Welcome to Systemax's 2008 second quarter earnings conference call. (Operator Instructions) I would now like to turn the conference over to [Denise Roche]. [Denise Roche]: I'm here today with Richard Leeds, Chairman and Chief Executive Officer, Max Fiorentino, General Manager of Systemax Technology Business which includes Tiger Direct, Comp USA and Masco, and Larry Reinhold, Executive Vice President and Chief Financial Officer of Systemax. This discussion may include certain forward-looking statements. It should be understood that actual results could differ materially from those projected due to a number of factors including those described under the caption forward-looking statements in the company's annual report on Form 10-K. This call is the property of and is copywrited by Systemax Inc. I will now turn the call over to Richard Leeds.

I'm pleased to report that during the second quarter, we delivered strong financial results despite continued softness in consumer spending, and more specifically in IT spending. Consolidated sales grew by more than 17%, $756 million driven by sales in our two key business segments. Technology product sales which include computers, computer supplies and consumer electronics grew 17.5%, $694 million. Growth in this segment came from three sources; our websites, our TigerDirect.com, our brick and mortar Tiger Direct locations and the Comp USA assets that we reopened. In our investor products group which includes material handling equipment, storage equipment and consumable industrial items, sales increased 10.4% to approximately $62 million. On a consolidated basis, our gross margin for the quarter was unchanged compared to the second quarter of 2007. Our operating income grew 5.2% versus the same period in 2007. This translated into 2.8% operating margin, a 30 basis point decline from the second quarter of 2007. Our operating margin, as well as additional expansion in our gross profit margin was tempered by the investment required to establish the 16 Comp USA and the web site, as well as opening two additional stores that were already in the works. Some of the costs were one time expenses incurred related to grand reopening promotional events, branding and other related expenses. While the majority of the increased expense is attributable to employee costs, these costs are expected to stabilize now that we are fully staffed. Further, as store sales ramp up, we expect to improvement in operating margins. Consolidated SG&A as a percentage of sales was 12.6% in the quarter, up 40 basis points from 2007. The six months ended June 30, 2008, SG&A costs were 12.3% as a percentage of sales, up 60 basis points from 2007. Going forward, we expect to…

The technology products group remained hard at work this quarter which translated into net sales of 17.5% versus the second quarter of 2007. Additionally, we grew our operating income within this division by 12.4% versus the same period one year ago. Our team made great strides in implementing our near term strategy to effectively integrate the Comp USA assets that we purchased last quarter into our overall business. This included launching new marketing and branding initiatives, our co-branding Comp USA with our established Tiger Direct business. Newspaper circulars are already being duly branded across our entire retail footprint as are employee work shirts, name badges, in store signage and other items. Our long term goal is to create a single Comp USA brand retail strategy in the United States and have both Comp USA and Tiger Direct.com brands in the United States on the internet. Getting 18 new brick and mortar stores open successfully and running in a short period of time was a tall order, but by the end of April, we had already re-staffed, re-stocked and held grand openings for all of our new stores. This is an accomplishment we are very proud of and one that would not have been possible if not for the hard work and dedication of our employees. As a result of this hard work, we are able to recognize revenue of over $76 million from Comp USA in the second quarter. Despite a challenging economic environment for retail business, we are seeing improving sales and close rates at many of our new stores as we continue to have high expectations for Comp USA. While we are very pleased with the streamlined roll out of the physical locations, we still intend to re-configure each store's layout over the coming months to more closely…

Our industrial products business, Global, Industrial and Nextel Industries, continued to grow at a double digit pace during the second quarter. We continue to utilize our proprietary profit center software solution which I'll speak about further in a moment to increase levels of efficiency, further scale this business and increase profitability. Our growing customer base continues to put high levels of satisfaction, a low price, top quality product selection as well as the ease of use associated with our leading web site technology. By maintaining the growth in our product offerings and better managing those products that have not performed well in the recent past, we've increased net sales in this division by 10.4% versus the same period one year prior. Further, because of the operating efficiencies we've been implementing, our operating income grew 18.4% in the quarter. Our efforts have helped us increase our product selection on the web by 40% versus 2007. New web visitors to our Global Industrial web site were up 41% versus the six month period last year. What's more, the total number of new web customers grew 29%. The growth generated from our web sites parlays nicely with our outbound telemarketing sales force and additional catalogue mailings. As I mentioned earlier, our hosted software business profit center software has played a big role in helping us grow our business. It was developed as a 100% web based on-demand application designed specifically for sales of multi-channel direct marketing companies challenged with the need to automate and manage products for the entire customer life cycle across multiple sales channels. Last quarter we announced the roll out of version 3.0 which improves continuity, world wide shipping, web search and navigation, personalization and enhanced accounting functionality. We currently have two customers live with this new version. One went…

As Richard mentioned earlier, the company reported solid second quarter results. Consolidated sales for the quarter were $756 million, up 17% from $647.1 million in the second quarter 2007. Net income for the quarter was $13.5 million, or $0.36 per diluted share compared with $0.37 per share in the same period last year. Earnings per share in the quarter was impacted by about $500,000 of lower interest income and by about $700,000 in higher income tax expense. Interest income was down due to lower cash balances as a result of the cash used to purchase Comp USA, its stock for new retail stores and to pay the special dividend. Income tax expense was higher principally due to our United Kingdom being taxed this year. You may recall that through Q3 of 2007, we had a large valuation allowance on our United Kingdom deferred tax assets. This valuation allowance was released in Q4 of 2007 due to the success of our turnaround in that business. Technology product sales were $694 million, an increase of 17.5% over the second quarter of 2007 representing 92% of the company's overall revenue. Operating income from this division was $23.3 million, an increase of 12.4% over the second quarter of 2007. Our technology products operating income for the quarter was impacted by an operating loss of about $1 million at the Comp USA retail stores. During the second quarter of 2008, net sales for our industrial products division was $61.6 million, an increase of 10.4% over the second quarter of 2007. Operating income in Q2 of '08 was $6.7 million, an increase of 28% over the second quarter of last year. The second quarter, our hosted software business incurred an operating loss of about $4.5 million which was $1.5 million greater than the same period of…

(Operator Instructions) Your first question comes from Andre Gardner – Iris [Andre Gardner]: Could you talk a little bit more about the PCS business and specifically about the customers? You said there's two live customers with the 3.0 version. Can you tell us anything about what markets they're in or what size companies these are?

I'm not going to give you the names on a conference call but they're basically business that are financial web businesses. I would categorize them as on the smaller side where the web site is in my opinion better than they've had in the past, and I think it's worked out well for those customers. [Andre Gardner]: Are you going to at some point, when do you plan on breaking out the PCS numbers on the income statement?

The PCS is already reported as a reporting segment, so the revenues and its operating loss or future income are in note eight. If you look in note eight of the 10-Q, it will be on file today. You'll see that broken out, also it's in the K's for the prior years. I'd like to warn you that as a hosted software product, that it's a deferred revenue so as those customers get live, we start recognizing the revenue. [Andre Gardner]: So that's subscription based then? It's recurring?

Yes. And there's in excess of $5 million of deferred revenue on the balance sheet. [Andre Gardner]: And the $76 million attributed to Comp USA, can you tell us, is that retail?

It's both. We haven't broken out specifically the revenue between the web site and retail. [Andre Gardner]: You said you would be willing to look at some conferences. Any plans to attend conference this fall?

We haven't announced any yet, but yes we are planning on attending. We're lining them up for the next Q. They'll be announced in advance when we've finalized what our space and plans.

Your next question comes from John Curti – Principal Global Investors John Curti – Principal Global Investors: I had a question on the hosted software business. You just mentioned $5 million of deferred revenue; over what time frame will that be recognized?

It varies. We talked about this in the past, John. The model that UCS business uses that we get paid to implement the software on a customers' site and then once they get installed and implemented, and they go live and we're paid on a subscription receipt basis over a contractual period. So with the customers that are in the implementation phase, we collect for performed services, we collect cash. We defer all that cash. The accounting model has us at the point of go live; we amortize that deferred revenue to income over the contractual hosting period. Typically that hosting period can range from one to many years, but it's probably safest to think about it as a three year on average. John Curti – Principal Global Investors: What is your anticipated path towards breakeven for this unit, or profitability? The first half of the year you ran at about $8.6 million loss, it was up $1.5 million in terms of operating loss for the quarter.

We're obviously not happy losing money there and we want to really focus on getting the business to be making money. That will come from a number of things. One is getting more customers live, scaling up as we scale up the business you have to have a certain infrastructure in place to run the business. It's a business that can scale and will scale, and once it's scaled, we'll be profitable. John Curti – Principal Global Investors: Are we looking at maybe like a three year ramp towards that breakeven point?

We're working very hard on getting a number of large customers live where not only do we recognize the revenue that I already talked about in deferred but also at that point we start boosting revenue and that all starts figuring in the model. But we're really not happy at this point. John Curti – Principal Global Investors: Question on the Comp USA business, you mentioned about $1 loss for Comp USA. Were the 18 stores that you opened, were they open for the entire quarter?

No, they weren't. We started opening them in late March and finished in April, and then there were two additional stores that were already on our road map that were also opened during the period. And keep in mind we opened these stores basically not with a running start but almost from zero, so we spent the entire quarter trying to build the revenue during May and June.

I'm actually quite pleased with the progress that Gilbert and his team has made with these stores. A typical new store environment is when you open a store, you expect to lose money until the traffic and sales are there to support it. That we've lost so little here, we're quite pleased. John Curti – Principal Global Investors: Are you anticipating that the stores will be profitable by year end?

We don't really forecast that type of stuff on our calls, but fourth quarter typically for a retailer is the best quarter and so in a whole, I think our retail operations will be very successful in the fourth quarter.

We disclosed that we had a loss in the retail stores of about $1 million for the quarter. That's really in the first quarter. John Curti – Principal Global Investors: That's from the stores?

That's from the stores. So you can do you own model on that but it's kind of a heroic outcome for what started out at the beginning of the quarter were 16 empty stores. That's the Comp USA signage. It's a herculean effort, and that was the end result in a quite challenging retail environment. John Curti – Principal Global Investors: What are your plans for store openings next year and maybe on a longer term basis, say over a five year period, what's your retail footprint going to look like?

We're very excited about the retail business because when you get a model that works, rolling that model out to additional stores has been proven by many competitors to be very successful, and so we are hoping to spend the rest of this year perfecting the model, getting the system in place, and the people and the training to be able to come back and say we are ready to open more stores at that point. It's a very exciting business for us because you can grow as rapidly as the real estate market allows and your own internal systems and people would allow. So there's a lot of short term investment being made there and people, time and money, but we really are excited about the possible future into the coming years. John Curti – Principal Global Investors: Do you have some leases lined up for next year?

There's an amazing retail environment out there for space with some of the problems that competitors and others in the retail world are having, and so it seems like the longer we wait the better the deals are going to be. John Curti – Principal Global Investors: On a segment basis, the unallocated corporate and other expenses were up about $1.2 million for the quarter to about $4.6 million. I was wondering what was behind that increase and should we look for something in that $4.5 million to $5 million range for the back two quarters of the year.

Certainly we had increased costs. Many of them were associated with external reporting and internal auto organization that was just really being created starting in the second quarter of 2007. So from a corporate infrastructure run rate, looking to be more efficient, that amount is probably not going to come down significantly.

There are no further calls.

Thank you everybody for listening to our conference call and we look forward to talking to you next quarter.