Good day everyone, and welcome to today’s Home Depot fourth quarter 2012 earnings conference call. [Operator instructions.] Beginning today’s discussion is Ms. Diane Dayhoff, vice president, investor relations. Ms. Dayhoff, please go ahead.

Thank you, Yolanda, and good morning to everyone. Welcome to the Home Depot fourth 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 of merchandising; Carol Tome, chief financial officer and executive vice president, corporate services. Following our prepared remarks the call will be open for analyst 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. Now, 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 will also include certain non-GAAP measurements. Reconciliations of these measurements is included in the release, and is provided on our website. Now let me turn the call over to Frank Blake.

Thank you, Diane, and good morning everyone. Sales for the fourth quarter were $18.2 billion, up 13.9% from last year. Comp sales were positive 7% and our diluted earnings per share were $0.68. Our stores in the United States had a positive comp of 7.1%. Even though we were anniversarying strong sales from last year’s warm weather and storm repair, all three of our U.S. divisions positively comped in the quarter, and 38 of our top 40 markets had positive comps. New York and New Jersey were our best-performing regions, driven principally by Hurricane Sandy related repair activity. And we continue to see recovery in our Florida, California, and Arizona markets. On the international front, our Canadian business had positive comps for the fifth consecutive quarter, and our Mexican business had another quarter of positive comps, making it 37 quarters in a row of positive comp growth. During the quarter, we also opened our 100th store in Mexico, a significant milestone in the growth of our business there. In the U.S., our results benefited from storm repair, but they also reflected an improving housing market. During the housing market downturn and even during the stabilization of the last few quarters, our pro sales performance lagged our consumer sales growth. An encouraging sign in the fourth quarter was that sales to our pro customers grew on particular with sales to consumers. We’re also beginning to see growth within our smaller pro segment. Previously, the growth in our pro business occurred predominantly within the larger pro segment. We had a hypothesis that the growth would start to reach our smaller volume pros as the market recovered, and our fourth quarter results provide at least one data point to suggest that is occurring. Our services business is also recovering. In the quarter we…

Thanks, Frank, and good morning everyone. We are pleased with our performance in the fourth quarter, as sales exceeded our expectations across the country and across all departments. But I would also like to take a moment and recognize the cross-functional efforts of our stores, our merchants, supply chain, and our vendors for meeting the needs of the communities impacted by Hurricane Sandy. They did a great job of working to take care of our customers. The departments that outperformed the company’s average comp for the fourth quarter were tools, lumber, electrical, outdoor garden, lighting, indoor garden, and décor. Flooring, kitchens, bath, plumbing, hardware, paint, and millwork performed positively, and while comp sales in building materials were negative, they exceeded our plan. As Sandy hit in the beginning of the fourth quarter and damaged the shorelines in New Jersey and New York, we saw a sales lift, which Carol will go over in her remarks. Specific categories in the northern division that were first to experience lift after the storm were generators, with a triple digit comp, as well as double digit performance in plywood, safety and security, extension cords, water heaters, and cleaning. These sales can be attributed to the immediate needs of our customers to get their homes back in order. We expect the impact of Sandy to continue at least through the first half of the year. While winter was warmer than average, it wasn’t as warm as 2011, which led to negative performance in exterior project categories in the northern division. However, we saw positive performance in the north, in projects completed inside the home, like laminate flooring, wood flooring, and interior paints. Across all U.S. divisions, the core of the store continues to maintain momentum, with positive performance in plumbing, hardware, and paint departments, as…

Thank you, Craig, and hello everyone. In the fourth quarter, sales were $18.2 billion, a 13.9% increase from last year. Our fiscal year included a 53rd week, which added approximately $1.2 billion in sales to the fourth quarter and the year. The extra week is not included in our comp or same-store sales calculation. Comps were positive 7% for the quarter, with positive comps of 7.2% in November, 13.7% in December, and 1.2% in January. Comps for U.S. stores were positive 7.1% for the quarter, with positive comps of 7.6% in November, 13.9% in December, and 1% in January. As we expected, the deceleration from December to January was due to the following factors. First, January was our toughest compare, as we had a positive comp of 8.8% in 2011. And then second, in 2012, the Christmas holiday fell in fiscal January compared to fiscal December in 2011, which shifted an entire day of sales from a comp perspective. Sales related to Hurricane Sandy were approximately $242 million in the fourth quarter, $112 million higher than the storm sales we realized from Hurricane Irene in the same period last year. As Craig explained, we believe there will be continued tailwinds from storm-related sales into 2013. For the year, our sales increased 6.2% to $74.8 billion. Total company comp sales were positive 4.6%, and comps for U.S. stores were positive 4.9%. Our total company gross margin was 34.9% for the quarter, a decrease of 6 basis points from last year. Five basis points of the year over year decline occurred in our U.S. business, and are explained by the following. First, our shrink efforts continue to gain traction, and we realized 15 basis points of gross margin expansion as a result of better shrink performance than one year ago. Second, we…

[Operator instructions.] We’ll take our first question from Michael Lasser, UBS.

First, I’m wondering if you’re seeing anything in the business today that would speak to the duration and sustainability of the recovery. Obviously you’re seeing really good trends right now. The issue is, how long can it last?

I’m not sure there’s anything directly that we can see that’s going to tell us how long it lasts. What I would say is that so far, what we’re seeing is consistent with, if not slightly better, than what we discussed with everyone back in our June investor conference, where we laid out here’s how we see our market recovering, that there will be a workout stage for a couple of years, before we hit the strong recovery stage. And I’d say what we’ve seen so far is consistent with that, if not slightly positive.

And would you suggest it’s coming from credit conditions easing? Is that in part what’s driving the improvement?

The way we look at it, it’s coming from a number of factors. It’s hard to pinpoint just one. And we hopefully gave a helpful roadmap back in June, but there’s additional household formation, there’s additional housing price appreciation, existing housing turnover is improving. Then credit availability, I’d actually say, is still a bit of a brake on the recovery. But we see a lot of positive signs there.

And maybe I’ll just give you one data point to make this real. We have a directionally correct, but imperfect, model, I would say. But if we look at just housing turnover, and you look at the number of units that turned in 2012, about 400,000 units, you apply an average spend against those units of about $3,500, apply our market share against that, and then we triangulate what it means to our comps, and we think about 50 basis points of our comp growth came from housing turnover. As we look to forecast for 2013, we would expect to get, again, 50 basis points of comp coming from housing turnover.

That’s very helpful. I think your models are probably more directionally correct than our models, so that’s useful. One quick follow up question on the 60-40 breakdown in service. Should we expect that once you reach your targeted goal, that the [keynote] is going to reflect some incremental investment in labor. The fear now would be, as your sales continue to recover like they have, you’re going to have to put more hours in the store to meet that demand.

The first thing I would say is our business model actually reflects adding hours as the sales increase, as it is. Marvin’s here, and he’ll comment on 60-40, but the second thing I’d say within 60-40 is our intention is when we get there - and obviously we’re very, very close - there’s an enormous amount of effort that will then go into optimizing our productivity within each of those groups of customer-facing and tasking. But Marvin, perhaps you want to comment.

We started this in roughly 2009, and within that timeframe, we’ve generated roughly 500 payroll hours that we’ve shifted to the selling floor. And that is a reallocation of payroll, not an incremental add of payroll, which is very beneficial to our financial model. As Frank mentioned, we will have a continuous improvement process, and we’ll hit this milestone before the end of 2013. We’re going to continue to find ways to optimize productivity. We’re going to find ways to get additional hours to the sales floor. So we’re not going to stop. We’re just probably going to not talk about it as much. But we’re going to continue to improve our processes. As Frank mentioned, we have an activity based model, so as sales increase, payroll will be generated. That’s going to be on top of what we can create with our productivity efforts. So we’re very proud of the hard work of the operations team, the men and women in our stores, but we see this as a continuous process.

We’ll take our next question from Matthew Fassler with Goldman Sachs.

My first question relates to the sales forecast. You talk about the relationship between your business and GDP, and you think about the [unintelligible] comp that you just produced in a quarter where GDP wouldn’t come close to explaining the increase. Are there any other reasons other than general conservatism to think about the sales forecast where it is? And do you feel like perhaps you’re understanding some the intrinsic and more sustainable drivers of the business that you saw in Q4?

The first thing I would say is when we build our forecasts, we do not assume any benefit from commodity or currency. So we are neutral from that perspective. And as we look out for 2013, we do look at GDP as the underlying basis for growth. Then we look at housing metrics to determine what we think could happen to the home improvement market, and that’s the basis for the guidance that we gave for 2013 of 3%. Now, I will say to you, look at our performance in the fourth quarter. We exceeded our expectations. We beat our plan by about 4.5%. We can easily explain 200 basis points of that. About 80 basis points, as Craig said, came from commodity inflation, about 70 basis points came from the impact of Hurricane Sandy, and then about 30 basis points came from appliances. The rest is strength across the core of the business. That could suggest that our view is conservative looking ahead, but we’d rather be conservative and react than [unintelligible].

Fair enough. And then the second question I just wanted to ask you, just to the appliance business, that pops up a couple of times in the discussion as a driver of ticket and as a driver of mix impact on margin. Could you talk about any particular efforts that you have, whether you feel like this is a market share gain by the Home Depot, or underlying strength in the appliance market?

We do believe that based on independent tracking we picked up a little share in the appliance business. As you know, we went out and we actually expanded our assortment breadth in this category and we took 120 stores that we completed in the quarter with an expanded offering on the selling floor. And we’re actually very pleased with the results that we’ve gotten from the additional brands that we’ve added to our assortment, as well as those 120 stores. And as a matter of fact, in 2013 we’ll look to add about another 120 stores to that expanded program in store.

We’ll take our next question from Dan Binder with Jefferies & Co. Dan Binder - Jefferies & Company: I was wondering if you can speak to any promotion or price investment year on year, if there was anything in the gross margin that reflected that.

Overall, our activity was comparable with what we had last year, and really the big drivers are what Carol called out in terms of the pressure we saw from mix, in part due to Hurricane Sandy with things like generators and plywood that run significantly below the company average.

We had double digit growth in lumber. We love those lumber sales, but they are low margin. Dan Binder - Jefferies & Company : Any thoughts on early Q1 trends?

Yeah, we’re very pleased with the performance of our business thus far. February is our toughest compare, and we’re quite pleased. Dan Binder - Jefferies & Company : Just one last thing, I was in a store recently - I realize you do lots of tests, but this was a fairly interesting test where you brought flooring to the front of the store, and I was just curious if that’s something that has greater promise based on the results you’re seeing there.

I know there’s flooring product in our [swing] area in certain stores. We do different buys at times on product that can vary by location in the country. But there’s no move right now in total to bring flooring forward.

I think this is consistent with the local store-based team working with the regional merchandising team in the field. Just take a look at market share. They’re responding to market demand, feedback from customers, and what they see as opportunities to grow incremental sales.

We’ll hear next from Dennis McGill with Zelman & Associates. Dennis McGill - Zelman & Associates: Carol, I guess just one question. If you could maybe talk a little bit about the pluses and minuses within the expense side of the business embedded within the 3% comp. And then maybe just talk about, on a [sensitivity] basis, if your forecast has proved to be consensus, and you’re able to do, let’s say, a 4% comp or a 5% comp, how would you expect expense leverage to unfold?

I think I’ll answer the last part of your question first. And here’s just a really nice, easy rule of thumb. For every 50 basis points of comp growth ahead of our guidance, that would equate to $0.05 of earnings per share. So then you can model it however you want to model it. But that’s an easy way to model it. Now, coming to the expense guidance that we gave before 2013, I’m going to give you a bit of a long-winded answer, but hopefully this will help with your modeling. If you look at the total expenses that we reported for 2012, we exceeded our typical rule of thumb, which is that expenses will grow at 40% of our sales growth rate. Even including China, expenses grew at 30% of our sales growth rate. So it was a terrific year from an expense perspective. A few reasons for that. One, at our investor conference back in June, we identified some cost-out opportunities in casualty reserves and other expense items that we actually enjoyed in 2012. So our cost-out teams were doing a great job of just continuing to optimize our productivity, and so we recognized some pull-forward benefit, if you will. We also, on a year over year basis, had some expenses in 2011 that didn’t repeat in 2012. Those expenses would include natural disaster expense. We had about $40 million in 2011 that didn’t repeat in 2012. We had a write off of [chem draw] you may recall, $35 million. That occurred in 2011, didn’t occur in 2012. So there’s some year over year comparisons. The way I’d like you to think about 2013 is simply this. If you take our expense base of a little over $18 billion for 2012, back out the costs associated with China, which is $135 million, back out the expenses associated with the extra week, which we estimate to be $260 million, that gives you a new cost base of call it $17.7 billion. I want you then to add to that expenses associated with some of the acquisitions that we made. That’s between $85 million and $100 million. And then growth. We are going to grow our expenses. Now, they’ll grow slower than our sales growth, but they will grow. So when you add it back up, you walk back up to a cost base in a dollar perspective about the same as it was in 2012, and then the rate of growth is 40% of sales on a 52-week basis. Long-winded answer, I know, but hopefully that’s helpful. Dennis McGill - Zelman & Associates : I think you just saved the analysts a lot of time. [laughter]

Our next question comes from Colin McGranahan with Bernstein.

Just looking at the pace of sales through the fourth quarter, can you help us with that December to January, a huge comp for December ‘14, and a [unintelligible] comp in January. How much was that day shift of Christmas, how much was the very strong seasonal trim a tree holiday sales? Was the hurricane benefit significantly greater in December as January? Just help us reconcile that very, very strong versus a little bit weak given the 300 basis point different in compare.

Well, I’ll start by telling you that we planned to have a negative comp in January. So when we look at the positive comp performance, we were thrilled with the results. Candidly, I didn’t go back and calculate the day movement from one month to another month. We were just so thrilled with the results. Now, from a holiday perspective, Craig, it was a terrific holiday.

Yeah, we had awesome performance in several areas in December that we went hard after, holiday décor being one of those. Our gift centers had strong double digit comp performance. The holiday was actually a double digit comp on a double digit comp from the year before. So it’s a business that we’re building, and it provided some real strength in December.

And there were extras, like the extra time before Christmas. There were other factors that we think contributed to a very strong December. But as Carol said, we were very pleased with January, because as we were laying it out, we thought it would be negative.

And then second question, just thinking about fiscal ’13, Carol, it sounds like you expect moderate gross margin expansion. I would expect that you’re going to have some mix pressure, at least in the first half of the year from some of the lumber and Hurricane Sandy. So if you can walk us through the gross margin drivers. And then thinking about that comp, which sounds like it’s pretty conservative, is there any risk you would be underinvesting in anything? Or can you react pretty quickly as the sales pick up?

Let me answer the latter part of your question first. We do have a conservative point of view here, and as a result, we have a conservative inventory plan. You saw that we drove our inventory turns up 2/10 year over year. We’re not planning to do that in 2013. We’ll get a little productivity off of inventory, of course, because of the great work that’s coming out of supply chain and our stores and our merchants. So we are going to be cautious on the inventory front so that we are ready if the sales are there. In terms of the gross margin expansion, we are planning for gross margin expansion in every quarter. The drivers of gross margin expansion will be continuing benefits from both operational and merchandising initiatives. Shrink has been a real home run for us, but we’re not done. Marvin and his team are doing a great job there. We continue to invest in new tools that are helping us on the assortment of our products. So while there may be some mix pressure, [unintelligible] on our portfolio, and so we feel good about that. And we do have margin benefits coming from the acquisitions. While they’re adding some expenses, they’re also adding gross margin. So when we say moderate, it’s more than the 10 basis points that we reported in 2012. And Craig, I don’t know if you want to give any color on anything here?

Again, we’re looking at how do we continue to drive productivity within our assortments. As Carol mentioned, we’re investing in enhanced tools for our merchants to be able to, in fact, develop our assortment of strategies inside of line structures, as well as clusters across the country, so that we can make sure that we give Marvin and the stores the kind of assortments they need in the appropriate areas. And we have plenty of opportunity to continue to work on that.

We’ll hear next from Kate McShane with Citi.

I know it’s still early days of your buy online, pick up in store initiative and ship to store initiative, but I wondered if it has started to have any impact on the comp at all this quarter, when we can expect that it will start to have an impact.

We’re a ways from having that have an impact on our comp. We view it as really foundational in terms of convenience for our customers, and our focus has been just making sure that we execute this well online and in the stores. And as I said, are really pleased. We track our customer service survey scores on this very closely, and they’ve improved substantially over time. But it’s not a near-term contributor to our comp.

And it is rolled out to every store currently?

Buy online, pick up in store is in every store. Buy online, ship to store is in the process of being rolled out, and will be completely rolled out by the end of the quarter.

I think we’re in 522 stores.

We’ll take our next question from Peter Keith with Piper Jaffray.

I wanted to ask about the SG&A for the fourth quarter. I think if you strip out China and the extra week, it looks like you got about 90-100 basis points of leverage, which is fairly comparable to the earlier quarters of the year. Yet the Q4 comp was surprisingly strong. So was there anything in there that sort of limited the expense leverage that you saw more recently?

We were very pleased with the performance in the fourth quarter. We were $63 million over our expense plan, but the really great news is that’s related to success sharing and bonus for our team. So as Frank mentioned, we had our highest payout of success sharing ever for the back half, over $100 million going to the associates in our stores. So we’re very excited about that.

On a separate topic, I was curious just about the general comp trend through the year. It’s good to hear that everything’s going to be running positive. Is there anything we should think about with Q1 given a little bit tougher compare and [weather] pull forward? That might be one of the weaker quarters of the year, and even now, should we think about Q4 as we look out toward the end of the year?

Yes, think about the shape every year like a bell curve. So the first and fourth quarter will be the lowest-comping quarters of the year.

We’ll hear next from Greg Melich with ISI Group.

I had two questions. First, on cash flow, if you look at your cash from operations guidance, it seems like working capital is at least a few hundred million benefit. If you could help us sort of figure that out. Is it payables? Especially given that there’s some inventory investment? And also capex, why is that creeping up? What’s that on?

First, on the cash flow, we generated from the business about $7.5 billion in 2012. That was $900 million higher than our plan. And if you look at the big contributor to that - lots that goes in and goes out - but the big contributor is the cash that we received from stock option exercises. If you look at the cash flow statement, I think you’d see a line, something like $700 million, almost $800 million from stock option and our employee stock purchase program with cash. We didn’t plan on that. And as we look to 2013, we’re not going to plan on that again. If it happens, that’s good news for everybody. But we’re not planning on that. So year on year, we’re forecasting our cash from the business will be about $7.2 billion. In terms of where we’re investing, think about it broadly. The capital that we’ve targeted for next year of $1.5 billion, 29% of that will go into IT. The rest will go into the business. The IT spend will be flattish year on year, about $430 million. Where the $200 million increase is, year on year, is in key initiatives, and I’ll give you a couple of examples. We’re spending $100 million in our U.S. retail business in support of really value-creating projects like building automation and re-lamping some of our stores, which will have huge IRR. And then were’ investing in our supply chain in support of our interconnected retail business. We need to invest in direct fulfillment, and we are. So our year on year investment in supply chain is up a lot of $60 million. So hopefully that’s helpful.

That’s super-helpful. And then second, and this is maybe a broader question on the consumer, I think Frank, in your prepared comments, you talked about credit availability still being a constraint for the consumer. Could you help us get some insight on that in terms of your own credit penetration growth and the things you’re doing to help the consumer out in this environment?

Our private label card is doing well, and Carol can comment on the increased penetration we’re seeing in the card. We can help with our private label card, as you suggest, but this is more broadly in terms of how customers with their homes, the access they have, either when they’re buying a house or if they’re trying to get a line of credit from the house. And that is quite constrained versus prior times. The average FICO scores for people applying for mortgages now is well over 700, and I think at least for us, as we talk to financial institutions, there’s still a great deal of pressure on just the mortgage lending side of the business.

Our private label penetration jumped in the fourth quarter 93 basis points. So a little over 23%. We were pleased with that. If we look at what’s happening inside the portfolio, our consumer approval rates just sort of flattened out at 68%. That’s down from a few years ago. It’s really the result of the CARD Act. Thinking it would be helpful to consumers, it’s actually limiting credit. On the pro side, what we’re seeing as the pros come back, some of our lower quality pros are applying and are not being approved. Our approval rates for pros is 68%, but that’s down from a year ago, which was north of 70%. So what we’re doing in that regard is having a third party take a second look. And if they take a second look, there may be ways to get credit to these customers. So we’ll do what we can without taking undue risk in the portfolio.

We’ll take our next question from Budd Bugatch with Raymond James.

Carol, you said you have the $4 billion of additional capacity, and you would be willing to do that. Any thoughts on the timing of that given where credit markets are and how you’re thinking about that?

A few thoughts, actually. We’ll be visiting with our board on this topic later this week. I would say we wouldn’t do anything until we filed our 10-K. And that’s in the March timeframe. We’d also look at other big issuers who are coming to market, because we don’t want to crowd the market. We’d like excellent execution, obviously. So you could envision, perhaps, some in the springtime, some in the back end of the year. We do have a little over a billion dollars that comes due in December. That would be an opportune time to refinance that and do something else. So we’ll come out with more specificity once we’ve got it all worked out.

And then just two other quick questions. Sandy gave you a $242 million benefit, I think, in the quarter, and that was a $130 million comparison positive from year over year. How should we think about that for 2013?

First, on the quarter, $242 million gross, $112 million net, year on year comparison. And so if we think about how to think about this for ’13, we use Irene as the basis. Irene, we had $360 million in 2011. For the back half of 2012, we had $312 million. So at least there’s $48 million, we think, of sales that could come our way in 2013. Now, Sandy was bigger than Irene, we understand. But it’s really impossible to project how much more will come our way, just because the nature of the damage was so very different than Irene.

Understood. And my last question is, you us week 53, out of $1.2 billion, and what was week one, and what’s the difference that goes into the comp base this year versus last?

I think it’s $1.6 billion. So the comp base will be higher in the first quarter than it was last year.

Our next question comes from Scot Ciccarelli with RBC Capital Markets.

You made the comment that we’re not at full recovery of housing. What would you expect a full recovery of housing to look like? And what kind of an impact do you think that would have on your business at this stage?

Again, in June we tried to set out what we thought were some of the parameters for the work-out phase and then the full recovery. And some of the determinants of full recovery would be an increase in household formation. So we’re talking about 1.2 million households formed. That would be a driver that you’d see. An increase in housing turnover significant above where it is now. Again, housing turnover is better, but a further increase. And then as we get through to that strong recovery, credit availability becomes a key determinant, and an easing up of credit, and in that scenario we’d see our business performing in the 2-plus basis points over GDP.

And then you made comments regarding improving pro sales, and we also saw a big jump in the big ticket sales. I know some of that stuff was generators and whatnot that contributed to that, but is there a correlation between those two?

Between the improvement in pro sales and the Sandy-related activity?

Not Sandy, but the $900-plus ticket bucket.

Well, the generator activity was really tied to Sandy. The pro, for us, does have a bigger ticket, but I’d say the call out really was more around generators and appliances for us in the quarter.

Here’s an interesting statistic from our consumer insights group. And I think I’m right on this. Our average pro spends a little over $6,000 with us. They shop 60 times a year. So that gives you an idea that they’re shopping frequently. Not such big ticket, but frequently.

We’ll take our next question from Priya Ohri-Gupta with Barclays Capital.

As we think about you progressing towards your leverage target, should we think about you getting to that this year, or is that something we should expect over a multiyear process? And secondly, as the housing market continues to improve, how should we broadly think about the need to maintain A ratings?

Let me answer the last part of your question first. We are committed to the A rating. We think it provides us the financial flexibility that puts us in a good place, and we’re staying there. In terms of your first question, we’ve got $4 billion of capacity today. We don’t see any need for our adjusted debt to EBITDAR ratio to fall. So as we are contemplating raising incremental financing, if we do it this year, we would do no more than $4 million.

We’ll hear next from Brian Nagel with Oppenheimer.

The first question I had is, I guess, a follow up to a couple of the prior questions with respect to the comments you made, Carol, about taking on additional leverage to buy back stock. Just so I’m clear, should we view this as incremental to what you had said before about capital allocation? Or is this consistent with the plans you’ve laid out before? Then along the same lines, to the extent you actually move ahead with this, if you take on more debt, would any buybacks under that fall within the $17 billion authorization you have out there?

Our actions are all under our capital allocation umbrella and the principles that we laid out and reiterated in our press release today. So we have a $17 billion authorization, which we plan to complete by 2015. We will purchase $4.5 billion this year with excess cash, and if we raise additional debt capital, we will buy additional shares. But it wouldn’t increase the authorization, that in would just be within that existing authorization.

And then just maybe a follow up, if I could. I think a lot of us right now are trying to gauge what stage of the housing recovery we’re in, the sustainability of this. Now that we’ve seen better and better results out of Home Depot for several quarters, if you look back at some of the markets, [that were first to] begun to recover, maybe those that were most beaten up through the housing downturn, how would you characterize the performance of those markets for you now versus some of the markets later to the recovery?

The hardest-hit markets, so if you think about Florida and California, have been performing well for us. Slightly above to slightly below the company comp average, Florida performing slightly better, the West Coast slightly worse. We’re starting to see recovery in Arizona, which has been very steady over time, which is very encouraging. And as Carol made the comment a few calls ago, we’re not seeing the enormous variation among all of our markets that we saw during the really tough times in the housing market. We’re now getting more bunched performance on the positive side.

We’ll move next to Eric Bosshard with Cleveland Research Company.

In terms of the sales improvement in Q4, you gave us a little bit of color on some of the components of that. I’m interested within the underlying business if there are categories where you have started to see progress. I know that in appliances that sounds like a response to some good strategies and execution on your part, but are there other categories that you’ve started to see come to life, either in Q4 or the second half of ’12 that you think are notable?

We’re really pleased with the strength across the store. Fourteen or 15 departments had positive comps, seven of our departments ran above the company average. So we start with the fact that we’ve been working hard to develop that strength across the store. I would say that the categories like flooring, like organization, garage organization, we’ve begun to see some real strength in those businesses. So those have been an improvement during 2012. So that’s encouraging to see. But it’s pretty widespread right now, across the core of our store, which is really what we’ve been focused on.

And then as a follow up, as you think about ’13, within merchandising is you see these trends and other trends within the business. Is there anything that you’re doing differently in areas that you’re trying to place a greater emphasis on? Small ticket, big ticket, discretionary, repair? Is there any position of [unintelligible] or inventories that you are considering or implementing in response to what you saw in ’12?

Our supply chain capabilities to make sure we’re in a position to be able to react for those businesses as well. And then we’re continuing to focus on technologies that the customer sees as real advantages. The growth in LED, the growth in lithium technology, the growth in water savings or time-saving products for our consumers and our pros is really… We’ve shared that in the past, and that remains our key focus as we move forward.

Thank you everyone today for being on our call. We look forward to talking with you next quarter, on our first quarter earnings call.