Mike Smargiassi - Brainerd Communicators Larry Reinhold - President & Chief Executive Officer Tex Clark - Vice President & Chief Financial Officer

Good afternoon, ladies and gentlemen, and welcome to Systemax, Inc. Fourth Quarter and Full Year 2016 Earnings Call. 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 fourth quarter and full year 2016 earnings call. Today's call will include formal remarks from Larry Reinhold, President and Chief Executive Officer, and Tex Clark, Vice President and Chief Financial Officer. We will not be hosting a live Q&A session at the end of today's call. If you should have any questions on fourth quarter results, please contact Brainerd Communicators or Systemax. Contact details can be found in the press release issued today and at systemax.com. Today's 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 forward-looking statements caption in the company's Annual Report on Form 10-K, and Quarterly Reports on Form 10-Q. I would like to highlight the non-GAAP metrics that are included in today's press release. The company believes that by presenting the entire North American technology products group, Misco Germany, and Afligo, our former rebates processing business, as discontinued operations, as well as excluding certain recurring and nonrecurring adjustments of comparable GAAP measures, investors have an additional meaningful measurement of the company's performance. In addition, as the fourth quarter 2015 period included 14 weeks and the fourth quarter 2016 period included 13 weeks, the results for the quarter and for the year are not directly comparable. The company is now reporting an average daily sales metric to enhance comparisons of the periods. This call will include a discussion of certain non-GAAP financial measures. The company has provided a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures in today's press release. The press release is available on the company's website and will be filed with the SEC in a Form 8-K. This call is the property of and is copyrighted by Systemax, Inc. I will now turn the call over to Mr. Larry Reinhold.

Thanks, Mike. Good afternoon, everyone, and thank you for joining us today. In 2016 we made significant progress in streamlining our corporate structure, while continuing to invest in our ongoing businesses. This commenced with the shutdown of the former North American technology group in the first quarter, the sale of our German IT reseller business in the third quarter, and the sale of our Afligo rebate processing business in the fourth quarter. These businesses each generated significant losses for a number of years and their exits have significantly improved Systemax's overall profitability as well as simplified the business. We also continued to invest in growth initiatives in our successful industrial, France, and Netherlands businesses and in turnaround initiatives in our United Kingdom and other European businesses. The initial impact of these efforts are reflected in our improved operating results in the fourth quarter. And we have returned the company to overall profitability from continuing operations both on a GAAP and a non-GAAP basis for the first time in several years. We believe we are well positioned for a strong performance in 2017 and beyond. Industrial had a solid year and fourth quarter on the top line, as we continued to outperform many competitors within the overall MRO market. Revenues reached a record $715 million for the full year 2016 and $176 million for the fourth quarter, which represented increase in average daily sales of nearly 3% for the year and 5% for the fourth quarter. The growth was broad across industrial's customer base and its product lines. Industrial's product margins are stable and the business is focused on improving execution and better leveraging the infrastructure we have built the past several years. We recently completed our warehouse management system conversion and all six of our distribution centers are now on…

Thank you, Larry. I will address our segment financial performance in more detail. As mentioned previously, our comments will be primarily related to non-GAAP results. In addition, revenue results now include an average daily sales metric to enhance comparability between periods. Fourth quarter consolidated revenue reflects top-line growth in both industrial and EMEA on a constant currency and average daily sales basis. Consolidated gross margins improved year over year, driven by the relative segment mix. Consolidated SG&A decreased on an absolute basis and non-GAAP operating profit and margin increased to $6.5 million and 1.6%, respectively. Starting with industrial's financial performance, industrial's fourth quarter revenue decreased 1.7% on a reported basis, but was up 4.7% on a constant currency and average daily sales basis. And 2016's fourth quarter had four fewer selling days versus 2015's fourth quarter, which resulted in the difference between reported and average daily sales. This was our strongest quarter of growth on an average daily sales basis in 2016, and we showed top-line momentum as we moved through the period, with December posting double-digit gains. Industrial's gross profit for the quarter decreased to $48.9 million from $51.8 million last year. Gross margin was off 120 basis points, reflecting decreased freight margins and increased warehouse staffing costs due to incremental temporary labor to ensure customer service levels during our systems transition. This was partially offset by a modest increase to product margins. We expect the higher levels of temporary staff to continue into the first quarter of 2017, but expect staffing expense to normalize in the second quarter, as we recently completed the warehouse management system conversion. SG&A spending for the quarter was $39.4 million and reflects the reduction in back office staffing costs and lower marketing costs. These reductions were partially offset by increased salary within our…