Good afternoon, ladies and gentlemen. Thank you for standing-by. Welcome to DXP Enterprises Inc. Third Quarter 2010 Results Conference Call. During today’s presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be open for question. (Operator Instructions) At this time, I’d like to turn the conference over to Mac McConnell, Senior Vice President of Finance and Chief Financial Officer. Please go ahead, sir.

Thank you. This is Mac McConnell, CFO of DXP. Good evening and thank you for joining us. Welcome to DXP's third quarter conference call. David Little, our CEO, will also speak to you and answer your questions. Before we begin, I want to remind you that today's discussion will include forward-looking statements. We want to caution you that such statements are predictions and actual events or results can differ materially. A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis is contained in our SEC filings. I will begin with a summary of DXP's third quarter 2010 results. David Little will share his thoughts regarding the quarter's results, then we will be happy to answer questions. Sales for the third quarter increased 20.1% to $172.2 million from the third quarter of 2009. After excluding Quadna sales of $14.5 million, sales for the third quarter increased 10%. Sales for Supply Chain Services decreased 5.2% to $31.9 million compared to $33.7 million for the 2009 third quarter. Sales of Innovative Pumping Solutions products increased 59.8% to $22.6 million compared to $14.1 million for the 2009 third quarter. After excluding Quadna, IPS sales of $6.8 million, IPS sales for the third quarter of 2010 increased 11.5% from the third quarter of 2009. Sales of MRO products by our service centers increased 23.1% to $117.7 million compared to $95.6 million of sales for the third quarter of 2009. After excluding the Quadna, MRO sales of $7.7 million, MRO sales for the third quarter of 2010 increased 15.1% from the third quarter of 2009. When compared to the second quarter of 2010, sales for the third quarter of 2010 increased 3%. Third quarter 2010 sales for Supply Chain Services increased 1.5% compared to…

Thanks, Mac and thanks to all of the participants on the call today. I would also like to thank all our DXP people for their continued efforts and execution of our sales and operational strategies to be customer driven and also would like to thank our customers who value our expertise at providing customer-driven solutions that helps make them more profitable. Our focus continues to be on operational excellent programs and consolidation of the administrative functions for cost savings, process improvements, reducing working capital requirements as well as decentralizing customer service to capitalize on growth opportunities by being experts at customer-driven solutions. Our management team for DXP service centers, Supply Chain Services and Innovative Pumping Solutions continue to be focused on growing sales, improving EBITDA margins, creating super centers, operational excellence and being experts at customer-driven solutions. DXP service center segment, despite shortages in capital expansion projects, our DXP service center segment emerged from a positive Q3 and continues with an optimistic outlook for Q4. Our service center segment will continue to focus on creating super centers, value added repair services and a regional distribution center opportunity. Several markets have improved, such as oil and gas, oil and gas terminals, chemical manufacturing, mining of gold, platinum, uranium and copper, food and beverage, car manufacturing, grain handling. Conversely, oil and gas production and completion, fabrication and our aggregate markets remain slow. DXP continues to invest in people, operations and sales. All DXP acquisitions and business units combine to provide optimum expertise of market coverage, that means customer-driven solutions for our customers. DXP's whole is greater than the sum of its parts, which results in greater expertise across various markets. This enables us to take market share away from the competition and allows for maximized business opportunities and expanded service areas nationally.…

(Operator Instructions) Our first question is from the line of Matt Duncan with Stephens Capitals Management. Please go ahead. Matt Duncan – Stephens Capitals Management: Good afternoon, guys.

Hey, Matt. Matt Duncan – Stephens Capitals Management: The first question I've got for you, David, I want to talk a little bit more about the southeast expansion. So what product type will this be based around, more bearings and PTs, more pops. What's the sort of product that you're going to enter that market with?

It's going to be the talent that we acquired has got a very strong bearing in power transmission background. But it's our intent to include industrial supplies and some ancillary pump products. Matt Duncan – Stephens Capitals Management: Okay. And then, do you know what the cost would be in the fourth quarter of adding these two locations?

Well, we're going to -- actually there is a business plan and I do not know that. I do know they've already sold $1 million worth of products so far. So I'm pretty positive about the fact that our costs versus profit equation won't last very long. We're really excited about these people. And there is a plan and I just -- I can't remember what those numbers are, but to give you a whole scope of the plan, we're adding -- we're actually taking a old precision location in Atlanta and we're combining that with some new talent and a new location along with the location in Macon, Georgia and Tampa, Florida. And we're also going to be adding somewhere close to 50,000 square feet of regional distribution space. Our east coast folks have suffered from not having a really good supply channel to them, to their customers. And so we're pretty excited about the expansion and we're already seeing some positive results but at this point all we have really done is hired about eight people. Matt Duncan – Stephens Capitals Management: But David, the state that you have got to set aside to be the regional BP, you said it’s about 50,000 square feet to start. Is it going to be easily expandable as you continue to build out the foot print in the southeast?

Yeah. There's more -- it’s a good time to be leasing space. Let's just put it that way. Atlanta has pretty much got a gluten of space. They overbuilt pretty bad and so the rates are a lot cheaper and there's plenty of space. It's in a building that's 200,000 or 300,000 square feet. Matt Duncan – Stephens Capitals Management: Okay.

But I will say, just to discuss this because I think it's an interesting point about our strategy, is when we look at the map and we get with UPS and we look at ground as a way of moving product around because a lot of stuff we have is heavy. We really think we're going to be better suited to having eight to nine 50,000 square feet facilities located across the United States then having four 200,000 or 300,000 square foot facilities. So that's our thinking right now and our thinking is that Houston's, okay, that Omaha is a good location, Atlanta has popped up, if you would -- if you want to be in Atlanta, so we're not going to build any of these things based on where we would -- where they might service the most of our existing customers. We're going to build them in a place where they help us serve the whole United States geography. Matt Duncan – Stephens Capitals Management: I know it's probably still early to have a finalized plan for 2011 but with this philosophy of adding square footage in 2011, do you have any idea of what your CapEx needs may be next year?

They'll be -- again, we rent the building. So we're not going to buy any buildings. And the equipment associated will be probably in the $2 million to $3 million range which -- that's kind of doubling what we normally do. Matt Duncan – Stephens Capitals Management: Okay. By shifting gears for a second looking over at innovative pumping solution, this is the first quarter since 3Q '08 if I'm looking at this correctly that you guys have had organic growth there. It sounds like it's probably more land driven as opposed to offshore, would that be fair?

That's fair. Matt Duncan – Stephens Capitals Management: I mean, do you think you can continue putting up sequentially growth off of this number or was there any thing of size in this quarter that helped or this may be a new base line for that segment to grow off of?

We're not -- by nature, you've been around as long as me. That seems like us, but anyway, back to the point is we did have offshore. We're likely to have a $5 million to $12 million job. Onshore, you don't see those jobs to begin with and so and then offshore because of the moratorium, there's more repair work and enhancement work being done. We're doing stuff offshore but we just don't see any big projects. Even 2011 what we see coming, I think I looked at a whole list of iffy jobs or more. And there wasn’t’ any of them that were really much bigger than $2.5 million. So we're just not seeing the big, big stuff that's out there but there's a lot of small stuff so to answer your first question is, yeah, we think this is a baseline. I think we could build off of this. We're real excited about the onshore activity. The acquisition of Quadna, what it brings to the onshore activity plus what we're already doing and then if onshore -- offshore comes back in a bigger way quicker than we think than that would be another plus. Matt Duncan – Stephens Capitals Management: Okay. And on the super center side, you said you guys had added one this quarter, sounded like that was Dallas that converted over. How long has that particular location sort of been under construction? And do you feel like you're starting to get more attraction with this super center conversion process and a recovering economy and maybe we could see -- I know you said one is how many you converted in the 3Q, one more in the 4Q and that bump up to maybe two or three locations a quarter next year?

Well, am I going to have a slight improvement or a big improvement in the economy would be my question, because I think your question is unfair, because I think its probably been at least 18 months since Dallas started down the path, they are trying to be a SuperCenter and it became a SuperCenter, I just like that was unfair to ask a question on the fact we just came off over recession. So, again we will build these things quicker, if the economy is giving us something if we are having to just fight it out and take market share away from all the modern pops that’s going to be a, we can do that. And we’ve proven that we can do that but that’s a slower process. Matt Duncan – Stephens Capital Management: I obviously understand the economy made it difficult to conversion of locations over. So, it sound likes the people that you needed has been there for a while, they just needed a healthier economy to make the kind of progress they were looking for.

True. Matt Duncan – Stephens Capital Management: Okay. I think the last thing I’ve got and I’ll jump back in queue is on the acquisition front. Sounds like you guys maybe have some things in your side, which you mentioned that you’re seeing some things out there right now, if I am doing my math right your leverage ratio is down to 2.6 times on trailing EBITDA at this point. So do you feel like you got the ability to go do what you want to do from an acquisition perspective at this point and are other things out there that are interesting, you maybe getting close too?

Yeah. On all those questions but I will explain more, we have -- we’re being pretty tough about trying to structure these deals where we actually do get him to take a little bit of stock and a little bit kind of normally talk and maybe 20% to 50% of the price in terms of taking our stock. It accomplishes than I’ve kind of gotten away from earn outs, earn outs have been a pain and they’ve held me back and they’re tough on integration and stuff like that. Especially, when you’re hiring somebody that’s going to stay on, I want them -- they have some skin in the gain. And so that’s kind of the structure that we’re kind of looking at now or it’s cash, it’s a bank debt along with the stock. And they were only paying four, five times EBITDA. So subsequently the bank is pretty happy to loan us some more money, especially if there are only we’re something under the 2.5% thresholds. So it’s kind of a -- it’s a combination that’s working for us right now and people are thinking that DXP is sort of stock price was at low point. And then it’s going to go bigger and better and all that kind of good stuff. So we have a lot of interest. Matt Duncan – Stephens Capital Management: Okay. And I assume that there is probably a smaller acquisition target maybe revenue is below 50 million, it’s going to be willing to take stock, is that probably fair?

Yeah. I know that’s a really good point, Matt, exactly that, yeah if we had to go out and through we’re going to buy a much, much larger company owned by an investment banking borrower some like that, they’re not going to want DXP stock. And so, we would have to go out and raise the equity, but we’re not looking at those right now. What we are looking at is like you said something under 50 million. Matt Duncan – Stephens Capital Management: Okay. Thanks David. Appreciate it. Nice quarter.

Thank you.

Thank you. (Operator Instructions) Next question is from the line of Joe Mondillo with Sidoti & Company. Please go ahead. Joseph Mondillo – Sidoti & Company: Good afternoon guys.

Hi Joe.

Hi Joe. Joseph Mondillo – Sidoti & Company: First question, in David I believe prepared remarks he mentioned sort of an outlook for the fourth quarter saying that you’re expecting a flat fourth quarter, is that on an EPS basis?

I was actually making that comment as it related to Supply Chain Services, which was roughly 20% of our business. And so actually we feel like that the service center segment in the IPS, the IPS will probably be flat also, its 10% of our business. There are some things that could make that better, but we’re not accounting of them and but the service center side of the business, our guys are projecting that it should be up slightly. So, if everybody is flat and they’re up will then both the top-line and the bottom line should be up. Joseph Mondillo – Sidoti & Company: Okay. Next question I just wanted to address was on the gross margin side of the business, what is your historical relationship with your vendors in terms of rebates, how is that trended recently and should we expect any benefits because you should be getting rebates on service center side of the business?

Well Mac, you want to...

I’ll do it. Now again part of it is rate – rebate, the bigger share of rebates only come from bearings and bearings are 30 – 30 or so percent of our business. So, it may not be a big of a factor compared to another competitor that’s primarily bearings and PT distributor. We accrue an estimate of rebates, so there shouldn’t necessarily be a – in our fourth quarter or something jump because we got rebates.

Okay. Lastly well – lastly I would say though that we are performing pretty well and so it’s not going to be – we are not going to be buying ahead or doing anything crazy just to get a few rebates. We feel like most of them that we are going to meet the criteria to get our normal rebates. Joseph Mondillo – Sidoti & Company: Okay. On IPS side, I know you spoke to briefly or somewhat on – could you just address what kind of backlog you have there and how that has trended from I guess the second quarter or the third quarter?

Yeah its -- its not anything well, but its trending up then we don’t normally give back what numbers, but its – but our backlogs is up. Joseph Mondillo – Sidoti & Company: Okay. So your orders are improving on that side of the business?

I think, yeah. Joseph Mondillo – Sidoti & Company: Okay. And then just in terms of the expansion on the service center side of the business, when was the last time you opened new service centers?

We opened a – all before – well, maybe some during 2008, before we knew that the world was coming to an end, was -- we opened up Minot a little before that when the shale play and….

Masport.

I don’t know we opened up very successfully. Joseph Mondillo – Sidoti & Company: So the last time was like 2008.

It’s actually unusual that we opened new locations. Joseph Mondillo – Sidoti & Company: It is.

In 10 years, we probably haven’t opened five new locations. Joseph Mondillo – Sidoti & Company: Okay.

Yeah. Joseph Mondillo – Sidoti & Company: And you spoke to the fact that you are expecting to continue to open some in 2011, do you have a certain number out there that you’re looking at?

To fully develop what we would like to do and – what we’ll call the Southeast, it would be a total of six to eight stores. Joseph Mondillo – Sidoti & Company: Okay.

We will open it in more – in essence opening up 2.5 for enhancing more than... Joseph Mondillo – Sidoti & Company: Okay. And per service center just estimate how much does it cost to open up one service center?

Well, it’s not that expensive from a capital point of view. We’re going to put up $150,000 on forklifts and trucks and excess. So a couple of hundred thousand dollars from a capital point of view. The real expense is people and so to me it’s a function of that we put in several hundred thousand dollars worth of people and how fast that they start producing income that offset that expense and when we did again than I won’t say Grand Prairie, but that is small. But it made money in...

Cleburne.

Cleburne.

Yeah. Cleburne, right. Cleburne made money in four months, but it was an all patch play. It was a lot of activity our customers wanted us to be there. It was very exciting. Minot, to 12 months so its just and it can depend. Joseph Mondillo – Sidoti & Company: Okay. So few hundred thousand upfront cost and then the labor.

Right. Joseph Mondillo – Sidoti & Company: Okay. And then Mac, could you just give me the operating cash flow and CapEx for the quarter, if you have that?

I can give you the CapEx. CapEx was $500,000 for the quarter and our operating cash flow, you’re talking about EBITDA or? Joseph Mondillo – Sidoti & Company: I’m sorry. Yeah. EBITDA is fine.

Okay. Joseph Mondillo – Sidoti & Company: Actually, I think that was in the press release, if you don’t have the full operating cash flow with the working cash flow, working capital?

We haven’t filed our 10-Q. We didn’t disclose it for that. Joseph Mondillo – Sidoti & Company: Okay. That’s fine.

They were somewhat being reduced, so if I gave you the number I have today if possible that could change if I don’t expect it. Joseph Mondillo – Sidoti & Company: Okay. Sure. All right. I think that’s about it. Thanks a lot.

Thank you.

Thank you. Our next question is from the line of Holden Lewis with BB&T Capital Markets. Please go ahead. John Cooper– BB&T Capital Markets: Thank you. Good afternoon. This is John Cooper on for Holden. Just kind of looking a little bit at the SCS segment, I know you guys kind of had mentioned that you’re renegotiating your agreements and something like that and it doesn’t really look like there is too much progress going on there. Are we kind of losing some business there or how is kind of the visibility looking there and what are you kind of expecting that tick up in improve?

I think -- we had a management chain in Supply Chain Services. So, first thing that John Jeffery did who has been with DXP for a long time was to go out and visit all the customers, review all the contracts and look at – and have frank discussions about where we were performing, where we weren’t performing. If we weren’t performing was it because the expectations were too high, etcetera and so we – we haven’t lost any business and our first goal is to make profit, to do everything possible not to lose any business. So that’s been transpiring. Then at the same time we have a – we’ve hired a new guy but we have three other existing outside sales guys that are out being discrete trying to come up with deals, not to mention that the old philosophy of Supply Chain Services was that, we didn’t want the service center people involved. The new philosophy is we do want them involved and we want, we especially want their – as on here is the street telling us look X, Y, Z customers looking at a different supply chain solution and we want to hear about it. Because, in the past if you’re going to include that guy, will they need didn’t tell you about it, because he was going to lose some business supply. So we’re trying to get the tunnel full. We have with new implementations. We have some implementation come in. We’ve been winning a few contracts here lately. And so I think the business needed to have a turnaround first and I think that sort of happened and I think we’re – I think everybody is on the same team or by their own same page and their and they’re pretty fired-up about what they can do. John Cooper– BB&T Capital Markets: Okay. So basically you kind of going to transition now and I mean is like 2011, Q1 2011 kind of like the base point where everything seems to be shifted right and you’ve got things in the right direction?

I think we’re already in the right direction. And I think we’ve already hit our base line, I think – I think it’s we’re expecting things to go-forward and I think we would have felt that in that fourth quarter had it not been for possibility of three strikes. And the fact that it’s just – its just a holiday season than a lot of these manufactures kind of will shutdown and clean things up and they’ll introduce things that this typically aren’t good for that business. John Cooper– BB&T Capital Markets: Right. And are there any I guess dates or benchmarks to look at for these potential strikes?

No. Just – just that they’re supposed to happen in the fourth quarter. John Cooper– BB&T Capital Markets: Okay. John Cooper– BB&T Capital Markets: And is there – and like have a duration or anything like that as far as setting down there anything?

Yeah. You got a better crystal ball than I do. John Cooper– BB&T Capital Markets: Sure.

I don’t know how most of the things work. John Cooper– BB&T Capital Markets: All right. And then just kind of on IPS a little bit, it looks like typically IPS is seen Q4 up sequentially from Q3, it’s kind of where we’ve seen over the last couple of years anyway beside last year obviously and it looks like a majority of the increase in Q3 was more of the acquired revenues, is there any reason to suspect that we’re not going to see that typical seasonal bump up again in Q4?

IPS second quarter to second -- third quarter to second question, our sales grew 20% that had acquired revenues or in there for both periods. John Cooper– BB&T Capital Markets: Right. Moving from Q3 into Q4, typically Q4 is been – generally been stronger than Q3 and I guess you said you’re kind of looking at it to be flattish. Is there any reason to not think that it could be – could improve off of Q3?

We’ll, there is certainly – there is really no reason I know for Q4 to be better than Q3. It used to be that it was better, because we went on to percentage completion and so we had this completed contract thing and we would and everybody would want to get it shipped and done before the end of the year. And so our fourth quarter would be bigger for leverage, but we’ve been on percentage completion out for at least a couple of years. So, I am not -- there really isn’t any real reason that Q4 should be lower or higher. John Cooper– BB&T Capital Markets: Okay.

Not from a market perspective. John Cooper– BB&T Capital Markets: All right. Okay. I think that’s all I’ve got for now. I’ll jump back in queue. Thanks, guys.

All right. Thank you.

Thank you. Our next question is a follow-up from the line of Matt Duncan, Stephens Capital Management. Please go ahead. Matt Duncan – Stephens Capital Management: Hey, guys. I just want to clarify something, David what you were saying about the fourth quarter on sales and earnings being up sequentially, you went through the three different pieces. I understand the revenue side, I just want to make sure on the earnings side that you are accounting for the extra cost associated with the people you brought on board in the Southeast. Taking that into account you would still think there were slight sales improvement at the service centers, would earnings still be up?

Yeah. Matt Duncan – Stephens Capital Management: Okay. So, you guys are looking for a little bit of margin improvement on the base business in the 4Q then?

Well, I am really looking for selling expense to go a little bit on dollars, but I would expect that might go down a little bit as a percent. Matt Duncan – Stephens Capital Management: Okay. Okay. I just want to make sure I have that right. And then I guess the last thing and I think you’ve talked about this a little bit but in terms of sort of the hand you’re being dealt currently by the economy, it sounds like you’re continuing to see underlying improvement in your business. And I would guess at this point at inventory restocking is largely over so you’re probably seeing true demand from your end customers. What customer groups do you think will lead the growth going forward based on what you are seeing today and you gave us some insight into what you saw in the quarter but what end markets are the strongest for you on a go forward basis do you think?

I feel pretty strong about all the commodity, people that being oil and gas, gold, platinum, nickel, copper all the commodity folks are blowing in Downing in trend that produce more. All the some other markets, food and beverage and et cetera they’re just – they are good markets but they’re not going to just lead the way. The chemical market, again, refineries are not doing well but the chemical markets because of the fact that gas prices are so low are doing really well. And then all your grain handling stuff, again, making oil out of corn and stuff like that they’re doing well. Things along housing industries are bad, things that relate to that I think that might be why the aggregate markets down. We talk about oil and gas transport, is been good. Matt Duncan – Stephens Capital Management: Okay. All right. That’s helpful. I just kind of want some insights when or where the growth will come from going forward. I appreciate it. Thanks, David

Sure.

Thank you. Ladies and gentlemen, this does conclude the DXP Enterprises Inc. third quarter 2010 results conference call. Thank you very much for your participation and you may now disconnect.