Good afternoon, ladies and gentlemen, and welcome to Systemax Inc. Second Quarter 2012 Earnings Teleconference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, July 31, 2012. At this time, I would like to turn the call over to Mike Smargiassi of Brainerd Communicators. Please go ahead.

Thank you, and welcome to the Systemax second quarter 2012 earnings conference call. I'm here today with Richard Leeds, Chairman and Chief Executive Officer of Systemax; and Larry Reinhold, Executive Vice President and Chief Financial Officer. This discussion may include certain forward-looking statements. It should be understood that actual results could differ materially from those projected due to a number of factors, including those described under the caption Forward-Looking Statements in the company's annual report on Form 10-K. This call is the property of and is copyrighted by Systemax Inc. I will now turn the call over to Mr. Richard Leeds.

Good afternoon. And thank you for joining us for today's second quarter 2012 earnings call. Our results reflect the continuation of the trends we saw in the first quarter of the year. Our B2B operations delivered a solid performance on a worldwide basis, which was more than offset by disappointing results from our consumer business in North America. As a result, consolidated revenues were flat on a constant currency basis. We generated a small consolidated operating loss due to weak consumer channel performance, special charges and investments that capitalize on growth opportunities. Our B2B performance was led by the Industrial Products Group, which outperformed the industry, and gained market share as we delivered a 31% revenue increase, its first $100 million revenue quarter and its ninth consecutive quarter of 25%-plus organic top line growth. Industrial success has been broad based as we continue to expand our product and category offerings which are fueling sales increases across the business. In technology B2B, our European business continues to outperform the regional IT sector with top line growth up 12% on a constant currency basis, and in North America, we delivered a modest revenue growth which compared favorably to the market. Our consumer business remains challenged as we face a tough consumer electronics environment. Revenue was down across all channels: web, retail stores and TV home shopping and in key categories. While unacceptable, the entire market contracted as reported from various natural data sources. NPD reported an overall reduction in the domestic retail market, highlighted by double-digit year-over-year declines in both the PC and television categories. We believe the slowdown in consumer buying behavior is due to the overall economy, a broader shift towards mobile solutions and the anticipation of the recently announced October launch of Windows 8, a buying pattern also experienced…

Thank you, Richard. Our second quarter 2012 consolidated sales were $849.5 million, a decline of 3% and flat on a constant currency basis compared to the second quarter of 2011. Results for the quarter were driven by strong growth in our B2B operations, offset by softness in our consumer business. Turning to our channels. Second quarter B2B channel sales were $519.5 million, growing 8% or 12% on a constant currency basis. B2B same-store sales on a constant currency basis increased 11% year-over-year. Our consumer sales were $329.9 million, a decrease of 15% or 14% on a constant currency basis, compared to the prior year. Consumer same-store sales, on a constant currency basis, decreased 15% year-over-year. Turning to our reporting segments. The Technology Products Group sales declined 6% year-over-year to $745.6 million or down 3% on a constant currency basis. Operating results from continued operations were a loss of $3.4 million, including special charges of approximately $0.3 million. Our Industrial Product Group sales increased to $102.9 million, up 31% compared to the prior year. Industrial's operating results were income of $6.7 million or $8.6 million excluding special charges. Looking at each of our reporting segments' performance during the quarter. The European Technology Product Group delivered strong revenue growth on a constant currency basis, with our 3 largest markets, the U.K., France and the Netherlands, driving the increase. In fact, all of our European operations saw increased sales on a constant currency basis except for Italy, which saw a modest single digit decline. We believe our top line results reflect performance better than the markets in which we participate. Bottom line results were solid, but reflect planned investments to drive revenue and improve operating efficiencies. SG&A costs overall, remain under control. Our efforts to create uniformity and consistency across our European operations…

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

I have a couple of questions. First, how much of your pressure in the technology segment in which you attribute to the people who are waiting for Windows 8 computers?

It's Richard, I'll answer that, Anthony. That's really hard to judge. We know from experience on Windows 7, that there was a slowdown in going up to the launch, so we're expecting that to be about the same. But for me to quantify that number, I really can't, I really can't quantify that.

Okay. Now with Windows 7, do you recall the magnitude of the slowdown?

I think we have a number, I mean, you can look from what sequentially what happened and it will lead up to that. And then after I think we saw a nice bump come from Windows 7 launch. But you also have to realize, when Windows 7 came out, the prior operating system wasn't as robust as Windows 7 is today. So to move from the Windows 7 to Windows 8, while Windows 8 is a far superior product, we really have -- don't -- can't -- cannot predict what the bump up will be.

And Anthony, it's Larry. To supplement what Richard just said, back when Windows 7 was launched, the market was in much different shape than it is today. So what we saw, leading up to the Windows 7 was a slowdown, a fairly significant slowdown in the rate of growth of what we were selling. So I can't remember the exact numbers, but we still grew right up to the Windows 7 launch but it was much slower than we were growing. Overall, the market was much better than it is today.

Okay. And I just wanted to see if you could get more details on the gross margin pressure. I think you said that because of your -- the new call center for the industrial segment, there was a little bit of pressure. So I just wanted to see if you guys could quantify the gross margin pressure, the 2 different business segments, technology versus industrial?

Okay. So industrial, as the amount of new products that we've added, which is primarily drop ship products, gross, that tends to drag down that margin, now that we have this new DC, and we're able to stock many more items, we're going to bring those into inventory and we should be able to counteract any drop that we've been experiencing, hold it [ph] , I mean, that's the game plan but that's going to be taking place over time as we stock these items. We're not really seeing too much pressure on the gross margin from the market today. We were always a low-cost leader out in the market, so we're not really seeing too much pressure other than the, like I said, dropship items. Gross margin in technology, it's a tough market out there and so, being in a tough market, you're going to see gross margin pressure.

It's over a full point in the technology business without getting into the complete details. But the tech business gross margin dropped more than a full point.

Okay. That's helpful, Great. And, lastly, certainly, your balance sheet continues to be in good shape, but just as a -- what are your thoughts on -- or your plans for cash flow usage?

As we talked about, previously, at every board meeting, we talked about our cash balances and I think now that there's opportunities out in the marketplace for M&A that we're seeing, there's good uses for our cash and other investments for us to make. So we talk about that all the time and we're satisfied where we are today.

[Operator Instructions] Our next question comes from Dorsey Gardner from Kelso Management.

How do you compete against someone like Amazon? Can you beat them on price, given the fact that they seem to not pay state taxes? And -- or do you go places where there aren't products that they don't sell? Or do you -- how much do your markets overlap? And then my second question has to do with your 42 retail stores, which you don't seem to be expanding. Are you -- compared to -- it's a tough market out there for everybody, for yourselves and BestBuy, but do you think you have a better model than BestBuy? And do you think it's -- there's a future in your retail business?

Well, the good news is that we have these multi-channels so we're able to balance things that we have, B2B, we have a consumer web business and retail stores. When you look at the -- when you're looking at the NPD data, and you see that the market is down for PCs and TVs, that goes across, no matter what channel it's in, okay? This is NPD data is sell-through from retail. And that goes across, whether it's brick-and-mortar or it's sold on the web, this is the marketplace that is down. And -- but again, the good news is that we have these 3 channels. The consumer channel, if you want it lumped together, brick-and-mortar and web is obviously very price sensitive, it's always one click away a competitor. And we have to constantly be monitoring our prices versus competition. And we're intent on making money, and so we know that we're very much focused on that. And while they're -- Amazon is a very strong competitor, they're one of many competitors that we have out there, and we just have to stay focused and really try to have excellence in our performance. I mean, that's really what it comes down to.

I show no one else in queue at this time. I would like to hand the conference back over to management for any closing remarks.

Thank you for listening to our quarterly call, and we look forward to speaking to you next quarter.

Ladies and gentlemen, thank you for participating in today's conference. This concludes our program for today. You may now disconnect, and have a wonderful day.