Good day ladies and gentleman. Thank you for standing by. Welcome to the DXP Enterprises Incorporated 2013 Conference Call. During today's presentation all parties will be in a listen only mode. Following the presentation the conference will be opened up for questions. (Operator Instructions). I would like now to turn the conference over to CFO, Mac McConnell. 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 I 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 is contained in our SEC filings, but DXP assumes no obligation to update that information. I will begin with a summary of DXP's third quarter 2013 results. David Little will share his thoughts regarding the quarter's results, and then we will be happy to answer questions. Sales for the third quarter increased 13.7% to $329.7 million from the third quarter of 2012. After excluding third quarter 2013 sales of $28.9 million for businesses acquired, sales for the third quarter increased $10.9 million or 3.8% on a same-store sales basis. This sales increase was primarily the result of improvements in the U.S. economy. Sales of Innovative Pumping Solutions products increased $22.7 million or 58.9% to $61.1 million, compared to $38.4 million for the 2012 third quarter. After excluding 2013 IPS segment sales of $11.9 million for businesses acquired, IPS segment sales for the third quarter of 2013 increased $10.8 million or 28% from the third quarter of 2012 on a same-store sales basis. This increase resulted from increases in capital spending by our oil and gas and mining related customers. Sales by our Service Centers segment increased 9.2% to $232.5 million, compared to $212.9 million of sales for the third quarter of 2012. After excluding 2013 Service Centers segment…

Thanks Mac and thanks to all our participants on our conference call today. I would also like to thank all the DXP people for their efforts and execution of our theme, Battle for Market Share. Given that we experienced the historic flood in Canada, a flood in Colorado, and a federal government that has no [fiscal] [ph] policy, you guys have done a fantastic job. You forecasted improvement in the second half of 2013 and so far you are making your forecast a reality. Sales increased 7% from Q2 of 2013 to Q3 of 2013 sequentially, of which 4% was organic and 3% inorganic and with a net increase in net income of 19%. Again, I want to thank and welcome all of the acquisitions to our DXP family this year and you are a big part of how we gain market share. As predicted, the oilfield service companies are starting to do better. Mining especially copper is active. We see signs of municipal business improving especially in Canada. Midstream oil and gas is very active. Food and beverage appears flat and general industries appears to be slightly down. From a sales and marketing perspective, DXP will continue to battle for market share by making the investments internally and externally to grow our top line. As to the bottom line, EBITDA margins improved in Q3 of 2013 as some of our early investments are beginning to pay off. Expenses are little high by design as we continue to support growth initiatives. Our return on investment capital continues to be strong, 31% after tax. We continue to be focused on asset management and cash flow with DXP’s debt to leverage ratio improving from 1.94:1 in Q2 to 1.81 in Q3 after spending $19 million on acquisitions. Our balance is strong and…

Thank you, sir. We will now begin the question-and-answer session. (Operator instructions) Our first question comes from the line of Matt Duncan with Stephens Incorporated. Please go ahead sir.

Good afternoon, guys. Congrats on another great quarter. First question I’ve got David is on the Innovative Pumping Solutions business. You’ve really built some very good momentum in that business this year and I’m trying to get a read on this, should we expect that to continue to go up, can it sort of maintain the $61 million quarterly revenue run rate that you were on there in the 3Q or how should we be thinking about the revenue outlook for that business?

I believe they are - I believe it remains to be the same or maybe slightly better. We’re optimistic that deliveries and [needs] [ph] and all that we tend to see that particular segment of the business creating a really nice fourth quarter for us historically and that have a lot of good activities, so we feel good about it.

Okay and then looking at the Service Centers business, it was good to see that get back to organic growth again, I guess it was about 2% to 3% year-over-year, organic, do you expect that to continue? It sounds like the energy business is maybe doing a little better for you. Industrial still top but as you look out into future, do you think you can keep that business growing organically?

When we look at our Service Centers, we have to realize that there is really three parts of it. One part is, they help create opportunities for Supply Chain Services. They don’t get credit for that but that’s what they do. They also help IPS business in fact they sell millions of millions of dollars of IPS business. And that is being driven by, we still lack the infrastructure to move all the product because of all the drilling that’s happened, over the last, frac and stuff and drilling that’s happened over the last three years. So when we talk about Supply Chains and we talk about our Service Centers, they’re really, from their perspective really doing good and should be complimented because we rob some of their sales they don’t know who’ll get credit for it, so what’s left is maintenance repair and operating. So it’s a pump in the box, it’s a replacement pump, it’s a bearing, it’s a safety, it’s industrial supplies. And so that’s just kind of sort of an aftermarket piece and it’s harder to grow that piece but it also should be more consistent. So, I think, they feel that they’re projecting things to be good, or good is not a good term because I don’t think things are good until you get the 10% organic growth, but given the environment we’re in, I think they think things were getting slightly better. They projected that they would get slightly better, they did, and so I tend to trust those guys.

Okay, and David last year that business was down sequentially in the fourth quarter which I think is just normal seasonality, should we expect the same type of seasonal downtick this year.

I think I have to think that way only because of the holidays and all the things that come into it, so, MRO's going to more of a function of how many working days and then a lot of people take vacations then, so I think maintenance, repair, and operating by its nature will normally have a small decline, and then it’s offset by the capital project stuff. Remember that our oil and gas segment people, they get paid by how much oil they produce so the more that they do the projects early in the year versus later in the year creates an environment where they place a lot of orders and want stuff delivered before the end of the year. That's really for them to produce income next year and so we can't guarantee how that plays out but that's how it’s played out the last couple of years, so we’ll see.

Moving on, looking at gross margins, those were kind of in the mid 29s I guess again this quarter and I know last quarter you had said that you were hoping it would bounce back up a little bit towards where it was in the first quarter, is there anything going on there with gross margins, should we still expect to see some improvement down the road there.

Well, remember one quarter we had a couple of IPS jobs that were lower margins, so those are gone and so margins in the IPS are improving with the exception that we're working hard with our Canadian buddies to realize they need to make a little more money, but the, and then P2 Todd Hamlin comments about the adoption rate of P2, P2s are solving our pricing software and the key there is that the computer tells you, you ought to sell this for $5 and do they sell it for $5 or something higher, then we give them a brownie point, if they sell it for something lower than that then we measure what the adoption rate is, how many times are they in fact using that price or something higher. So he's referring to the fact that the adoption rate continues to improve so that is helping somewhat mixed IPS jobs versus supply chain services as lower margins so they've got some nice activity that looks like it's in front of them so that will increase the mix for them but probably won't have a big effect on our margins, but nonetheless will have some negative effect on it.

So net, net gross margin can at least stay here but it sounds like IPS margins ought to go up and if that continues to be your fastest growing segment that should pull the whole thing up some, correct?

Right.

And the last thing from me Mac, just on the tax rate, it's been trending down all year, what tax rate should we be using in our forecast going forward.

The same rate that we have for the nine months, if you’re talking about forward being next year?

Yes.

2014, I guess I’d take it up a little bit.

37 maybe I mean it’s been trending sort of 36 I guess this year. So 36, 37 somewhere is the number to use?

Yes.

Thank you, (Operator Instructions) and our next question comes from the line of Joe Mondillo with Sidoti and Company, please go ahead sir.

So first question, just regarding the SG&A cost, you mentioned that same store sales were up about little under 4% but the SG&A went up to 8% and David I think you mentioned possibly that could be related to supporting growth initiatives, just wondering if you could expand on that.

We're actually seeing a little more activity between hiring some season salesmen and of course everybody's fat, dumb and happy then they're not changing jobs, but when they're not making as much money in a soft market then they're more likely to look around. So any time we get the opportunity to hire a technical expert we do it. And course they're supposed to bring a book of business with them and it’s normally about half what they think, but nonetheless we’re happy to get them. So we’re spending money on salesmen, we're still hiring 50 people a month, we just are not throttling back at all on our gross initiatives, even though in good times they would come to fruition much quicker, we're still making progress on but the progress is slower so our expenses are trending up a bit. They are also trending up a little bit because some of the acquisitions we have done have a bit of little higher on the gross margin side and higher on the SG&A side. So that's not a big effect but that's some. And so just a combination of all that, I am not happy when EBITDA margins are below 10%, so I have to look at it and self justify to myself why that's the case and so those kind of things are happening which I am okay with. Joe Mondillo - Sidoti & Company: And then just to switch gears to IPS; you mentioned that 4Q looks pretty good. I think the lead times in that business average much higher than sort of three to five months. So I was just wandering sort of what is the post 4Q backlog sort of look like?

Again I don't think we gave backlog out and if we do I apologize because I don't have that number in front of me. Joe Mondillo - Sidoti & Company: No I guess I am not looking for an actual number per se, but I was just wondering if you could comment on sort of what kind of work you have in place or in the backlog? How does.

Our coating activity is up and our backlog is certainly not down, I don't know that I can speak to it being up substantially or anything but it's certainly is bigger than it's ever been. Joe Mondillo - Sidoti & Company: Let me ask you this, where do you see sort of the size of this business going to? You are at a 60 million run rate here; we would never even thought of that 18 months ago. Where do you see this business in terms of long term size?

Well I guess I will say again bigger as long as we’ve got competitors, we haven't killed anybody lately. But it has a lot of capacity that's built in. Golden, we enlarged its facility. Snyder, we enlarged its facility about a year ago, so they have capacity. Houston has a lot of capacity because remember it used to do most, at 90% what it did it in the Gulf of Mexico and that business hasn't come back yet. Now when I say that, I want everybody to understand that drilling in the Gulf of Mexico has come back. But the building of big platforms and where we play, has not come back. So we'll go out there and drill a dozen wells before they ever consider building a platform. So we're just late in the cycle, because drilling is going on and we’re selling and doing repairs in small step there but none of the big projects because there is really not, besides there is one platform that's being built and it was engineered I guess improperly and so it has had a lot of delays and they are trying to fix it and et cetera. So they haven't needed our type of equipment along that platform yet. So business is coming and it's just a matter of when. So I think as long as, to answer your question, I think as long as onshore, fracking, infrastructure all of that which looks like that's going to be going on for the next 10 years and then you add offshore gulf and then offshore projects that we do in Africa and around the world, to me it can get a lot bigger. Joe Mondillo - Sidoti & Company: What is your capacity? Could you give us an update on sort of what that looks like right now? Where you are running at?

It's really hard to define; I mean we're at 529 , we're running at something close to 2.5 years? Joe Mondillo - Sidoti & Company: I guess at the quarterly run rate that you are at, how much upside do you think there is before you have to, are you anywhere as close to hitting full capacity or is there is a lot upside?

It's just a matter I mean if you have, I am talking to Mac I am sorry, but I’m just explaining to him that, I mean if you have 25 people working in 2.5 shifts, does that limit you from having 50 people that work three shifts? No, so I think there is still, I think if I was just speculating I would think somewhere in the neighborhood but before we have to do some major additions that we would be looking at 30%, 40% growth. Joe Mondillo - Sidoti & Company: I mean you are seeing 25% growth on an annual basis right now, could we get to a point in 12 to 18 months where you may have to start building capacity if we continue at these growth rates.?

Yes. Joe Mondillo - Sidoti & Company: And then just lastly, Mac I was wondering if you could give me the corporate expense and the amortization lines?

Sure. They stated in the press release. Joe Mondillo - Sidoti & Company: Are they? I’m sorry.

Corporate expense for the quarter was $9.486 million up from the second quarter that was 8.430 million. Amortization was pretty flat $3,434 million compared to 3,474 million last year. And corporate expenses are up. The primary factors are we made more money, so incentive compensation was up and health claims were up and health insurance, also all the health claims are in corporate. So as we get bigger and have more employees health claims in corporate are going to be more. And that’s how people suddenly get healthier.

Thank you. And our next question comes from the line of Brandon Hemmelgarn with Shaker Investments. Please go ahead.

Just two questions; if you could discuss how October same store sales compared with our 3.8% year-over-year you saw in Q3 and then second just an update on the M&A pipeline and actives you’re seeing there?

I think I understood the first question and that is just is what’s October telling us and it’s doing good. There is nothing there that surprises us. And then the M&A pipeline is very full.

Thank you. Ladies and gentlemen, this concludes the DXP Enterprises Incorporated conference call. Thank you for your participation. You may now disconnect.