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    response012010.htm

January 25, 2010

Mr. Jeffrey Gordon

Staff Accountant

Division of Corporation Finance

United States Securities and Exchange Commission

Washington, DC 20549-7010

RE:           DXP Enterprises, Inc.

Form 10-K for Fiscal Year Ended December 31, 2008

Form 10-Q for the period ended March 31, 2009

Schedule 14A filed on April 29, 2009

File No. 0-21513

Dear Mr. Gordon:

I have reviewed the comments contained in your letter to me dated January 11, 2010.  My responses are keyed to your comments.

FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2008

Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 11.

Goodwill and Long-lived Asset Recovery, page 32

1.

In future filings, if DXP has any goodwill, intangible assets or asset groups where DXP has determined that fair value is not substantially in excess of the carrying value and those asset amounts, in the aggregate or individually, could materially impact DXP’s operating results or total shareholder’s equity, DXP will provide the following disclosures:

·

The reporting unit(s)/asset group(s) affected;

·

The percentage by which fair value exceeds the carrying value;

·

A description of the assumptions that drive the estimated fair value;

·

A discussion of the uncertainty associated with the key assumptions;

·

A discussion of any potential events and/or circumstances that could have a negative effect to the estimated fair value.

If DXP has determined that the estimated fair value substantially exceeds the carrying value for all of DXP’s long-lived assets or asset groups, DXP will disclose this determination.  Please refer to Item 303 of Regulation S-K and Sections 216 and 501.14 of the SEC’s Codification of Financial Reporting Policies for guidance.

Item 9A – Controls and Procedures, page 47

2.

In response to comment 2 of your letter January 11, 2010, please see Item 9A of the draft of a proposed amendment to DXP’s Annual Report on Form 10-K on Form 10-K/A for the year ended December 31, 2008,  and Item 4 of the drafts of proposed amendments to DXP’s Quarterly Reports on Form 10-Q on Forms 10-Q/A for the quarterly periods
ended March 31, 2009, June 30, 2009 and September 30, 2009, attached as exhibits to the letter.

FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 2009

Item 6 – Exhibits

Exhibit 32.1 – Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

3.

In response to comment 3 of your letter dated January 11, 2010, please see the draft of the proposed Amendment No. 2 to DXP’s Quarterly Report on Form 10-Q, as amended by Amendment No. 1 on Form 10-Q/A, for the quarterly period ended March 31, 2009, attached as Attachment II to this letter.

Please contact me at 713-996-4897 if you have any questions regarding this letter or to confirm that the staff will have no further comments of our filing.

Sincerely,

/s/ Mac McConnell

Mac McConnell

Senior Vice President & CFO

MM:sb

Attachment I

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K/A

Amendment No. 2

(Mark One)

[X]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.  For the fiscal year ended December 31, 2008

or

[   ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from

to

Commission file number 0-21513

DXP Enterprises, Inc.

(Exact name of registrant as specified in its charter)

Texas

76-0509661

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

7272 Pinemont, Houston, Texas 77040

(713) 996-4700

(Address of principal executive offices)

Registrant’s telephone number, including area code.

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.01 Par Value

NASDAQ

(Title of Class)

(Name of exchange on which registered)

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes [  ]   No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes [  ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.  Yes [X] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  (See definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act).

Large accelerated filer [  ]                                                                                                                     Accelerated
filer [X]

Non-accelerated filer [  ] (Do not check if a smaller reporting company)                                                                                                                                Smaller
reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]

Aggregate market value of the registrant's Common Stock held by non-affiliates of registrant as of June 30, 2008:  $176,693,573.

Number of shares of registrant's Common Stock outstanding as of March 13, 2009:  12,869,304.

Documents incorporated by reference: Portions of the definitive proxy statement for the annual meeting of shareholders to be held in 2009 are incorporated by reference into Part III hereof.

EXPLANATORY NOTE

The Company is filing this Amendment No. 2 to its Annual Report on Form 10-K for the year ended December 31, 2008, as filed with the Securities Exchange Commission on March 16, 2009.  The sole purpose of this amendment is to disclose the identification of a material weakness in the Company’s general computer control environment.  Management’s
Report on Internal Control and Item 9A have been revised to report the Company has not maintained effective internal control over financial reporting as of December 31, 2008, based on a criteria established in the COSO Framework.  The Report of Independent Registered Public Accounting Firm on Internal Controls has been revised to report the Company has not maintained effective internal control over financial reporting as of December 31, 2008.  The Report of Independent Registered Public Accounting
Firm on Financial Statements, with revised dating, and a currently dated  Consent of Independent Registered Accounting Firm have been included with this amendment. .  Additionally, in connection with the filing of this amendment and pursuant to SEC rules, the Company is including currently dated certifications.  This amendment does not otherwise update any exhibits as originally filed and does not otherwise reflect events occurring after the original filing date of the Annual Report
on Form 10-K for the year ended December 31, 2008.

TABLE OF CONTENTS

DESCRIPTION

Item

Page

PART 1

1.

Business

3

1A.

Risk Factors

7

1B.

Unresolved Staff Comments

8

2.

Properties

8

3.

Legal Proceedings

9

4.

Submission of Matters to a Vote of Security Holders

9

PART II

5.

Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

9

6.

Selected Financial Data

11

7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

11

7A.

Quantitative and Qualitative Disclosures about Market Risk

19

8.

Financial Statements and Supplementary Data

20

9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

47

9A.

Controls and Procedures

47

9B.

Other Information

47

PART III

10.

Directors, Executive Officers, and Corporate Governance

48

11.

Executive Compensation

48

12.

Security Ownership of Certain Beneficial Owners and Management

 and Related Stockholder Matters

48

13.

Certain Relationships and Related Transactions, and Director Independence

48

14.

Principal Accountant Fees and Services

48

PART IV

15.

Exhibits, Financial Statement Schedules

49

Signatures

53

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements can be identified by the use of forward-looking terminology such as “believes”, “expects”, “may”,
“estimates”, “will”, “should”, “plans” or “anticipates” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy.  Any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and actual results may vary materially from those discussed in the forward-looking statements as a result of various factors.  These factors
include the effectiveness of management’s strategies and decisions, our ability to affect our internal growth strategy, general economic and business conditions, developments in technology, our ability to effectively integrate businesses we may acquire, new or modified statutory or regulatory requirements and changing prices and market conditions.  This report identifies other factors that could cause such differences.  We cannot assure you that these are all of the factors that could
cause actual results to vary materially from the forward-looking statements.  We assume no obligation and do not intend to update these forward-looking statements.

PART I

This Annual Report on Form 10-K contains, in addition to historical information, “forward-looking statements” that involve risks and uncertainties. DXP Enterprises, Inc.'s actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed in "Risk Factors", and elsewhere in this Annual Report on Form 10-K. Unless the context otherwise requires, references in this Annual Report on Form 10-K to the "Company" or "DXP" shall mean DXP Enterprises, Inc., a Texas corporation, together with its subsidiaries.

ITEM 1.  Business

DXP was incorporated in Texas in 1996 to be the successor to a company founded in 1908.  Since our predecessor company was founded, we have primarily been engaged in the business of distributing maintenance, repair and operating (“MRO”) products, equipment and service to industrial customers.  We are organized
into two segments: MRO and Electrical Contractor.  Sales and operating income for 2006, 2007 and 2008, and identifiable assets at the close of such years for our business segments are presented in Note 15 of the Notes to the Consolidated Financial Statements.

The industrial distribution market is highly fragmented. Based on 2007 sales as reported by industry sources, we were the 22nd largest distributor of MRO products in the United States. Most industrial customers currently purchase their industrial supplies through numerous local distribution and supply companies. These distributors generally
provide the customer with repair and maintenance services, technical support and application expertise with respect to one product category. Products typically are purchased by the distributor for resale directly from the manufacturer and warehoused at distribution facilities of the distributor until sold to the customer. The customer also typically will purchase an amount of product inventory for its near term anticipated needs and store those products at its industrial site until the products are used.

We believe that the distribution system for industrial products in the United States, described in the preceding paragraph, creates inefficiencies at both the customer and the distributor levels through excess inventory requirements and duplicative cost structures. To compete more effectively, our customers and other users of MRO products
are seeking ways to enhance efficiencies and lower MRO product and procurement costs. In response to this customer desire, three primary trends have emerged in the industrial supply industry:

·

Industry Consolidation.  Industrial customers have reduced the number of supplier relationships they maintain to lower total purchasing costs, improve inventory management, assure consistently high levels of customer service and enhance purchasing power. This focus on fewer suppliers has
led to consolidation within the fragmented industrial distribution industry.

·

Customized Integrated Service. As industrial customers focus on their core manufacturing or other production competencies, they increasingly are demanding customized integration services, ranging from value-added traditional distribution to integrated supply and system design, fabrication, installation
and repair and maintenance services.

·

Single Source, First-Tier Distribution. As industrial customers continue to address cost containment, there is a trend toward reducing the number of suppliers and eliminating multiple tiers of distribution. Therefore, to lower overall costs to the MRO customer, some MRO distributors are expanding
their product coverage to eliminate second-tier distributors and the difficulties associated with alliances.

Recent Acquisitions

Our growth strategy includes effecting acquisitions of businesses with complementary or desirable product lines, locations or customers.  We completed four acquisitions in 2006, three acquisitions in 2007 and three acquisitions in 2008.

On August 20, 2005, we paid approximately $2.4 million to purchase the assets of a pump remanufacturer.  We made this acquisition to enhance our ability to meet customer needs for shorter lead times on selected pumps.  We

assumed $1.0 million of liabilities and gave a $0.5 million credit to the seller to use to purchase maintenance, repair and operating supplies from us.

On December 1, 2005, we purchased 100% of R. A. Mueller, Inc. to expand geographically into Ohio, Indiana, Kentucky and West Virginia.  DXP paid $7.3 million ($3.65 million cash and $3.65 million in promissory notes payable to the former owners) and assumed approximately $1.6 million of debt and $1.9 million of accounts payable
and other liabilities.

On May 31, 2006, DXP purchased the businesses of Production Pump and Machine Tech.  DXP acquired these businesses to strengthen DXP’s position with upstream oil and gas and pipeline customers.  DXP paid approximately $8.9 million for the acquired businesses and assumed approximately $1.2 million worth of liabilities.  The
purchase price consisted of approximately $5.4 million paid in cash and $3.5 million in the form of promissory notes payable to the former owners of the acquired businesses.  In addition, DXP may pay up to an additional $1.2 million contingent upon future earnings.

On October 11, 2006, we completed the acquisition of the business of Safety International.  DXP acquired this business to strengthen DXP’s expertise in safety products and services.  DXP paid $2.2 million in cash for the business of Safety International.

On October 19, 2006, DXP completed the acquisition of the business of Gulf Coast Torch & Regulat