Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the DXP Enterprises 2013 First Quarter 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 questions. (Operator Instructions) The conference is being recorded today, Wednesday, May 1, 2013. At this time, I would like to turn the conference over to, Mac McConnell, Senior Vice President of Finance and Chief Financial Officer. Please go ahead, sir.

This is Mac McConnell CFO of DXP. Good evening and thank you for joining us. Welcome to DXP’s first quarter 2013 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 could differ materially. A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis this contained in our SEC filings, but DXP assumes no obligation to update that information. I will begin with a summary of DXP’s first quarter 2013 results. David Little will share his thoughts regarding the quarter’s results, then we will be happy to answer questions. Sales for the first quarter increased 15% to $290.1 million from the first quarter of 2012. After excluding first quarter of 2013 sales of $41.1 million for businesses acquired during 2012, sales for the first quarter decreased 1.3% on a same-store sales basis. This sales decrease is primarily the result of two less business based in the 2013 first compared to the 2012 first quarter. Sales for Supply Chain Services increased 1.9% to $38.5 million, compared to $37.8 million for the 2012 first quarter. Sales of Innovative Pumping Solutions products increased 5.3% to $41.5 million, compared to $39.4 million for the 2012 first quarter. Sales by our Service Center segment increased 20% to $210.1 million, compared to $175.1 million of sales for the first quarter of 2012. After excluding 2013 Service Center segment sales of $41.1 million for businesses acquired during 2012, Service Center segment sales for the first quarter of 2013 decreased 3.5%from the first quarter of 2012 on a same-store sales basis.…

Thanks, Mac, and thanks to all our participants on our conference call today. I’m not happy with the fact that our 12 straight quarters of rolling the top-line and bottom-line broken by our Q1 2013 results. Despite the economy slowness, our total company’s sales on a shipment basis which would exclude percentage completion would have been up sequentially 1%, the service center segment was up 1.32%, SCS sales were up 3.24% and without the percentage completion IPS was down 3.55%, percentage completion, helps moves out revenues, when we all know that IPS can be lumpy because of the sizeable orders and the delivery of vendor shipments of major components. When we look at the first quarter of 2012, the economy was growing pretty substantially and it was especially growing in the oil and gas sector, starting in the third quarter of 2012, the economy started to slowdown and continue to slow through the fourth quarter and as best described as choppy for the first quarter of 2013, when we try to evaluate the reasons of it in areas of industry and customer softness, we are perplexed because our customers in the same industry are headed in opposite directions, one customer is growing and charging ahead and the next customer is in a slowdown mode. When we look at DXP sales from January started off strong for January and February finished weak and March was much better, but not as big as usual of which that contributes some of this to the early Easter. The oil and gas market is surprising soft, oil and gas prices are good, manpower and infrastructure are lacking in certain areas, rotating equipment is up quarter-to-quarter and sequentially, bearings and power transmission is down quarter-to-quarter, but up sequentially, this could be a sign that our OEM…

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions). Our first question is from the line of Matt Duncan with Stephens. Please go ahead. Matt Duncan – Stephens Inc.: Good afternoon, guys.

Hey, Matt. Matt Duncan – Stephens Inc.: This first question I’ve got is really just about the trends that you’re seeing in the business. Can you talk, you mentioned that January was a little lower, February is down, I think it was a little better, known as sales per selling day and then maybe March was better than that, what have you seen into April, in that regard?

Well, first of all, I think we had a fantastic January, by the way and especially for our January start of the year, when every company in the world is trying to get everything they can out of the previous year. So and then February was good, but it closed soft and then March was up substantially, but maybe not as substantially as we had hoped and then I would say April has been okay. Matt Duncan – Stephens Inc.: Okay, Mac is there any way that you can quantify the impact of the timing of the Easter holiday, I know you guys take Good Friday off and that would have been one of the fewer selling that you had, this year versus last, but is there anyway to sort of quantify in dollar terms, what the timing of Easter may have done to your revenues this year versus last, and shouldn’t that be a tailwind here in April?

I mean, average sales per day were like $4.7 million for the quarter so that would be the easy math. Matt Duncan – Stephens Inc.: But given that it was the last selling day of the quarter, would that not result and maybe it’s having a bigger impact in just the average day.

Well, if we move to the extent that people took [broadly] and thirsty they were getting ready for a long Easter holiday and as we know Easter it’s a time for family travel so, I would think it couldn’t have held. Matt Duncan – Stephens Inc.: Okay, and then David moving onto the innovative pumping solutions business, it sounds like you are expecting a little bit of a sequential decline there again 2Q versus 1Q, is there anyway to quantify, how much you think it might be down and then it also sounds like you would expect that to bounce back in the back half of the year, it’s been that sort of a fairway to look at the shape of the year there?

I think, our second quarter will be flat with our first quarter and then I were a little concerned about what the economy is doing and why the customers seems to be reluctant to release orders for projects that have been approved. And so I think we have good color on second quarter and probably most of the third quarter. It’s that we’re a little concerned going forward. So all that could change, I mean we did – last quarter we talked about an order in the shale in Alaska of the coast that’s been on hold because of permitting. We expected to get that order in the first quarter we didn’t. We got a $1 million order for some HP-Plus units we got couple million dollar order that I believe lets going into Africa or maybe somewhere. That happened long time, there is large orders that see minimum in the Gulf Coast, but they haven’t released him yet and they really thought that they would. So I think we’re a little more concerned about the reverse where business should be okay next quarter and it may or may not tail off towards the end of the year. Matt Duncan – Stephens Inc.: Okay, but just too early to really tell. It depends on these projects that are in the holding pattern get released or not.

Exactly. Matt Duncan – Stephens Inc.: Okay. And then moving on to the Natpro acquisition, you talked about that a little bit, but I’m hoping maybe you could talk more about the strategy there. Obviously before this deal if I remember correctly through Austin and Belgium you guys only had two locations up in Canada, certainly you can add six more service centres. You’ve got a little bigger footprint, but relatively small but you can add some products to, those guys are a pump distributor, but given that you have a large safety services business in Canada, is there any plan to go in there, and add some safety products to that to Natpro footprint, to try and sell those to the customers that are, or customers of HSE and IPS up there?

I think no, I think the answer for that is no. I think that said, we don’t really have the logistics spot down at this point for sales, safety, supply. We have and so we are safety service company up there and so, services were sold a little different than what our super centers typically do. That said there is some really nice synergies, we are ecstatic about our Natpro is only been in the fabrication, IPS type business for the last couple of years and are still ramping up, and so we think there is best practices there, we think there is things we can do to make them more competitive with our purchasing power of valves and type and things along those lines, so we are really, really pleased with that. And then we know that our bearing business, those in pumps and so there is opportunities along those lines, so there is some nice things that we can do to make Natpro’s gross margins go up and so we are excited about that, they are they have, we are excited about them learning to leverage their national print, footprint a little better they are from the East Coast to the West Coast and they’ve got it all covered. And there is some product lines that we can work on together us obtaining something they have and we obtaining something they have through authorization of that manufacturing, just shipping out of our territory or stuff like that. I don’t want to give anybody that impression because we’re not going to do that, but getting authorized in each others territories. So, there is plenty of opportunity within the rotating equipment division that we’re excited about. Matt Duncan – Stephens Inc.: Okay.

We’d now go on to other products. Matt Duncan – Stephens Inc.: Okay. And a last thing for me and I’ll hop back in queue, the SG&A cost obviously jump quite a bit sequentially you may mentioned that there is, Mac, there is a couple of things going on with healthcare cost and payroll taxes, but it also sounds like maybe there was some headcount addition, David you made the comment that you were below at 10% EBITDA margin this quarter but you are going to fix that in the 2Q, should we take that to mean that you are looking at some fixed cost reductions to help in that regard or do you think it’s really just a matter of leveraging a higher sales number?

That’s a matter of leveraging a higher sales number, I think we add the expense in sales comps after the fact, so I think we will slowdown our growth machine appropriately, but we went into thanking, we knew that the fourth quarter was soft and we knew that the first quarter was going to be soft as well what we didn’t know was really, was the softness that was coming out of the oil field and we didn’t know that the softness would be quite as severe as that ended up being. So I think our headcount, which you know, I got a number somewhere is easily up 40 people or something like, that is – its not that we’re going to cut back issues that will slowdown the growth of our headcount to be more appropriate what the economy give us. Matt Duncan – Stephens Inc.: Okay, thanks for all the color.

Thank you. Your next question is from the line of Joe Mondillo with Sidoti & Company. Please go ahead. Joe L. Mondillo – Sidoti & Co. LLC: Good afternoon, guys.

Hi, Joe.

Hi, Joe. Joe L. Mondillo – Sidoti & Co. LLC: In terms of – I missed when you talked about the IPS profitability and margins, I was wondering if you could just go over that again and if you expect that margin to bounce back going forward?

Yeah, IPS had a couple of jobs, we made lower margins than we expected to make or that typically quote at, one of the particular reason for it and this is just one of those things that happen, so that’s unusual, so we do see margins coming back, we are not trying to cut price to get business, there is plenty of business that we just get the customer to let it release it. Joe L. Mondillo – Sidoti & Co. LLC: Okay, sort of looking going forward are we sort of thinking maybe you high teens, but may be a little under that 20% rate that we saw in the fourth quarter?

I am trying to [rework] on my operating income number here, so I got operating income of IPS in this 20% to 19% range and I think we should there are many reasons to expect that to be lower. Joe L. Mondillo – Sidoti & Co. LLC: Okay.

And somewhere between 18.5 and 20.

Back to the – and I will get close to the tone factor the 2012 operating income levels. Joe L. Mondillo – Sidoti & Co. LLC: Okay, and just could you understand what’s going on IPS and seems like there is certainly a slowdown, what does the backlog look like at the end of the first quarter compared to the end of the fourth quarter, it is sort of flattish and that is why going forward, you sort of thinking a flat second quarter, and then hopefully, we see improvement in the back half.

Yeah we I think in the fourth quarter we said, we had 60 plus backlog, and at the end of the first quarter, we saw a 60 plus backlog. Joe L. Mondillo – Sidoti & Co. LLC: Okay and then in terms of the pieces of that business you go over a lot of different sort of pieces geographically right now. Could you talk about what sort of driving the major part of that business right now is it mostly a U.S. upstream oil and gas, and then you’re expecting that Middle East comes in, Africa comes in, the Gulf of Mexico comes in or you seeing benefits from all those pieces currently?

Well the emerging markets is always part of our plan, but it’s restricted basically to the major oil companies, but customer takes us there, we’re not, we don’t have salesmen in the Mid East or anything like that. So to Chevron or shale somebody says look DXP is our preferred supplier of modular equipment and then we want them to do the work. So that we get pulled there. So it’s a matter where the major oil companies have projects that will drive those sales in those areas. So, and that’s what we call our Gulf of Mexico and offshore industry group of people headed up by Tom Atkinson and group of a people they call them engineering contractors in the major oil accounts. The on land stuff is really done mostly by our service centers and the pump salesman they have in those areas and that’s driven by these shale plays and the infrastructure, it’s not drilling, we’re not typically on the drilling side, we’re on the production side. So, we’re on the small gathering facility in a field or a bigger gathering facility or a terminal or something like that and that’s mostly described is midstream and that infrastructure is very solid, even though drilling rig count has been down, it’s been down for a while. The infrastructure backlog is still there and the companies are having trouble, because a lot of these plays are in places they don’t have big populations, so and it’s certainly of technical people, so there is kind of this backlog of building this infrastructure. So, we’re referring to the fact that the production facility is on the drawing board and it hasn’t been started, because there about behind on their site preparation. And so, they are delaying our shipments to those projects, but that’s going to be strong for quite a long time. Joe L. Mondillo – Sidoti & Co. LLC: Okay. So, even if we don’t see a rebound in drilling or the rig count, you still expect at least a year out of strength in that infrastructure part of the of the market?

Yes, more than a year actually, yes. Joe L. Mondillo – Sidoti & Co. LLC: Okay.

And by the way, I mean, somewhat they still on the fact, I said drilling down, I mean, so its down from 2,000 rigs to 1,700 rigs, there is still 1,700 rigs punched holes out there, so it’s not like the business, it’s not like they’re not building new fields or developing new fields, they are, it’s just that of slower pace than it was a year and half ago or two years ago. Joe L. Mondillo – Sidoti & Co. LLC: Okay, and then just to jump on the SG&A just one last time, as a percent of sales is obviously going up last few quarters, and it seems like you are sort of working, I mean, service centers, organic growth is sort of flat to down this past quarter, IPS seems like it’s going to be flat into the second quarter, it doesn’t seem like we’re going to see the volume improvement substantially anyways until at least sort of the back half of the year. So are we expecting sort of that SG&A as a percent of sales to not sort of tick down until that back after the year.

I think what we said was we had some unusually high items that we hope will not reoccur and that was in healthcare, payroll taxes and high growth rate of our payroll. So… Joe L. Mondillo – Sidoti & Co. LLC: But if your headcount is flat when those costs still remain?

Yes it will, yes and no, I mean we don’t – the healthcare is claim, so I mean, it’s actually…

Yeah, I mean the claims between first quarter and increase from the fourth quarter by 76%, and we didn’t miss out any more people. Joe L. Mondillo – Sidoti & Co. LLC: Okay.

We’re self insured, so w are paying the claims. Joe L. Mondillo – Sidoti & Co. LLC: Okay, okay.

And so that’s way it’s not like where we got a insurance policy over here and it’s just per person kind of deal.

And the payroll taxes compared to a year ago went up substantially as compared to the fourth quarter, it’s normal there are a lot payroll taxes that are based on lower dollars of income and they go down as you go through the year. Joe L. Mondillo – Sidoti & Co. LLC: Okay got you, so that sort of $3 million may become maybe cut in half or

I hope so Joe L. Mondillo – Sidoti & Co. LLC: Okay.

Yes, we certainly hope so. Joe L. Mondillo – Sidoti & Co. LLC: Okay, I’ll hop back in queue, thanks a lot guys.

Bye.

(Operator Instructions) And our next question is from the line of Holden Lewis with BB&T. Please go ahead. Holden Lewis – BB&T Capital Markets: Thank you. Good afternoon.

Hi, Hold. Holden Lewis – BB&T Capital Markets: The gross margin tough quarter of this gross margin did very, very well, yeah I guess you kind of slide in perhaps a little bit of mix, I thought maybe give a little color, Jerzy acquisition there is something else kind of in the mix that we should be aware of, but I was also curious about the pricing software, it seems like that receive some credit for margin improvement in Q4, but you didn’t really state it in Q1, and I’m curious if its, how sustainable this 30.5 to 31 gross margin is, it might trend lower going forward.

Yeah. I’ll start with answering some of it, I mean our margin was higher in the fourth quarter also, and that somewhat coming form the acquisitions that have occurred during 2012, and then addition in Q1 we found that our safety service businesses that we bought in Canada, they’re selling labor and selling equipment rental. And so, when their revenues go up which they did in the first quarter compared to the fourth quarter, their gross profit margin also goes up. And so, some of that if, since the first quarter is their best, it can be their best quarter. There could be a seasonal factor to gross profit that we haven’t experience before. And so, if their sales were to go down in the second quarter with the spring thaw, then their gross profit margin also would be expect to go down with it. And then lastly, I’ll speak to P2. Our compliance to P2 is up over last three quarters, our improvement is almost 1% a quarter. But we have to discount that and only 10% to 15% of our business at this point is being run through P2. So, our next phase is to get a bigger chunk of our business. But we’re just now attacking sort of the smaller accounts in the (inaudible). Holden Lewis – BB&T Capital Markets: So, when you say it has improved to 100 basis points, you’re talking about your margins on that 10% to 15% throughout the 100 basis points or company wide, they’re up a 100 basis points because of?

No, 100 basis points of that 10% to 15%. Holden Lewis – BB&T Capital Markets: For that 10% to 15%, okay. It’s really only getting, okay.

Yeah, we’re only getting, yeah, like 15 basis points though. Holden Lewis – BB&T Capital Markets: All right.

…overall margin enhancement. Holden Lewis – BB&T Capital Markets: So, that gross margin is probably seasonally inflated, do you have a sense of where that goes, sort of in the – sort of balance of the year, as you are getting better feel for steady in business, give a sense of where that goes for the rest of the year?

Well actually like 30%, I can’t promise. There is always just my target, forever in fact, this year it’s going to go down a little bit because of the safety services, there is no question about it. Holden Lewis – BB&T Capital Markets: Got it. And those safety services are in the MRO business, I mean traditionally you have seen the MRO margin increased from Q1 to Q2, but I guess that typical pattern might, might not occur here?

I want to give you, the magnitude of that – let’s say HSE and the Paramedic business up here will have, that’s $125 million worth of MRO business on a yearly basis, so we are talking about a quarter where it goes down. So I think you’ve got to take some percentage of that, so let’s say, it goes down a couple of percentage points, so and the quarter of that would be.

50-50 business I think.

Yeah, its not just a killer, we are talking about. Holden Lewis – BB&T Capital Markets: Got it, okay. And then you touched on some nice sort of boundaries around Natpro, what was the accretion that you are expecting in 2013?

It’s like $0.01 a quarter, at macros it depends what we do with it, if we can get all these synergies expand our pump business then we’ll get more, but right now it’s sort of that stuff.

We don’t limit it, it’s about a penny a quarter or $0.03 to $0.05. Holden Lewis – BB&T Capital Markets: Okay. All right, fair enough. And then yeah, I guess that’s all I have. Thanks guys.

Thank you Holden.

Matt?

Our next question is from a follow up from the line of Matt Duncan with Stephens, please go ahead. Matt Duncan – Stephens Inc: Is there anyway to quantify the Mac you gave us the acquired sales number in the quarter, do you know how much they added altogether to earnings in the quarter?

Okay. Matt Duncan – Stephens Inc: Just sort of what the collective EPS accretion would be?

Okay, yeah, I’ve got that, I want to find it. Matt Duncan – Stephens Inc: While you are at that David, maybe if you can, you said that you expect to close probably three more deals here in 2013, most of the ones you’ve been doing more recently have been anywhere from sort of call it $6 million to $8 million of revenue year all the way up to the HSD deal which was a little bit bigger than usual, but the sweet spot seems to be kind of $10 million in sales to call it $50 million or all three of those probably going to fall in that type of size range? Are there any bigger ones in there?

$10 million to $15 million. Matt Duncan – Stephens Inc: $10 million to $15 million in annual revenues each?

Yeah. Matt Duncan – Stephens Inc: Okay. So, these are smaller transaction that’s you are looking at right now.

Right. And then back to the EPS accretion.

Well I give you this is my math include interest on the acquisitions, and increased amortization of interest in our debt issuance cost that came because of the acquisitions. Matt Duncan – Stephens Inc: Sure.

And other things during the quarter they added a $1.9 million of somewhere between $1.8 million to $1.9 million of pretax income. Matt Duncan – Stephens Inc: Of pretax okay, okay. And the same tax rate, I would assume would apply to those that are applied in the rest of this business.

Yeah. Yes, because it’s the matter of U.S. and Canada normally. Matt Duncan – Stephens Inc: Okay. So that looks it’s about a combined $0.08 of EPS accretion okay. Thanks.

Thank you, ladies and gentlemen. There are no further questions at this time. That does conclude our conference for today. Thank you very much for your participation and at this time, you may now disconnect. Have a great day.