of the store were solid and we saw strength in larger ticket categories, such as appliances and countertops. Project based categories such as tile and vanities performed well and our Services business grew double-digits. The recovery of our pro business continues in the third quarter, our pro business slightly faster pace than our consumer business. In addition to sales from our pro customers, we also track whether we draw an increase number of pros, we household our customer data looking at unique customers and account numbers, and we’ve seen a steady year-over-year increase in the pro segment. During the quarter, we launched our first version of the mobile app for our pro customers. The app enables pros to see multiple stores inventory of one time, provides them direct access to our pro desks, tracks, receipts and provide other functionality that can help pros better manage their businesses. We will continue to upgrade and improve the app and are already ahead of our plan on downloads. We also continue to enhance our website and consumer mobile presence. During the quarter, we added enhanced communication for order delivery. Refresh category pages simplified the checkout process and invested across interconnected retail to improve the customer experience. Both traffic to the site and our conversion rate grew double digits in the quarter. Sales from our online channels, including those picked up in our stores, were up over 50% and are now approximately 3% of our total sales. Marvin and his team rolled out new first training focused specifically on the interconnected experience in our stores. We know that our customers are expecting a simple and easy experience shopping online and in our stores and in the intersection between the two. That has required new training for our associates as well as technological improvements. For example, during the quarter, we enabled our first phones to be able to process, buy online and pick up in-store or BOPUS and buy online, ship to store or BOSS orders. Previously an associate would have to go to a terminal for this activity, adding time to the customer’s business and complexity to our process. Now with the First Phone, our associates can close the transaction immediately from wherever they are in the store. The training and additional technology have led to a significant improvement in our interconnected customer service. We separately track customer satisfaction scores on BOPUS and BOSS orders. Those scores have shown a marked improvement over the quarter, and we will continue to refine and improve this process. On the international front, our Mexican business positively comped for the quarter. That makes 40 quarters in a row for 10 years of quarter-over-quarter positive comp growth for our Mexican business -- a great achievement. Our Canadian business had positive comps for the eighth quarter in a row. As Carol will discuss in more detail, we are updating our sales and earnings guidance for the year based on our third quarter out-performance versus our plan and a somewhat more favorable outlook for the remainder of the year. We still face several headwinds in the fourth quarter, particularly the storm-related sales from last year. But the housing market continues to be positive. Private fixed residential investment or PFRI as a percent of GDP improved in this past quarter to 3.2% but it remains well below the 60-year average of approximately 4.6%. Let me close by thanking our associates for their hard work and dedication throughout the quarter and for their ongoing efforts to assist those in need as the result of the tornado that hit the Midwest this past weekend. Based on this quarter's results, almost 100% of our stores will qualify for success sharing, our profit sharing program for our hourly associates. We're proud of that result and plan on carrying that forward into the fourth quarter. With that, let me turn the call over to Craig.

Thanks, Frank and good morning everyone. We were pleased with our performance in the third quarter as sales exceeded our expectations. Strengthened core of the store, the continued resurgence for our pro-customers and mild temperatures helped us overcome difficult comparisons cycling last year’s storm-related sales. All merchandising departments posted positive comps. Kitchens, lighting, décor, lumber, electrical, indoor garden, paint and bath were above the company average. Mower, flooring, plumbing, outdoor garden, building materials, hardware and tools performed positively but were below the company average. In the core of the store, maintenance and repair categories saw continued positive comp performance in products like ladders, light bulbs, air circulation, wiring devices, pipes and fittings, fasteners and builder’s hardware. We’ve also strengthened the core with comps above the company average in categories, such as lighting, countertops, floor tile, window coverings, faucets, vanities, fixtures, and special order carpet. At the end of the third quarter, we had approximately 400 stores with our enhanced appliance showroom, a reset that we began last year. Using localization tools in these stores that have various footprints, we optimize the space between our kitchen appliance showrooms and showcase our expanded assortment. This expanded assortment is also available online and as a result, we experienced double-digit growth for appliances both in-store and online in the third quarter. As Frank mentioned, total customer sales continue to gain strength and while approached up across the store, we saw a double-digit comp growth in categories such as gypsum, concrete, pressure-treated lumber and moldings. Mild weather throughout much of the quarter and across the country continued to drive sales in our exterior project categories. For example, sales in exterior stains and water sealers, pressure washers and exterior paint, all posted comps above the company average. Our Labor Day and fall clean-up events provide great values and were well received by our customers resulting in solid comps in grills, storage, and soils and mulches. Total transactions grew by 4%, while average ticket increased 3.2% for the quarter. Our average ticket increase was positively impacted somewhat by commodity price inflation from products, such as lumber and copper. The total impact of comp growth from commodity inflation was approximately 45 basis points. Transactions for tickets under $50, representing approximately 20% of our U.S. sales were up 3.1% from third quarter. Transactions for tickets over $900 also representing approximately 20% of our U.S. sales, were up 10.3% in the third quarter. The drivers behind the increase in big ticket purchases were continued strength in our pro business, appliances, HVAC, countertops and in-stock kitchens. Now, let me turn our attention to the fourth quarter. Our strategy of partnering with our suppliers for exclusive launches of new and innovative products continues to gain traction. During the fourth quarter, we’re excited about the launch of the Nest Protect smoke and carbon monoxide detector. Its alarm quiets down when you wave your hand at it and sends a message to your phone if the alarm goes off or batteries run low. Instead of just chirping at you, it speaks with a human voice and gives a friendly heads up before burning toast can turn into emergency. We’re also introducing new technology in door locks with the Kevo Bluetooth Deadbolt from Kwikset. With Kevo, your smartphone is your key. You can share keys with visitors, monitor lock activity and delete or disable access, all from the mobile app. Finally there is innovation in lighting from Cree with the launch of the Cree TrueWhite bulb. The TrueWhite LED bulb gives out some of the best natural color when compared to other LED bulbs in the market and is a great compliment to the product launches that we have celebrated this year. We have an outstanding offering of products in our Gift Centers for the holiday season. This year we’re featuring a Ryobi One Plus Cordless drill that includes two lithium ion batteries, charger and carrying case at a price below the Ni-Cd alternatives in the market today. For our pro customers, we have exclusive values on Power Tools combo kits from Makita, Milwaukee and Rigid. And we’re also introducing the Husky Total Socket. The Husky Total Socket is an adjustable wrench, one tool that replaces up to 44 sockets. It also features a lower profile than standard socket wrenches allowing you to give them the tight spaces. We have our best lineup yet in holiday decor. We continue to bring innovation in the latest offerings to our customers and we're becoming a leading destination for the category both in store and through our extended assortment online. We’re committed to simplifying holiday decor for our customers, about half of our pre-lit artificial tree assortment is designed with a quick set electro-connections. This connect the poles to the base and your tree will illuminate hassle free. Making it easy for our customers to enjoy the holidays and providing great values, will allow us to win this holiday season. Finally, I'd be remiss if I didn’t mention the outstanding Black Friday special buyers that we have planned this year with extreme values for our traditional DIYers and professional customers, including some amazing offers on appliances. Going to our stores or online and I think that you will agree this is one of our most exciting lineups yet. And with that, I’d like to turn the call over to Carol.

Thank you, Craig and hello, everyone. In the third quarter, sales were $19.5 billion, a 7.4% increase from last year. Comps or same-store sales were positive 7.4% for the quarter with positive comps of 8.7% in August, 8.2% in September and 5.6% in October. Comps for U.S. stores were positive 8.2% for the quarter with positive comps of 9.6% in August, 9.4% in September and 6.2% in October. Our total company gross margin was 34.9% for the quarter, an increase of 35 basis points from last year, of which 32 basis points came from our U.S. business. Our gross margin expansion in the U.S. is explained by the following factors: First, we experienced 22 basis points of gross margin expansion in our supply-chain due primarily to higher productivity. Second, we experienced approximately 17 basis points of gross margin expansion due to the impact of gross margin accretive businesses that were acquired in 2012. Third, our shrink reduction efforts continued to gain traction and we realized 2 basis points of margin expansion due to lower shrink. Finally, we experienced 9 basis points of gross margin contraction due to a change in the mix of products sold, the majority of which was due to a higher penetration of clientele than one year ago. Our total company gross margin performance also reflects $10 million of inventory liquidation costs associated with our China store closings in 2012 that did not repeat this year. While we continue to project modest gross margin expansion for the year, as we look to the fourth quarter of fiscal 2013, we expect our gross margin to decline roughly 15 basis points from what we reported in the fourth quarter of fiscal 2012, due primarily to certain gross margin benefits recognized last year that we do not expect to repeat. In the third quarter, operating expense as a percent of sales decreased by 187 basis points to 23.1%. Our spend leverage reflects our strong sales performance and some favorable year-over-year comparison. As you will recall, in the third quarter of 2012, we closed our stores in China and incurred $155 million of operating closing costs that did not repeat this year. Adjusting for the China store closing, we leveraged operating expenses by 101 basis point -- better than our plan. For the year, we expect our expenses to grow at approximately 34% of our sales growth on a 52-week basis. Interest and other expense for the third quarter was $188 million, a 25.3% increase from last year, reflecting new interest expense associated with $2 billion of incremental debt issued in April, and an additional $3.25 billion of incremental debt issued in September of this year. Proceeds from the September debt issuance will be used to repay $1.25 billion of outstanding debt that is coming due in December with the remainder to be used for share repurchases. I’d also like to note that during the quarter, we received an upgrade from Standard & Poor’s taking our long-term debt rating to single A. Our income tax provision rate was 35.8% in the third quarter and for the year we expect our tax provision to be approximately 36.5%. Diluted earnings per share for the third quarter were $0.95, an increase of 50.8% from last year. Adjusting for the cost of the China store closing, our diluted earnings per share grew 28.4% from the same period in the prior year. Now moving to our operational metrics. During the third quarter, we opened two new stores in Mexico for an ending total company store count of 2,260. At the end of the third quarter, selling square foot was 236 million and total sales per square foot were $329, up 7.2% from last year. At the end of the quarter, inventory was roughly $11.3 billion and inventory turns were 4.7 times, up from 4.6 times last year. We ended the quarter with $43.8 billion in assets, including $4.9 billion in cash. Moving to our share repurchase program. In the third quarter, we received 2.4 million share related to the true-up of an accelerated share repurchase or ASR program we initiated in the second quarter. Additionally, in the third quarter we repurchased $2.1 billion or 24.5 million of our outstanding shares. This included $600 million or 8.1 million shares repurchased in the open market and 16.4 million shares repurchased through an ASR program. For the shares repurchased under the ASR program, this is an initial calculation. The final number of shares repurchased will be determined upon completion of the ASR program in the fourth quarter. Further, we plan to repurchase an additional $2.1 billion of outstanding shares in the fourth quarter, bringing our total shares repurchases to $8.5 billion for the year. Computed on the average of beginning and ending long-term debt and equity for the trailing four quarters, return on invested capital was 19.7%, 316 basis points higher than the third quarter of fiscal 2012. As we look to the fourth quarter, please remember that the fourth quarter of 2012 had an extra week, contributing $1.2 billion of sales and $0.07 of earnings per share that will not repeat in the fourth quarter of fiscal 2013. Additionally, we are up against some very tough comparisons, as we had approximately $255 million of storm-related sales in the fourth quarter of 2012 that we don’t expect to repeat. Thus, we had a great third quarter, exceeded our plan in all departments and our business momentum continues. Housing is a bright spot in our economy. As such, we are forecasting our fourth quarter sales and earnings to be stronger than our plan. So today, we are lifting our 2013 sales and earnings per share growth guidance, reflecting our year-to-date performance and our forecast for the fourth quarter. We now expect fiscal 2013 sales to increase by approximately 5.6%, with positive comps on a 52-week like for like basis of approximately 7%. For earnings per share, remember that we guide off of GAAP. We now project fiscal 2013 diluted earnings-per-share to increase approximately 24% to $3.72. This earnings-per-share guidance includes a $6.4 billion of shares repurchases completed in the first three quarters of 2013 and our intent through purchase an additional $2.1 billion in shares during the fourth quarter. We look forward to talking with you at our Investor Conference on December 11th in Boston, where we will update you on our key strategic initiatives and progress towards reaching our longer-term financial goals. We thank you for your participation in today's call. And, Jake, we are now ready for questions.

Thank you. (Operator Instructions) And we'll hear first from Gary Balter with Credit Suisse. Gary Balter - Credit Suisse: Thank you. Congratulations on just another solid, solid -- good quarter. Frank and Carol and everybody, question is -- a couple years ago when you had your last Analyst Meeting you highlighted that you're more focused on GDP as your driver as opposed to PFRI or previous housing metrics that you used. Yet, your numbers have clearly been better than GDP and Carol, you just finished -- you talked about housing being one of the drivers. As you look at your results and you look at the opportunities in housing, are you rethinking the metrics that you used from a macro perspective?

Well, Gary, thanks for your question and for your comments. Thank you very much. We still think GDP is the basis for sales growth, but as you know we have an imperfect but directionally correct model that gives us some insight as to how housing is driving our sales. Now, it’s hard to nail it on a quarter that for the year we feel pretty good about what our model is telling us. So as you know, we’ve just increased our comps for 2013 to 7%. And in case we get there is this way. First, we start with the GDP estimate of around 2%. Then, we add to that what we think housing is contributing to our sales. We look at housing turnover, home price appreciation and new household formation. And when we look at those drivers, we think housing is contributing about 250 basis points of our growth. To that, we add the benefits that we've enjoyed this year from commodity price inflation that’s maybe around 80 basis points for the year. The benefits that we are enjoying from our new expanded appliance assortment that’s another 80 basis points, and then there is about 90 basis from that that’s just coming from other growth via new innovations that we are bringing into stores, great execution by our store associates. But that’s how we get to the 7%.

Now we will take a question from Christopher Horvers with JPMorgan. Christopher Horvers – JPMorgan: Following up on the housing topic, there has been -- some of the metrics recently have slowed or at least perhaps plateauing and even had a lot of rate volatility. So I was curious what your thoughts are around that if you’re seeing anything in your business and [indiscernible] is what you are seeing today simply a lag effect that would suggest that later on as we start to comp the comp and see the lag from slower housing metrics that things are going to be slower in the future?

Chris, one of the things that I think – Carol might want to elaborate on this, is for us a new home construction is less important as a driver of our business than what is happening with existing homes both turnover and most importantly price appreciation. We've long thought that one of the key determinants of our business is do people feel good about investing in their house, because they’re going to see pricing appreciation in their home. And that continues to move forward at a pretty good pace. But Carol, you may want to add into more detail.

Sure. So we’ve regressed ourselves both against 10 year treasuries and 30 year mortgages, to see if there is any sort of correlation and we can’t see it. But all that being said, we do pay the similar attention, as Frank mentioned, to both housing turnover and home prices. And if we were to see housing turnover decline because of a rising rate environment, we would then look to see, what’s happening with the home prices. And if home prices were to decline, then we might have a different point of view on the housing recovery, but we are not seeing that. And for us anyway we think home price appreciation has been the biggest contributor of our sales growth this year. And if you look at the Kasur [ph] data, that shows that home prices are up 10% year-on-year and if you look at the composite index maybe up closer to 13%, but still 25% lower than their peak. So we think that there is a lot of room for recovery and it’s not going to stop in the short term. Christopher Horvers – JPMorgan: And how much of that do you think is that perhaps – is the underinvestment that in the homes of durable products, filled with durable products and if there is this recapture effect, as people had under-spent for a number of years?

That’s a tough one to answer, Chris. I would say many years ago somebody’s comment and economist’s comment to us was look for when consumers start to think as of a granite countertop as an expense rather than an investment. And our hypothesis – there are a lot of things that people want to do with their home, whether it's just improving the livability or actually fixing things up, that is determined by that investment versus expense factor.

[indiscernible] interesting work that shows people who have positive equity in their home and that comes as a result of rising home prices. People who have positive equity in their home spend three times as much as those who have negative equity in their home.

Brian Nagel, Oppenheimer will have the next question. Brian Nagel – Oppenheimer: Question on the pro-customer. The comments you made today in your prepared remarks suggest that the pro-business for you continues to improve. And if I look back over the prior few quarters, it seems like we are seeing a strengthening trend there. The question I have, how should we think about the potential for pro going forward and with the backdrop of improving house environment?

So Brian, I would say, first off, it has been really for the last several years one of our key indicators on recovery, because the pro customer was hit harder and for us during the housing crash, and now is recovery. Going forward and you see it a bit this past quarter, we would expect pro to be growing at or maybe slightly better than the rate of our consumer. But really the catch-up has happened and now they should both be growing probably at about the same rate. And it will probably bounce a bit back and forth depending on the quarter. Second quarter consumer grew slightly more than pro. Third quarter pro grew slightly more than consumer. But the good news is both are experiencing growth. Brian Nagel – Oppenheimer: And then as a quick follow up, if I could, for Carol. If you look at the expense leverage – more like it’s more of a modeling question – if you look at the expense leverage here in the third quarter versus what we saw in the second quarter, it was much better. In the second quarter you called out the -- step up in incentive compensation, I know there is a lot of moving up, was that basically the difference Q2 to Q3?

[Phil], there a number of things that drove the differences between the quarters. In the second quarter of 2012 we had some good guys that didn’t repeat, including positive expense resulting from our casualty reserve analysis. As we look to the third quarter and the fourth quarter of 2013, we are going to have higher expenses related to compensation and we are really thrilled. In fact, if you just put our expenses into perspective for you, if you back to the beginning of the year and the guidance that we gave, you fast forward now to the end of the third quarter. We have increased our sales growth guidance by $2.9 billion. We have increased our expense guidance by $180 million. And of the $180 million, this is all implied in the guidance that I given you, of the $180 million, a third of that is variable compensation, success sharing and bonus. Brian Nagel – Oppenheimer: Very helpful. Thanks.

Our next question will come from Dan Binder with Jefferies. Dan Binder - Jefferies: Hi. Good morning. Congratulations on a good quarter.

Thank you. Dan Binder - Jefferies: My question was regarding the appliance reset. I was wondering if you can give us any more color around how the storage with the full reset are performing in that category versus the storage that have not received the resets, specifically in the appliance business?

Dan, the -- obviously, the customer has responded well to the expanded brands that we have and where we are able to show that footprint, we are seeing very nice lift in those stores. But also remember that all those brands became available to all stores through homedepot.com and as a result, we have seen nice lift really in all stores and seeing category growth in every subset of appliance business. So we are very pleased with how that is going so far. Dan Binder - Jefferies: I guess, I was wondering because, as you look at the two difference sets, the reset obviously is pretty impressive and I’m just curious how many stores you will ultimately put that in and why you wouldn’t put in certain stores versus others, because it seems like it’s a material improvement over what you had?

I mean, we certainly intend to continue to look at the opportunity. We don’t see this as a fit for all stores, but clearly there is opportunity for us to continue to improve in additional stores and we will evaluate that as we continue to watch the performance.

We will talk more about this at our Investor conference because we are going to lay out our goals for ’14 and we will talk to you about our capital where it’s going. Dan Binder - Jefferies: Okay. Great. Thanks.

Now we will take a question from Matthew Fassler, Goldman Sachs. Matthew Fassler - Goldman Sachs: Hello and good morning.

Good morning. Matthew Fassler - Goldman Sachs: A couple of questions. First of all, can you talk to us, how to think about the cadence of the business, given the trend you saw in October and the compares that that you faced here in Q4, maybe any initial comments on the tone of business? November is presumably you are facing kind of the piece of the Sandy compares, it would be very helpful?

Well, sure, as you know, we did a lot better than we thought we would do in the third quarter and the cadence of the business, it’s really our reflection of year-over-year comparison. So we had strong comps, not all three months, but obviously October was our lowest comping months. If you think about that’s when we were up against the Sandy sales in last year and we had $122 million of Sandy sales in October, also, if you think about one of our largest Gulf region. The Gulf region had a terrific month in October, but slowed down year-on-year because the prior year they had double-digit comps coming off of other storm sales. So we were pleased with the cadence of the business and now as we have entered into the fourth quarter and obviously, it’s very early in the fourth quarter, our toughest compare is ahead, our hardest comp of month is the month of December that now -- we lift the guidance today because we think we are going to do better than we originally thought in the fourth quarter and we wouldn’t have done that today, if we haven’t started off ahead of our expectations. Matthew Fassler - Goldman Sachs: Great. And then the second question, as we look at the expectation for EBITD for this year on a full year basis. You are sort of creeping up to that 12% number, probably a little faster than you thought you would when you first issued that guidance, I guess, about a year and a half ago? How does that lead you to think about the long-term target, would probably becomes quite germane as you look towards next year, or expectations probably are going to start to get to that number?

So Matt, the good news is we have our conference coming up in just a few weeks. And so we will be able to lay that out for you and everyone then.

And we will take a question from Aram Rubinson with Wolfe Research. Aram Rubinson - Wolfe Research: A question on the balance of ticket and traffic. I think the last time I saw a ticket and traffic so well balanced, actually if you go back to the fourth year 2000. I was just wondering if you can talk about whether or not you find that as significant and what it says about the business and if you would expect the shape of that to change as this cycle progresses?

Yes, the first comment on this – as I said in my opening comments, we do find that as – see that as a real positive for the balance of the growth of our business. And obviously it’s something we’d like to sustain.

Aram, it’s definitely something we work on consistently to drive both traffic and ticket. And we do think it’s important. Certainly it’s a measure of how well the assortments are performing within the store. Clearly we have seen nice growth in big ticket categories for several quarters in a row now. And again our pro contributes to that, things like kitchens and HVAC, all that has been positive contributors. But likewise, we have been really focused on making sure that we capture the opportunity for the consumer with the smaller tickets as well and some of the key driving factors behind the lower ticket categories, things like bulbs and part tool accessories and fasteners that are being driven, with larger projects and more pro business, as well as great innovation in products like spray paint and hand tools that have allowed us to drive the smaller tickets. So it’s something that we really focus on to try to bring a balanced approach to the business. Aram Rubinson - Wolfe Research: So it’s not easy to stay and stock on a lot of those stuff, smaller ticket items and the comping is hard to do, you must be doing a great job on the supply chain.

The supply chain is definitely helping with awesome in-stock position while leveraging inventory.

We will take the next question from Budd Bugatch with Raymond James. Budd Bugatch - Raymond James: I guess my first question really has to do with the leverage factor, Carol. You talked about 34% for the year. I wonder if you could maybe give us some more color on the fourth quarter, and how should we think about that for 2014 and beyond now?

So if you look to the fourth quarter, our expense growth factor will be higher than it was in the third quarter for a couple of reasons. It will be higher because of incentive comp. We’ve just raised our guidance, which means we are going to blow through with the plan that we put together, which is great news for our store associates and for everyone who is bonus or success sharing eligible. So that will drive year-over-year outperformance and higher expense growth, if you will. We also put some of our – we’ve got a year-over-year comparisons related to China. Last year we had a good guy in China, it was a $20 million good guy and that will not repeat. So if I look at our expense growth factor in the fourth quarter, it will be more like 50% of our sales growth, for the year it’s 34%. And as Frank pointed out, we’ve got an investor conference coming up on December 11 and we will give you longer term point of view on expenses at that time. Budd Bugatch - Raymond James: And my follow-up question, just you talked about – you did better than you expected. Can you give us – can you quantify how much better than you expected, you did in both sales and maybe earnings?

Sure. I am happy to do it from an earnings perspective. Well, I will give two for both, why not. So we beat our sales plan by about $700 million and we beat our earnings plan from an earnings per share perspective by about $0.10 per share.

We will take a question from Dennis McGill, Zelman & Associates. Dennis McGill - Zelman & Associates: First question would just be, as it relates to mix within categories, I am thinking about consumers’ willingness to trade up, can you maybe just elaborate on what you are seeing there and maybe any examples whether you, I guess, a) are seeing mix benefits, and b), if you are, where that might be?

That’s we are seeing customers’ willing to spend particularly where you are bringing innovative product that helps them complete their job faster, saves them money so things like LED which is a significant premium in the market compared to incandescent or halogen for that matter or CFL bulbs were seeing terrific growth in that as customers understand the value proposition. Likewise when you think about tools, lithium continues to grow. It carries a premium price in the market, particularly pro tools because the performance and hence have been there and we’re in about our fourth generation of lithium battery technology over the past five years. So we’ve seen customers step up there. And likewise we’re seeing customers willing to step up and things that we tested, for example a 100 gallon Japanese maple tree for $3,000 this spring. And we were actually quite surprised at how that sold. So there are customers willing to step up and likewise at the same time, we need to be conscious that there are more runners in the market today less space. So we’re also looking at the opening price point or the smaller items within our categories as well. For example, we added in products in our cleaning where we took it out of club packs if you will and brought in singles and we’ve seen nice response with that as well.

This is Marvin. And also double-digit growth in the services installed business reflection our customers willingness to trade up and take on bigger ticket purchases. Dennis McGill - Zelman & Associates: So I guess, it sounds like innovation to big part of it, if I said it different way the better and best portion of the price spectrum gaining share at the expense of good if you look across the store?

No, we didn’t necessarily say that. I think the opportunity that we’ve seen is we have customers willing to step up but not necessarily seen the decline in the opening price point. Dennis McGill - Zelman & Associates: And then second question, the fourth quarter comp which you highlighted seems to be recurring theme that we’ve seen out for a last few years and you continue to rest that comp I think above expectations after the quarters wrapped up, or I guess said another way the fourth quarter seems to be coming a bigger portion of the storage, you get into more décor in holiday items. How should we think about that growing piece of the pie in relations to how you’re approaching merchandising in the categories that are in the box?

Certainly one of things that we’re trying to do is in many ways create our home seasons, if you will. And so we have seen tremendous growth over the past several years with our holiday décor program as a driver of both traffic to the stores, new customers coming in to the Home Depot so that has been nice. We have likewise focused on the opportunity that we have around the gift giving holiday season with Black Friday. We put a bigger effort around that as well, but even with those things said we have a lot of customers doing projects every single day in our stores. And we’re continuing to focus on the core of the store as well, which is a key factor, things like paint remain one of the top categories. Customers need cleaning products. They need bulbs and so on throughout the year. And that’s really been our focus is to drive productivity through our assortment in our base on a consistent basis quarter-over-quarter. Dennis McGill - Zelman & Associates: Great, best of luck guys.

Thanks.

We’ll take a question from Keith Hughes with SunTrust. Keith Hughes - SunTrust: Thank you. My question on gross margin you discussed in the prepared text, the 15 basis point sequential decline, can you give any more detail on what’s happening as in the third and fourth on that metric?

Happy to, in the fourth quarter of 2012, we had 15 basis points gross margin expansion coming from improved strength. As you know, Keith, I -- we’ve been really working on to across much effort to manage our shrink down. We’ve done a great job but we don’t expect that 15 basis points to repeat in the fourth quarter. The other thing that’s happening from a year-over-year perspective is if you look at the nature of the product sold in January, there is margin coming off of that tends to be higher than the nature of product sold both in December and November. In the fourth quarter of last year, we had an extra week, that extra week was in the month of January that had a higher margin rate, well just the year-over-year comparison is causing that 15 basis points decline. Keith Hughes - SunTrust: That 15 basis points is year over year, correct?

It is. Keith Hughes - SunTrust: And then second question -- I believe it was Marvin mentioned earlier about the installed product being strong in the quarter. Is there any specific product that was stronger than other in the last quarter or two?

I mean across the board, when you think about installed businesses, well you think about carpet, you think about kitchens, countertops, we had strength really in the flooring side of the business. We also had strength across the board from a kitchen standpoint. We are pleased with that business. We worked really hard to simplify the entire offering in the process. As you can imagine, big ticket and also big complexity, so we are working really hard on the customer experience and we are going to talk at the investor conference of our vision of how you take our flooring model and how we’ve really transitioned it into three easy steps with the customer. We’re going to try transition more of our installed businesses to similar format. But overall we’re pleased with that entire business platform.

We’ll take the next question from Kate McShane, Citi Research. Kate McShane – Citigroup: I wondered if we could hear a little bit more about ongoing improvements in supply chain. It seemed like you benefited more this quarter with the 22 basis points of gross margin expansion from the supply chain. Can you walk us through if there were any meaningful changes during the quarter?

Well I can start and maybe Mark Holifield will jump in. As I look at it from at least the lens of the CFO we had higher units per hour. We had better outbound and inbound cubic utilization which drove productivity throughout the supply chain. But it didn't just stop us there. We also had about a basis points of benefit coming from lower fuel costs. And then we had about 7 basis points coming -- this is all within the 22 basis points, 7 basis points coming from lower cost within our international distribution channel. Mark, do you want a give any more color?

Yes, Carol has run down the key points there in terms of the key contributors to productivity. I would just add that, that occurred across the board all of our distribution platforms. Our direct-to- store expenses for transportation and our international logistics were all leveraged during the quarter. Kate McShane – Citigroup: And my second question is kind of a longer-term question, Carol, you've always given your opinion on what you thought could be the next leg for growth in the housing market aside from the turnover and higher prices and that was the easing of the availability of mortgages. I just wondered if you could maybe update us on what your opinion is on timing or anything you are hearing with regard to that?

Kate, that's still an opportunity, isn't it? If you think about it the underwriting standards are very tight. There was a recent survey of banks, 79% of the respondents said that they have not loosened up on their underwriting standards. And you can appreciate that in some perspective because they are all faced with higher capital requirements. They are trying to make a buck in a low interest rate environment. So taking on more risk is difficult for these prudential institutions. But you sure need some movement there because that I think would just be a big boost to the steepness of the recovery. We also continue to believe there needs to be a reform with the GAC and there is a lot of dialogue there but nothing really happening. But if we were to get some movement in the space I think we'd see a sharper recovery than what we are experiencing.

Michael Lasser with UBS will have the next question. Michael Lasser - UBS: I'm curious about the week-to- week volatility with the track [ph] that you're seeing in stores. How does it compare to what you saw a year or two ago when the cycle just started to build? And then how does that compare to the depth of the decline? Are you just seeing more consistent traffic build on a week -to- week basis at this point?

Michael, you're getting us -- I don't think we have a good answer for you. In terms of whether -- if I understand your question is whether the delta on traffic week-to-week, whether that differential is narrower with a recovering market or steeper. And it's an interesting question and don't have an answer for you.

Michael, we'll get back to you. Michael Lasser - UBS: Okay. Is it more consistent now so you --

Yes. So, I understand the question. To be honest, we just haven't analyzed that. Michael Lasser - UBS: Okay.

It’s a great question.

We will have to figure out how to have normalize for weather, because that certainly impacts traffic. But we will look at that, it’s a good question. Michael Lasser - UBS: Yeah. Okay. The other question I had, if you look within the basket of Pro customers, is there anything to suggest that you are starting to take share within categories where you have historically underindexed relative to that kind of customer, I think probably the prototypical product is paint, but I am -- presumably there is others as well?

I would say that when we look at our unit productivity across many Pro dominated categories, we are very, very pleased, whether that be things like dimensional lumber, plywood, concrete, we are extremely pleased with the performance and actually the growth in terms of quarter-over-quarter growth as well. And it’s a little bit hard to tell you around share with the Pro because it’s a very fragmented market against a lot of competitors, lumbar building material, supply houses, electrical distributors. And that data is a little bit harder to get at, but given the unit productivity we have, we feel pretty solid, so we think we are taking some share.

Mike, this is Marvin. The only I think I will add to that, the expanded appliance offering gave us the ability with property investors to have a better and more economical offering for appliances and so we are seeing strength in that category. Craig noted that appliances was really strong across the broad. The Pro segment contributed to that, other than that I think, Craig answered the question pretty well. Michael Lasser - UBS: Okay. That's very helpful. Thank you very much.

Yes.

We will now take the next question from Greg Melich with ISI Group. Greg Melich - ISI Group: Hi, thanks. I had a couple of questions. One is on gross margin, just to understand the fourth quarter a bit more. Historically, your fourth quarter gross margin usually gets better sequentially and I would've thought supply chain and other things wouldn't go away. So, I understand last year's comparison, but if you just look at sequentially, why would gross margins be down a little bit, if I take your guidance, right.

Sequentially they will be. I’m just talking year-over-year. Greg Melich - ISI Group: Okay. You are talking you got it.

Yes. Greg Melich - ISI Group: And on online, so if I got the number right, it was up 50%, was that in the prepared comments?

Yes. Greg Melich - ISI Group: Was there acquisitions or anything else driving that or what changed and then how does that impacts traffic and ticket and all the other metrics we talk about because that's a point of revenue?

Yes. We are very pleased with our online performance. We have been talking to a lot about all the investments that we are making from an interconnected experience and it's starting to play out in terms of sales. So as Frank pointed out, about 3% of our total sales are now online, up 50% year-on-year, I can give you a little color as it relates to traffic. Traffic for our company was up 13 million year-on-year, 1 million of that was driven by our online property. But remember, Greg, we look at this totally interconnected, how do we increase [strong growth] [ph] in our stores, how our stores did the same thing for our online presence and it seems to be getting good traction. Greg Melich - ISI Group: And there was no acquisition.

No, there was no acquisition. Greg Melich - ISI Group: Nothing else turned that on. And then lastly Carol, could you update us on credit? You talked about how generally speaking banks have not shifted their underwriting standards. How have you guys been able to maybe help your consumer out to offset that?

Yeah. Well, our private-label grew from a penetration perspective. They grew 68 basis points in the quarter. We are now standing at 23.4%. If you look at the consumer approval rates, they were up 150 basis points year-on-year, so now 69%. The through the door FICO score is 715. So, it’s still pretty doggone high. But I'm glad to see that the approval rates are up. Those lines for consumers are about $5,700 and they're about 26% utilized. On the Pro, with credit, I think is actually more important. We also saw approval rates at 69%. At much higher rate, the average line is around $8,400 and what we're doing for the Pro is a couple of things. It's very targeted, it's very focused, but for our large spend pros, we will work with them to extend the lines. So we work with the underwriter of the program and we will go back and extend the lines. We think that makes good sense. We also have a card called the prox card, which is a payment term card using at least 30 days. For certain select Pro customers, we will extend the payment days to 45 days or 60 whatever it is on a case by case basis. So we are working very closely with the underwriters to give credit to this very important customer.

Next question will come from Scot Ciccarelli with RBC Capital Markets. Scot Ciccarelli - RBC Capital Markets: Hey guys Scot Ciccarelli. The slowdown that we saw in the month of October, was that more on the transaction side or ticket side, because obviously if there was more ticket that might just be a mix issue? And I know you guys have touched a little bit upon big ticket sales during this call, but is there any reason to believe that the momentum we've seen in that kind of category or bucket should flow anytime soon?

So, on the sales slowdown, basically, we are up against $122 million of storm from a year ago. And so that's spread across things like generators and cleaning and those type of categories. Batteries, flashlights, so that's really the pressure that you saw in October and the year-over-year.

So more tickets than transaction.

Yes.

Because those generated are big ticket item.

Big ticket, right. And then as it relates to big ticket in general, as I mentioned earlier, we've had several quarters in a row now of strong growth in big tickets. And don't really see why that would change going forward, we have continued opportunities to grow big ticket categories. Things like appliances, things like kitchens, flooring all those have been key focuses for us to continue to enhance our offerings, our assortments. And we saw strong growth in those categories again.

And Craig if I may we saw an increase in items per basket in the third quarter. That's a second quarter in the row where we’ve seen that and that's a contributor isn't it to the big ticket growth.

It is. And as Marvin mentioned earlier likewise our installed business have seen nice growth as well and we see that continuing going forward.

And that question will come from Eric Bosshard with Cleveland Research Company. Eric Bosshard - Cleveland Research: The improved sales in the second half both 3Q and 4Q relative to your expectations. Any specific categories or areas of the store that you would look at and say we thought this would wouldn't be as good as its turning out to be?

Yes so we did about 400 basis points better from a gross rate perspective in the third quarter within our expectations. And we had thought that we would see a drag from appliances, we thought that we would see commodity deflation and we didn't expect to have a good weather in the third quarter. And when you add that all up, that contributed about 230 basis points of that outperformance, because we didn't get commodity inflation appliances grew and weather was the help. And then the remaining 170 basis points was across the store. Let's say, as Craig pointed out, every department was positive. And as we look to the fourth quarter, we're expecting more of the same. Eric Bosshard - Cleveland Research: Within that, I guess the appliance drag is this the category you expected to be slower or the payback from your expansion initiatives and market share efforts you expected to be slower or what if we drill into that specifically?

Yes, if you remember right, Eric, we had begun to roll out expanded showroom at the end of third quarter last year actually beginning in the third quarter into the fourth quarter and we thought that we would see tougher comps as we came over those rollouts from a year ago. But that wasn't the case. Eric Bosshard - Cleveland Research: And then secondly on the impact of Sandy in October. From a basis point perspective, what was roughly the impact, it looks like its 150 or 200 basis points , was the impact of that ?

Well I will give you the dollar and you can calculate it. Last year we had $122 million of Sandy sale, this year we had $10 million of Sandy sale, it's a net deduct of $112 million.

Well, thank you all for joining us today and we look forward to meeting with you at our conference in Boston on December 11.

Ladies and gentlemen, this will conclude your conference for today. We do thank you for your participation.