Good afternoon. My name is Mary and I will be your conference operator today. At this time, I would like to welcome everyone to the DXP Enterprises 2006 year-end conference call. (Operator Instructions) It is now my pleasure to turn the floor over to your host, Mac McConnell, Senior Vice President of Finance. Sir, you may begin your conference.

Thank you. Welcome to DXP’s fourth quarter and full year results 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, but DXP assumes no obligation to update that information. I will begin with a summary of DXP's fourth quarter and full year 2006 results. David Little will share his thoughts regarding 2006 results and the future. Then we will be happy to answer questions. Sales for the fourth quarter increased 45% to $79.3 million from the fourth quarter of 2005. Sales by the four businesses acquired in 2006 accounted for $9.2 million of the sales increase. Excluding sales for the four acquired businesses, sales for the 2006 fourth quarter increased 28.2% from the 2005 fourth quarter. Gross profit for the quarter increased 49% from 2005. Gross profit as a percentage of sales increased to 28.3% from 27.5% in 2005’s fourth quarter, as a result of successful acquisitions completed in 2006 and increased sales of higher margin fabricated pump packages. We continue to look for opportunities to acquire high margin, high service businesses which we can grow as part of DXP. SG&A increased only 44.4% compared to the 45% sales increase and the 49% gross profit increase. Interest expense increased 124%, primarily as a result of increased debt incurred to fund acquisitions and internal growth. Long-term debt increased $7.5 million during the quarter, primarily as a result of funding three acquisitions in the fourth…

Thanks, Mac, and I would also like to thank everybody for participating in our first conference call. I would like to first reflect on some of the successes we had in 2006 and then talk about the initiatives we have for 2007. We started 2006 with the reorganization of our top management team so that we could have more focus on the three segments of our business, DXE service centers, innovative pumping solutions, and B2B solutions. I asked David Vinson, who was the Senior Vice President of Operations, to head up innovative pumping solutions, and Mike Wappler, who was Senior Vice President of Sales, to head up B2B solutions. I hired Greg Oliver, Senior Vice President of Operations of DXP Service Centers who came from Home Depot Supply, to team up with John Jefferies, our Senior Vice President of Sales and Marketing to help run the DXP Service Center objectives. The focus by these individuals has made a big difference in the growth and profitability of these segments. We have become more focused. B2B solutions added four new SmartSource sites with two different customers, added two new product categories with an existing customer, and signed several new agreements to implement SmartSource programs in 2007. The group hired a hunter salesmen to call on Fortune 1,000 accounts, ended the year with two-and-one-half implementation teams, so we now can implement two sites at a time, and we also celebrate our 10th anniversary with our first SmartSource client. Innovative pumping solutions created a VP of Sales, added five salesmen to call on engineering contractor firms. Because we did this, we had to add additional fabrications space which double our capacity at our Houston facility. That created a healthy backlog for 2007 and because of manufacturing lead times, most of the orders we received…

(Operator Instructions) Our first question comes from Matt Duncan from Stephens Inc. Please go ahead.

Good afternoon, David and Mac, and congrats on an excellent quarter. A couple of quick questions here. David, I know you guys did not give guidance in the press release and you did not give any here in your prepared comments, but you mentioned that on Tuesday you went through a plan and the forecast for ’07. Is there anything you can tell us about what your expectations are for this year, at least on the top line anyway, on revenue?

Well, our goal is, and I think we have made this public to everybody, our goal is to certainly grow the top line 20% and the bottom line 35%. We do that through the three-pronged growth initiatives that we have. Certainly we have been exceeding that. I would say, not to venture out too far, that we feel pretty strongly that we are going to exceed that.

Okay, fair enough. On the innovative pumping solution side, you mentioned interestingly that it looks like you guys have got enough orders to pretty much take you through 2007. You mentioned that some of the orders you are taking today are probably not going to be fulfilled until 2008, that group is so busy and I did see that the first time I was down there to see you guys, but I am curious if you have any feel for how much you think you can grow those revenues this year. Are we looking at something on par with what you did there in 2006, or could it even accelerate a little bit?

I believe we have told people, Mac, that we grew that business about 80% last year? Again, I think that part of our business is 15%. Is that right?

15% to 20%.

Yes, so I think they feel pretty good about growing that segment of the business about 50%.

Okay. I wanted to ask a little bit too about your acquisition strategy and what the pipeline looks like. I know obviously you guys plan on acquiring across the country to get larger. Can you just comment a little bit on what the pipeline is like right now? Are you seeing a lot of good opportunities? Just talk a little bit about that.

We see more opportunities than we can act upon, and that is two-fold. One is, as you all now, we have not tapped the equity markets for any additional capital, so we have funded all existing acquisitions internally and with our bank revolver. Secondly, the execution of those acquisitions, we have a plan and we stick with that plan and the plan is all about not just acquiring somebody and leaving them alone. We have to grow their top line and we have to grow their bottom line, so we do not really prefer to do so many acquisitions that would just look kind of like a roll-up. So we are very selective. We like to pick high margin oriented companies, companies that can throw off some serious money on the bottom line. We may pay a little more good will for a type of company like that but that has worked really, really well for us. Yet at the same time, we do have a goal of being a national company, so we would entertain a larger acquisition that would get us there fast. I think on several conferences people ask me what my personal goals are and I love this business and I am passionate about it and I really want to be a billion dollar company and to be a major force in this. It is going to take more than your average $20 million revenue company and only doing two or three of those, or only growing 10% to get to that billion dollar number. So we would look at that kind of opportunity also.

Great, and last question here and I will jump back in the queue. Did you guys notice any difference in the growth rate in your non-energy customers business in the fourth quarter? I know some other industrial distributors have mentioned that business was a little bit slower in the fourth quarter than maybe it had been earlier in 2006. Did you see that or do you see your business staying pretty strong, even with the non-energy customers?

First of all, I think 12% organic growth is pretty strong and so I made a comment that we have five regions and the slowest region grew 12% and the highest growth region was about 48%. There are always markets that are going to be better than other markets, regions that are better than other regions. We do feel very fortunate to not be in the home building and the automotive sector.

Sure. I appreciate it. Thanks, guys, and congrats again on a great quarter.

Our next question comes from Andrea Sharkey from Sidoti and Company. Please go ahead. Andrea Sharkey - Sidoti & Company: Good afternoon, everyone. Just follow-up on that last question, if you look at Q1, do you think that -- I mean, we are getting pretty close to the end of it. Is it shaping up to look similar to what you have had in this fourth quarter you just reported or are you seeing any significant differences one way or the other?

I think the only thing that -- everything looks up. Everything looks up so we would anticipate a quarter-to-quarter continuous growth rate and that is certainly our goal. The only thing that makes that not come true at this point, or what we can see is that sometimes we have capital projects, especially on the innovative pumping solutions side, where you might not have several couple-million dollar projects close, and then they close the next quarter. I am not anticipating that to happen in the first quarter. In fact, I think, Mac, we did close a pretty nice job in the first quarter but that would be the only thing that would cause our quarter-to-quarter activity to be a little -- what would the term be, unbalanced or --

Choppy.

Choppy. Choppy might be a good word. Is that fair? Andrea Sharkey - Sidoti & Company: Yes, that’s fair. I definitely understand that. Actually, talking about the innovative pumping and saying that you are booking orders into ’08, is there any plan on your part to even expand your capacity further so that those projects that you are booking out into ’08 you could pull into ’07, or is that more just a function of that is when the customers want the delivery, is ’08?

Well, it is not customer-driven but you are close. It is manufacturing driven. A lot of our manufacturers in the pump side of the industry, we do not see this in other parts but on the pump side of the industry, their delivery of the pump, when we fabricate things we buy a pump, we buy a diesel engine, we do the fabrication of piping controls, but we buy those major components. It is those lead times frankly that are out causing us to be into ’08. From our own point of view, we are running three shifts. A larger capacity and from time to time, that will cut back to two shifts, so we have a lot of flexibility to produce on our end. It is the manufacturers that hold us back. Andrea Sharkey - Sidoti & Company: Okay, that makes sense. And then, talking about the moving towards the super stores, I know we have talked about having, as you mentioned, getting the right people to be able to cross-sell these products. Could you give us an update on how that process is going? Have you been able to successfully find the sales staff that you need to be able to introduce these new product lines to your existing service centers?

The comment is when we have a DXP service center that just sells comps and we are wanting to add bearings and power transmission, our strategy is to go out and find the very best bearings and power transmission salesmen and inside salesperson that is kind of like a small acquisition of those two people. We have the products and they are the ones that are kind of our seed to get started in that business. That is a very strong initiative by all our regional managers. They are supposed to help HR find those kinds of people because they are in the field, they hear from their customer who the very best people are. Everybody has an initiative to truly have a super store, which would be all our products; bearings, power transmission, pumps, safety, industrial supplies, hose, and to have a true super store. Every region is supposed to have at least one of those this year. That is not to be confused with the fact that there will be several others that will be like a bearing and power transmission store that does in fact become a safety store also but it does not have all our products, but now they are a bearing and safety store. So there is incremental market share gain by just doing one product category. Andrea Sharkey - Sidoti & Company: Sure, okay, that’s great. Last kind of clean-up question, could you tell me what your cash flow from operations and your CapEx were for ’06 and what you think your CapEx might be for ’07?

I’m glad someone finally asked an accounting question.

Capital expenditures for 2006 were $2.4 million, and I guess I would assume that for 2007, we would spend that amount or more. And your other question was? Andrea Sharkey - Sidoti & Company: Cash flow from operations for the year, ’06.

On the cash flow, $131,000. Andrea Sharkey - Sidoti & Company: Thank you.

Our next question comes from Paul Resnik from Dutton Associates. Please go ahead.

Congratulations on the quarter. I finally after all this time to come up with a sales target that was so outrageously aggressive that you had a little trouble reaching it but you blew out my earnings estimate anyway. A couple of questions. On RA Mueller, when did they -- was that acquisition in the fourth quarter of 2005?

Yes, it was.

So there was a couple million in revenues there that might have been helped in the comparison. On SmartSource, I am still trying to get a sense here. Certainly it provides a really stable growth opportunity. As you progress there, are the margins continuing to track the general corporate margins or are you seeing some opportunity to do better?

We feel like that they get to the same operating income level but they do it different. The customer typically we will drive down margins a bit and so our margins will be lower but the customer pays for our people. It is on site so it gives us management fees, and then plus the fact that we do not have bricks and mortar, our operating expense is much lower. So we are still trying to -- we still drive a minimum of a 10% operating margin, and so we are very pleased with that business. Like you pointed out, when you land one of those contracts, they are doing business with a couple hundred vendors and then all of a sudden they buy everything from you, so each site is a $1.5 million to -- I don’t know what our biggest site is -- $5 million. It is a huge market share gain and a big win. As I pointed out also, as we celebrate our tenth anniversary of a particular account, that these annuities last for a pretty long time.

Just one out-of-the-box question, innovative pumps is a great business and it is really a cross-site manufacturing business. Do you see any other product lines where that sort of model would make sense?

We are very, very pleased with power machinery that we purchased -- when did we purchase that, end of -- in ’06.

’05.

’05, at the end of ’05, and that business is actually again related to pumps but nonetheless, it is a little different in the sense that instead of being fabrication, it is a remanufacturing facility. We take used equipment and we refurbish it to new and we do it in 12 weeks when new equipment lead times are 52 weeks, and so if you can imagine these are sold on pipelines, a pipeline wanting to get its product flowing cannot wait for 52 weeks. We actually can sell the used equipment at the same price as new and then, of course, because we redid it and remanufactured it and we have really talented people that can do that, we actually tout the fact that the product is better than new.

And the SmartSource runs about 10% of the business?

That is correct.

Okay, I will give other people a chance. Thanks a lot.

(Operator Instructions) Our next question comes from Rick Nelson from J Giordano Securities. Please go ahead.

Good evening. Just one quick question, Mac. Everybody else has asked all the questions I was planning on asking. Just on the other income, $413,000, is that something that is on a more regular basis or is that just one of those quirky things?

It is a one-time gain. It came from the State of Texas decided they wanted one of our buildings for a widened highway.

Okay. I take it though that the momentum, the strong momentum you had going into the fourth quarter, that is just carrying on into this year. Again, you blew my numbers out, and congratulations. Very nice. Thank you very much.

Gentlemen, there appear to be no more questions at this time. I would like to turn the floor over to Mac McConnell and David Little for any closing comments.

Well, this was our first conference so thank you. I hope we did okay. I would like to thank everybody for the questions that they had. We are very excited about our company. We feel like that our employees are putting in 110% and we are winning at the game of business and we look forward to talking to you all again. Thank you very much.

Thank you, everyone. This concludes today’s conference call. You may disconnect your lines at this time and please have a wonderful day.