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<SEC-DOCUMENT>0000899681-06-000777.txt : 20061226
<SEC-HEADER>0000899681-06-000777.hdr.sgml : 20061225
<ACCEPTANCE-DATETIME>20061226131527
ACCESSION NUMBER:		0000899681-06-000777
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20060930
FILED AS OF DATE:		20061226
DATE AS OF CHANGE:		20061226

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SYSTEMAX INC
		CENTRAL INDEX KEY:			0000945114
		STANDARD INDUSTRIAL CLASSIFICATION:	RETAIL-CATALOG & MAIL-ORDER HOUSES [5961]
		IRS NUMBER:				113262067
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-13792
		FILM NUMBER:		061298658

	BUSINESS ADDRESS:	
		STREET 1:		22 HARBOR PARK DR
		CITY:			PORT WASHINGTON
		STATE:			NY
		ZIP:			11050
		BUSINESS PHONE:		5166087000

	MAIL ADDRESS:	
		STREET 1:		22 HARBOR PARK DRIVE
		CITY:			PORT WASHINGTON
		STATE:			NY
		ZIP:			11050

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	GLOBAL DIRECTMAIL CORP
		DATE OF NAME CHANGE:	19950509
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>systemax-10q_122206.htm
<TEXT>
<HTML>
<HEAD>
<TITLE>10-Q</TITLE>
</HEAD>
<BODY>

<P ALIGN=CENTER><FONT SIZE=3><B>UNITED STATES <BR>
SECURITIES AND EXCHANGE COMMISSION<BR>
WASHINGTON, D.C. 20549 </B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=3><B>FORM 10-Q</B> </FONT></P>

<P><FONT SIZE=3>[X]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934</B></FONT></P>

<P><FONT SIZE=3>For the quarterly period ended September 30, 2006 </FONT></P>

<P ALIGN=CENTER><FONT SIZE=3>or</FONT></P>

<P><FONT SIZE=3>[&nbsp;&nbsp;]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934</B></FONT></P>

<P><FONT SIZE=3>For the transition period from ____________ to _____________</FONT></P>

<P ALIGN=CENTER><FONT SIZE=3>COMMISSION FILE NUMBER 1-13792</FONT></P>

<P ALIGN=CENTER><FONT SIZE=3><B>Systemax Inc.</B><BR>
(Exact name of registrant as specified in its charter) </FONT></P>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=50% ALIGN=CENTER>
Delaware<BR>
(State or other jurisdiction<BR>
of incorporation or organization)
</TD>
<TD WIDTH=50% ALIGN=CENTER>
11-3262067<BR>
(I.R.S. Employer<BR>
Identification No.)
</TD>
</TR>
</TABLE>
<BR>

<P ALIGN=CENTER><FONT SIZE=3>11 Harbor Park Drive<BR>
Port Washington, New York 11050<BR>
(Address of registrant&#146;s principal executive offices)<BR>
(516) 608-7000<BR>
(Registrant&#146;s telephone number, including area code)</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Default" -->
<P><FONT SIZE=3>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.<BR>
Yes  [  ]    No  [X] </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Default" -->
<P><FONT SIZE=3>Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the
Exchange Act).<BR>
Large accelerated filer [  ]  Accelerated filer [  ] Non-accelerated filer [X] </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Workstation" -->
<P><FONT SIZE=3>Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act)<BR>
Yes [ ] No [X] </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Default" -->
<P><FONT SIZE=3>The number of shares outstanding of the registrant's Common Stock as
of November 30, 2006 was 35,174,147 </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<P ALIGN=LEFT><FONT SIZE=3><U><B>TABLE OF CONTENTS</B></U> </FONT></P>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=95%>Explanatory Note<BR>
Available Information</TD>
<TD WIDTH=5%>3<BR>
3</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>Part I<BR>
&nbsp;&nbsp;Item 1.<BR>
&nbsp;&nbsp;Item 2.<BR>
&nbsp;&nbsp;Item 3.<BR>
&nbsp;&nbsp;Item 4.</TD>
<TD WIDTH=85%><BR>
Financial Statements<BR>
Management's Discussion and Analysis of Financial Condition and Results of Operations<BR>
Quantitative and Qualitative Disclosures About Market Risk<BR>
Controls and Procedures</TD>
<TD WIDTH=5%><BR>
4<BR>
14<BR>
20<BR>
20</TD>
</TR>
</TABLE>
<BR>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>Part II<BR>
&nbsp;&nbsp;Item 4.<BR>
&nbsp;&nbsp;Item 6.</TD>
<TD WIDTH=85%><BR>
Submission of Matters to a Vote of Security Holders<BR>
Exhibits<BR>
<BR>
Signatures</TD>
<TD WIDTH=5%><BR>
22<BR>
23<BR>
<BR>
24</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<P ALIGN=LEFT><FONT SIZE=3>Explanatory Note&nbsp; </FONT></P>

<P><FONT SIZE=3>The
filing of this Quarterly Report on Form 10-Q was delayed because of the
longer-than-expected 2005 year-end closing process caused in part by the decision by the
Company's former independent registered public accounting firm not to stand for
re-appointment and the inability of the Company to appoint a new registered public
accounting firm until December 2005.</FONT></P>

<!-- MARKER FORMAT-SHEET="Head Sub 2 Left" FSL="Default" -->
<P ALIGN=LEFT><FONT SIZE=3><B>Available Information</B></FONT></P>

<P><FONT SIZE=3>We maintain an internet web site at <U>www.systemax.com</U>. We file reports
with the Securities and Exchange Commission ("SEC") and make available free of
charge on or through this web site our annual reports on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K, including all amendments
to those reports. These are available as soon as is reasonably practicable after
they are filed with the SEC. All reports mentioned above are also available from
the SEC's web site (<U>www.sec.gov</U>). The information on our web site is not
part of this or any other report we file with, or furnish to, the SEC.</FONT></P>

<P><FONT SIZE=3>Our Board of Directors has adopted the following corporate governance documents
with respect to the Company (the "Corporate Governance Documents"):</FONT></P>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&#149;</TD>
<TD WIDTH=95%>Corporate Ethics Policy for officers, directors and employees</TD>
</TR>
</TABLE>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&#149;</TD>
<TD WIDTH=95%>Charter for the Audit Committee of the Board of Directors</TD>
</TR>
</TABLE>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&#149;</TD>
<TD WIDTH=95%>Charter for the Compensation Committee of the Board of Directors</TD>
</TR>
</TABLE>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&#149;</TD>
<TD WIDTH=95%>Charter for the Nominating/Corporate Governance Committee of the Board of Directors</TD>
</TR>
</TABLE>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&#149;</TD>
<TD WIDTH=95%>Corporate Governance Guidelines and Principles</TD>
</TR>
</TABLE>
<BR>

<P><FONT SIZE=3>In accordance with the corporate governance rules of the New York Stock
Exchange, each of the Corporate Governance Documents is available on our Company
web site (<U>www.systemax.com</U>) or can be obtained by writing to Systemax
Inc., Attention: Board of Directors (Corporate Governance), 11 Harbor Park
Drive, Port Washington, NY 11050.</FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<P ALIGN=LEFT><FONT SIZE=3><B>PART I &#151; FINANCIAL
INFORMATION</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<P ALIGN=LEFT><FONT SIZE=3><B>Item 1.&nbsp;&nbsp;&nbsp;<U>Financial
Statements</U></B> </FONT></P>

<P><FONT SIZE=3><B>Systemax Inc.</B><BR>
Condensed Consolidated Balance Sheets<BR>
(In thousands, except share data)</FONT></P>
<HR SIZE=1 NOSHADE>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=2></TH>
     <TH COLSPAN=2>September 30,<BR>
<U>2006</U><BR>
(Unaudited)</TH>
     <TH COLSPAN=2>December 31,<BR>
<U>2005</U><BR><BR></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=65% ALIGN=LEFT>ASSETS:</TD>
     <TD WIDTH=5% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=10% ALIGN=RIGHT></TD>
        <TD WIDTH=5% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=10% ALIGN=RIGHT></TD>
        <TD WIDTH=5% ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;CURRENT ASSETS:</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$70,477</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$70,925</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable, net</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>152,258</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>143,001</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories, net</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>206,610</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>189,502</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>27,423</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>18,477</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income tax assets, net</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>7,088</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>9,227</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>463,856</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>431,132</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;PROPERTY, PLANT AND EQUIPMENT, net</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>47,392</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>57,259</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;DEFERRED INCOME TAXES AND OTHER ASSETS, net</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>16,507</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>16,153</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL ASSETS</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$527,755</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$504,544</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;LIABILITIES AND SHAREHOLDERS' EQUITY:</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;CURRENT LIABILITIES:</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Short-term borrowings, including current portions of long-term debt</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$16,011</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$26,773</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>160,734</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>171,667</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses and other current liabilities</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>69,810</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>62,888</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>246,555</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>261,328</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;LONG-TERM DEBT</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>539</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>8,028</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;OTHER LIABILITIES</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>3,629</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>2,346</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;SHAREHOLDERS' EQUITY:</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;Preferred stock, par value $.01 per share, authorized 25 million shares, issued none</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;Common stock, par value $.01 per share, authorized 150 million shares, issued</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;38,331,990 (2006) and 38,231,990 (2005) shares; outstanding 35,134,993 (2006)</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and 34,761,174 (2005)</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>383</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>382</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;Additional paid-in capital</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>173,034</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>177,574</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive income</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>5,130</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>893</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;Retained earnings</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>136,041</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>98,927</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;Common stock in treasury at cost - 3,196,997 (2006) and 3,470,816 (2005) shares</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>(37,556</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>(40,772</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;Unearned restricted stock compensation - Note 2</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>--</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>(4,162</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total shareholders' equity</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>277,032</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>232,842</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$&nbsp;527,755</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$&nbsp;504,544</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Default" -->
<P><FONT SIZE=3>See notes to condensed consolidated financial statements.
</FONT></P>

<PAGE>

<P><FONT SIZE=3><B>Systemax Inc.</B><BR>
Condensed Consolidated Statements of Operations (Unaudited)<BR>
(In Thousands, except per share amounts)</FONT></P>
<HR SIZE=1 NOSHADE>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=1></TH>
     <TH COLSPAN=4>Nine Months Ended<BR>
September 30,<HR WIDTH=88% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=5>Three Months Ended<BR>
September 30,<HR WIDTH=85% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2></TH>
     <TH COLSPAN=2 ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2006<HR WIDTH=85% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=2 ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005<HR WIDTH=75% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=2 ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2006<HR WIDTH=85% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=2 ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005<HR WIDTH=85% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=52% ALIGN=LEFT><BR>Net sales</TD>
     <TD WIDTH=2% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=9% ALIGN=RIGHT>$&nbsp;1,697,191</TD>
        <TD WIDTH=3% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=9% ALIGN=RIGHT>$1,532,552</TD>
        <TD WIDTH=2% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=9% ALIGN=RIGHT>$&nbsp;575,041</TD>
        <TD WIDTH=3% ALIGN=LEFT>&nbsp;</TD>
     <TD WIDTH=9% ALIGN=RIGHT>$488,502</TD>
        <TD WIDTH=2% ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>Cost of sales</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>1,437,544</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>1,310,932</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>483,527</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>418,022</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>Gross profit</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>259,647</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>221,620</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>91,514</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>70,480</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>Selling, general &amp; administrative expenses</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>209,030</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>201,806</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>72,349</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>62,025</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>Restructuring and other charges</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>--</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>3,494</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>--</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>442</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>Income from operations</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>50,617</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>16,320</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>19,165</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>8,013</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>Other non-operating (income) expense, net</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>(6,502</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>967</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>87</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>959</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>Interest (income) and expense, net</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>(609</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>1,385</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>(430</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>317</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>Income before income taxes</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>57,728</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>13,968</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>19,508</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>6,737</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>Provision for income taxes</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>20,614</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>5,933</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>7,057</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>2,862</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>Net income</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;37,114</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,035</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$&nbsp;&nbsp;&nbsp;12,451</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$&nbsp;&nbsp;&nbsp;&nbsp;3,875</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Net income per common share:</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;&nbsp;Basic</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.06</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.23</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.36</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.11</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;&nbsp;Diluted</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.99</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.22</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.33</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.11</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Weighted average common and common equivalent shares:</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;&nbsp;Basic</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>34,887</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>34,619</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>35,054</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>34,695</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;Diluted</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>37,666</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>36,479</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>37,967</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>36,552</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Default" -->
<P><FONT SIZE=3>See notes to condensed consolidated financial statements. </FONT></P>

<PRE>
<FONT SIZE=1>
<B>Systemax Inc.</B>
Condensed Consolidated Statement of Shareholders' Equity (Unaudited)
(In Thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                               Accumulated
                                 Common Stock                                   Other                      Unearned
                              Number of              Additional              Comprehensive     Treasury    Restricted
                               Shares                 Paid-in     Retained     Income,         Stock,        Stock     Comprehensive
                             Outstanding    Amount    Capital     Earnings    Net of Tax       At Cost   Compensation     Income
                             -------------------------------------------------------------------------------------------------------

Balances, January 1, 2006
                                 34,761       $382    $177,574      $98,927        $893       $(40,772)    $(4,162)

Reversal of unamortized
  unearned restricted stock
  compensation - Note 2
                                                        (4,162)                                              4,162
Stock-based compensation
  expense                                                1,659
Issuance of restricted stock
                                    100          1
Exercise of stock options           274                 (2,465)                                  3,216
Income tax benefit on
  stock-based compensation
                                                           428
Change in cumulative
  translation adjustment, net
                                                                                  4,237                                      4,237
Net income                                                           37,114                                                 37,114
                                 ------       ----      ------       ------      ------          ------      -----          ------

    Total comprehensive
         income                                                                                                            $41,351
                                                                                                                           =======
Balances, September 30, 2006     35,135       $383    $173,034     $136,041      $5,130       $(37,556)        $ 0
                                 ======       ====    ========     ========      ======       ========         ===
</FONT>
</PRE>


<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Default" -->
<P><FONT SIZE=3>See notes to condensed consolidated financial statements. </FONT></P>

<PAGE>

<P><FONT SIZE=3><B>Systemax Inc.</B><BR>
Condensed Consolidated Statements of Cash Flows (Unaudited)<BR>
(In Thousands)</FONT></P>
<HR SIZE=1 NOSHADE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH COLSPAN=2></TH>
     <TH COLSPAN=4>Nine Months<BR>
Ended September 30,<HR WIDTH=90% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2></TH>
     <TH COLSPAN=2>2006<HR WIDTH=85% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=2>2005<HR WIDTH=85% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH="65%" ALIGN="LEFT"><BR>CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:</TD>
     <TD WIDTH="5%" ALIGN="LEFT">&nbsp;</TD>
     <TD WIDTH="10%" ALIGN="RIGHT"></TD>
        <TD WIDTH="5%" ALIGN="LEFT">&nbsp;</TD>
     <TD WIDTH="10%" ALIGN="RIGHT"></TD>
        <TD WIDTH="5%" ALIGN="LEFT">&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;Net income</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$37,114</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$8,035</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash provided by (used in)</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;operating activities:</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>6,035</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>8,017</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision (benefit) for deferred income taxes</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>2,743</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>(4,053</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for returns and doubtful accounts</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>2,391</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>4,531</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Compensation expense related to equity compensation plans</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>1,659</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>861</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Gain)loss on dispositions and abandonment</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>(7,760</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>736</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax benefit from exercises of stock options</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>--</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>11</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities:</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>(4,351</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>(6,442</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>(14,313</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>15,170</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>(8,418</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>882</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable, accrued expenses and other current liabilities</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>(10,032</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>(12,488</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>5,068</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>15,260</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;Investments in property, plant and equipment</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>(4,566</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>(4,450</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;Proceeds from disposals of property, plant and equipment</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>19,080</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>253</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) investing activities</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>14,514</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>(4,197</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;(Repayments) proceeds of borrowings from banks</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>(8,123</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>3,043</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;Repayments of long-term debt and capital lease obligations</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>(12,394</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>(454</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;Proceeds from issuance of common stock</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>751</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>668</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;Excess tax benefit from exercises of stock options</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>294</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash (used in) provided by financing activities</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>(19,472</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>3,257</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>EFFECTS OF EXCHANGE RATES ON CASH</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>(558</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>918</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>NET (DECREASE) INCREASE  IN CASH AND CASH EQUIVALENTS</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>(448</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>15,238</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>70,925</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>36,257</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>CASH AND CASH EQUIVALENTS - END OF PERIOD</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$70,477</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$51,495</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>Supplemental disclosures of non-cash investing and financing activities:</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>&nbsp;&nbsp;&nbsp;Acquisitions of equipment through capital leases</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$602</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>--</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=2></TD><TD></TD></TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Default" -->
<P><FONT SIZE=3>See notes to condensed consolidated financial statements. </FONT></P>

<PAGE>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT SIZE=3><B>Systemax Inc.</B><BR>
Notes to Condensed Consolidated Financial Statements (Unaudited)</FONT></P>
<HR SIZE=1 NOSHADE>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT><B>1.</B></TD>
<TD WIDTH=95%><B>Basis of Presentation</B>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT SIZE=3>
The accompanying condensed consolidated financial statements of the Company and
its wholly-owned subsidiaries are unaudited and have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America are not required
in these interim financial statements and have been condensed or omitted. All
significant intercompany accounts and transactions have been eliminated in
consolidation. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT SIZE=3>
In the opinion of management, the accompanying condensed consolidated financial
statements contain all normal and recurring adjustments necessary to present
fairly the financial position of the Company as of September 30, 2006 and the
results of operations for the three and nine month periods ended September 30,
2006 and 2005, cash flows for the nine month periods ended September 30, 2006
and 2005 and changes in shareholders' equity for the nine month period ended
September 30, 2006. The December 31, 2005 Condensed Consolidated Balance Sheet
has been derived from the audited consolidated financial statements included in
the Company's Annual Report on Form 10-K for the year ended December 31, 2005.
</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT SIZE=3>
These condensed consolidated financial statements should be read in conjunction
with the Company's audited consolidated financial statements as of December 31,
2005 and for the year then ended included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2005. The results for the three and
nine months ended September 30, 2006 are not necessarily indicative of the
results for an entire year.<BR>
<BR>
<B>Adoption of New Accounting Standard</B></FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT SIZE=3>
The Company's significant accounting policies are disclosed in the Notes to
Consolidated Financial Statements in the Company's annual report on Form 10-K
for the year ended December 31, 2005. During the first quarter of fiscal 2006,
the Company adopted the provisions of, and accounts for stock-based compensation
in accordance with, Statement of Financial Accounting Standards No.
123&#150;revised 2004 (SFAS 123(R)), "Share-Based Payment." Prior to the
adoption of SFAS 123(R), the Company applied the provisions prescribed by
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees," in accounting for its stock-based awards, and accordingly,
recognized no compensation cost for its stock option plans other than for
restricted stock awards. See Note 2 of this Form 10-Q for further information
regarding the Company's stock-based compensation expense and assumptions,
including pro forma disclosures for the prior year's first quarter as if
stock-based compensation was expensed. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT SIZE=3>
Since the date of the Company's annual report on Form 10-K, there have been no
other material changes to the Company's significant accounting policies.
</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT><B>2.</B></TD>
<TD WIDTH=95%><B>Stock-based Compensation Plans</B>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT SIZE=3>
The Company currently has four equity compensation plans which reserve shares of
common stock for issuance to key employees, directors, consultants and advisors
to the Company. The following is a description of these plans: </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=95%>
<U><I>The 1995 Long-term Stock Incentive Plan</I></U> &#151; This plan,
adopted in 1995, allowed the Company to issue qualified, non-qualified and
deferred compensation stock options, stock appreciation rights, restricted stock
and restricted unit grants, performance unit grants and other stock based awards
authorized by the Compensation Committee of the Board of Directors. Options
issued under this plan expire ten years after the options are granted.
The&nbsp;ability to grant new&nbsp;awards under this plan ended on December 31,
2005 but awards granted prior to such date continue until their expiration. A
total of 1,223,214 options were outstanding under this plan as of September 30,
2006.<BR>
<BR>
<U><I>The 1995 Stock Option Plan for Non-Employee Directors</I></U> &#151; This
plan, adopted in 1995, provides for automatic awards of non-qualified options to
directors of the Company who are not employees of the Company or its affiliates.
All options granted under this plan will have a ten year term from grant date
and are immediately exercisable. A maximum of 100,000 shares may be granted for
awards under this plan. The&nbsp;ability to grant new&nbsp;awards under this
plan ended on October 12, 2006 but awards granted prior to such date continue
until their expiration. A total of 39,000 options were outstanding under this
plan as of September 30, 2006.<BR>
<BR>
<I><U>The 1999 Long-term Stock Incentive Plan, as amended ("1999 Plan")</U></I>
&#151; This plan was adopted on October 25, 1999 with substantially the same
terms and provisions as the 1995 Long-term Stock Incentive Plan. A maximum of
5.0 million shares may be granted under this plan. The maximum number of shares
granted per type of award to any individual may not exceed 1,500,000 in any
calendar year and 3,000,000 in total. No award shall be granted under this plan
after December 31, 2009. Restricted stock grants and common stock awards reduce
stock options otherwise available for future grant. A total of 1,533,246 options
and 900,000 restricted stock units were outstanding under this plan as of
September 30, 2006.<BR>
<BR>
<U><I>The 2006 Stock Incentive Plan For Non-Employee Directors</I></U> &#150;
This plan, adopted by the Company's stockholders on October 11, 2006, replaces
the 1995 Stock Option Plan for Non-Employee Directors. The Company adopted the
plan so that it could offer directors of the Company who are not employees of
the Company or of any entity in which the Company has more than a 50% equity
interest ("independent directors") an opportunity to participate in the
ownership of the Company by receiving options to purchase shares of common stock
at a price equal to the fair market value at the date of grant of the option and
restricted stock awards. Awards for a maximum of 200,000 shares may be granted
under this plan.
</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%>
Shares issued under our share-based compensation plans are usually issued from
shares of our common stock held in the treasury.</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%><I>Adoption of SFAS 123(R)</I></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%>
In December 2004, Statement of Financial Accounting Standards 123(R) ("SFAS
123(R)"), "Share Based Payment", was issued, pursuant to which the intrinsic
value method of accounting under APB Opinion 25 was superseded with a fair value
method that requires recognition of compensation expense in the consolidated
results of operations for all share-based transactions.</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%>
Effective January 1, 2006, the Company adopted the provisions of SFAS 123(R),
using the modified-prospective-transition method. Under that transition method,
compensation cost recognized for the three and nine months ended September 30,
2006 includes: (a) compensation cost for all share-based payments granted prior
to, but not yet vested as of, January 1, 2006, based on the grant-date fair
value estimated in accordance with the original provisions of SFAS 123, and (b)
compensation cost for the vested portion of share-based payments granted
subsequent to January 1, 2006, based on the grant-date fair value estimated in
accordance with the provisions of SFAS 123(R). Results for prior periods have
not been restated.</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%>
The fair value of employee share options is recognized in expense over the
vesting period of the options, using the graded attribution method. The fair
value of employee share options is determined on the date of grant using the
Black-Scholes option pricing model. The Company has used historical volatility
in its estimate of expected volatility. The expected life represents the period
of time (in years) for which the options granted are expected to be outstanding.
The Company used the simplified method for determining expected life as
permitted in SEC Staff Accounting Bulletin 107 for options qualifying for such
treatment ("plain-vanilla" options) due to the limited history the Company
currently has with option exercise activity. The risk-free interest rate is
based on the U.S. Treasury yield curve. There were no modifications to stock
option awards during the nine months ended September 30, 2006.</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%>
The Company receives an income tax deduction for stock options exercised by
employees in the United States equal to the excess of the market value of our
common stock on the date of exercise over the option price. Prior to the
adoption of SFAS 123(R), the income tax benefit from the exercise of stock
options was presented as a component of cash flow from operating activities.
SFAS 123(R) requires the excess tax benefits (tax benefits resulting from tax
deductions in excess of compensation cost recognized) to be classified as a cash
flow provided by financing activities.</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%>
Compensation cost related to non-qualified stock options recognized in operating
results (selling, general and administrative expense) was $1,228,000 for the
nine months ended September 30, 2006 and $511,000 for the three months ended
September 30, 2006. The related future income tax benefits recognized were
$423,000 for the nine months and $176,000 for the three months ended September
30, 2006.</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%>
<I>Stock Options</I></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%>
The following table presents the weighted-average fair value and the
weighted-average assumptions used to estimate the fair value of options granted
in 2006:</TD>
</TR>
</TABLE>
<BR>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="60%" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH></TH>
     <TH ALIGN="RIGHT">2006<HR WIDTH=40% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH ALIGN="RIGHT">&nbsp;</TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH="50%" ALIGN="LEFT">Fair value</TD>
     <TD WIDTH="15%" ALIGN="RIGHT">$5.24</TD>
     <TD WIDTH="55%" ALIGN="RIGHT">&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>Expected annual dividend yield</TD>
     <TD ALIGN="RIGHT">0%</TD>
     <TD ALIGN="RIGHT">&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Risk-free interest rate</TD>
     <TD ALIGN="RIGHT">4.77%</TD>
     <TD ALIGN="RIGHT">&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Expected volatility</TD>
     <TD ALIGN="RIGHT">78.7%</TD>
     <TD ALIGN="RIGHT">&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Expected life in years</TD>
     <TD ALIGN="RIGHT">6.0</TD>
     <TD ALIGN="RIGHT">&nbsp;</TD></TR>
</TABLE>
<BR>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%>
The following table reflects the activity for all stock option plans during the
nine months ended September 30, 2006:</TD>
</TR>
</TABLE>
<BR>



<PRE>

                                                   Weighted   Weighted Average    Aggregate
                                                    Average      Remaining        Intrinsic
                                                  Exercise     Contractual        Value (in
                                    For Shares      Price          Life           thousands)
                                    ----------    ---------   ----------------    ----------
Outstanding January 1, 2006          2,657,419      $3.93
Granted                                439,334      $7.37
Exercised                            (273,819)      $2.74
Canceled or lapsed                    (27,474)     $12.84
                                      -------      ------
Outstanding September 30, 2006       2,795,460      $4.50          6.42           $32,239
                                     =========      =====          ====           =======
Exercisable at September 30, 2006    1,877,809      $4.08          5.89           $22,444
                                     =========      =====          ====           =======

</PRE>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%>
The aggregate intrinsic value in the table above represents the total pretax
intrinsic value (the difference between the closing stock price on the last day
of trading in the quarter ended September 30, 2006 and the exercise price) that
would have been received by the option holders had all options been exercised on
September 30, 2006. This value will change based on the fair market value of the
Company's common stock.</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%>
The total intrinsic value of options exercised was $1,065,000 and the cash
received from stock option exercises was $751,000 during the nine months ended
September 30, 2006. The tax benefit expected to be realized from the tax
deductions for stock option exercises totaled $373,000 for the nine months ended
September 30, 2006 and is reflected as a component of shareholders' equity in
the Condensed Consolidated Balance Sheet.</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%>
The following table reflects the activity for all unvested stock options during
the nine months ended September 30, 2006:</TD>
</TR>
</TABLE>
<BR>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="70%" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH></TH>
     <TH ALIGN="RIGHT">For Shares<HR WIDTH=40% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH ALIGN="RIGHT">Weighted Average&nbsp;&nbsp;&nbsp;&nbsp;<BR>
Grant-Date Fair Value<HR WIDTH=70% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH="35%" ALIGN="LEFT">Unvested at January 1, 2006</TD>
     <TD WIDTH="30%" ALIGN="RIGHT">840,189&nbsp;</TD>
     <TD WIDTH="35%" ALIGN="RIGHT">$1.84</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Granted</TD>
     <TD ALIGN="RIGHT">439,334&nbsp;</TD>
     <TD ALIGN="RIGHT">$5.24</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Vested</TD>
     <TD ALIGN="RIGHT">(357,874)</TD>
     <TD ALIGN="RIGHT">$2.13</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Forfeited</TD>
     <TD ALIGN="RIGHT">(3,998)</TD>
     <TD ALIGN="RIGHT">$2.25</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Unvested at September 30, 2006</TD>
     <TD ALIGN="RIGHT">917,651&nbsp;</TD>
     <TD ALIGN="RIGHT">$3.35</TD></TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%>
At September 30, 2006, there was $1.7 million of unrecognized compensation costs
related to unvested stock options, which is expected to be recognized over a
weighted average period of 1.5 years. The total fair value of stock options
vested during the nine months ended September 30, 2006 was $762,000.</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%>
<I>Restricted Stock and Restricted Stock Units</I></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%>
In October 2004, the Company granted 1,000,000 restricted stock units under the
1999 Plan to a key employee who is also a Company director. A restricted stock
unit represents the right to receive a share of the Company's common stock. The
restricted stock units have none of the rights as other shares of common stock
until common stock is distributed, other than rights to cash dividends. The
restricted stock unit award was a non-performance award which vests at the rate
of 20% on May 31, 2005 and 10% per year on April 1, 2006 and each year
thereafter. The share-based expense for restricted stock awards was determined
based on the market price of the Company's stock at the date of the award.
Compensation expense related to the restricted stock award was $144,000 for the
three month period and $431,000 for the nine month period ended September 30,
2006 and $144,000 for the three month period and $861,000 for the nine month
period ended September 30, 2005.</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%>
Under the provisions of SFAS 123(R), the recognition of unearned compensation is
no longer required. Unearned compensation is a contra-equity balance sheet
account representing the amount of unrecognized expense related to restricted
stock that is amortized as the expense is recognized over the vesting period of
the award. As of January 1, 2006, the balance of Unearned Restricted Stock
Compensation was reversed into Additional Paid-in Capital on the Company's
balance sheet. As of September 30, 2006, there was unrecognized stock-based
compensation of $3.7 million related to the restricted stock award, which is
expected to be recognized over a weighted-average period of 6.50 years.</TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%>
<I>Prior to the Adoption of SFAS 123(R)</I></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%>
Prior to 2006, the Company elected to follow the accounting provisions of APB
Opinion 25 for stock-based compensation and to provide the pro forma disclosures
required under SFAS 148, "Accounting for Stock-Based Compensation &#150;
Transition and Disclosure." Accordingly, the Company did not recognize
compensation expense for stock option grants made at an exercise price equal to
or in excess of the market value of the underlying stock on the date of grant
for periods prior to January 1, 2006. The following table illustrates the effect
on net income per share had compensation costs of the plans been determined
under a fair value alternative method as stated in SFAS 123, "Accounting for
Stock-Based Compensation" (in thousands, except per share data):</TD>
</TR>
</TABLE>
<BR>

<P><FONT SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Periods ended September 30, 2005:</B> </FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="80%" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH></TH>
     <TH ALIGN=RIGHT>Nine months<HR WIDTH=60% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH ALIGN=RIGHT>Three months<HR WIDTH=60% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH="60%" ALIGN="LEFT">Net income - as reported</TD>
     <TD WIDTH="20%" ALIGN="RIGHT">$8,035</TD>
     <TD WIDTH="20%" ALIGN="RIGHT">$3,875</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Add: Stock-based compensation expense included in</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;reported net income, net of related tax effects</TD>
     <TD ALIGN=RIGHT>555</TD>
     <TD ALIGN=RIGHT>93</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Deduct: Stock-based employee compensation expense</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;determined under fair value based method, net of</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>&nbsp;&nbsp;&nbsp;&nbsp;related tax effects</TD>
     <TD ALIGN=RIGHT>892</TD>
     <TD ALIGN=RIGHT>194</TD></TR>
<TR>
     <TD></TD>
     <TD ALIGN=RIGHT><HR WIDTH=40% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD ALIGN=RIGHT><HR WIDTH=40% NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Pro forma net income</TD>
     <TD ALIGN=RIGHT>$7,698</TD>
     <TD ALIGN=RIGHT>$3,774</TD></TR>
<TR>
     <TD></TD>
     <TD ALIGN=RIGHT><HR WIDTH=40% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD ALIGN=RIGHT><HR WIDTH=40% NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Net income per common share - basic:</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Net income  - as reported</TD>
     <TD ALIGN=RIGHT>$.23</TD>
     <TD ALIGN=RIGHT>$.11</TD></TR>
<TR>
     <TD></TD>
     <TD ALIGN=RIGHT><HR WIDTH=40% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD ALIGN=RIGHT><HR WIDTH=40% NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Net income  - pro forma</TD>
     <TD ALIGN=RIGHT>$.22</TD>
     <TD ALIGN=RIGHT>$.11</TD></TR>
<TR>
     <TD></TD>
     <TD ALIGN=RIGHT><HR WIDTH=40% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD ALIGN=RIGHT><HR WIDTH=40% NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Net income per common share - diluted:</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Net income - as reported</TD>
     <TD ALIGN=RIGHT>$.22</TD>
     <TD ALIGN=RIGHT>$.11</TD></TR>
<TR>
     <TD></TD>
     <TD ALIGN=RIGHT><HR WIDTH=40% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD ALIGN=RIGHT><HR WIDTH=40% NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Net income - pro forma</TD>
     <TD ALIGN=RIGHT>$.21</TD>
     <TD ALIGN=RIGHT>$.10</TD></TR>
<TR>
     <TD></TD>
     <TD ALIGN=RIGHT><HR WIDTH=40% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD ALIGN=RIGHT><HR WIDTH=40% NOSHADE COLOR=#000000 SIZE=2></TD></TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT><B>3.</B></TD>
<TD WIDTH=95%><B>Net Income per Common Share</B>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT SIZE=3>Net income per common share &#151; basic was
calculated based upon the weighted average number of common shares outstanding
during the respective periods presented. Net income per common share &#151;
diluted was calculated based upon the weighted average number of common shares
outstanding and included the equivalent shares for dilutive options outstanding
during the respective periods. The dilutive effect of outstanding options issued
by the Company is reflected in net income per share &#151; diluted using the
treasury stock method. Under the treasury stock method, options will only have a
dilutive effect when the average market price of common stock during the period
exceeds the exercise price of the options. The weighted average number of stock
options outstanding excluded from the computation of diluted earnings per share
was 53,000 shares for the nine months ended September 30, 2006, 512,000 shares
for the nine months ended September 30, 2005, 23,000 shares for the three months
ended September 30, 2006 and 488,000 shares for the three months ended September
30, 2005 due to their antidilutive effect. </FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT><B>4.</B></TD>
<TD WIDTH=95%><B>Comprehensive Income</B>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT SIZE=3>
Comprehensive income consists of net income and foreign currency translation
adjustments, net of tax, and is included in the Condensed Consolidated Statement
of Shareholders' Equity. For the nine month periods ended September 30,
comprehensive income was $41,351,000 in 2006 and $5,566,000 in 2005. For the
three month periods ended September 30, comprehensive income was $12,218,000 in
2006 and $(162,000) in 2005. </FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT><B>5.</B></TD>
<TD WIDTH=95%><B>Credit Facilities</B>
</TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT SIZE=3>
The Company maintains a $120 million (which may be increased by up to $30
million, subject to certain conditions) secured revolving credit agreement with
a group of financial institutions which provides for borrowings in the United
States and United Kingdom. The borrowings are secured by all of the Company's
domestic and United Kingdom accounts receivable, the domestic inventories of the
Company, general intangibles and the Company's shares of stock in its domestic
subsidiaries and the Company's United Kingdom headquarters building. The credit
facility expires and the outstanding borrowings thereunder are due on October
26, 2010. The revolving credit agreement contains certain financial and other
covenants, including maintaining a minimum level of availability and
restrictions on capital expenditures and payments of dividends. The Company was
in compliance with all of the covenants as of September 30, 2006, except for the
required timely submission of financial statements, for which it has obtained a
waiver. As of September 30, 2006, eligible collateral under the agreement was
$113.8 million and total availability was $91.1million. There were outstanding
letters of credit of $10.6 million and there were outstanding advances of $12.1
million (all in the United Kingdom) as of September 30, 2006. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT SIZE=3>
Under the Company's &#128;5.0 million ($6.3 million at the September 30, 2006
exchange rate) Netherlands credit facility, there were &#128;2.6 million ($3.3
million) of borrowings outstanding at September 30, 2006, with interest payable
at a rate of 5.0% per annum. Borrowings under the facility are secured by the
subsidiary's accounts receivable and are subject to a borrowing base limitation
of 85% of the eligible accounts. The facility expires in August 2007.
</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT><B>6.</B></TD>
<TD WIDTH=95%><B>Accrued Restructuring Costs</B>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT SIZE=3>
The
Company periodically assesses its operations to ensure that they are efficient, aligned
with market conditions and responsive to customer needs. During the years ended December
31, 2005, 2004 and 2003 management approved and implemented restructuring actions which
included workforce reductions and facility consolidations. The following table summarizes
the amounts recognized by the Company as restructuring and other charges for the periods
presented (in thousands): </FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="70%" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH ALIGN=LEFT>Periods ended September 30, 2005<HR WIDTH=75% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH ALIGN=RIGHT>Nine months<HR WIDTH=55% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH ALIGN=RIGHT>Three months<HR WIDTH=60% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH="50%" ALIGN="LEFT">2004 United States streamlining plan</TD>
     <TD WIDTH="25%" ALIGN="RIGHT">$122</TD>
     <TD WIDTH="25%" ALIGN="RIGHT"></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Other severance and exit costs</TD>
     <TD ALIGN=RIGHT>3,372</TD>
     <TD ALIGN=RIGHT>$442</TD></TR>
<TR>
     <TD></TD>
     <TD ALIGN=RIGHT><HR WIDTH=30% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD ALIGN=RIGHT><HR WIDTH=30% NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Total restructuring and other charges</TD>
     <TD ALIGN=RIGHT>$3,494</TD>
     <TD ALIGN=RIGHT>$44</TD></TR>
<TR>
     <TD></TD>
     <TD ALIGN=RIGHT><HR WIDTH=30% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD ALIGN=RIGHT><HR WIDTH=30% NOSHADE COLOR=#000000 SIZE=2></TD></TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%>
<I><U>2004 United States Streamlining Plan</U></I></TD>
</TR>
</TABLE>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT SIZE=3>
In the first quarter of 2004, the Company implemented a plan to streamline the
back office and warehousing operations in its United States computer businesses.
During the first quarter of 2005, the Company recorded $122,000 of additional
severance costs in connection with this plan. </FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%>
<I><U>Other Severance and Exit Costs</U></I></TD>
</TR>
</TABLE>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT SIZE=3>
During the first quarter of 2005, the Company implemented plans to streamline
operations in its European businesses. The Company recorded $3.4 million of
costs related to these actions for severance and benefits for approximately 200
terminated employees during the first nine months of 2005. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT SIZE=3>
The following table summarizes the components of the accrued restructuring
charges and the movements within these components during the nine months ended
September 30, 2006 (in thousands). </FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="80%" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH></TH>
     <TH ALIGN="RIGHT">Severance and<BR>
Personnel Costs<HR WIDTH=60% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH ALIGN="RIGHT">Other<BR>
Exit Costs<HR WIDTH=40% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH ALIGN="RIGHT">Total<HR WIDTH=40% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH="30%" ALIGN="LEFT">Accrued at December 31, 2005</TD>
     <TD WIDTH="25%" ALIGN="RIGHT">$253</TD>
     <TD WIDTH="25%" ALIGN="RIGHT">$265</TD>
     <TD WIDTH="20%" ALIGN="RIGHT">$518</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Amounts utilized</TD>
     <TD ALIGN="RIGHT">(253)</TD>
     <TD ALIGN="RIGHT">(119)</TD>
     <TD ALIGN="RIGHT">(372)</TD></TR>
<TR>
     <TD></TD>
     <TD ALIGN="RIGHT"><HR WIDTH=30% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD ALIGN="RIGHT"><HR WIDTH=30% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD ALIGN="RIGHT"><HR WIDTH=30% NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Accrued at September 30, 2006</TD>
     <TD ALIGN="RIGHT">$-</TD>
     <TD ALIGN="RIGHT">$146</TD>
     <TD ALIGN="RIGHT">$146</TD></TR>
<TR>
     <TD></TD>
     <TD ALIGN="RIGHT"><HR WIDTH=30% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD ALIGN="RIGHT"><HR WIDTH=30% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD ALIGN="RIGHT"><HR WIDTH=30% NOSHADE COLOR=#000000 SIZE=1></TD></TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT><B>7.</B></TD>
<TD WIDTH=95%><B>Long-term Debt</B>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT SIZE=3>
The Company repaid its 7.04% mortgage loan in March 2006 as a result of the sale
of its Suwanee, Georgia distribution facility. </FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT><B>8.</B></TD>
<TD WIDTH=95%><B>Segment Information</B>
</TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT SIZE=3>
The Company operates in one primary business as a reseller of business products
to commercial and consumer users. The Company operates and is internally managed
in two operating segments, Computer Products and Industrial Products. Computer
Products sales include our Systemax PCs complemented by offerings of other brand
name PCs and notebook computers. This segment's sales also include computer
related products such as peripherals (hard disks, CD-ROM and DVD drives,
printers, scanners and monitors), memory upgrades, data communication and
networking equipment, packaged software, digital cameras, plasma televisions and
supplies, such as printer cartridges and media (recordable disks, CD's and
magnetic tape cartridges). Our Industrial Products sales include storage
equipment, such as metal shelving, bins and lockers, light material handling
equipment such as forklifts, hand carts and hand trucks, furniture and
consumable industrial products such as first aid items, safety items, protective
clothing and OSHA compliance items. The Company has also separately disclosed
its costs associated with the development of the Company's web-hosted software
application, which is being marketed to third parties and for which no revenues
have been recognized to date. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT SIZE=3>
The Company's chief operating decision-maker is the Company's Chief Executive
Officer. The Company evaluates segment performance based on income from
operations before net interest, foreign exchange gains and losses, restructuring
and other charges and income taxes. Corporate costs not identified with the
disclosed segments and restructuring and other charges are grouped as "Corporate
and other expenses." The chief operating decision-maker reviews assets and makes
capital expenditure decisions for the Company on a consolidated basis only. The
accounting policies of the segments are the same as those of the Company.<BR>
<BR>
Financial information relating to the Company's operations by reportable segment
was as follows (in thousands):
</FONT></TD>
</TR>
</TABLE>
<BR>


<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="90%" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH COLSPAN=2></TH>
     <TH COLSPAN=4>Nine Months Ended<BR>
September 30,<HR WIDTH=65% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=4>Three Months Ended<BR>
September 30,<HR WIDTH=65% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2></TH>
     <TH COLSPAN=2 ALIGN=CENTER>2006<HR WIDTH=30% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=2 ALIGN=CENTER>2005<HR WIDTH=30% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=2 ALIGN=CENTER>2006<HR WIDTH=30% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=2 ALIGN=CENTER>2005<HR WIDTH=30% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH="35%" ALIGN="LEFT">Net sales:</TD>
     <TD WIDTH="3%" ALIGN="LEFT">&nbsp;</TD>
     <TD WIDTH="12%" ALIGN="RIGHT"></TD>
        <TD WIDTH="4%" ALIGN="LEFT">&nbsp;</TD>
     <TD WIDTH="12%" ALIGN="RIGHT"></TD>
        <TD WIDTH="4%" ALIGN="LEFT">&nbsp;</TD>
     <TD WIDTH="12%" ALIGN="RIGHT"></TD>
        <TD WIDTH="4%" ALIGN="LEFT">&nbsp;</TD>
     <TD WIDTH="12%" ALIGN="RIGHT"></TD>
        <TD WIDTH="2%" ALIGN="LEFT">&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Computer products</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$1,550,185</TD>
        <TD ALIGN=LEFT></TD>
     <TD ALIGN=RIGHT>$1,401,446</TD>
        <TD ALIGN=LEFT></TD>
     <TD ALIGN=RIGHT>$522,690</TD>
        <TD ALIGN=LEFT></TD>
     <TD ALIGN=RIGHT>$442,709</TD>
        <TD ALIGN=LEFT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Industrial products</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>147,006</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>131,106</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>52,351</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>45,793</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=70% NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Consolidated</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$1,697,191</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$1,532,552</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$575,041</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$488,502</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=70% NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Income (loss) from operations:</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Computer products</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$48,145</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$23,340</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$17,281</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$8,951</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Industrial products</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>9,619</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>5,157</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>4,543</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>2,114</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Software application</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>(5,922</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>(4,977</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>(2,268</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>(1,743</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Corporate and other expenses</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>(1,225</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>(7,200</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>(391</TD>
        <TD ALIGN=LEFT>)</TD>
     <TD ALIGN=RIGHT>(1,309</TD>
        <TD ALIGN=LEFT>)</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=70% NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Consolidated</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$50,617</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$16,320</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$19,165</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$8,013</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=70% NOSHADE COLOR=#000000 SIZE=2></TD></TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=95%>
Financial information relating to the Company's operations by geographic area
was as follows (in thousands):
</TD>
</TR>
</TABLE>
<BR>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="90%" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH COLSPAN=2></TH>
     <TH COLSPAN=4>Nine Months Ended<BR>
September 30,<HR WIDTH=65% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=4>Three Months Ended<BR>
September 30,<HR WIDTH=65% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2></TH>
     <TH COLSPAN=2 ALIGN=CENTER>2006<HR WIDTH=30% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=2 ALIGN=CENTER>2005<HR WIDTH=30% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=2 ALIGN=CENTER>2006<HR WIDTH=30% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=2 ALIGN=CENTER>2005<HR WIDTH=30% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH="35%" ALIGN="LEFT">Net sales:</TD>
     <TD WIDTH="3%" ALIGN="LEFT">&nbsp;</TD>
     <TD WIDTH="12%" ALIGN="RIGHT"></TD>
        <TD WIDTH="4%" ALIGN="LEFT">&nbsp;</TD>
     <TD WIDTH="12%" ALIGN="RIGHT"></TD>
        <TD WIDTH="4%" ALIGN="LEFT">&nbsp;</TD>
     <TD WIDTH="12%" ALIGN="RIGHT"></TD>
        <TD WIDTH="4%" ALIGN="LEFT">&nbsp;</TD>
     <TD WIDTH="12%" ALIGN="RIGHT"></TD>
        <TD WIDTH="2%" ALIGN="LEFT">&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>United States:</TD><TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Industrial products</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$147,006</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$131,106</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$52,351</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$45,793&nbsp;&nbsp;</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Computer products</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>920,934</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>815,336</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>309,802</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>259,970&nbsp;&nbsp;</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=60% NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>United States total</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>1,067,940</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>946,442</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>362,153</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>305,763&nbsp;&nbsp;</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Other North America</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>94,373</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>68,233</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>33,388</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>21,510&nbsp;&nbsp;</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=60% NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>North America total</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>1,162,313</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>1,014,675</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>395,541</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>327,273&nbsp;&nbsp;</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Europe</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>534,878</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>517,877</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>179,500</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>161,229&nbsp;&nbsp;</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=60% NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT>Consolidated</TD><TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$1,697,191</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$1,532,552</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$575,041</TD>
        <TD ALIGN=LEFT>&nbsp;</TD>
     <TD ALIGN=RIGHT>$488,502&nbsp;&nbsp;</TD>
        <TD ALIGN=LEFT>&nbsp;</TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=50% NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD COLSPAN=2 ALIGN=CENTER><HR WIDTH=60% NOSHADE COLOR=#000000 SIZE=2></TD></TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenues are
attributed to countries based on the location of the selling subsidiary.
</FONT></P>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT><B>9.</B></TD>
<TD WIDTH=95%><B>Recent Accounting Pronouncements </B>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Level 2" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT SIZE=3>
In June 2006, the FASB ratified the consensus reached by the EITF on Issue No.
06-3, "How Taxes Collected from Customers and Remitted to Governmental
Authorities Should Be Presented in the Income Statement (That Is, Gross versus
Net Presentation)." The consensus requires disclosure of either the gross or net
presentation, and any such taxes reported on a gross basis should be disclosed
in the interim and annual financial statements. This Issue is effective for
financial reports beginning after December 15, 2006. The Company does not expect
to change its presentation of such taxes, as its sales are currently recorded
net of tax. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Large Indent Level 2" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT SIZE=3>In June 2006, the Financial Accounting Standards
Board ("FASB") issued FASB Interpretation No. 48 "Accounting for Uncertainty in
Income Taxes (an interpretation of FASB Statement No. 109)&quot;, which is
effective for fiscal years beginning after December 15, 2006. This
interpretation was issued to clarify the accounting for uncertainty in income
taxes recognized in the financial statements by prescribing a recognition
threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. The
Company is currently evaluating the potential impact, if any, of this
pronouncement. </FONT>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Level 2" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT SIZE=3>
In September 2006, the SEC issued Staff Accounting Bulletin No. 108 ("SAB 108")
"Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements". SAB 108 provides
interpretative guidance on how the effects of the carryover or reversal of prior
year misstatements should be considered in quantifying a current year
misstatement. The SEC staff believes that registrants should quantify errors
using both a balance sheet and an income statement approach and evaluate whether
either approach results in quantifying a misstatement that, when all relevant
quantitative and qualitative factors are considered, is material. This
pronouncement is effective for fiscal years ending after November 15, 2006. The
Company is currently evaluating the provisions of SAB 108. </FONT></TD>
</TR>
</TABLE>
<BR>

<P><FONT SIZE=3><B>Item 2.&nbsp;&nbsp;&nbsp;<U>Management's Discussion and Analysis of Financial
Condition and Results of Operations</U>.</B></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT SIZE=3><B>Forward Looking Statements</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Workstation" -->
<P><FONT SIZE=3>This report contains forward looking statements within the
meaning of that term in the Private Securities Litigation Reform Act of 1995
(Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934). Additional written or oral forward looking statements may
be made by the Company from time to time, in filings with the Securities and
Exchange Commission or otherwise. Statements contained in this report that are
not historical facts are forward looking statements made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward looking statements may include, but are not limited to, projections of
revenue, income or loss and capital expenditures, statements regarding future
operations, financing needs, compliance with financial covenants in loan
agreements, plans for acquisition or sale of assets or businesses and
consolidation of operations of newly acquired businesses, and plans relating to
products or services of the Company, assessments of materiality, predictions of
future events and the effects of pending and possible litigation, as well as
assumptions relating to the foregoing. In addition, when used in this
discussion, the words "anticipates", "believes", "estimates", "expects",
"intends", "plans" and variations thereof and similar expressions are intended
to identify forward looking statements. </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Workstation" -->
<P><FONT SIZE=3>Forward-looking statements in this report are based on the
Company's beliefs and expectations as of the date of this report and are subject
to risks and uncertainties which may have a significant impact on the Company's
business, operating results or financial condition. Investors are cautioned that
these forward-looking statements are inherently uncertain. Should one or more of
the risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results or outcomes may vary materially from those described
herein. Statements in this report, particularly in "Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Notes to Condensed Consolidated Financial Statements, describe certain
factors, among others, that could contribute to or cause such differences.
</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Default" -->
<P><FONT SIZE=3>Readers are cautioned not to place undue reliance on any forward
looking statements contained in this report, which speak only as of the date of
this report. We undertake no obligation to publicly release the result of any
revisions to these forward looking statements that may be made to reflect events
or circumstances after the date hereof or to reflect the occurrence of
unexpected events. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT SIZE=3><B>Critical Accounting Policies and Estimates</B>
</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Workstation" -->
<P><FONT SIZE=3>The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements, and
revenues and expenses during the period. Significant accounting policies
employed by the Company, including the use of estimates, were presented in the
Notes to Consolidated Financial Statements of the Company's 2005 Annual Report
on Form 10-K. The Company adopted SFAS 123(R), "Share-based Payment," effective
January 1, 2006 to account for stock-based compensation. In accordance with SFAS
123 (R), we measure the cost of employee services received in exchange for an
award of equity instruments based on the grant-date fair value of the award.
That cost is recognized over the period during which an employee is required to
provide service in exchange for the award for stock option grants. No
compensation cost is recognized for equity instruments for which employees do
not render the requisite service. We determine the grant-date fair value of
employee share options using the Black-Scholes option-pricing model. </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Default" -->
<P><FONT SIZE=3>Critical accounting policies are those that are most important
to the presentation of our financial condition and results of operations,
require management's most difficult, subjective and complex judgments, and
involve uncertainties. The accounting policies that have been identified as
critical to our business operations and understanding the results of operations
pertain to revenue recognition, net accounts receivable, inventories, long-lived
assets, income taxes and restructuring charges and accruals. The application of
each of these critical accounting policies and estimates was discussed in Item 7
of the Company's Annual Report on Form 10-K for the year ended December 31,
2005. There have been no significant changes in the application of critical
accounting policies or estimates during 2006. Management believes that full
consideration has been given to all relevant circumstances that we may be
subject to, and the condensed consolidated financial statements of the Company
accurately reflect management's best estimate of the consolidated results of
operations, financial position and cash flows of the Company for the periods
presented. Because of the uncertainty in these estimates, actual results could
differ from estimates used in applying the critical accounting policies. We are
not aware of any reasonably likely events or circumstances which would result in
different amounts being reported that would materially affect its financial
condition or results of operations. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT SIZE=3><B>Overview</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Workstation" -->
<P><FONT SIZE=3>We are a direct marketer of brand name and private label
products. Our operations are organized in two primary reportable segments &#150;
Computer Products and Industrial Products. Our Computer Products segment markets
personal desktop computers, notebook computers and computer related products in
North America and Europe. We assemble our own PCs and sell them under our own
trademarks, which we believe gives us a competitive advantage. We also sell
personal computers manufactured by other leading companies, such as Hewlett
Packard, E-Machines and Sony. Our Industrial Products segment markets material
handling equipment, storage equipment and consumable industrial items in North
America. We offer more than 100,000 products and continuously update our product
offerings to address the needs of our customers, which include large, mid-sized
and small businesses, educational and government entities as well as individual
consumers. We reach customers by multiple channels, utilizing relationship
marketers, e-commerce web sites, mailed catalogues and retail outlet stores. We
also participate in the emerging market for on-demand, web-based software
applications through the marketing of our PCS Profitability Suite&#153; of
hosted software, which we began during 2004, and in which we have not yet
recognized any revenues and have incurred considerable losses to date. Computers
and computer related products account for 91% of our net sales, and, as a
result, we are dependent on the general demand for information technology
products. </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Workstation" -->
<P><FONT SIZE=3>The market for computer products is subject to intense price
competition and is characterized by narrow gross profit margins. The North
American industrial products market is highly fragmented and we compete against
multiple distribution channels. Distribution of information technology and our
industrial products is working capital intensive, requiring us to incur
significant costs associated with the warehousing of many products, including
the costs of leasing warehouse space, maintaining inventory and inventory
management systems, and employing personnel to perform the associated tasks. We
supplement our on-hand product availability by maintaining relationships with
major distributors and manufacturers, utilizing a combination of stocking and
drop-shipment fulfillment. </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Workstation" -->
<P><FONT SIZE=3>The primary component of our operating expenses historically has
been employee related costs, which includes items such as wages, commissions,
bonuses, and employee benefits. We have made substantial reductions in our
workforce and closed or consolidated several facilities over the past several
years. With evidence of a prolonged economic downturn in Europe, we took
measures to align our cost structure with expected potentially lower revenues
and decreasing gross margins, initiating several cost reduction plans there
during 2004 and 2005. We will continue to monitor our costs and evaluate the
need for additional actions. </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Default" -->
<P><FONT SIZE=3>The discussion of our results of operations and financial
condition that follows will provide information that will assist in
understanding our financial statements, the factors that we believe may affect
our future results and financial condition as well as information about how
certain accounting principles and estimates affect the consolidated financial
statements. This discussion should be read in conjunction with the condensed
consolidated financial statements included herein. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<P ALIGN=LEFT><FONT SIZE=3><B>Results of Operations</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT SIZE=3><I>Nine Months Ended September 30, 2006 Compared to Nine
Months Ended September 30, 2005</I> </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Workstation" -->
<P><FONT SIZE=3>Net sales for the nine months ended September 30, 2006 increased
10.7% to $1.7 billion compared to $1.5 billion in the year-ago period. Net sales
in the first nine months of 2006 included approximately $583.4 million of
internet-related sales, a 30.7% increase from $446.5 million of internet-related
sales in the prior year's first nine months. North American sales were $1.16
billion, an increase of 14.6% from $1.01 billion in the prior year. European
sales increased to $534.9 million (representing 31.5% of worldwide sales)
compared to $517.9 million (33.8% of worldwide sales) in the year-ago period.
Movements in foreign exchange rates negatively impacted the European sales
comparison by approximately $16.7 million in 2006. Excluding the movements in
foreign exchange rates, European sales would have increased 6.5% from the prior
year. Sales as measured in local currencies in all but two of the European
markets we serve increased in the first nine months of 2006. The increase in our
North American sales resulted from sales growth in both our computer and
industrial products groups. Sales of computer products were $1.55 billion, an
10.6% increase from $1.4 million of sales in the prior year. This increase was
primarily a result of our continuing internet initiatives and expansion of our
product offerings. Sales of industrial products increased 12.1% to $147.0
million from $131.1 million in the prior year. </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Workstation" -->
<P><FONT SIZE=3>Gross profit, which consists of net sales less product cost,
shipping, assembly and certain distribution center costs, was $259.6 million
compared to $221.6 million in the year-ago nine months, an increase of $38.0
million. The gross profit margin was 15.3% in the current period, compared to
14.5% in the year-ago period. The increase in the gross profit margin resulted
from a favorable change in product mix, increased internet sales, increased
consideration from vendors and reduced warehouse costs for staff and supplies.
</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Workstation" -->
<P><FONT SIZE=3>Selling, general and administrative expenses for the first nine
months increased $7.2 million, or 3.6%, to $209.0 million compared to $201.8
million in the first nine months of 2005. Selling, general and administrative
costs in Europe declined approximately $8.1 million in the first nine months of
2006, primarily the result of the restructuring actions we took in Europe in
2005 and $1.3 million of decreased costs due to the effects of changes in
foreign exchange rates. The European decreases were partially offset by
increased spending in North America on salaries and employee related expenses of
approximately $10.8 million and increased advertising costs net of rebates of
approximately $2.5 million and higher credit card processing fees related to the
higher sales volume of approximately $2.7 million. Selling, general and
administrative expenses also include $1.2 million of stock compensation expense
in 2006 as a result of the adoption of SFAS 123(R). The Company used the
modified prospective transition method at adoption and accordingly, financial
statement amounts for prior periods presented in this Form 10-Q have not been
restated to reflect the fair value method of recognizing compensation cost
relating to non-qualified stock options. Selling, general and administrative
expenses as a percentage of net sales was 12.3% in the current nine month period
compared to 13.2% in the year-ago period. </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Workstation" -->
<P><FONT SIZE=3>During the first quarter of 2005 we implemented plans to
streamline and restructure the activities of our European computer businesses,
resulting in the elimination of approximately 200 positions. We incurred $3.5
million of restructuring costs associated with these actions in the first nine
months of 2005 for staff severance and benefits for terminated employees.
</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Workstation" -->
<P><FONT SIZE=3>We had income from operations for the current nine months of
$50.6 million compared to $16.3 million in the year-ago period. We had income
from operations of $39.5 million in North America in the current year compared
to income from operations of $24.5 million last year. We had income from
operations in Europe of $11.1 million in the first nine months of 2006, compared
to a loss from operations of $8.2 million in the year-ago period. </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Workstation" -->
<P><FONT SIZE=3>During the first quarter of 2006 we sold our distribution
facility in Suwanee, Georgia and recognized a gain of approximately $6.7 million
net of a prepayment penalty incurred upon the repayment of the underlying
mortgage loan, which is included in "Other non-operating (income) expense, net."
The facility was replaced by a larger, leased building in the same geographic
area. </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Workstation" -->
<P><FONT SIZE=3>Interest income and expense, net includes interest expense of
$1.4 million in the first nine months of 2006 and $2.0 million in 2005. The
decrease resulted from lower average European short-term borrowings. Interest
income earned on invested funds increased in 2006 as a result of an increase in
funds available for investment. </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Workstation" -->
<P><FONT SIZE=3>Income tax expense was $20.6 million in the first nine months of
2006 and $5.9 million in the year-ago period. The effective income tax rate was
35.7%, compared to 42.5% in the year ago period. The effective income tax rate
was lower in 2006 primarily as a result of income earned in the United Kingdom
for which the tax provision has been offset by the reversal of a deferred tax
valuation allowance previously recorded against the deferred tax asset for our
United Kingdom carryforward losses. Changes in the mix of U.S. and non-U.S.
earnings over the balance of the year and changes in the valuation of deferred
tax assets could have a significant impact on the effective tax rate for the
year. </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Default" -->
<P><FONT SIZE=3>Net income for the first nine months was $37.1 million, or $1.06
per basic share and $.99 per diluted share, compared to $8.0 million, or $.23
per basic and $.22 per diluted share, in the first nine months of 2005.
</FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT SIZE=3><I>Three Months Ended September 30, 2006 Compared to
Three Months Ended September 30, 2005</I> </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Workstation" -->
<P><FONT SIZE=3>Net sales for the three months ended September 30, 2006
increased 17.7% to $575.0 million compared to $488.5 million in the year-ago
quarter. Net sales in the third quarter of 2006 included approximately $192.4
million of internet-related sales, a 30.4% increase from $147.6 million of
internet-related sales in the prior year's third quarter. North American sales
were $395.5 million, an increase of 20.9% from $327.3 million in the prior year.
European sales increased 11.3%, to $179.5 million (representing 31.2% of
worldwide sales) compared to $161.2 million (33.0% of worldwide sales) in the
year-ago quarter. Movements in foreign exchange rates positively impacted the
European sales comparison by approximately $8.3 million in 2006. Excluding the
movements in foreign exchange rates, European sales would have increased 6.2%
from the prior year. Sales as measured in local currencies in all of the
European markets we serve increased in the third quarter of 2006. The increase
in our North American sales resulted from sales growth in both our computer and
industrial products groups. Sales of computer products were $522.7 million, an
18.1% increase from $442.7 million of sales in the prior year. This increase was
primarily a result of our continuing internet initiatives and expansion of our
product offerings. Sales of industrial products increased 14.3% to $52.4 million
from $45.8 million in the prior year, and continue to grow in line with the
favorable economic conditions in the United States. </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Workstation" -->
<P><FONT SIZE=3>Gross profit, which consists of net sales less product cost,
shipping, assembly and certain distribution center costs, was $91.5 million
compared to $70.5 million in the year-ago quarter, an increase of $21.0 million.
The gross profit margin was 15.9% in the current period and 14.4% in the
year-ago period. </FONT></P>

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<P><FONT SIZE=3>Selling, general and administrative expenses for the quarter
increased $10.3 million to $72.3 million compared to $62.0 million in the third
quarter of 2005. Selling, general and administrative costs in Europe declined
approximately $2.2 million in the third quarter of 2006, primarily the result of
the restructuring actions we took in Europe in 2005 and $.9 million of increased
costs due to the effects of changes in foreign exchange rates. The European
decreases were offset in part by increased spending in North America on salaries
and employee related expenses of approximately $8.6 million, higher credit card
processing fees related to the higher sales volume of approximately $2.0 million
and higher advertising costs net of rebates of $1.9 million. Selling, general
and administrative expenses also include $0.5 million of stock compensation
expense in 2006 as a result of the adoption of SFAS 123(R). The Company used the
modified prospective transition method at adoption and accordingly, financial
statement amounts for prior periods presented in this Form 10-Q have not been
restated to reflect the fair value method of recognizing compensation cost
relating to non-qualified stock options. Selling, general and administrative
expense as a percentage of net sales was 12.6% in the current quarter compared
to 12.7% in the year-ago quarter. </FONT></P>

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<P><FONT SIZE=3>During the first quarter of 2005 we implemented plans to
streamline and restructure the activities of our European computer businesses,
resulting in the elimination of approximately 200 positions. We incurred $.4
million of additional restructuring costs associated with these actions during
the third quarter of 2005 for staff severance and benefits for terminated
employees. </FONT></P>

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<P><FONT SIZE=3>We had income from operations for the current quarter of $19.2
million compared to $8.0 million in the year-ago quarter. We had income from
operations of $15.6 million in North America in the third quarter compared to
income from operations of $6.8 million last year. We had income from operations
in Europe of $3.6 million in the third quarter of 2006, compared to $1.2 million
in the year-ago quarter. </FONT></P>

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<P><FONT SIZE=3>Interest income and expense, net includes interest expense of
$0.4 million in the third quarter of 2006 and $0.6 million in 2005. The decrease
resulted from lower average European short-term borrowings. Interest income
earned on invested funds increased in 2006 as a result of an increase in funds
available for investment. </FONT></P>

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<P><FONT SIZE=3>Income tax expense was $7.1 million in the third quarter of 2006
and $2.9 million in the year-ago quarter. The effective income tax rate for the
third quarter of 2006 was 36.2%, compared to 42.5% in the year ago period. The
effective income tax rate was lower in 2006 primarily as a result of income
earned in the United Kingdom for which the tax provision has been offset by the
reversal of a deferred tax valuation allowance previously recorded against the
deferred tax asset for our United Kingdom carryforward losses. Changes in the
mix of U.S. and non-U.S. earnings over the balance of the year and changes in
the valuation of deferred tax assets could have a significant impact on the
effective tax rate for the year. </FONT></P>

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<P><FONT SIZE=3>Net income for the third quarter was $12.5 million, or $.36 per
basic share and $.33 per diluted share, compared to $3.9 million, or $.11 per
basic and diluted share, in the third quarter of 2005. </FONT></P>

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<P ALIGN=LEFT><FONT SIZE=3><B>Liquidity and Capital Resources</B> </FONT></P>

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<P><FONT SIZE=3>Our primary liquidity needs are to support working capital
requirements in our business and to fund capital expenditures. We rely
principally upon operating cash flow and borrowings under our credit facilities
to meet these needs. We believe that cash flow available from these sources will
be sufficient to meet our working capital requirements, projected capital
expenditures and interest and debt repayments in the foreseeable future.
</FONT></P>

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<P><FONT SIZE=3>Our working capital was $217.3 million at September 30, 2006, an
increase of $47.5 million from $169.8 million at the end of 2005. This resulted
from a $9.3 million increase in accounts receivable, a $17.1 million increase in
inventories, a $8.9 million increase in prepaid expense and other current
assets, a $10.7 million decrease in short-term borrowings, a $4.0 million
decrease in accounts payable and other accrued expenses offset by a $2.1 million
decrease in deferred tax assets and a $.4 million decrease in cash and cash
equivalents. Inventory levels increased $19.6 million in North America,
primarily in our computer products segment and inventories in Europe decreased
$2.5 million. Our inventory turnover was 9.3 times at the end of the third
quarter and 2005. Our accounts receivable increased in Europe by approximately
$5.2 million, as local currency sales in some of our larger markets increased
from the fourth quarter. Accounts receivable in North America increased
approximately $4.1 million from the end of the prior year. Future accounts
receivable and inventory balances will continue to fluctuate with changes in
sales volume and the mix of our net sales between consumer and business
customers. </FONT></P>

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<P><FONT SIZE=3>Our cash balance decreased slightly to $70.5 million during the
nine months ended September 30, 2006 from $70.9 million at the end of 2005. Net
cash provided by operating activities was $5.1 million for the first nine months
of 2006, compared to net cash provided by operating activities of $15.3 million
in the same period of 2005. The decrease in cash provided by operations in 2006
resulted from changes in our working capital accounts, which used $37.1 million
in cash compared to $2.9 million of cash used in 2005. The reduction resulted
primarily from a $14.3 million increase in inventories in the first nine months
of 2006 compared to an $15.1 million decrease for the same period of the prior
year, an increase in prepaids and other current assets of $8.4 million compared
to a reduction of $.9 million for the same period in 2005 and a decrease in
accounts payable, accrued expenses and other current liabilities in the first
nine months of 2006 of $10.0 million compared to a $12.5 million increase for
the same period of the prior year. Cash generated from net income adjusted by
other non-cash items provided $42.2 million for the nine months ended September
30, 2006 compared to $18.1 million provided by these items for the nine months
ended September 30, 2005, primarily as a result of the increase in our net
income. </FONT></P>

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<P><FONT SIZE=3>We maintain our cash and cash equivalents primarily in money
market funds or their equivalent. As of September 30, 2006, all of our
investments mature in less than three months. Accordingly, we do not believe
that our investments have significant exposure to interest rate risk.
</FONT></P>

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<P><FONT SIZE=3>For the nine months ended September 30, 2006 we had $14.5
million of cash provided by investing activities. This consisted of $19.1
million of proceeds from the sale of our Suwanee, Georgia distribution facility
and other fixed asset disposals, offset by $4.6 million of capital expenditures.
Capital expenditures in 2006 included facilities costs and equipment for the
replacement distribution facility we leased and upgrades and enhancements to our
information and communications systems hardware. For the nine months ended
September 30, 2005, we used $4.1 million in investing activities, principally
for the purchase of property, plant and equipment. Capital expenditures in 2005
consisted primarily of upgrades and enhancements to our information and
communications systems hardware and facilities costs for the opening of new
retail outlet stores. </FONT></P>

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<P><FONT SIZE=3>Net cash of $19.5 million was used in financing activities for
the nine months ended September 30, 2006. We used cash of $12.4 million to repay
long-term debt obligations, primarily for the mortgage on our Georgia
distribution facility, and we used $8.1 million to repay short-term borrowings
in Europe. Exercises of stock options provided $0.8 million of cash for the nine
months ended September 30, 2006. Cash of $3.3 million was provided by financing
activities in 2005. Cash of $3.0 million was provided by short-term borrowings
under our European credit facilities. We used cash of $0.5 million for payments
under long-term borrowing and capital lease agreements. Exercises of stock
options provided $0.7 million of cash for the nine months ended September 30,
2005. </FONT></P>

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<P><FONT SIZE=3>Under our $120 million (which may be increased by up to $30
million, subject to certain conditions) secured revolving credit agreement for
borrowings in the United States and United Kingdom, as of September 30, 2006,
eligible collateral was $113.8 million and total availability was $91.1 million.
There were outstanding letters of credit of $10.6 million and there were
outstanding advances of $12.1 million (all in the United Kingdom) as of
September 30, 2006. The borrowings are secured by all of the domestic and United
Kingdom accounts receivable, the domestic inventories of the Company, general
intangibles and the Company's shares of stock in its domestic subsidiaries and
the Company's United Kingdom headquarters building. The credit facility expires
and the outstanding borrowings thereunder are due on October 26, 2010. The
revolving credit agreement contains certain financial and other covenants,
including maintaining a minimum level of availability and restrictions on
capital expenditures and payments of dividends. We were in compliance with all
of the covenants as of September 30, 2006, except for the required timely
submission of financial statements, for which we have obtained a waiver.
</FONT></P>

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<P><FONT SIZE=3>Under our Netherlands &#128;5 million ($6.3 million at the
September 30, 2006 exchange rate) credit facility, at September 30, 2006 there
were &#128;2.6 million ($3.3 million) of borrowings outstanding under this line
with interest payable at a rate of 5.0% per annum. This facility expires in
August 2007. </FONT></P>

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<P><FONT SIZE=3>We also have certain obligations with various parties that
include commitments to make future payments. Our principal commitments at
September 30, 2006 consisted of repayments of borrowings under our credit
agreements, payments under operating leases for certain of our real property and
equipment and payments under employment and other service agreements. In
connection with the sale of our Suwanee, Georgia distribution facility, the
Company repaid the related mortgage loan which was secured by the land and
building. </FONT></P>

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<P><FONT SIZE=3>Our current and anticipated needs for cash include funding
growth in working capital and capital expenditures necessary for future growth
in sales, and potential expansion through acquisitions. We believe that our cash
balances and our availability under credit facilities will be sufficient to fund
our working capital and other cash requirements for the foreseeable future.
</FONT></P>

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<P ALIGN=LEFT><FONT SIZE=3><B>Off-balance Sheet Arrangements</B> </FONT></P>

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<P><FONT SIZE=3>The Company has not created, and is not party to, any
special-purpose or off-balance sheet entities for the purpose of raising
capital, incurring debt or operating the Company's business. The Company does
not have any arrangements or relationships with entities that are not
consolidated into the financial statements that are reasonably likely to
materially affect the Company's liquidity or the availability of capital
resources. </FONT></P>

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<P ALIGN=LEFT><FONT SIZE=3><B>Recent Accounting Developments</B> </FONT></P>

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<P><FONT SIZE=3>In June 2006, the FASB issued Interpretation No. 48 (FIN 48),
"Accounting for Uncertainty in Income Taxes &#150; an interpretation of FASB
Statement No. 109." FIN 48 clarifies and sets forth consistent rules for
accounting for uncertain tax positions taken or expected to be taken in
accordance with SFAS 109, "Accounting for Income Taxes." FIN 48 is effective for
fiscal years beginning after December 15, 2006. The Company is currently
evaluating the impact that adoption of FIN 48 may have on its consolidated
results of operations or financial position. </FONT></P>

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<P><FONT SIZE=3>In June 2006, the FASB ratified the consensus reached by the
EITF on Issue No. 06-3, "How Taxes Collected from Customers and Remitted to
Governmental Authorities Should Be Presented in the Income Statement (That Is,
Gross versus Net Presentation)." The consensus requires disclosure of either the
gross or net presentation, and any such taxes reported on a gross basis should
be disclosed in the interim and annual financial statements. This Issue is
effective for financial reports beginning after December 15, 2006. The Company
does not expect to change its presentation of such taxes, as its sales are
currently recorded net of tax. </FONT></P>

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<P><FONT SIZE=3>In September 2006, the SEC issued Staff Accounting Bulletin No.
108 ("SAB 108"), "Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements". SAB 108
provides interpretative guidance on how the effects of the carryover or reversal
of prior year misstatements should be considered in quantifying a current year
misstatement. The SEC staff believes that registrants should quantify errors
using both a balance sheet and an income statement approach and evaluate whether
either approach results in quantifying a misstatement that, when all relevant
quantitative and qualitative factors are considered, is material. This
pronouncement is effective for fiscal years ending after November 15, 2006. The
Company is currently evaluating the provisions of SAB 108. </FONT></P>

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<P ALIGN=LEFT><FONT SIZE=3><B>Item 3.&nbsp;&nbsp;&nbsp;<U>Quantitative and Qualitative Disclosure
About Market Risk</U>.</B> </FONT></P>

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<P><FONT SIZE=3>We are exposed to market risks, which include changes in U.S.
and international interest rates as well as changes in currency exchange rates
(principally Pounds Sterling, Euros and Canadian dollars) as measured against
the U.S. dollar and each other. </FONT></P>

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<P><FONT SIZE=3>The translation of the financial statements of our operations
outside of the United States is impacted by movements in foreign currency
exchange rates. Changes in currency exchange rates as measured against the U.S.
dollar may positively or negatively affect sales, gross margins, operating
expenses and retained earnings as expressed in U.S. dollars. We have limited
involvement with derivative financial instruments and do not use them for
trading purposes. We may enter into foreign currency options or forward exchange
contracts aimed at limiting in part the impact of certain currency fluctuations,
but as of September 30, 2006 we had no outstanding forward exchange contracts.
</FONT></P>

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<P><FONT SIZE=3>Our exposure to market risk for changes in interest rates
relates primarily to our variable rate debt. Our variable rate debt includes
short-term borrowings in Europe under our credit facilities. As of September 30,
2006, the balance outstanding on our variable rate debt was approximately $12.1
million. Based on our market sensitive instruments as of September 30, 2006, a
hypothetical change in average interest rates of one percentage point is not
expected to have a material effect on our financial position, results of
operations or cash flows for the fiscal year. </FONT></P>

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<P ALIGN=LEFT><FONT SIZE=3><B>Item&nbsp;4.&nbsp;&nbsp;&nbsp;<U>Controls and Procedures</U></B> </FONT></P>

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<P ALIGN=LEFT><FONT SIZE=3><B>Disclosure Controls and Procedures</B> </FONT></P>

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<P><FONT SIZE=3>The Company establishes and maintains disclosure controls and
procedures that are intended to provide reasonable assurance that information
required to be disclosed by the Company in the reports it files under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms. Disclosure
controls are also intended to provide reasonable assurance that such information
is accumulated and reported to management, including the Chief Executive Officer
and the Chief Financial Officer, to allow timely decisions regarding required
disclosure. </FONT></P>

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<P><FONT SIZE=3>Our management, including our Chief Executive Officer and Chief
Financial Officer , does not expect that our disclosure controls and procedures
will prevent all errors and all fraud. A control system, no matter how well
designed and operated, can provide only reasonable, not absolute, assurance that
the objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in control systems, misstatements due to error or fraud may
occur and not be detected. These limitations include the circumstances that
breakdowns can occur as a result of error or mistake, the exercise of judgment
by individuals or that controls can be circumvented by acts of misconduct. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate. </FONT></P>

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<P><FONT SIZE=3>As of the end of the period covered by this report, we carried
out an evaluation, under the supervision and with the participation of our
management, including the Chief Executive Officer and the Chief Financial
Officer, of the effectiveness of the design and the operation of our disclosure
controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15 of the
Securities Exchange Act of 1934. </FONT></P>

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<P><FONT SIZE=3>Based on their evaluation, as of September 30, 2006, the Chief
Executive Officer and the Chief Financial Officer have concluded that our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended) were not effective to
ensure that the information required to be disclosed by us in this quarterly
report on Form 10-Q was recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms. This conclusion is based on
our identification of three material weaknesses in our internal controls over
financial reporting as of September 30, 2006. The material weaknesses are:
</FONT></P>


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<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT SIZE=3>&#149;</FONT></TD>
<TD WIDTH=90%><FONT SIZE=3>We do not maintain sufficiently and adequately
trained personnel resources at certain locations outside of the Company's
corporate headquarters with the requisite knowledge and financial reporting
expertise to execute a timely financial closing process, address non-routine
accounting issues that arise in the normal course of the Company's operations
and ensure the timely and accurate preparation of interim and annual financial
statements. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT SIZE=3>&#149;</FONT></TD>
<TD WIDTH=90%><FONT SIZE=3>
We have insufficient processes to effectively prepare timely account
reconciliations and analyses with thorough documentation and substantiation of
certain general ledger accounts resulting in a number of audit adjustments
required to be recorded after being identified by our independent registered
public accountants. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT SIZE=3>&#149;</FONT></TD>
<TD WIDTH=90%><FONT SIZE=3>
We have inadequately designed processes to properly estimate certain liability
accounts related to inventory purchases at our Tiger Direct subsidiary. The
processes lack sufficient internal controls to accurately record, reconcile and
review such transactions. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT SIZE=3>As a result of this determination and as part of the work
undertaken in connection with this report, we have applied compensating
procedures and processes as necessary to reasonably ensure the reliability of
our financial reporting. Accordingly, management believes, based on its
knowledge, that (i) this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which they were made, not misleading
with respect to the period covered by this report and (ii) the financial
statements, and other financial information included in this report, fairly
reflect the form and substance of transactions and fairly present in all
material respects our financial condition, results of operations and cash flows
as at, and for, the periods presented in this report. </FONT></P>

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<P ALIGN=LEFT><FONT SIZE=3><B>Material Weaknesses Reported for the Year Ended
December 31, 2005</B> </FONT></P>

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<P><FONT SIZE=3>As reported in our Annual Report on Form 10-K for the year ended
December 31, 2005, management was unable to conclude that the Company's internal
controls over financial reporting were then effective, as a result of the three
material weaknesses described above. Ernst &amp; Young LLP, our independent
registered public accounting firm, issued a material weakness letter to the
Company which addressed these material weaknesses. These matters have been
discussed among management, the audit committee and our independent registered
public accountants. </FONT></P>

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<P><FONT SIZE=3>During 2006, we have taken the following actions to date to
address the material weaknesses: </FONT></P>

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<TD WIDTH=10%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT SIZE=3>&#149;</FONT></TD>
<TD WIDTH=85%><FONT SIZE=3>Hired additional staff, including two senior level
managerial positions, at Tiger Direct  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=10%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT SIZE=3>&#149;</FONT></TD>
<TD WIDTH=85%><FONT SIZE=3>
Implemented additional review and reconciliation procedures at Tiger Direct in connection
with inventory purchase transactions and the recording of vendor liabilities </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=10%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT SIZE=3>&#149;</FONT></TD>
<TD WIDTH=85%><FONT SIZE=3>
Began work on identification of required program changes in certain information systems
applications to remediate deficiencies related to account reconciliation procedures </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT SIZE=3>While progress is being made to remediate the material
weaknesses identified, we are continuing to monitor these processes to further
improve our procedures. </FONT></P>

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<P ALIGN=LEFT><FONT SIZE=3><B>Section 404 of the Sarbanes-Oxley Act</B> </FONT></P>

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<P><FONT SIZE=3>We are not yet subject to the internal controls certification
and attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002
because we are not an accelerated filer. Assuming that our current stock price
and public float remain substantially the same as of the end of the second
quarter of 2007 from such price and float as it is currently, we anticipate
being an accelerated filer as of the end of fiscal 2007, in which event the
requirements of Section 404 that management provide an assessment of the
effectiveness of the Company's internal control over financial reporting and the
Company's independent registered public accounting firm will be required to
audit that assessment will apply to us without further extension. (If we are not
an accelerated filer at that time, based on SEC implementing regulations in
effect as of December 15, 2006, for all nonaccelerated filers the management
assessment requirement would become effective at the end of fiscal 2007 but the
audit requirement would not become effective until the end of 2008) .
</FONT></P>

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<P><FONT SIZE=3>We are continuing to work to achieve compliance with the
requirements of Section 404. We have dedicated substantial time and resources to
documentation and review of our procedures.. We will also evaluate the need to
engage outside consultants to assist us. We have not completed this process or
its assessment, due to the complexities of our decentralized structure and the
number of accounting systems in use. We have not completed our assessment of our
internal control over financial reporting. In addition to the three material
weaknesses as of September 30, 2006 discussed under the caption "Disclosure
Controls and Procedures," we have identified a number of internal control
significant deficiencies, including controls in the information technology area,
that may affect the timeliness and accuracy of recording transactions and which,
individually or in the aggregate, could become material weaknesses in future
periods if not remediated. While the Company does not believe that the following
are currently material weaknesses, they are designated as significant
deficiencies as of September 30, 2006: </FONT></P>

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<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT SIZE=3>&#149;</FONT></TD>
<TD WIDTH=90%><FONT SIZE=3>
The disparate operating and financial information systems used at certain of our locations
have inherent limitations resulting in a control environment heavily reliant upon manual
review procedures and adjustments. These deficiencies include inadequate or lack of
systems interfaces and the preparation of numerous manual journal entries. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT SIZE=3>&#149;</FONT></TD>
<TD WIDTH=90%><FONT SIZE=3>
Internal control deficiencies in the information technology area include lack of adequate
general controls. We lack program change and project management controls, have inadequate
segregation of duties between information technology department development and production
functions, need formal information technology strategic planning, need formal
documentation of information security procedures, need security around user rights to
certain application systems and need to implement formal help desk procedures. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Large Hang Level 4" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT SIZE=3>&#149;</FONT></TD>
<TD WIDTH=90%><FONT SIZE=3>
Internal control deficiencies in processes related to recording accurately and in a timely
manner certain cash and revenue transactions with third party service providers. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Default" -->
<P><FONT SIZE=3>We have a significant amount of work to do to remediate the
items we have identified. In the course of completing our evaluation and testing
we may identify further deficiencies and weaknesses that will need to be
addressed and will require remediation. We may not be able to correct all such
internal control deficiencies in a timely manner and may find that a material
weakness or weaknesses continues to exist. As a result, management may not be
able to issue an unqualified opinion on the effectiveness of the Company's
internal control over financial reporting as of December 31, 2007. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT SIZE=3><B>Changes in Internal Control Over Financial Reporting</B>
</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Default" -->
<P><FONT SIZE=3>Our management is not aware of any changes in internal control
over financial reporting other than those described above that occurred during
the quarter ended September 30, 2006 that materially affected, or were
reasonably likely to materially affect, our internal control over financial
reporting. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<P ALIGN=LEFT><FONT SIZE=3><B>PART II &#151; OTHER INFORMATION</B> </FONT></P>

<P><FONT SIZE=3><B>Item 4.&nbsp;&nbsp;&nbsp;<U>Submission of Matters to a Vote of Security
Holders</U></B></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
2006 annual meeting of the stockholders of the Company was held on October 11,
2006. Each of the seven candidates for the position of director (Richard Leeds,
Bruce Leeds, Robert Leeds, Gilbert Fiorentino, Robert D. Rosenthal, Stacy S.
Dick and Ann R. Leven) was re-elected. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
matters voted upon at the meeting and the number of votes cast for, against or withheld
(including abstentions) as to each matter, including nominees for office, are as follows: </FONT></P>

<P><FONT SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;Director election:</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="70%" ALIGN="CENTER">
<TR VALIGN=Bottom>
     <TH></TH>
     <TH></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH="40%" ALIGN="LEFT">Richard Leeds</TD>
     <TD WIDTH="60%" ALIGN="LEFT">For: 32,426,355</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT></TD>
     <TD ALIGN=LEFT>Against: 1,651,570</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>Robert Leeds</TD>
     <TD ALIGN=LEFT>For: 32,734,631</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT></TD>
     <TD ALIGN=LEFT>Against: 1,334,294</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>Bruce Leeds</TD>
     <TD ALIGN=LEFT>For: 32,426,355</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT></TD>
     <TD ALIGN=LEFT>Against: 1,651,570</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>Gilbert Fiorentino</TD>
     <TD ALIGN=LEFT>For: 32,721,264</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT></TD>
     <TD ALIGN=LEFT>Against: 1,356,661</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>Robert D. Rosenthal</TD>
     <TD ALIGN=LEFT>For: 33,403,964</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT></TD>
     <TD ALIGN=LEFT>Against: 673,961</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>Stacy S. Dick</TD>
     <TD ALIGN=LEFT>For: 33,406,964</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT></TD>
     <TD ALIGN=LEFT>Against: 670,961</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><BR>Ann R. Leven</TD>
     <TD ALIGN=LEFT>For: 33,559,145</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT></TD>
     <TD ALIGN=LEFT>Against: 518,780</TD></TR>
</TABLE>


<P><FONT SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp; Approval of the Company's
2006 Stock Incentive Plan for Non-Employee Directors:</FONT></P>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15% ALIGN=LEFT></TD>
<TD WIDTH=20%>For: 28,752,893<BR>
Against: 1,976,152<BR>
Abstain: 242,667</TD>
<TD WIDTH=65%></TD>
</TR>
</TABLE>
<BR>

<P><FONT SIZE=3>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp; Ratification of Ernst &amp;
Young as the Company's Independent Registered Accountants for 2006: </FONT></P>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15% ALIGN=LEFT></TD>
<TD WIDTH=20%>For: 33,820,398<BR>
Against: 14,518<BR>
Abstain: 243,009</TD>
<TD WIDTH=65%></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<P ALIGN=LEFT><FONT SIZE=3><B>Item 6.&nbsp;&nbsp;&nbsp;<U>Exhibits</U></B> </FONT></P>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=5%>31</TD>
<TD WIDTH=90%>Certifications of the Chief Executive Officer and Chief Financial
Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 </TD>
</TR>
</TABLE>
<BR>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT></TD>
<TD WIDTH=5%>32 </TD>
<TD WIDTH=90%>Certifications of the Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</TD>
</TR>
</TABLE>
<BR>



<PAGE>


<!-- MARKER FORMAT-SHEET="Stroock Head Major Center Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT SIZE=3><B><U>SIGNATURES</U></B></FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush"  -->
<P><FONT SIZE=3>Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized. </FONT></P>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=50% ALIGN=LEFT></TD>
<TD WIDTH=50%>SYSTEMAX INC.</TD>
</TR>
</TABLE>
<BR>
<BR>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=50% ALIGN=LEFT>Date:  December 22, 2006</TD>
<TD WIDTH=50%>By: <U>/s/ RICHARD LEEDS</U><BR>
Richard Leeds<BR>
Chairman and Chief Executive Officer
</TD>
</TR>
</TABLE>
<BR>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=50% ALIGN=LEFT></TD>
<TD WIDTH=50%>By: <U>/s/ STEVEN GOLDSCHEIN</U><BR>
Steven Goldschein<BR>
Senior Vice President and Chief Financial Officer
</TD>
</TR>
</TABLE>
<BR>


<PAGE>



<P ALIGN=CENTER><FONT SIZE=3>EXHIBIT INDEX</FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Level 5" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT SIZE=3>31</FONT></TD>
<TD WIDTH=95%><FONT SIZE=3>
Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 </FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5% ALIGN=LEFT>32</TD>
<TD WIDTH=95%>Certifications of the Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
</TD>
</TR>
</TABLE>
<BR>




</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>2
<FILENAME>systemax-ex31_122206.htm
<DESCRIPTION>EXHIBIT 31
<TEXT>
<HTML>
<HEAD>
<TITLE>Ex-31</TITLE>
</HEAD>
<BODY>

<!-- MARKER FORMAT-SHEET="Head Right" FSL="Workstation" -->
<P ALIGN=RIGHT><FONT SIZE=3>Exhibit 31 </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Head Major Center Bold" FSL="Default" -->
<P ALIGN=CENTER><FONT SIZE=3><B>CERTIFICATION UNDER SECTION 302 OF THE<BR>
SARBANES-OXLEY ACT OF 2002</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT SIZE=3><B>CERTIFICATION OF CHIEF EXECUTIVE OFFICER</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Workstation" -->
<P><FONT SIZE=3>I, Richard Leeds, Chief Executive Officer of Systemax Inc.,
certify that: </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para (List) Flush Bold" FSL="Workstation" -->
<P><FONT SIZE=3>1.&nbsp;&nbsp;&nbsp;I have reviewed this quarterly report on
Form 10-Q of Systemax Inc. (the "registrant");</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para (List) Flush Bold" FSL="Workstation" -->
<P><FONT SIZE=3>2.&nbsp;&nbsp;&nbsp;Based on my knowledge, this quarterly
report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect
to the period covered by this quarterly report;</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para (List) Flush Bold" FSL="Workstation" -->
<P><FONT SIZE=3>3.&nbsp;&nbsp;&nbsp;Based on my knowledge, the financial
statements, and other financial information included in this quarterly report,
fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods
presented in this quarterly report;</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para (List) Flush Bold" FSL="Workstation" -->
<P><FONT SIZE=3>4.&nbsp;&nbsp;&nbsp;The registrant's other certifying officer
and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
(except as disclosed in Item 4 of this quarterly report on Form 10-Q) we
have:</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para (List) Flush Bold" FSL="Workstation" -->
<P><FONT SIZE=3>a)&nbsp;&nbsp;&nbsp;Designed such disclosure controls and
procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to reasonably ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us
by others within these entities, particularly during the period in which this
quarterly report is being prepared;</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para (List) Flush Bold" FSL="Workstation" -->
<P><FONT SIZE=3>b)&nbsp;&nbsp;&nbsp;Evaluated the effectiveness of the
registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation;
and</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para (List) Flush Bold" FSL="Workstation" -->
<P><FONT SIZE=3>c)&nbsp;&nbsp;&nbsp;Disclosed in this report any change in the
registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over
financial reporting.</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para (List) Flush Bold" FSL="Workstation" -->
<P><FONT SIZE=3>5.&nbsp;&nbsp;&nbsp;The registrant's other certifying officer
and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee
of the registrant's board of directors (or persons performing the equivalent
function):</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para (List) Flush Bold" FSL="Workstation" -->
<P><FONT SIZE=3>a)&nbsp;&nbsp;&nbsp;All significant deficiencies and material
weaknesses in the design or operation of internal control over financial
reporting known to me which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial
information; and</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para (List) Flush Bold" FSL="Workstation" -->
<P><FONT SIZE=3>b)&nbsp;&nbsp;&nbsp;Any fraud, whether or not material, that
involves management or other employees who have a significant role in the
registrant's internal controls over financial reporting.</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Head Left" FSL="Workstation" -->
<P ALIGN=LEFT><FONT SIZE=3>Dated: December 22, 2006</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Head Left" FSL="Workstation" -->
<P ALIGN=LEFT><FONT SIZE=3><U>/s/ RICHARD LEEDS&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><BR>
Richard Leeds, Chief Executive Officer</FONT></P>

<PAGE>

<!-- MARKER FORMAT-SHEET="Stroock Head Left" FSL="Workstation" -->
<P ALIGN=RIGHT><FONT SIZE=3>Exhibit 31</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Head Major Center Bold" FSL="Default" -->
<P ALIGN=CENTER><FONT SIZE=3><B>CERTIFICATION UNDER SECTION 302 OF THE<BR>
SARBANES-OXLEY ACT OF 2002</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT SIZE=3><B>CERTIFICATION OF CHIEF FINANCIAL OFFICER</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Workstation" -->
<P><FONT SIZE=3>I, Steven M. Goldschein, Chief Financial Officer of Systemax
Inc., certify that: </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para (List) Flush Bold" FSL="Workstation" -->
<P><FONT SIZE=3>1.&nbsp;&nbsp;&nbsp;I have reviewed this quarterly report on
Form 10-Q of Systemax Inc. (the "registrant");</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para (List) Flush Bold" FSL="Workstation" -->
<P><FONT SIZE=3>2.&nbsp;&nbsp;&nbsp;Based on my knowledge, this quarterly
report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect
to the period covered by this quarterly report;</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para (List) Flush Bold" FSL="Workstation" -->
<P><FONT SIZE=3>3.&nbsp;&nbsp;&nbsp;Based on my knowledge, the financial
statements, and other financial information included in this quarterly report,
fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods
presented in this quarterly report;</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para (List) Flush Bold" FSL="Workstation" -->
<P><FONT SIZE=3>4.&nbsp;&nbsp;&nbsp;The registrant's other certifying officer
and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
(except as disclosed in Item 4 of this quarterly report on Form 10-Q) we
have:</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para (List) Flush Bold" FSL="Workstation" -->
<P><FONT SIZE=3>a)&nbsp;&nbsp;&nbsp;Designed such disclosure controls and
procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to reasonably ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us
by others within these entities, particularly during the period in which this
quarterly report is being prepared;</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para (List) Flush Bold" FSL="Workstation" -->
<P><FONT SIZE=3>b)&nbsp;&nbsp;&nbsp;Evaluated the effectiveness of the
registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation;
and</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para (List) Flush Bold" FSL="Workstation" -->
<P><FONT SIZE=3>c)&nbsp;&nbsp;&nbsp;Disclosed in this report any change in the
registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over
financial reporting.</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para (List) Flush Bold" FSL="Workstation" -->
<P><FONT SIZE=3>5.&nbsp;&nbsp;&nbsp;The registrant's other certifying officer
and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee
of the registrant's board of directors (or persons performing the equivalent
function):</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para (List) Flush Bold" FSL="Workstation" -->
<P><FONT SIZE=3>a)&nbsp;&nbsp;&nbsp;All significant deficiencies and material
weaknesses in the design or operation of internal control over financial
reporting known to me which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial
information; and</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para (List) Flush Bold" FSL="Workstation" -->
<P><FONT SIZE=3>b)&nbsp;&nbsp;&nbsp;Any fraud, whether or not material, that
involves management or other employees who have a significant role in the
registrant's internal controls over financial reporting.</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Head Left" FSL="Workstation" -->
<P ALIGN=LEFT><FONT SIZE=3>Dated: December 22, 2006</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Head Left" FSL="Workstation" -->
<P ALIGN=LEFT><FONT SIZE=3><U>/s/ STEVEN M. GOLDSCHEIN&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><BR>
Steven M. Goldschein, Chief Financial Officer</FONT></P>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>3
<FILENAME>systemax-ex32_122206.htm
<DESCRIPTION>EXHIBIT 32
<TEXT>
<HTML>
<HEAD>
<TITLE>Ex-32</TITLE>
</HEAD>
<BODY>

<!-- MARKER FORMAT-SHEET="Stroock Head Left" FSL="Workstation" -->
<P ALIGN=RIGHT><FONT SIZE=3>Exhibit 32</FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Head Major Center Bold" FSL="Default" -->
<P ALIGN=CENTER><FONT SIZE=3><B>CERTIFICATION PURSUANT TO SECTION 906 OF THE<BR>
SARBANES-OXLEY ACT OF 2002</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT SIZE=3><B><U>CERTIFICATION OF CHIEF EXECUTIVE OFFICER</U></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Workstation" -->
<P><FONT SIZE=3>The undersigned, the Chief Executive Officer of Systemax Inc.,
hereby certifies that to the best of his knowledge Systemax Inc.&#145;s Form
10-Q for the period ended September 30, 2006 fully complies with the
requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 (15 U.S.C. 78m or 78 (o)(d) and that the information contained in such Form
10-Q fairly presents, in all material respects, the financial condition and
results of operations of Systemax Inc. </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Head Left" FSL="Workstation" -->
<P ALIGN=LEFT><FONT SIZE=3>Dated: December 22, 2006</FONT></P>
<BR>

<!-- MARKER FORMAT-SHEET="Stroock Head Left" FSL="Workstation" -->
<P ALIGN=LEFT><FONT SIZE=3><U>/s/ RICHARD LEEDS&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><BR>
Richard Leeds, Chief Executive Officer</FONT></P>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Workstation" -->
<P ALIGN=LEFT><FONT SIZE=3><B><U>CERTIFICATION OF CHIEF FINANCIAL OFFICER</U></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Para Flush" FSL="Workstation" -->
<P><FONT SIZE=3>The undersigned, the Chief Financial Officer of Systemax Inc.,
hereby certifies that to the best of his knowledge Systemax Inc.&#145;s Form
10-Q for the period ended September 30, 2006 fully complies with the
requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 (15 U.S.C. 78m or 78 (o)(d) and that the information contained in such Form
10-Q fairly presents, in all material respects, the financial condition and
results of operations of Systemax Inc. </FONT></P>

<!-- MARKER FORMAT-SHEET="Stroock Head Left" FSL="Workstation" -->
<P ALIGN=LEFT><FONT SIZE=3>Dated: December 22, 2006</FONT></P>
<BR>

<!-- MARKER FORMAT-SHEET="Stroock Head Left" FSL="Workstation" -->
<P ALIGN=LEFT><FONT SIZE=3><U>/s/ STEVEN M. GOLDSCHEIN&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><BR>
Steven M. Goldschein, Chief Financial Officer</FONT></P>

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