Forward Looking Statements

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.

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.

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.

Overview

Systemax is primarily a direct marketer of brand name and private label products. Our operations are organized in three reportable business segments - Technology Products, Industrial Products and Software Solutions. Our Technology Products segment sells computers, computer supplies and consumer electronics which are marketed in North America and Europe. Except for certain personal computer ("PC") products that we assemble ourselves and sell under the trademarks Systemax™ and Ultra™, substantially

all of our products are manufactured by other companies. We also sell certain computer-related products manufactured for us to our own design under the trademark Systemax™ and Ultra™. For the nine months ended September 30, 2009, Technology products accounted for 93% of our net sales.

Our Industrial Products segment sells a wide array of material handling equipment, storage equipment and consumable industrial items which are marketed in North America. Substantially all of these products are manufactured by other companies. Some products are manufactured for us to our own design and marketed under the trademarks Global™, GlobalIndustrial.com™ and Nexel™. Industrial products accounted for 7% of our net sales for the nine months ended September 30, 2009. In both of our Technology Products and Industrial Products segments, we offer our customers a broad selection of products, prompt order fulfillment and extensive customer service. In our Industrial segment, we recently deployed an entirely new ecommerce website (www.globalindustrial.com) that we believe is generationally more advanced than the sites of many other companies in the sector.

We announced plans to exit the Software Solutions segment during the second quarter of 2009 and are continuing the process of winding down operations and anticipate completing this process by the end of 2009. Software Solutions accounted for approximately $1.2 million in sales for the nine months ended September 30, 2009. See Note 8 to the condensed consolidated financial statements included in Item 1 of this Form 10-Q for additional financial information about our business segments as well as information about our geographic operations.

Our Industrial Products and Technology Products segments sell dissimilar products. Industrial products are generally higher in price, lower in volume and higher in product margin. Technology products are generally higher in volume, lower in price and lower in product margin. This results in higher operating margin for the Industrial Products segment. Each segment carries specifically identifiable selling, general and administrative expenses, with the selling, general and administrative expenses for the Industrial Products segment being higher as a percentage of sales than those of the Technology Products segment as a result of the Industrial Products segment having a longer selling cycle than those of the Technology Products segment.

On September 18, 2009, we acquired WStore, a European supplier of business IT products and software solutions with operations in France and the United Kingdom. The purchase price (after giving effect to the conversion of Euros to U.S. dollars) was approximately $4.4 million in cash, $2.2 million of which was placed into an escrow account for one year to secure the sellers' indemnification obligations under the purchase agreement. A preliminary allocation of the purchase price was done as of the acquisition date. A final purchase price allocation will be done during the fourth quarter of 2009. However the Company has determined that this is not a material acquisition for financial reporting purposes. The accounts of WStore are included in the condensed consolidated balance sheet included in Item 1 of this Form 10-Q. The operating results of WStore are included in the condensed consolidated statements of operations included in Item 1 of this Form 10-Q from the date of acquisition. WStore is included in our Technology Products business segment.

The market for computer products and consumer electronics 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 is working capital intensive, requiring us to incur significant costs associated with the warehousing of many products, including the costs of maintaining inventory, leasing warehouse space, 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 stock and drop-shipment fulfillment.

The primary component of our operating expenses historically has been employee related costs, which includes items such as wages, commissions, bonuses, employee benefits and stock option expenses. We continually assess our operations to ensure that they are efficient, aligned with market conditions and responsive to customer needs.

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 and in conjunction with the audited financial statements as of December 31, 2008 and the other information provided in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

Critical Accounting Policies and Estimates

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 2008 Annual Report on Form 10-K.

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, accounts receivable and allowance for doubtful accounts, inventories, goodwill and intangible assets, long-lived assets, accruals,

income taxes and restructuring charges. 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, 2008. There have been no significant changes in the application of critical accounting policies or estimates during 2009. 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 the Company's financial condition or results of operations.

Recent Accounting Pronouncements

Public companies in the United States are subject to the accounting and reporting requirements of various authorities, including the Financial Accounting Standards Board ("FASB") and the Securities and Exchange Commission ("SEC"). These authorities issue numerous pronouncements, most of which are not applicable to the Company's current or reasonably foreseeable operating structure. Below are the new authoritative pronouncements that management believes are relevant to Company's current operations.

In June 2009, the FASB issued FASB Statement No. 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles - a replacement of FASB Statement No. 162". The FASB Accounting Standards Codification (ASC) became the source of authoritative U.S. accounting and reporting standards for nongovernmental entities, in addition to guidance issued by the SEC. This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009.

Effective January 1, 2009 the Company adopted authoritative guidance that establishes principles and requirements for how an acquirer in a business combination (i) recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed, and any non-controlling interest in the acquiree, (ii) recognizes and measures goodwill acquired in a business combination or a gain from a bargain purchase, and (iii) determines what information to disclose to enable users of financial statements to evaluate the nature and financial effects of the business combination. This guidance is applied prospectively for all business combinations entered into after the date of adoption. In the third quarter of 2009 the Company expensed approximately $0.8 million of costs that would have been capitalized under previous guidance.

In May 2009, the FASB issued authoritative guidance related to the accounting for and disclosures of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. This guidance requires the Company to disclose the date through which subsequent events have been evaluated, as well as whether that date is the date the consolidated financial statements were issued or the date the consolidated financial statements were available to be issued. This guidance became effective for the Company for the period ended June 30, 2009 and did not have a significant impact on the Company's condensed consolidated financial statements.

In June 2008, FASB issued authoritative guidance to clarify that instruments granted in share-based payment transactions can be participating securities prior to the requisite service having been rendered. The guidance applies to the calculation of Earnings Per Share ("EPS") for share-based payment awards with rights to dividends or dividend equivalents. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two-class method. This guidance became effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented is adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data). The Company adopted this authoritative guidance in January 2009 and it did not have a material impact on its condensed consolidated financial statements.

Results of Operations

Three and Nine Months Ended September 30, 2009 compared to the Three and Nine Months Ended September 30, 2008

Key Performance Indicators (in thousands):



                         Three Months Ended                   Nine Months Ended
                           September 30,          %             September 30,
                          2009        2008      Change       2009          2008       % Change
Net sales by
segment:
Technology products    $  701,745   $ 676,133      3.8 %  $ 2,080,021   $ 2,037,780        2.1 %
Industrial products        52,014      63,187    (17.7 )%     146,518       182,166      (19.6 )%
Hosted software               121         159    (23.9 )%       1,208           305      296.1 %
Total net sales        $  753,880     739,479      1.9 %  $ 2,227,747   $ 2,220,251        0.3 %
Net sales by
geography:
North America          $  552,125   $ 512,304      7.8 %  $ 1,648,457   $ 1,496,578       10.1 %
Europe                    201,755     227,175    (11.2 )%     579,290       723,673      (20.0 )%
Total net sales        $  753,880   $ 739,479      1.9 %  $ 2,227,747   $ 2,220,251        0.3 %
Gross margin                 15.0 %      15.6 %   (0.6 )%        14.7 %        15.5 %     (0.8 )%
Selling, general and
administrative costs   $   93,394   $  94,997     (1.7 )% $   284,309   $   276,349        2.9 %
Selling, general and
administrative costs
as a % of net sales          12.4 %      12.8 %   (0.4 )%        12.8 %        12.4 %      0.4 %
Operating income       $   19,369   $  20,422     (5.2 )% $    43,058   $    67,573      (36.3 )%
Operating margin              2.6 %       2.8 %   (0.2 )%         1.9 %         3.0 %     (1.1 )%
Effective income tax
rate                         38.0 %      39.5 %   (1.5 )%        36.3 %        37.3 %     (1.0 )%
Net income             $   12,598      11,273     11.8 %  $    27,787   $    42,875      (35.2 )%
Net margin                    1.7 %       1.5 %    0.2 %          1.3 %         1.9 %     (0.6 )%

The Technology Products net sales increase during the third quarter of 2009 was attributable to increased retail and internet sales in North America. In North America, Technology Products sales increased 11.4% in the third quarter of 2009 and 14.2% in the first nine months of 2009 compared to the same periods in 2008. On a constant currency basis (using current year results at prior year average exchange rates), European sales declined 0.3% in the third quarter of 2009 and 4.4% for the first nine months of 2009 compared to the same periods in 2008. Sales attributable to the WStore acquisition were $7.9 million during the third quarter of 2009.

The movements in foreign exchange rates accounted for $24.8 million and $112.8 million, respectively, of the revenue decline in Europe in the third quarter and first nine months of 2009. The trend of declining sales in Europe is expected to continue until global economic conditions improve. Growth in North America during the third quarter and first nine months of 2009 is attributable to increased retail and internet sales in the consumer channels. Retail sales benefited from the acquisition of 16 retail stores locations from CompUSA in 2008. Ecommerce sales were up in substantially all of the Company's U.S. based sites in 2009. As in Europe, North America business to business sales declined in both the third quarter and first nine months of 2009. On a constant currency basis, North America Technology Products sales grew 12.2% in the third quarter of 2009 and 15.8% in the first nine months of 2009 compared to the same periods in 2008. Movements in foreign exchange rates negatively impacted the North American sales comparison by approximately $3.7 million and $21.3 million, respectively, in the third quarter and first nine months of 2009.

For the third quarter of 2009, worldwide consumer sales, defined as revenues from retail stores, consumer websites, catalogs, and shopping channels, were $426.2 million compared to $389.2 million in the same period in 2008, an increase of 9.5%. Consumer sales growth in the third quarter of 2009 was driven primarily by growth in computers, including laptops and netbooks and consumer electronics, including televisions. For the third quarter of 2009 worldwide business to business sales were $327.7 million compared to $350.3 million in the same period in 2008. For the first nine months of 2009 worldwide consumer sales were $1.3 billion compared to $1.15 billion in the same period in 2008, an increase of 13.5%. Consumer sales growth in the first nine months of 2009 was driven primarily by growth in computers, including laptops and netbooks, and consumer electronics, including televisions. Worldwide business to business sales were $327.7 million in the third quarter of 2009 compared to $350.3 million in the same period in 2008, a 6.5% decrease, and for the first nine months of 2009 worldwide business to business sales were $917.4 million compared to $1.06 billion in the same period in 2008, a 13.9% decrease. Worldwide business to business sales declined as the result of the global economic slowdown.

For the third quarter of 2009, Technology Products operating income declined approximately 5% compared to the same period in 2008. The decline is attributable to the worldwide decline in business to business sales, price promotions and freight discounts offered in the quarter and costs related to the WStore acquisition partially offset in the quarter by increased sales from the CircuitCity.com website. For the first nine months of 2009 Technology Products operating margin declined approximately 21% compared to the same period in 2008. The

decline is attributable to the worldwide decline in business to business sales as the result of the global economic slowdown, price promotions and freight discounts offered in the period and costs related to the WStore acquisition.

Industrial Products sales are primarily business to business and declined in the third quarter and first nine months of 2009 as compared to the same periods in 2008. The sales decline is largely attributable to the slowdown in economic activity which started in the second half of 2008 and continued through the third quarter of 2009. The Company has implemented strategies such as adding additional products to its catalogs and website and closely monitoring its cost structure to mitigate some of the effects of the decline in sales.

For the third quarter of 2009, Industrial Products operating income declined approximately 51% compared to the same period in 2008. The decline is attributable to the decline in business to business sales as a result of significant decreases in business spending in the United States resulting from the economic slowdown and increased spending on information technology spending in the quarter. For the first nine months of 2009 Industrial Products operating income declined 49% compared to the same period in 2008. The decline is attributable to the decline in business to business sales as the result of the global economic slowdown.

The Company announced plans to exit the Software Solutions segment during the second quarter of 2009 and is continuing the process of winding down operations and anticipates completing this process by the end of 2009. Software Solutions accounted for approximately $1.2 million in sales for the nine months ended September 30, 2009.

Consolidated gross margin declined in the third quarter and the first nine months of 2009 by 60 and 80 basis points, respectively, compared to the same periods in 2008. The Company has lowered certain product prices and offered freight incentives in order to both maintain and grow market share and to respond to competitive pricing pressures that started during 2008. The Company has continued to offer such selective incentives to maintain and grow market share in anticipation of future gross margin expansion. Additionally, consolidated gross margin has been impacted by a shift in mix, as higher margin Industrial Products accounted for a smaller portion of consolidated revenues than in prior quarters. Gross margin is dependent on variables such as product mix, vendor price protection and other sales incentives, competition, pricing strategy, cooperative advertising funds required to be classified as a reduction to cost of sales, freight discounting and other variables, any or all of which may result in fluctuations in gross margin.

The decrease in selling, general and administrative expenses for the third quarter of 2009 compared to the third quarter of 2008 was primarily the result of a $2.8 million decrease in advertising and catalog production costs offset by a $1.7 million increase in various operating expenses and depreciation expense. Included in the third quarter of 2009 are costs related to the acquisition of WStore Europe SA ("WStore") of approximately $0.8 million. The Company expects to incur significant integration costs related to the WStore acquisition in future quarters.

The increase in selling, general and administrative expenses for the first nine months of 2009 as compared to the first nine months of 2008 was primarily the result of a $6.4 million charge for severance costs, litigation and contractual lease terminations of which approximately $2.6 million related to winding down PCS operations, and a $1.7 million increase in various expenses. Corporate related selling, general and administrative expenses increased approximately $4.7 million in the first nine months of 2009 primarily related to performance based incentive compensation and information technology spending.

The Company's effective tax rate for the third quarter of 2009 was 38.0% compared to 39.5% in the third quarter of 2008. The effective tax rate for the nine months ended September 30, 2009 was 36.3% compared to 37.3% in 2008. Included in the 2009 rate is a reversal of tax reserves of approximately $1.0 million as the result of statute expirations, and included in the 2008 rate is a reversal of a tax reserve of approximately $0.4 million. Excluding the tax reserve reversal the Company's effective tax rate was 38.7% in 2009. The higher rate in 2009 is primarily the result of a higher percentage of taxable income in the U.S. where corporate income taxes are typically higher.

Net income in the third quarter of 2009 increased 11.8% to $12.6 million compared to $11.3 million in the third quarter of 2008. Net income for the nine months ended September 30, 2009 declined 35.2% to $27.8 million compared to $42.9 million for the nine months ended September 30, 2008. The decline in net income for the nine months ended September 30, 2009 year is the result of a slowdown in economic activity in all of the Company's segments and geographies and the charges incurred, including the costs of winding down our Software Solutions segment. The Company has adjusted its cost structure and reduced headcount during the first nine months of 2009 and has implemented selected hiring freezes in certain business units as the result of general economic uncertainty worldwide. The Company will continue to monitor economic conditions and make further adjustments if necessary.

Financial Condition, Liquidity and Capital Resources

Our primary liquidity needs are to support working capital requirements in our business, fund capital expenditures, repurchase Company stock, fund special dividends declared by our Board of Directors and fund acquisitions. We rely principally upon operating

cash flow to meet these needs. We believe that cash flow available from these sources and our availability under credit facilities will be sufficient to fund our working capital and other cash requirements for the next twelve months.

Selected liquidity data (in thousands):

                                           September       December 31,
                                            30, 2009           2008          $ Change
Cash and cash equivalents                 $    102,117    $      115,967    $   (13,850 )
Accounts receivable, net                  $    213,170    $      182,532    $    30,638
Inventories, net                          $    315,977    $      290,594    $    25,383
Prepaid expenses and other current
assets                                    $     17,852    $       12,667    $     5,185
Accounts payable                          $    302,097    $      284,378    $    17,719
Accrued expenses and other current
liabilities                               $     82,125    $       73,075    $     9,050
Current portion of capitalized lease
obligations                               $        951    $          773    $       178
Short term debt                           $     17,819    $            -    $    17,819
Working capital                           $    256,846    $      253,092    $     3,754

Our working capital increased in the first nine months of 2009 primarily as the result of the cash generated from net income for the period adjusted for non cash charges of approximately $14.1 million offset by the purchase of WStore, the purchase of certain CircuitCity.com assets, fixed asset purchases, and stock repurchases. The increase in inventory is the result of additional inventory needs as the result of the increased sales volume related to the acquisition of the Circuit City.com assets and to the opening of additional retail stores. The . . .