Good day and welcome to The Home Depot Q1 2016 Earnings Call. Today’s conference is being recorded. [Operator Instructions]. At this time, I would like to turn the conference over to Ms. Diane Dayhoff, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning to everyone. Joining us on our call today are Craig Menear, Chairman, CEO and President; Ted Decker, EVP of Merchandising; and Carol Tomé, 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 Investor Relations department at 770-384-2387. Now before I turn the call over to Craig, 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 the factors identified in the release and in our filings with the Securities and Exchange Commission. Today’s presentations may also include certain non-GAAP measurements. Reconciliation of these measurements is provided on our website. Now, let me turn the call to Craig.

Thank you, Diane, and good morning everyone. Sales for the first quarter were 22.8 billion, up 9% from last year. Comp sales were up 6.5% from last year, and our US Stores had a positive comp of 7.4%. Diluted earnings per share were $1.44 in the first quarter. We are pleased with the start of the year. In the US, all three of our divisions posted positive comps in the first quarter, led by our southern division. And all 19 US regions and top 40 markets saw single to low double-digit comps in the quarter. Internationally, our Mexican and Canadian businesses had another quarter of solid performance. Mexico reported positive double-digit comps in local currency, making it the 50th consecutive quarter of positive comp growth. Our Canadian business also posted mid-single digit comps in local currency for a total of 18 consecutive quarters of positive comp growth. While weather had somewhat of a positive impact on our business and certainly drove variability in demand the first quarter was not an early spring story; it was an execution in the core of the store story. We continue to see broad based growth across our store, as both ticket and transactions grew in the quarter. All of our merchandising departments posted positive comps and we saw a healthy balance of growth among both our Pro and DIY categories with Pro outpacing our DIY business in the US. As Ted will detail, our customers continue to respond positively to our deep assortment of trusted brands, as we are the product authority for both our Pro and DIY customers. The Interline integration is progressing nicely. We continue to move forward on a number of exciting sales driven initiatives, and we have outlined a path to truly realize the value of the Interline acquisition and…

Thanks, Craig, and good morning everyone. We had a strong first quarter, driven by continued strength across the store, particularly with our Pro customers, and unseasonally warm February was followed by a more normal but wetter March and April. While weather positively impacted our sales performance in the first quarter, spring has not yet arrived in many of our markets. In the first quarter, total comp transactions grew by 4%, while comp average ticket increased 2.5%. Our average ticket increase was somewhat impacted by commodity price deflation, mainly from lumber and copper. The total impact to ticket growth from commodity price deflation was approximately 15 basis points. Transactions for tickets under $50, representing approximately 20% of our US sales were up 2.7% in the first quarter. Transactions for tickets over $900 also representing approximately 20% of our US sales were up 9.5% in the first quarter. The drivers behind the increase in big ticket purchases were appliances, roofing, sheds and windows, all of which had double-digit comps. The departments that outperformed the company’s average comp where appliances, tools, building materials, lumber, lighting, hardware, mill work and décor. Electrical, paint, flooring, indoor garden, Kitchen and bath, plumbing and outdoor garden had positive comps but were below the company average. Pro heavy categories continue to show great strength, as we saw double-digit comps in fencing, pressure treated decking, boards, fasteners, doors and conduit. In addition, the core of the store continue to perform well and we saw strength in maintenance and repair categories across the country. Tool storage, commercial and industrial lighting, portable power, power tool accessories, hand tools and wiring devices had double digit comps in the quarter. The core categories including garage organization, laminate flooring, landscape lighting, final plank and wood flooring had comps above the company average. Our store…

Thank you Ted and good morning everyone. In the first quarter, sales were $22.8 billion, a 9% increase from last year, driven primarily by positive comp sales as well as the impact of Interline Brands, versus last year, a stronger US dollar negatively impacted total sales growth by approximately 196 million or 0.9%. Our total company comps or same store sales were positive 6.5% for the quarter, with positive comps of 10.2% in February, 6.7% in March and 4.3% in April. Comps for US stores were positive 7.4% for the quarter, with positive comps of 11.8% in February, 7.7% in March and 4.6% in April. We estimate weather-driven demand positively impacted our US sales growth by approximately $250 million. The variability and our comp sales performance during the quarter was due in large part to weather and to the timing of Easter this year versus last year. Our total company gross margin was 34.2% for the quarter, a decrease of 13 basis points from last year. The change in our gross margin is explained largely by the following factors; first, as expected we had 25 basis points of gross margin contraction due to the impact of Interline. Second, we had 12 basis points of gross margin expansion in our supply chain, driven by lower fuel cost and increased productivity. For fiscal 2016, we continue to expect our gross margin rate to be about the same as what we reported in fiscal 2015. In the first quarter, operating expense as a percent of sales decreased by 122 basis points to 20.7%. Our expense leverage reflects the impact of positive comp sales growth along with great expense control. For the year, we now expect our expenses to grow at approximately 35% of our sales growth rate. Our operating margin for the quarter…

[Operator Instructions] And our first question comes from Seth Sigman with Credit Suisse. Please go ahead.

In aggregate it seems like weather did help the quarter, and you talked about 250 million or so, can you elaborate on where you saw that benefit, and if that means you actually pulled some sales forward or do you think that’s just incremental.

So obviously with a warm February, we had a great start to the year and we saw outdoor project business in the north very, very strong. The 250 million that we’ve estimated, that is - it’s kind of hard to understand exactly how much of that is pull forward, but that’s - what we’re estimating is the demand that we saw from the weather benefit, we think there is 40ish million or so seasonal product pulled forward.

And the rest of the outperformance was in building material categories like concrete and pressure treated lumber, so on and so forth. That really is weather driven demand.

And just a follow-up there, does that 250 million consider that spring weather hasn’t arrived in some markets as you alluded to, and would that be factored in to that number?

That’s right. We think we pulled forward two spring related categories $40 million to $50 million. And as you know, I don’t what you’re setting Seth, but as you know in certain parts of the country spring has not yet arrived. So we’re still anticipating a bang up spring quarter.

And just one follow-up on the Pro initiatives here, the extension of credit earlier in the quarter. Can you just talk about how that’s going and how incremental to the number this quarter that may have been?

Yes, we’re very pleased with the new value proposition that we are offering on our private label card for our Pros. You’ll recall that we are now offering 60 days to pay 365 day return and discounts at the fuel pump. What we’re seeing with our Pros is great receptivity; new accounts are ahead of our sales plan which is great news. But Seth remember that we just rolled this out to all stores in January, so there was no measurable impact to the topline because of this, but we anticipate that to come.

Our next question comes from Simeon Gutman with Morgan Stanley.

Just want to clarify something, when we used the word pull forward and if we take the 40 million out, that seasonal. Just thinking about the other part that ‘was pulled forward’ maybe other projects getting done a little earlier, do we know statistically one to three month pull forward. These are projects that presumably could get done in other parts of the year. And where I’m going is trying to think about how that could impact the second quarter versus others later in the year.

Well here’s how we’ve looked at this, we think there was 250 millionish of weather-driven demand. It’s not all seasonal pull forward, this is just activity because of great weather earlier in the quarter, and we’re not rolling that forward, because we anticipated that these were projects that would be completed later in the year and just got done earlier in the year. So we’re not rolling that forward. It will bleed in to Q2, Q3, may be even Q4.

To you point, if somebody was doing a concrete project but maybe they had plan for the summer and they said, hey, look, the grounds not frozen in the north I can do it now, and they do it. It’s hard to tell which quarters it’s come from, but it’s certainly probably the next couple of quarters.

So as we think about the shape of the year and this might help for modeling, we now think that the first quarter will be the highest comping quarter, as a result the first half will be slightly higher than the back half of the year, and if you look at the comps that we are projecting for Q2, Q3 and Q4, we expect them to be in the similar range, not a lot of difference in those comp numbers.

That’s helpful. My follow-up on the online business, I think you mentioned growth of about 21.5%, anything different about the pickup in store percentage that changed and then your comments on the delivery strain maybe from delivering from store, is that because Home Depot is offering the customer the option of where they want the product from or that’s your system that’s choosing to deliver from store.

First of all a comment, the percentage of pickup is around 40% where the customer is choosing the option to pick up their items from homedepot.com in our stores. And as it relates to the delivery, we have piloted the delivery program for a while, we saw mid-single digit growth in deliveries with the pilot, when we went in to additional markets, markets like Atlanta for example. We saw a pretty substantial increase in the customer option to choose that delivery and we’re seeing double digit growth in deliveries.

Next we’ll hear from Michael Lasser with UBS.

Carol, as you mentioned it’s not typical for the company to raise its guidance after the first quarter, and you have seen strong first quarters in the past. So what’s different about what you’re witnessing in the business right now and inspire so much confidence for you to move estimates higher?

It’s really the strength across the store, and as you know when we build our sales plan we use our directionally correct but imperfect sales forecasting model which is an economic driven model. We do not build market share gains in to our forecast. As we look at the performance in the first quarter, clearly there were some share shifts. Look at appliance, Ted called it out, appliances contributed 50 basis points of our comp growth in the first quarter. So we are confident with what we saw in the first quarter and what we’re seeing early in May to roll forward the out performance of the first quarter.

So you mentioned GDP forecast are a little lower, housing is about where you thought it was. So what’s changed is you’re gaining a little bit more market share than you originally thought.

We don’t plan market share as you know, so we believe there were share shifts and that was confirmed by [NAICS] [ph] data that came out that shows that from a census perspective anyway we did grow share. The other thing that we must look at is housing and just from all sorts of things that are happening within the housing market that we haven’t built in to our plan, but we find to be of interest. Here’s the statistic, we’ve seen home equity values increase 94% since 2011. How is that possible? Because home prices are up 25% and people have been continuing to pay down their mortgages. So there’s a wealth affect that’s occurring with home owners. And this wealth effect as we’ve talked at length, if you feel like your home as an investment and no an expense you spend differently in your home, and you can [indiscernible] in our big ticket categories.

And then my follow-up question is on the expense outlook, you’re now expecting expenses to grow at 35% [indiscernible] sales. Is that all due to what happened in the first quarter, or do you expect there to be some expense [good guys] [ph] in the remainder of the year?

Well despite [indiscernible] plan considerably in the first quarter, our total expenses were actually $13 million under our plan. That was driven by lower utilities as you would expect because of warmer weather in February, but also we’re not seeing the kind of pressure on medical as we had anticipated. So now for the full year, we anticipate that our expenses will be lower than our original plan, which is helping tick our expense growth faster down from what we have said at 40% to now 35%.

And next we have Kate McShane with Citi.

I wanted to follow up on the other question that was just asked. Just given some of the earnings that we’ve seen so far for Q1 that the health of the US consumer I think is being called into question somewhat. So I wondered if you could beyond what you’ve already mentioned just talk about the DIY business, and if there’s any read through there to the overall take of the consumer, and just how much of the out-performance of Pro versus DIY is driven versus maybe the housing statistics versus your initiatives?

I would say that when you look at the strength of the business, it really comes across the board. We’re really pleased with the mix of both transactions and ticket growth that we had, it’s something we look for in terms of balancing the business. We see the consumer continuing to engage in big ticket sales with transactions above $900, growing at 9.5% in the quarter. So while our Pro business was strong, and we’re pleased to see that, we’re also very pleased to see the growth in our DIY business. So the balance is what really is, is what we’re striving to achieve and we’re seeing that balance across the store.

And again I go back to the housing data, the housing data suggest that home owners still like they have more value than they did before. Look at negative equity, homes with negative equity have dropped from 22% at the beginning of 2012 to now 8.5%.

And then my second follow-up question is unrelated, I know you’ve spent some time in the prepared comments talking about Buy Online Ship from Store, which I think you’re rolling out by the end of the year. Just wonder if we could have more detail in terms of how much of your merchandise that program will address? Is it going to be eligible for everything that’s online and in the store? How will we expect that to work by the end of the year?

It pretty much is almost everything we sell, whether its online or in store, we’ll be eligible for delivery, and we’ll leverage the supply chain network that we’ve build out to do that in a most cost effective way using our RDCs as flow-through points for product that will come from our distribution points that a customer chooses to have delivered, so definitely a broad approach to the assortment that we carry.

And Scott Mushkin with Wolfe Research, your line is open

I just wanted to go back to the Buy Online and Deliver From Store economics, trying to understand it a little bit more. Our research has suggested particularly the (inaudible) really want to do that. They don’t really necessarily want to pick up in-store. I was just wondering looking at the uptake is exceeding expectations, what are the margins attached to that business.

First I would say that in our business we have a lot of project business. We have a lot of things that are big and bulky, and so that’s why in many ways we’re seeing significant portion of our customers chose to pick up their products in-store and then potentially have it delivered it from store. We also have Pros, who are interested in having the product deliver from store to their job sites. It saves them time, it saves the runners from to come in to the stores overall. And then candidly, we’ve been doing delivery from store for quite some time, for years, and that’s just part of the overall operating cost of doing the business, and so we approach that on a day in, day out basis as part of operating the business and our value proposition for the customer across product takes out a new account.

So refresh my memory do you guys charge for that or is that not charged for?

Yes we do. We charge for it and there’s options for tighter windows where there is a premium paid.

And then I wanted to go into the credit changes extending from 30 to 60 days, and just try to understand a little bit more of the credit limits attached. I know you guys are using a bank to help you with that. What are your upper credit limits, and is there a thought of expanding that out and maybe just a little tutorial on that, that would be great.

Sure. Our private label credit card is underwritten by a third party and on I’ll do some averages and talk to you about outliners. So for our commercial customers these would be our Pros. The average line of credit is $6600, which seems to adequately meet their needs, but we do have some higher spend Pros. So the third party underwriter will extend larger lines, and we have six [build through] lines to many of our customers who ask for those lines. Furthermore, if there is a situation where the credit lines tighten up a bit, we have a second look program with another third person provider that will take a second look at the request and up the line of credit. So we have a number of tools in our toolkit to adequately provide the financing requirements of our Pros. The biggest tool is moving to 60 days, because if you think about it, we’re providing working capital support for them. They are going to get paid by their customers before they have to pay us back.

And I think you said there’s some six figures out there. With the mix of the business are you anticipating that 6600 that you referenced going up meaningfully, and would you guys ever think of taking some of this on your own balance sheet or no?

We’ll let the customers take us where they take us. We want to grow the Pro and if they need more credit, we’re happy to force them in that effort. In terms of taking it on to our balance sheet, we love the arrangement that we have with our third party underwriter today.

And moving on we’ll next hear from Chris Horvers with JPMorgan.

Wanted to just at the risk of beating a dead horse so to speak, follow-up on California and the oil markets, we’ve seen someone like Costco seen some variability in California and they sell a lot of food so it was a bit surprising to us. Are you seeing anything different in those markets that alerts you or causes any concern?

No, overall we’re really not and the area that we watch most closely is Texas. We have 178 stores in Texas. Texas absolutely outperform the company average in the quarter. I think all major markets in Texas outperformed well. Texas clearly has diversified their economy more so over the past few years, which I think is a benefit. Clearly in western Canada we saw some pressure. As you might imagine not quite as diversified environment there. So we haven’t really seen any major shift.

Actually in California Governor Brown just released some [water] restructuring, so we think that would be a good mark for our growing business. So our California business is doing quite well. We did have a pop-up store in North Dakota; we popped it up during the height of the [fracking] days. Chris we’re popping that store down.

It’s a big pop-up.

That’s about the impact really.

Understood, and can you talk about any research that you’ve done around millennials and household formation? Are they coming to form households now, do you think they will act like Gen X did before them and how do you think it impacts the long term outlook of the box and the online business?

We actually have done a fair amount of research here and it was part of our strategic planning last summer, where we had several groups of millennials work on what Home Depot looks like 8 to 10 years out as well. What our research tells us is that basically this is a delayed cycle, that the millennial generation has many of the same desires that generations prior to them have, we’ve seen as household formation goes up roughly a third or so of those formations are happening with millennials at the tail end of that age group. It appears there’s about a six year delayed cycle here. But our research indicates that in many ways they’ll act the same as previous generations.

Yeah, the average age of new home buyers last year was 33 years old, that’s the edge of the millennials. So that another proof of age that at some point they want to own a home.

Yeah, and then one last just clarification question, was there any impact in the monthly because of the Easter shift?

If we look at how we reported comps, and I’m talking to the US now, March was reported was 7.7. If you shift it for like-for-like for April that comp would have been a 9.2. April was reported at 4.6, it would have been like-for-like 3.6.

Our next question comes from Matt McClintock with Barclays.

I was wondering if we could ask a question on appliances. Thinking about the longer term opportunity within that category, particularly now that you’re seeing other channels of retail that are maybe more challenged right now the department stores etcetera; looking at that as also a new growth opportunity, can you maybe just update us on your thoughts and maybe how those thoughts have changed now that you’re seeing more competition in that category?

We haven’t seen the impact of any increase competition in our [finance] business; it’s extremely strong again in the first quarter and that it accelerated as we exited the quarter. We’ve been leaning in to that space as you know, and we’re going to expand the appliance square footage in to another 100 odd stores again this year. So we’re very happy with the results, in fact certain markets some competitors entered the space. We saw significantly higher performance than rest of the country.

And next question in the queue we have Brian Nagel with Oppenheimer.

So my first question with market share, anything as you look at the data to maybe comment to market share one way or the other, and particularly with what seemed to be somewhat of a volatile weather through the period did that impact market share trends at your chain within the channel through the quarter?

I don’t think we really have any way of knowing if weather really impacted share. We’re really focused on making sure that we’re driving every day great value for our customers and trying to bring innovative products that solve problems for them. Ted I hope you have any additional comments, but --.

No, again with the weather has been normal and in fact good are seasonal businesses, so the whole store has been performing and then the things tied more heavily to the consumer in outdoor gardening that has been extremely strong where we have good weather. So don’t know yet if we would have taken any share there. And then right now April in the north and even now a day like today with a lot of rain, again we don’t see great consumer outside sales. But again you don’t know the relative performance at this point.

Got it, that’s helpful. And the second question I have is bigger picture in nature, but one of the questions I get a lot from our clients is, here is Home Depot’s put up great numbers now for a while and how much longer does this persist? And I know an analysis you had talked about it at your analyst meeting and said just to look at the productivity of the store, particularly by category, so maybe as a quick update there, as you look around the store and relative to historic peak levels if you will, where are still the biggest opportunities in the categories to drive increased productivity from here?

I would say that as we look at the business, first of all my starting comment would be, we’re planning a $550 billion market all-in now with the addition of Interline and Plain in the MRO space for multi-family hospitality and institutional. And we own less than 20% of that in total. So we think there’s lots of opportunity to grow. We’ve several initiatives underway and I have both Ann-Marie and Mark Holifield are here. I’ll let them comment, but several initiatives underway to drive productivity as we move forward and coordinated effort between our supply chain and our store operations team.

This is Mark Holifield, we are very pleased with the supply chain Sink initiative. We’ve got rolled pretty much in the southern tier of RDCs with a good deal of our dollar flow on that. One of the things that’s going along with Sink is the floor load process where we’re loading our product under the floor, where previously it was loaded on pallets, and that’s driving tremendous productivity just filling trucks much more full as they depart for stores. So still rolling that out, so still lots of opportunity there.

And in conjunction with that there is tremendous opportunity in the backend of the store. So as Mark talked about how to think, we also focus on getting this product to the shelf. And as we manage the flow of products in the stores, we then really engineer the backend to create a better streamlined process to get the product on the shelf and much quicker as well. So a ton of opportunities there, and in addition we have talked about Buying Online Deliver from Store. We’ve also talked about Buy Online Ship to Store and all those are convenient experiences for the customer and we want to make sure that we lean in and show that we organize or labor round where the customers go in and create an efficient and effective process for them.

And if I could jump in, this sales productivity opportunity is to - as Craig said huge market to plan, lots of room for growth. But if you think about it from pick to drop, we still haven’t fully recovered some of our category. So when I look at productivity still to be recovered special or kitchen, mill work, some of our building materials category still have room to recover from the peak.

The building material categories in lumber, mill work, those were still as Carol said off our ‘06 peak as we exited last year. And it was nice to see those were some of our strongest departments in the first quarter here in 2016. So it’s nice to see larger project business under way.

Your next question comes from Peter Benedict with Robert W. Baird.

In the past you’ve spoken to it’s roughly 25% of your sales mix being in a bucket that you’ve considered at risk of online competition, obviously that’s a big topic right now. Is that still the right way to think about it, and can you give us any color may be on how the products in the bucket have performed relative to the rest of the box or how you’ve been merchandising against that bucket?

Yeah, I would say in general, still a good way to think about it. If you think about those things that carry the highest level of risk would be those that are small package, reasonably high value, easy to ship product. So you think categories like power tools, faucets and so on. As Ted called out, we had a tremendous quarter as it related to tool sales. Quite candidly we’re seeing both channels grow in these categories that represent that 25%. We’re staying very focused on driving great value for our customer every day.

And then Carol maybe just on leverage, is there a scenario where you would be comfortable revisiting that two times leverage (inaudible), what would need to happen for you to even consider something like that?

Peter as you know, our targeted adjusted debt-to-EBITDA ratio is 2. We’re slightly under that, we’re about 1.9 today. We like that too as a guardrail. It provides financial flexibility, but more importantly just we can sleep at night because we don’t have too much leverage as a company, and so we like it. Now it’s not our goal to let that leverage ratio decline, and it will as we earn more. So as you’ve seen us in the past, as the leverage point gets to a certain inflexion point and it infiltrates our selling and so forth, we will raise incremental debt. And you said that to support our share repurchase program.

And next we’ll hear from Dan Binder with Jefferies. Please go ahead.

If we look at the comp store sales to the quarter, there was a little bit of deceleration which I suspect was weather related. I was just curious if you could comment on whether May has picked back up or seeing trends similar to April?

As I said earlier, one reason that we’re confident with our ability to lift the sales for the year is what we’re seeing in May.

And then on the Pro business I know you said it was above the company average, and there is somewhat of an estimate in there. But just curious is the big gap between the DIY and the Pro business widening, stable or narrowing?

Not dramatically different. It was slightly stronger in the first quarter, I think we saw more outdoor project business which can have a tendency to be Pro related if you’re doing things like concrete.

And then lastly on the overtime proposal that’s out there being reviewed, can you just comment on how Home Depot would be able to adjust if it becomes law?

We look at all factors when we put together our plans. Clearly we are aware that this was possible to come, that’s factored in to our guidance.

And Jaime Katz with Morningstar your line is open.

I’m curious about lending standards, you guys have mentioned them in the past, and I’m wondering if there have been any changes particularly if you have them by any sort of demographic. There have been a few articles out recently saying that millennials have had a more difficult time accessing the credit markets.

Well you can look at it through two lenses, first is just call it consumer credit, which may come through bank card or in our case through a private label card. We consumer credit asks are being approved 71% of the time. So that’s a pretty good approval rate. Now I’ll tell you if that was pretty high, its over 700. But that’s a pretty good approval rate and also speak to the type of customers who are shopping inside of our store. And the approval rates of our Pro cards or Pro applicant is about the same. It gets [approval] 70% of the time. Then you need to look at lending standards and for mortgages and lending standards are changing ever so slowly, it’s like a glacier melting. And you can appreciate it why, because financial institutions have higher capital ratios, it’s very hard to make a buck in this rather straight environment. So you can understand why its slow to move. But we’ve factored that in as we think about where our business may go. And if there were to be easing, our underwriting standards for mortgages that would be good news, because the affordability index if you can get a mortgage the affordability index is something like a 170. That’s awesome. So if you can get it approved, you can afford it.

Can you guys offer any commentary on any lessons you may have learned so far from Interline Brands or shared best practices you’ve adopted into The Home Depot model?

The lessons learned would be that our anticipation that we have a customer who has come and made across both businesses would be a clearer learning. The desire for the customer whether it’s an Interline customer to fill in and shop at The Home Depot and/or customers who are shopping in The Home Depot to have a desire to buy through Interline is there. We’re pleased with it, I’ll ask Bill if you have any other comments.

Jaime, Bill Lennie. I think Craig’s exactly right, we’re encouraged by the customer feedback and the advantages they see when we combine Interline and Home Depot. And then the second thing that we’re pleased with is the collaboration we’re seeing within outside sales organization and our ability to join forces and sell across the end markets.

And next we have Mike Baker with Deutsche Bank

Just one or two may be even three follow-ups. One, just to clear on the guidance are you raising the full year guidance because of currency being less burdensome and what you saw in the first quarter? Are you also changing and raising the second, third or fourth quarter guidance or is all the increase just because of what we saw in the first quarter and currency?

Mike the increase is solely related to the outperformance in the United States. The reason that we are no longer providing a range is that the exchange rate that we use for our plan are now about the same as the current spot rate. So no need to provide a range, but we’re just rolling forward our performance except for weather driven demand. We are rolling over the rest of the outperformance.

So no real change in how you would have thought about the second, third and fourth quarter?

That’s right.

Two others; one, Easter so if I understand it, so Easter hurt March, helped April, that’s because of the store - people don’t really shop on Easter. But I would’ve thought that would have been outweighed by people shopping before Easter to do some outdoor projects, but that’s not the case. Easter hurts March and it helped April to shift, did I understand that correctly?

Easter is not a big selling day for the Home Depot.

But again the sales around Easter don’t offset that I suppose?

No, they don’t.

You’ll lose if we (inaudible).

Because it’s a weekend in spring, but again it did impact the (inaudible).

Right understood. And then one last, this is maybe a bigger picture question. But it sounds like you think some of the housing trends are favorable and we agree with that. One thing you look at as an important metric and we agree again is that home price appreciation. But home prices are now pretty close to where they were in 2006, if we think about as the peak year. So how do you think about that? Are we concerned that there’ll be less home price appreciation and then therefore less of a driver to your business?

I think the way we’d look at it and the important factor is, is when home values are positive it’s a good thing for our business. Clearly the customer knew to recover the value of their homes. We’ve seen that recovery obviously take place and improve for a large portion of customers. But as long as home value stay positive it’s a good thing. For years and years home value has grown on an average in the low single digit 1%, 2%, 3%.

And in your view as we are now back towards peak year, your view is that that home price appreciation can continue?

We factor that in to our longer term forecast, and now this year we believe home prices will be up around 5%. It’s important to note that if not fully recovered even with that 5% and it’s certainly different in different parts of the country. So if we take 5% this year and then we take next year maybe 3%, the year on after that, and so it continues to crack the point because it is just ongoing home price appreciation.

Derek we have time for one more question.

Absolutely, our last question for today comes from Dennis McGill with Zelman & Associates.

Just a couple of quick ones; Carol, on the cash flow can you just refresh how we should think about cash flow drop down for the year and working capital as you work through the year?

Yeah, so we think we’ll generate around $10 billion of cash from the business this year. That includes a slightly improvement in working capital principally in inventory turnover. We’re planning to take our inventory turnover up by [10] in 2016.

And then the share transaction that’s greater than $900, you’ve talked about that as around 20% of late. Where did that peek out in the last cycle?

Where did it peak out in 2006?

Just so the sign of big ticket share.

I don’t know. I have to go look at it. I’m not even sure we did that (inaudible).

I don’t know that we did in 2006, but I can tell you that for the last seven or eight, maybe seven years it’s been pretty comparable to that. And I think the other factor to consider is when we look at 2006 and look at kind of peak performance, in our own minds we’re not sure what the peak really was, because in 2006 we actually had negative transactions. We were firing customers. And so we don’t know that we actually - we assume we didn’t actually peak in 2006 the way we should have.

Well, thank you for joining us on our call today, and we look forward to discussing quarter earnings results in August.

And that does conclude today’s conference call. We appreciate your participation.