Good afternoon, ladies and gentlemen, and welcome to Systemax Inc.'s Third Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, November 1, 2012. At this time, I would like to turn the call over to Mr. Mike Smargiassi of Brainerd Communicators. Please go ahead.

Thank you, operator. Welcome to the Systemax Third Quarter 2012 Earnings Conference Call. I'm here today with Richard Leeds, Chairman and Chief Executive Officer of Systemax; and Larry Reinhold, Executive Vice President and Chief Financial Officer. 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 and quarterly reports on Form 10-Q. This call is the property of and is copyrighted by Systemax Inc. I will now turn the call over to Mr. Richard Leeds.

Good afternoon, and thank you for joining us for today's third quarter 2012 earnings call. Overall, our third quarter performance was similar to the trends we witnessed in the first half of the year, with a solid performance from our B2B operations, which are more than offset by continued softness in the consumer environment. Across the company, our management teams are focused on making operational improvements, with an eye on both our top and bottom line performance. In addition, we continue to review our operations from a strategic standpoint to ensure that we are optimizing our performance and competitive position. In this regard, today we announced 3 initiatives, which I will talk about in a moment. Our operating loss for the quarter was $1.9 million, including special charges of $2 million. Most of these charges were patent litigation settlements with patent controls. Excluding these special charges, we delivered breakeven operating income for the third quarter as we did for the second quarter. Our B2B channel continues to deliver strong results, led by our Industrial Products Group, which recorded second consecutive $100 million plus revenue quarter and 10th consecutive quarter of 25% plus organic growth. Industrial is seeing a rapid growth as we expand our product and category offerings, which are fueling sales increases across the business. To support our product expansion, we oftentimes drop ship product as we evaluate demand, which tend to lower our consolidated product margin in the short term. However, our new distribution center significantly expands our capacity to support our growth and should, over time, drive improved margins as we bring these products into inventory and capitalize on our supply chain model. Industrials' bottom line also reflected operational challenges around freight, where we did not optimize our performance. We've already identified and are executing on a…

Thank you, Richard. Our third quarter 2012 consolidated sales were $846.3 million, a decline of 6% and off 3% on a constant currency basis compared to the third quarter of 2011. Results for the quarter were driven by strong growth in our B2B operations, which was more than offset by softness in our Consumer business. Turning first to our reported sales channels. Third quarter B2B channel sales were $526.8 million, an increase of 4%, or 9% on a constant currency and same-store basis. Our consumer channel sales were $319.5 million, a decrease of 19%. Consumer sales were off 20% on a constant currency and same-store basis. Turning now to our public reporting segments. The Technology Products Group sales declined 10% year-over-year to $734.7 million, which was a 7% decline on a constant currency basis. Operating loss was $3.9 million, including special charges of approximately $2 million. Excluding the special charges, the Technology Products Group's operating income declined by $15.9 million. This decline is due primarily to weak consumer sales in North America. Our Industrial Products Group sales increased to $110.4 million, up 27% compared to the prior year. Industrial's operating income was $7.6 million, a decline of $2.8 million, or 27%. The decline was primarily due to an increased volume of lower margin drop ship products in support of our expanded SKU count, a reduction in freight margins and costs related to the second quarter 2012 opening of an additional warehouse and B2B call center. Looking in more detail at each of our reporting segments' performance during the quarter, the European Technology Products Group delivered strong revenue growth on a constant currency basis, with our 3 largest markets, the U.K., France and the Netherlands, driving the increase. The majority of our European operations recorded top line gains on a local…

[Operator Instructions] Our first question is from Anthony Lebiedzinski of Sidoti & Company.

First, when looking at the initiatives that you had outlined, you have provided the benefits for the PC manufacturing business exit and also the European Shared Services Center. Could you perhaps give us a sense of the expected benefit from the consolidating of the U.S. technology brands? I think, Richard, you mentioned advertising efficiencies. So if you could give us perhaps some color about the expected benefit, that would be great.

So right now, we're managing these 3 brands, and what we've decided to do is basically put all of our efforts behind one brand. So any of the expenses that we -- of the advertising expenses that were going towards the other 2 brands, we're going to swing over and put them towards Tiger, and under the belief that, that's going to help us grow the Tiger sales. So we're not really doing that. Second is, we're going to gain efficiencies from having everybody focused on 1 brand as opposed to working on the 3 brands. We don't expect to have any reduction in headcount from that focus. We're just going to take everybody and swing them over to, again, growing the 1 brand.

Okay, that's helpful. And could you give us a sense as to the annual revenue run rate of the PC manufacturing business?

Anthony, it's -- we haven't disclosed historically the specific revenues associated with any brand or a line product category. So the Systemax brand, it certainly is one that we sold primarily through our own sales channels. I would tell you that revenue, historically -- certainly, well under 2% of total revenues. And we anticipate that it will -- by switching to our effort to focusing on primarily Tier 1 vendor partners, that'll be more profitable, and we are certainly going to make every attempt to keep all of that revenue, but just shift it to our partner programs.

Okay. And any sense as to the expected timing of opening the new European Shared Services Center?

So we're looking at a time frame that's going to evolve between the first half of the year. We have still are -- not identified the country that we're going to be locating it in, so we're somewhat in our preliminary stages, but we will be updating you guys each quarter as we go through this.

Okay. And you did mention that the third quarter was impacted by some consumers waiting for Windows 8. So now that it's here, any -- can you give us -- I know it's still kind of perhaps maybe early, but if you could provide any comment as to whether you expect some of the -- those sales that you've lost perhaps to come back to a certain extent, in the fourth quarter?

Well, we do. I mean, Windows 8 is a -- well, I can't say Windows 8, but any new operating system, when it's been released, there's always been a slowdown in advance of it. And then once it gets released, there's a pent-up demand. The biggest one, obviously, was Vista -- was the switch from Vista. But we're not expecting nor do we have that same type of bump. But as the new laptops and new desktops come out with, especially the ones with touch, we expect that we'll see customers buying those products and they're coming to market, almost daily now, between now and Black Friday and/or the end of the year.

Okay, that's helpful. And last question, as far as the larger distribution center for the Industrial Products, have you already seen some benefits from actually carrying more inventory in-house?

Yes. So this has always actually been our model of where we -- we've talked about this in the past, where we start off with drop ship low margin, see how the product sales. Once it starts to sell, we go and we negotiate a better price for stocking it, we bring it into stock, and that's the cycle that we're going for now. And we're continuing to go through those as we continue to add more and more products. It's actually a really nice business model because you've taken the risk out of it, and then you get to see and have your power of going to negotiate with the vendor based upon the sales that you have some drop ship.

The next question is from Dorsey Gardner of Kelso Management.

Yes, any thoughts on the retail stores that you've opened? Are you adding to the stores, toward the numbers? And you were starting some kiosks or some ways of selling telephones and, what do you call them, iPads or tablet computers, and has that been successful? Or it's been a tough business for people like Radio Shack, and just wondered what your thoughts were.

Yes. So we added sales of telephone and mobility items to most of our stores, not to all of them because that's mostly in the United States first. And then we've had relatively slow start in this business and it is continuing to build. We still think that's a growth area for us because we started from 0 and are working our way up as opposed to some of the competitor that you mentioned who had a very strong business and is now having some issues with that. But that seems -- that is still -- there's an opportunity for us to grow that business.

And how about adding new stores?

I'm sorry, adding new stores, we're continuing to evaluate the right number of stores for us to have. As we've mentioned, we closed one store. And as our leases come up, we're going to evaluate whether those store -- some of our stores are in the right location and whether they are the right mix for us. And we probably might increase the number of stores if we have the right opportunity with lease values and location, but we typically don't disclose that.

At this time, we have no further questions in queue.

Okay. Thank you. We look forward to talking to you next quarter. Bye.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Good day.