PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

           Systemax common stock is traded on the New York Stock Exchange under the symbol "SYX". The following table sets forth the high and low closing sales price of our common stock as reported on the New York Stock Exchange for the periods indicated.

     2004                                                         High       Low
     ----                                                         ----       ---

     First quarter.............................................  $7.95    $ 4.88
     Second quarter............................................   6.70      5.01
     Third quarter.............................................   6.68      5.32
     Fourth quarter............................................   7.34      5.65

     2003                                                         High       Low
     ----                                                         ----       ---
     First quarter.............................................  $1.99    $ 1.29
     Second quarter............................................   4.28      1.95
     Third quarter.............................................   8.45      3.47
     Fourth quarter............................................   7.78      6.49

           On April 14, 2005, the last reported sale price of our common stock on the New York Stock Exchange was $6.92 per share. As of April 14, 2005, we had 240 shareholders of record.

           We have not paid any dividends since our initial public offering and anticipate that all of our cash provided by operations in the foreseeable future will be retained for the development and expansion of our business, and therefore do not anticipate paying dividends on our common stock in the foreseeable future.

Item 6. Selected Financial Data.

           The following selected financial information is qualified by reference to, and should be read in conjunction with, the Company's Consolidated Financial Statements and the notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained elsewhere in this report. The selected statement of operations data for the years ended December 31, 2004, 2003 and 2002 and the selected balance sheet data as of December 31, 2004 and 2003 is derived from the audited consolidated financial statements which are included elsewhere in this report. The selected balance sheet data as of December 31, 2002, 2001 and 2000 and the selected statement of operations data for the years ended December 31, 2001 and 2000 is derived from the audited consolidated financial statements of the Company which are not included in this report.

                                                Years Ended December 31
                                                -----------------------
                             (In  millions, except per common share data and number of catalog titles)

                                                             --------------------------------------------------------------
                                                                2004         2003         2002         2001        2000
                                                             --------------------------------------------------------------
Statement of Operations Data:
- ----------------------------
Net sales                                                     $1,927.8     $1,657.8     $1,551.5     $1,547.0    $1,686.1
Gross profit                                                    $290.4       $265.0       $265.6       $276.9      $209.9
Selling, general & administrative expenses                      $260.1       $251.5       $256.1       $271.6      $270.9
Restructuring and other charges                                   $7.4         $1.7        $17.3         $2.8
Income (loss) from operations                                    $22.9         $9.3       $(7.8)         $2.5     $(61.0)
Provision (benefit) for income taxes                              $7.9         $4.4       $(1.0)          $.4     $(24.5)
Income (loss) before cumulative effect of change in
   accounting principle, net of tax                              $12.6         $3.3       $(8.0)          $.7     $(40.8)
Cumulative effect of change in accounting principle, net
   of tax                                                                                $(51.0)
Net income (loss)                                                $12.6         $3.3      $(58.9)          $.7     $(40.8)
Net income (loss) per common share, basic:
Income (loss) before cumulative effect of change in
   accounting principle, net of tax                               $.37         $.10       $(.23)         $.02     $(1.19)
Cumulative effect of change in accounting principle, net
   of tax                                                                                $(1.50)
Net income (loss) per common share                                $.37         $.10      $(1.73)         $.02     $(1.19)
Net income (loss) per common share, diluted:
Income (loss) before cumulative effect of change in
   accounting principle, net of tax                               $.35         $.10       $(.23)         $.02     $(1.19)
Cumulative effect of change in accounting principle, net
   of tax                                                                                $(1.50)
Net income (loss) per common share                                $.35         $.10      $(1.73)         $.02     $(1.19)
Weighted average common shares outstanding:
Basic                                                             34.4         34.2         34.1         34.1        34.3
Diluted                                                           35.5         34.9         34.1         34.1        34.3
Selected Operating Data:
- -----------------------
Orders entered                                                     5.2          4.4          4.0          4.0         3.9
Number of catalogs distributed                                      88           97          106          126         157
Number of catalog titles                                            22           30           37           38          37
Balance Sheet Data:
- ------------------
Working capital                                                 $160.7       $145.5       $133.3       $103.3      $106.7
Total assets                                                    $484.3       $446.7       $437.9       $454.4      $538.0
Short-term debt                                                  $16.6        $20.8        $21.2         $2.8       $48.6
Long-term debt, excluding current portion                        $17.1        $18.4        $17.5
Shareholders' equity                                            $226.5       $210.1       $201.9       $254.9      $255.7

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Overview

           We are a direct marketer of brand name and private label products, including personal desktop computers, notebook computers, computer related products and industrial 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 IBM and Hewlett Packard. 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. Computers and computer related products account for more than 90% of our net sales, and, as a result, we are dependent on the general demand for information technology products.

           The market for computer products is subject to intense price competition and is characterized by narrow gross profit margins. Distribution of information technology 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 product availability by maintaining relationships with major distributors, utilizing a combination of stocking and drop-ship fulfillment.

           After poor economic and market conditions in the prior two fiscal years, we experienced improved economic conditions and increased sales and profitability in North America in the year just ended. In response to the economic conditions over those past two years, we implemented a plan in the first quarter of 2004 to streamline our United States computer business. This plan consolidated duplicative back office and warehouse operations, which we expect will result in annual savings of approximately $8 million excluding severance and other restructuring costs of approximately $3 million recognized in fiscal 2004. Economic conditions in Europe have not yet recovered and performance in those markets continues to be negatively impacted with cautious information technology spending. With evidence of a prolonged economic downturn, we took measures to align our cost structure with lower revenues and decreasing gross margins. We implemented several cost reduction plans in Europe during 2004 and, in January 2005, we announced additional actions to increase efficiency and profitability in our United Kingdom operation.

           The primary component of our operating expenses historically has been employee related costs, which includes items such as wages, commissions, bonuses, and benefits. We have made substantial reductions in our workforce and closed or consolidated several facilities over the past several years, reducing selling, general and administrative expenses from 16.5% of net sales in 2002 to 13.5% of net sales in 2004. We will continue to monitor our costs and evaluate the need for additional actions.

           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 consolidated financial statements included herein.

Results of Operations

           We had net income of $12.6 million for the year ended December 31, 2004 and $3.3 million for the year ended December 31, 2003. For the year ended December 31, 2002, we had a net loss of $58.9 million, after recording a cumulative effect of a change in accounting principle of $51 million, net of tax, to reflect the impairment of the entire carrying amount of goodwill.

           The following table represents our consolidated statement of operations data expressed as a percentage of net sales for our three most recent fiscal years:

                                                             2004       2003       2002
                                                             ----       ----       ----
     Net sales                                              100.0%     100.0%     100.0%
     Gross profit                                            15.1%      16.0%      17.1%
     Selling, general and administrative expenses            13.5%      15.2%      16.5%
     Restructuring and other charges                          0.4%       0.1%       1.1%
     Goodwill impairment                                                 0.2%
     Income (loss) from operations                            1.2%       0.6%     (0.5)%
     Interest expense                                         0.2%       0.1%       0.1%
     Provision (benefit) for income taxes                     0.4%       0.3%     (0.1)%
     Income (loss) before cumulative effect of change
       in accounting  principle, net of tax                   0.7%       0.2%     (0.5)%
     Cumulative effect of change in accounting principle,
      net of tax                                                                  (3.3)%
     Net income (loss)                                        0.7%       0.2%     (3.8)%

NET SALES

           Net sales were $1.93 billion for the year ended December 31, 2004, an increase of 16.3% from $1.66 billion for the year ended December 31, 2003. Net sales in 2004 included approximately $515 million of internet-related sales, an increase of $131 million, or 34%, from 2003. North American sales increased to $1.23 billion, a 20.0% increase from last year’s $1.03 billion. The increase in North American sales resulted primarily from continued growth in our consumer business, as reflected by the substantial increase in our internet-related sales. With the United States economy improving after several years of softness, we also had strong growth in our industrial product sales in 2004. European sales, stated in US dollars, increased 10.2% to $696.2 million for 2004 (representing 36.1% of worldwide sales) compared to $631.5 million (representing 38.1% of worldwide sales) in the year-ago period. Movements in foreign exchange rates positively impacted European sales for 2004 by approximately $70.0 million. If currency exchange rates for 2003 had prevailed in 2004, European sales would have decreased 0.8% from the prior year. Continued weakness in demand for information technology products from corporate customers in Europe and the effect of exchange rate movements on product pricing in certain European markets resulted in decreased local currency denominated sales.

           Net sales for the year ended December 31, 2003 were $1.66 billion, an increase of 6.8% from $1.55 billion for the year ended December 31, 2002. North American sales were $1.03 billion, a 6.5% increase from last year’s $963.8 million. The increase in North American sales was a result of growth in our consumer business. Continued weakness in demand for information technology products from corporate customers resulted in lower sales to those customers. European sales, in US dollars, increased 7.5% to $631.5 million for 2003 (representing 38.1% of worldwide sales) compared to $587.7 million (representing 37.9% of worldwide sales) in the year-ago period. Movements in foreign exchange rates positively impacted European sales for 2003 by approximately $81.0 million. If currency exchange rates for 2002 had prevailed in 2003, European sales would have decreased 6.3% from the prior year. Lower demand and the effect of exchange rate movements on product pricing in certain European markets resulted in decreased local currency denominated sales.

           European economies continued to weaken during 2004, which is reflected in our results. The table below reflects European sales for the three reported years as reported herein at constant (2002) exchange rates (in millions):

                                                  2004         2003          2002
                                                  ----         ----          ----
     European sales as reported                  $696.2       $631.5       $587.7
     European sales at 2002 exchange rates       $545.5       $550.6       $587.7

GROSS PROFIT

           Gross profit, which consists of net sales less product cost, shipping, assembly and certain distribution center costs, was $290.4 million, or 15.1% of net sales, for the year ended December 31, 2004, compared to $265.0 million or 16.0% of net sales in 2003. Our gross profit ratio declined in 2004 as a result of increased pricing pressures on our computer business both in North America and Europe. The decline was partially offset by improved margins on industrial products.

           Gross profit was $265.0 million for the year ended December 31, 2003, or 16.0% of net sales, compared to $265.6 million, or 17.1% of net sales, in 2002.  As a result of adopting Emerging Issues Task Force (“EITF”) Issue No. 02-16, “Accounting by a Customer (including a Reseller) for Certain Consideration Received from a Vendor”, $14.5 million of vendor consideration was recorded as a reduction of cost of sales in 2003. Excluding the impact of EITF 02-16, and therefore on a non-GAAP basis, the gross profit margin would have been 15.1% in 2003 compared to 17.1% in 2002. (The non-GAAP gross profit margin has been included here to provide comparability to the prior year.) The decline in the gross profit margin was due to continued pricing pressure resulting from weak market demand and response to competition and changes in the mix of products sold, as customers continue to shift to lower-priced solutions.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

           Selling, general and administrative expenses totaled $260.1 million, or 13.5% of net sales, in 2004, an increase of $8.7 million, or 3.4%, compared to $251.5 million, or 15.2% of net sales, in 2003. This increase resulted from approximately $10 million of increased costs in Europe resulting from the effects of changes in foreign exchange rates and $4 million of higher credit card processing fees from the higher sales volume in 2004. The increase was partially offset through restructuring actions taken, reducing our employee count in the United States and lowering salary expense and related benefit costs by $6 million in 2004.

           Selling, general and administrative expenses for 2003 were $251.5 million compared to $256.1 million in 2002, a net decrease of $4.6 million or 1.8%. The decrease was realized in our North American operations and included decreased television advertising spending related to sales of the Company’s PCs. In addition, as a result of increased internet sales, we were able to leverage our total advertising spending and reduce our other advertising expenses by reducing the number of catalogs we mailed. These decreases were partially offset by approximately $13 million of increased costs in Europe resulting from the effects of changes in foreign exchange rates and the effects of the adoption of EITF 02-16. The adoption of EITF 02-16 resulted in the reclassification of $14.5 million of vendor consideration as a reduction of cost of sales, which would previously have been recorded as a reduction of advertising expense. As a percentage of sales, selling, general and administrative expenses were 15.2% (14.3% on a non-GAAP basis before the adoption of EITF 02-16) compared to 16.5% in the year-ago period.

RESTRUCTURING AND OTHER CHARGES

           We incurred $7.4 million of restructuring and other charges in 2004. In the first quarter of 2004 we implemented a plan to streamline the activities of our United States computer businesses’ back office and warehouse operations, resulting in the elimination of approximately 200 jobs. We incurred $3.7 million of restructuring costs associated with this plan, including $3.2 million for staff severance and benefits for terminated employees and $0.5 million of non-cash costs for impairment of the carrying value of fixed assets. We recorded $0.6 million of additional costs in 2004 related to facility exit costs for our 2003 plan to consolidate United States warehouse locations. We also implemented several cost reduction plans in Europe during 2004, including a consolidation of United Kingdom sales offices which resulted in the elimination of 50 jobs. We incurred $2.5 million of restructuring charges for facility exit costs and workforce reductions in connection with these actions and $0.5 million of additional costs resulting from adjustments to our estimates of lease and contract termination costs for our 2002 plan to consolidate our United Kingdom operations.

           In 2003, we had $1.7 million of restructuring and other charges. In the fourth quarter of 2003 we implemented a plan to consolidate the warehousing facilities in our United States computer business. We recorded $713,000 of costs related to this plan in the fourth quarter, including $233,000 of non-cash costs for impairment of the carrying value of fixed assets and $480,000 of charges for other exit costs. During the fourth quarter of fiscal 2003 we recorded $2.2 million of additional costs, net of reductions, as a charge to operations for our 2002 United Kingdom consolidation plan. These charges consisted of $1.6 million of other restructuring activities as we adjusted the original estimates of lease and contract termination costs and $600,000 of additional non-cash asset impairments, related to buildings vacated. The restructuring costs incurred in 2003 were partially offset by a $1.3 million reversal of a previously recorded liability which was no longer required as a result of our settlement of litigation with a software developer in August 2003.

           During the second quarter of 2003, we purchased the minority ownership of our Netherlands subsidiary for approximately $2.6 million, pursuant to the terms of the original purchase agreement. All of the purchase price was attributable to goodwill and, as a result of an impairment analysis, was written off in accordance with Statement of Financial Accounting Standards 142, “Goodwill and Other Intangible Assets."

           We recorded $17.3 million of restructuring and other charges during 2002. We implemented a plan to consolidate the activities of our three United Kingdom locations into a new facility we had constructed. We incurred $4.1 million of costs associated with the plan, including $1.9 million for recruitment, staff relocation and severance and benefits for approximately 150 terminated employees, $1.7 million of charges for other exit costs, primarily facilities closing and lease terminations, and $0.5 million of non-cash costs for impairment of the carrying value of fixed assets. During the second quarter of 2002 we recorded a non-recurring write-off of $13.2 million resulting from our decision to discontinue development of internal-use computer software.

INCOME (LOSS) FROM OPERATIONS

           We had income from operations of $22.9 million in 2004 and $9.3 million in 2003. We had a loss from operations of $7.8 million in 2002. For the year ended December 31, 2004, restructuring charges of $7.4 million were included in income from operations. Results in 2003 include restructuring and other charges of $1.7 million and a goodwill impairment charge of $2.6 million. The loss from operations in 2002 includes $17.3 million of restructuring and other charges.

           We had losses from operations in Europe for the year ended December 31, 2004 of $12.5 million and in 2003 of $5.2 million, compared to income from operations of $7.8 million in Europe in 2002. European results continued to decline as a result of decreased gross profit and increased selling, general and administrative expenses. As a result of the decline in our European profitability, in early 2005 we announced additional plans to reduce costs and increase efficiency through the elimination of approximately 185 positions in Europe, which is expected to result in approximately $8 million in annual savings.

INTEREST AND OTHER INCOME AND INTEREST EXPENSE

           Interest expense was $3.1 million in 2004, $2.3 million in 2003 and $1.7 million in 2002. Interest expense increased in 2004 as a result of increased short-term borrowings in the United Kingdom. The increased expense in 2003 resulted from increased short-term borrowings under our United Kingdom facility and a full year of interest expense on long-term obligations incurred in 2002. Interest and other income, net was $0.6 million in 2004, $0.8 million in 2003 and $0.4 million in 2002.

INCOME TAXES

           Our income tax provision was $7.9 million in 2004 and $4.4 million in 2003 and we had an income tax benefit of $1.0 million in 2002. The effective rates were 38.7% in 2004, 56.5% in 2003 and 11.5% in 2002. The tax rate in 2004 was higher than the United States statutory rate of 35% primarily due to losses in foreign jurisdictions for which we recognized no tax benefit and losses in a foreign jurisdiction where the benefit rate is lower than the rate in the United States. The effective tax rate in 2003 was adversely affected by the goodwill impairment write-off, which is not tax deducible. The mix in taxable income and losses between our U. S. and foreign operations and the expected utilization of our deferred tax assets significantly impacted the recording of the 2002 tax benefit. In 2002, we also incurred additional tax expense in connection with audit assessments in two of our foreign subsidiaries. For the years ended December 31, 2004, 2003 and 2002, we have not recognized certain foreign tax credits, certain state tax benefits on losses in the United States and certain benefits on losses in foreign tax jurisdictions due to our inability to carry such credits and losses back to prior years. Accordingly, valuation allowances were recorded against the deferred tax assets associated with those tax credits and net operating loss carryforwards.

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

           During the first half of 2002, we completed the transitional review for goodwill impairment required by SFAS 142. The review indicated that the entire carrying value of the goodwill recorded on our consolidated balance sheet was impaired as of January 1, 2002. Accordingly, we recorded a transitional impairment loss of $68 million ($51 million net of tax or a net loss per share of $1.50) as a cumulative effect of change in accounting principle in our statements of operations for the year ended December 31, 2002.

NET INCOME (LOSS)

           As a result of the above, net income for 2004 was $12.6 million, or $.37 per basic share and $.35 per diluted share, and for 2003 was $3.3 million, or $.10 per basic and diluted share. The net loss for 2002 was $58.9 million, or $1.73 per basic and diluted share.

Seasonality

           Net sales have historically been modestly weaker during the second and third quarter as a result of lower business activity during those months. The following table sets forth the net sales, gross profit and income (loss) from operations for each of the quarters since January 1, 2003 (amounts in millions).

     2003                                                 March 31      June 30      September 30      December 31
     ----                                                 --------      -------      ------------      -----------
     Net sales                                              $486         $431           $460              $551
     Percentage of year's net sales                         25.2%        22.4%          23.9%             28.5%
     Gross profit, as restated (1)                           $74          $67            $72               $77
     Income from  operations,  as restated(1)                 $5           $2             $5               $11

     2003
     ----
     Net sales                                              $426         $389           $405              $438
     Percentage of year's net sales                         25.7%        23.5%          24.4%            26.4%
     Gross profit                                            $72          $63            $66               $64
     Income (loss) from operations                            $8          $(1)            $3                $-

     (1) See Note 12 of the notes to the consolidated financial statements

Financial Condition, Liquidity and Capital Resources

           Liquidity is the ability to generate sufficient cash flows to meet obligations and commitments from operating activities and the ability to obtain appropriate financing and to convert into cash those assets that are no longer required to meet existing strategic and financing objectives. Therefore, liquidity cannot be considered separately from capital resources that consist of current and potentially available funds for use in achieving long-range business objectives and meeting debt service commitments. Currently, our liquidity needs arise primarily from working capital requirements and capital expenditures.

           Our working capital was $161 million at December 31, 2004, an increase of $15 million from $146 million at the end of 2003. This was due principally to a $42 million increase in inventories, a $1 million increase in accounts receivable and a $4 million decrease in short-term borrowings offset by a $17 million increase in accounts payable, an $8 million increase in taxes payable, a $2 million increase in accrued expense and other current liabilities, a $2 million decrease in cash and a $3 million decrease in prepaid expenses and other current assets. We increased our inventories in the United States to meet the needs of our growing consumer base, as increased stock levels facilitate such sales. The inventory increase in the U.S. was partially offset by a reduction in our European inventories in response to the weakness in these markets. The increase in our accounts receivable as a percentage was less than the increase in our sales. Our North American accounts receivable decreased, as our sales growth there came primarily from consumer accounts, which are generally paid by credit card in a 2-3 day shipment-to-cash cycle. The increase in accounts receivable was attributable to Europe, as the accounts receivable stated in U.S. dollars increased as a result of changes in exchange rates. We expect that future accounts receivable and inventory balances will fluctuate with the mix of our net sales between consumer and business customers, as well as geographic regions.

           We maintain our cash and cash equivalents primarily in money market funds or their equivalent. As of December 31, 2004, 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.

           Our cash balance decreased $2.4 million to $36.3 million during the year ended December 31, 2004. Net cash provided by operating activities was $12.6 million for the year ended December 31, 2004, compared with net cash used in operating activities of $6.6 million in 2003 and net cash provided by operating activities of $4.9 million in 2002. The $19.2 million increase in cash provided by operating activities in 2004 resulted from an increase in cash provided by net income adjusted by other non-cash items, such as depreciation expense, and a decrease in cash used for changes in our working capital accounts. Cash provided by net income and other non-cash items was $30.4 million in 2004, compared to $21.9 million in 2003, and was primarily attributable to our increase in net income. The cash used for changes in our working capital accounts, which was discussed previously, was $17.8 million in 2004 compared to $28.5 million in 2003. The decrease of $11.5 million in cash provided by operations for the year ended December 31, 2003 compared to 2002 resulted from changes in our working capital accounts, which used $28.5 million in cash compared to using $16.8 million in 2002, and resulted primarily from the increase in our inventories and a decrease in accounts payable and accrued expenses. Cash provided from our net income and other non-cash items was $21.9 million in 2003, which was substantially unchanged compared to $21.6 million provided by these items in 2002.

           In 2004, $8.3 million of cash was used in investing activities, principally for the purchase of property, plant and equipment. Capital expenditures in 2004 included upgrades and enhancements to our information and communications systems hardware and facilities costs for the opening of two additional retail outlet stores in the United States. During 2003, $11.2 million of cash was used in investing activities, principally $8.7 million for the purchase of property, plant and equipment, and $2.6 million for the acquisition of the minority interest in our Netherlands subsidiary. The capital expenditures in 2003 included upgrades and enhancements to our information and communications systems hardware and facilities costs for the opening of several retail outlet stores. Cash of $14.7 million was used in investing activities in 2002. This included $15.4 million of additions to property, plant and equipment, primarily for the completion of a new facility for our United Kingdom operations. We anticipate no major capital expenditures in 2005 and will fund any capital expenditures out of cash from operations and borrowings under our credit lines.

           Net cash of $6.7 million was used in financing activities in 2004, primarily for the repayment of short and long-term borrowings. Net cash of $2.3 million was used in financing activities in 2003. Cash of $4.2 million was used to repay short and long-term obligations, which was partially offset by $1.5 million of cash provided by the issuance of capital leases and $419,000 provided by the exercise of stock options. Cash of $33.8 million was provided by financing activities in 2002 from bank borrowings and the mortgaging of our Georgia distribution facility and new United Kingdom facility.

           Under our $70 million United States secured revolving credit agreement, which expires on September 30, 2006, availability as of December 31, 2004 was $54.6 million. The revolving credit agreement contains certain financial and other covenants, including restrictions on capital expenditures and payments of dividends. We were in compliance with all of the covenants as of December 31, 2004. There were outstanding letters of credit of $9.1 million and there were no outstanding advances as of December 31, 2004.

           We also maintain a(pound)15 million ($28.5 million at the December 31, 2004 exchange rate, which exchange rate applies to all the other Sterling denominated amounts below) multi-currency credit facility with a financial institution in the United Kingdom, which is available to our United Kingdom subsidiaries. The facility does not have a termination date, but may be canceled by either party on six months notice. Borrowings under the facility are secured by certain assets of our United Kingdom subsidiaries. At December 31, 2004 there were(pound)5.3 million ($10.0 million) of borrowings outstanding under this line with interest payable at a rate of 5.87%.

           Our Netherlands subsidiary has a(euro)5 million ($6.7 million at the December 31, 2004 exchange rate, which exchange rate applies to all the other Euro denominated amounts below) credit facility. 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. At December 31, 2004 there were(euro)3.5 million ($4.8 million) of borrowings outstanding under this line with interest payable at a rate of 5.0%. The facility expires in November 2005.

           In 2002 we entered into a(pound)6.6 million ($12.5 million), 11 1/2year term loan agreement with a United Kingdom bank, to finance the construction of a new United Kingdom facility. The borrowings are secured by the land and building and are repayable in 40 quarterly installments of(pound)165,000 ($313,000) through August 2012. The outstanding borrowings bear interest at LIBOR plus 160 basis points (5.25% at December 31, 2004). In connection with this term loan, we also entered into an interest rate collar agreement to reduce our exposure to market rate fluctuations. At December 31, 2004, the notional amount of the interest rate collar was(pound)5,115,000 ($9,713,000) with an interest rate cap of 6.0% and a floor of 4.5%. The interest rate collar expires on April 30, 2005. As of December 31, 2004, the collar was in a neutral position. The change in the fair value of this derivative for the year ended December 31, 2004 has been recognized in the Consolidated Statement of Operations as this hedge was determined to be ineffective. The term loan agreement contains certain financial and other covenants related to our United Kingdom subsidiaries. As of December 31, 2004, the Company was not in compliance with the financial covenants. The Company has received the lender's agreement to issue a waiver with respect to these covenants.

           In April 2002 we entered into a ten year, $8.4 million mortgage loan on our Suwanee, Georgia distribution facility. The mortgage has monthly principal and interest payments of $62,000 through May 2012, with a final additional principal payment of $6.4 million at maturity in May 2012. The mortgage loan bears interest at 7.04% and is collateralized by the underlying land and building.

           We are obligated under non-cancelable operating leases for the rental of most of our facilities and certain of our equipment which expire at various dates through 2014. We currently lease our New York facility from an entity owned by Richard Leeds, Robert Leeds and Bruce Leeds, the Company's three principal shareholders and senior executive officers. The annual rental totals $612,000 and the lease expires in 2007. We have sublease agreements for leased space in Compton, California and Markham, Ontario. In the event the sublessees are unable to fulfill their obligations, we would be responsible for rent due under the leases. However, we expect the sublessees will fulfill their obligations under these leases.

           Following is a summary of our contractual obligations for future principal payments on our debt, minimum rental payments on our non-cancelable operating leases and minimum payments on our other commitments at December 31, 2004 (in thousands):

                                                                                     After
                                         2005     2006     2007     2008     2009     2009
                                         ----     ----     ----     ----     ----     ----
Contractual Obligations:
Maturities of long-term debt           $1,811   $1,817   $1,747   $1,587   $1,482  $10,466
Payments on non-cancelable
   operating leases, net of
   subleases                            8,097    7,633    7,092    5,691    5,326    6,924
Purchase commitments                    1,040      727      316       75        -        -
                                      --------  -------   ------   ------   -----    ------
Total contractual obligations         $10,948  $10,177   $9,155   $7,353   $6,808  $17,390
                                      =======   ======   ======   ======   ======  =======

Other Commitments:
  Letters of credit                    $9,102      N/A      N/A      N/A      N/A      N/A
                                       ======

           Our operating results have generated cash flow which, together with borrowings under our debt agreements, have provided sufficient capital resources to finance working capital and cash operating requirements, fund capital expenditures, and fund the payment of interest on outstanding debt. Our primary ongoing cash requirements will be to finance working capital, fund the payment of principal and interest on indebtedness and fund capital expenditures. We believe future cash flows from operations and availability of borrowings under our lines of credit will be sufficient to fund ongoing cash requirements.

           We are party to certain litigation, the outcome of which we believe, based on discussions with legal counsel, will not have a material adverse effect on our consolidated financial statements.

Off-balance Sheet Arrangements

           We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating our business. We do not have any arrangements or relationships with entities that are not consolidated into the financial statements that are reasonably likely to materially affect our liquidity or the availability of capital resources.

Factors That May Affect Future Results and Financial Condition

           There are a number of factors and variables that affect our results of operations and financial condition. Following is a description of some of the important factors that may affect future results.

           Other factors that could contribute to or cause such differences include, but are not limited to, unanticipated developments in any one or more of the following areas: (i) the effect on us of volatility in the price of paper and periodic increases in postage rates, (ii) the operation of our management information systems, (iii) significant changes in the computer products retail industry, especially relating to the distribution and sale of such products, (iv) timely availability of existing and new products, (v) risks involved with e-commerce, including possible loss of business and customer dissatisfaction if outages or other computer-related problems should preclude customer access to us, (vi) risks associated with delivery of merchandise to customers by utilizing common delivery services such as the United States Postal Service and United Parcel Service, including possible strikes and contamination, (vii) borrowing costs or availability, (viii) pending or threatened litigation and investigations and (ix) the availability of key personnel, as well as other risk factors which may be detailed from time to time in our Securities and Exchange Commission filings.

           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.

Critical Accounting Policies and Estimates

           Our significant accounting policies are described in Note 1 to the consolidated financial statements. The policies below have been identified as critical to our business operations and understanding the results of operations. Certain accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty, and as a result, actual results could differ from those estimates. These judgments are based on historical experience, observation of trends in the industry, information provided by customers and information available from other outside sources, as appropriate. Management believes that full consideration has been given to all relevant circumstances that we may be subject to, and the 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 years presented. Actual results may differ from these estimates under different conditions or assumptions.

Revenue Recognition. We recognize product sales when persuasive evidence of an order arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectibility is reasonably assured. Generally, these criteria are met at the time of product shipment under FOB shipping terms. Sales are shown net of returns and allowances, rebates and sales incentives. Reserves for estimated returns and allowances are provided when sales are recorded, based on historical experience and current trends. We recognize revenue for our software sales in accordance with Emerging Issues Task Force (EITF) Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables.” Hosting and service revenues will be recognized on a monthly basis over the terms of the contracts. Professional services and other revenues, when sold with hosting services, are recognized as the services are rendered.

Accounts Receivable and Allowance for Doubtful Accounts. We record an allowance for doubtful accounts to reflect our estimate of the collectibility of our trade accounts receivable. We evaluate the collectibility of accounts receivable based on a combination of factors, including an analysis of the age of customer accounts and our historical experience with accounts receivable write-offs. The analysis also includes the financial condition of a specific customer or industry, and general economic conditions. In circumstances where we are aware of customer charge-backs or a specific customer's inability to meet its financial obligations, a specific reserve for bad debts applicable to amounts due to reduce the net recognized receivable to the amount management reasonably believes will be collected is recorded. In those situations with ongoing discussions, the amount of bad debt recognized is based on the status of the discussions. While bad debt allowances have been within expectations and the provisions established, there can be no guarantee that we will continue to experience the same allowance rate we have in the past.

Inventories. We value our inventories at the lower of cost or market, cost being determined on the first-in, first-out method. Reserves for excess and obsolete or unmarketable merchandise are provided based on historical experience, assumptions about future product demand and market conditions. The adequacy of these reserves are evaluated quarterly. If market conditions are less favorable than projected or if technological developments result in accelerated obsolescence, additional write-downs may be required. While obsolescence and resultant markdowns have been within expectations, there can be no guarantee that we will continue to experience the same level of markdowns we have in the past.

Long-lived Assets. Management exercises judgment in evaluating our long-lived assets for impairment. We believe we will generate sufficient undiscounted cash flow to more than recover the investments made in property, plant and equipment. While we believe that our estimates of future cash flows are reasonable, different assumptions regarding such cash flows could materially affect our evaluations

Income Taxes. We are subject to taxation from federal, state and foreign jurisdictions and the determination of our tax provision is complex and requires significant management judgment. Management judgment is also applied in the determination of deferred tax assets and liabilities and any valuation allowances that might be required in connection with our ability to realize deferred tax assets.

Since we conduct operations internationally, our effective tax rate has and will continue to depend upon the geographic distribution of our pre-tax income or losses among locations with varying tax rates and rules. As the geographic mix of our pre-tax results among various tax jurisdictions changes, the effective tax rate may vary from period to period. We are also subject to periodic examination from domestic and foreign tax authorities regarding the amount of taxes due. These examinations include questions regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. We have established, and periodically reevaluate, an estimated income tax reserve on our consolidated balance sheet to provide for the possibility of adverse outcomes in income tax proceedings. While management believes that we have identified all reasonably identifiable exposures and that the reserve we have established for identifiable exposures is appropriate under the circumstances, it is possible that additional exposures exist and that exposures may be settled at amounts different than the amounts reserved.

We account for income taxes in accordance with Statement of Financial Accounting Standards 109, “Accounting for Income Taxes”, which requires that deferred tax assets and liabilities be recognized for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. The realization of net deferred tax assets is dependent upon our ability to generate sufficient future taxable income. Where it is more likely than not that some portion or all of the deferred tax asset will not be realized, we have provided a valuation allowance. If the realization of those deferred tax assets in the future is considered more likely than not, an adjustment to the deferred tax assets would increase net income in the period such determination is made. In the event that actual results differ from these estimates or we adjust these estimates in future periods, an adjustment to the valuation allowance may be required, which could materially affect our consolidated financial position and results of operations.

Restructuring charges. We have taken restructuring actions, and may commence further restructuring activities which requires management to utilize significant estimates related to expenses for severance and other employee separation costs, lease cancellations, asset impairments and other exit costs. Should the actual amounts differ from our estimates, the amount of the restructuring charges could be impacted, which could materially affect our consolidated financial position and results of operations.

Recent Accounting Developments

In November 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4.” SFAS 151 clarifies that abnormal inventory costs such as costs of idle facilities, excess freight and handling costs, and wasted materials (spoilage) are required to be recognized as current period charges. SFAS 151 also requires that the allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facility. The provisions of SFAS 151 will be effective for fiscal years beginning after June 15, 2005. The Company is currently evaluating the provisions of SFAS 151 and does not expect that the adoption will have a material impact on the Company’s consolidated financial position or results of operations.

In December 2004, the FASB issued Statement of Financial Accounting Standards 123 (revised 2004) (SFAS 123R), “Share-Based Payment”. SFAS 123R replaced SFAS 123, Accounting for Stock-Based Compensation (SFAS 123), and superseded Accounting Principles Board Opinion 25, Accounting for Stock Issued to Employees. SFAS 123R will require the Company to expense share-based payments, including employee stock options, based on their fair value. The Company is required to adopt the provisions of SFAS 123R effective as of the beginning of its first quarter in 2006. SFAS 123R provides alternative methods of adoption which include prospective application and a modified retroactive application. The Company is currently evaluating the available alternatives of adoption, of SFAS 123R. The Company believes the adoption of SFAS 123R will have a financial statement impact which could be significant.

In December 2004, the FASB issued FASB Staff Position (FSP) 109-1, “Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004.” FSP 109-1 states that qualified domestic production activities should be accounted for as a special deduction under SFAS 109, “Accounting for Income Taxes,” and not be treated as a rate reduction. Accordingly, any benefit from the deduction should be reported in the period in which the deduction is claimed on the tax return. The company is currently evaluating the effect that the deduction, if any, will have in subsequent years.

In December 2004, the FASB also issued FSP 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004.” FSP 109-2 provides guidance under SFAS 109, “Accounting for Income Taxes”, with respect to recording the potential impact of the repatriation provisions of the American Jobs Creation Act of 2004 (“Jobs Act”). FSP 109-2 temporarily allows companies that are evaluating whether to repatriate foreign earnings under the Jobs Act to delay recognizing any related taxes until that decision is made. This pronouncement also requires companies that are considering repatriating earnings to disclose the status of their evaluation and the potential amounts being considered for repatriation. The Company has completed its evaluation of this legislation and FSP 109-2 and will not repatriate any foreign earnings

Item 7A. Quantitative and Qualitative Disclosure About Market Risk.

           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 Sterling, Euros and Canadian dollars) as measured against the U.S. dollar and each other.

           We have limited involvement with derivative financial instruments and do not use them for trading purposes. 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 may enter into foreign currency options or forward exchange contracts aimed at limiting in part the impact of certain currency fluctuations, but as of December 31, 2004 we had no outstanding forward exchange contracts.

           Our exposure to market risk for changes in interest rates relates primarily to our variable rate debt. In connection with our United Kingdom term loan agreement, effective April 30, 2002 we entered into an interest rate collar agreement to reduce our exposure to market rate fluctuations. At December 31, 2004 the notional amount of the interest rate collar was £5.1 million ($9.7 million at the December 31, 2004 exchange rate) with an interest rate cap of 6.0% and a floor of 4.5%. The interest rate collar expires on April 30, 2005.

Item 8. Financial Statements and Supplementary Data.

           The information required by Item 8 of Part II is incorporated herein by reference to the Consolidated Financial Statements filed with this report; see Item 15 of Part IV.

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.

           None.

Item 9A. Controls and Procedures.

           Our management is responsible for establishing and maintaining adequate disclosure controls and internal control over financial reporting.

Disclosure Controls and Procedures

           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 Chairman and 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.

           As previously disclosed in a Current Report on Form 8-K, which we filed on February 21, 2005, we announced that we would restate previously filed consolidated financial statements for the year ended December 31, 2003 and the first three quarters of 2004 to correct errors in accounting for inventory at our United Kingdom subsidiary. Management has concluded that the internal control deficiencies that made the restatements necessary indicate the existence of a material weakness, as defined by the Public Company Accounting Oversight Board’s Auditing Standard No. 2. Based on this evaluation and due to existence of the internal control deficiencies described below, our Chairman and Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2004. The design and operation of our disclosure controls and procedures did not reduce to a relatively low level of risk the chance or chances that a material misstatement would occur and not be detected.

           As a result of a review of the subsidiary’s inventory activities for the fiscal years ended December 31, 2002, 2003 and 2004, the Company determined that the errors requiring this restatement were principally a result of changes in the way certain inventory transactions were processed and recorded and an inaccurate recording of a period end cut-off. These errors were undetected or unrecognized as a result of the following weaknesses and deficiencies in the subsidiary’s controls:

           Subsequent to the quarter ended December 31, 2004, we began implementing remedial measures to address the identified material weakness described above in connection with the preparation of our financial statements included in our Amendment No. 1 to Form 10-K for the year ended December 31, 2003 and in this Form 10-K for the year ended December 31, 2004. We have modified our internal procedures to more accurately identify the types of inventory transactions processed. This has been combined with additional system reporting to provide more details to enhance the inventory reconciliation process. This reconciliation process is also supported by additional management review. Additional review procedures have been implemented to test cut-off accuracy. We are continuing to monitor these processes to further improve our procedures as may be necessary.

           Our independent registered public accounting firm has issued a material weakness letter to the Company which addresses the weaknesses identified above at the Company’s United Kingdom subsidiary and, as well, addresses inadequate oversight and control activities on the part of senior management of the Company over its remote subsidiaries. These matters have been discussed in detail among management, the audit committee and our independent registered public accountants. We are in the process of addressing the latter of the items identified on an immediate and longer-term basis.

Internal Control Over Financial Reporting

           Based on current SEC implementing regulations and assuming that we will be considered an accelerated filer in 2005 (which will be determined based on our public float at the end of our second fiscal quarter of 2005), at the end of fiscal year 2005, Section 404 of the Sarbanes-Oxley Act of 2002 will require that management provide an assessment of the effectiveness of the Company’s internal control over financial reporting and that the Company’s independent registered public accounting firm will be required to audit that assessment. We are taking actions to permit timely compliance with Section 404. We are in the process of performing the system and procedures documentation, evaluation and testing for compliance with the requirements of Section 404. We have dedicated substantial time and resources to the review of our control processes and procedures, including the engagement of another independent accounting firm 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. We have already identified a number of weaknesses which, individually or in the aggregate, may be a material weakness or weaknesses. They are as follows:

           We have identified a number of internal control deficiencies that may affect the timeliness and accuracy of recording transactions. 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.

           We have identified internal control deficiencies in the information technology area, including, among others, the lack of program change and project management controls, inadequate segregation of duties between information technology department development and production functions, the need for formal information technology strategic planning, the need for formal documentation of information security procedures, the need for security around user rights to certain application systems and the need to implement formal help desk procedures.

           We have identified internal control deficiencies related to subsidiary ledger postings and account reconciliation processes. These deficiencies include differences between control accounts and subsidiary ledgers which require extensive manual research to reconcile, some of which can not be resolved on a timely basis.

           We have identified internal control deficiencies relating to the processing and reconciliation of intercompany transactions, including the elimination of intercompany account balances in our financial statement consolidation process.

           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 remediated. We cannot be assured that we will 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 a positive opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005.

Limitations on the Effectiveness of Controls

           Our management, including our CEO and CFO, 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.

Changes in Internal Controls Over Financial Reporting

           Our management is not aware of any changes in internal control over financial reporting that occurred during the quarter ended December 31, 2004 that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

PART III

Item 10. Directors and Executive Officers of the Registrant.

           The information required by Item 10 of Part III is hereby incorporated by reference from the Company's Proxy Statement for the 2005 Annual Meeting of Stockholders (the "Proxy Statement").

Item 11. Executive Compensation.

           The information required by Item 11 of Part III is hereby incorporated by reference from the Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

           The information required by Item 12 of Part III is hereby incorporated by reference from the Proxy Statement.

Item 13. Certain Relationships and Related Transactions.

           The information required by Item 13 of Part III is hereby incorporated by reference from the Proxy Statement.

Item 14. Principal Accounting Fees and Services.

           The information required by Item 14 of Part III is hereby incorporated by reference from the Proxy Statement.

PART IV

Item 15. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.

               Exhibit
               No.                      Description
               -------                  -----------
                   3.1              Composite Certificate of Incorporation of Registrant, as amended 9
                   3.2              By-laws of Registrant 1
                   4.1              Stockholders Agreement 2
                  10.1              Form of 1995 Long-Term Stock Incentive Plan 3*
                  10.2              Form of 1999 Long-Term Stock Incentive Plan as amended 13*
                  10.3              Lease  Agreement dated September 20, 1988 between the Company and Addwin Realty
                                    Associates (Port Washington facility)1
                  10.4              Amendment to Lease Agreement dated September 29, 1998 between the Company and
                                    Addwin Realty Associates (Port Washington facility)6
                  10.5              Lease  Agreement  dated as of July 17,  1997  between the Company and South Bay
                                    Industrials Company (Compton facility)4
                  10.6              Build-to-Suit  Lease  Agreement dated April,  1995 among the Company,  American
                                    National  Bank and  Trust  Company  of  Chicago  and  Walsh,  Higgins & Company
                                    (Naperville facility)1
                  10.7              Lease  Agreement  dated  September  17, 1998  between  Tiger  Direct,  Inc. and
                                    Keystone Miami Property Holding Corp. (Miami facility)5
                  10.8              Royalty  Agreement  dated June 30, 1986 between the Company and Richard  Leeds,
                                    Bruce Leeds and Robert Leeds, and Addendum thereto1
                  10.9              Form of 1995 Stock Plan for Non-Employee Directors 3*
                 10.10              Consulting  Agreement  dated as of  January 1, 1996  between  the  Company  and
                                    Gilbert Rothenberg 3*
                 10.11              Separation  Agreement  and  General  Release  between  the  Company  and Robert
                                    Dooley, dated March 5, 2004*
                 10.12              Employment  Agreement  dated as of December  12,  1997  between the Company and
                                    Steven M. Goldschein 4*
                 10.13              Loan and Security Agreement, dated June 13, 2001, between The Chase Manhattan
                                    Bank (as Lender and Agent) and TransAmerica Business Capital Corporation (as
                                    Lender and Co-Agent) with the Company and certain subsidiaries of the Company
                                    (as Borrowers), as amended, the “Chase Loan Agreement”) 7
                 10.14              Amendment No. 1, dated as of September 1, 2001, to the Chase Loan Agreement 8
                 10.15              Amendment No. 2, dated as of December 13, 2001, to the Chase Loan Agreement 9
                 10.16              Amendment No. 3, dated as of December 20, 2001, to the Chase Loan Agreement 9
                 10.17              Amendment No. 4, dated as of April 18, 2002, to the Chase Loan Agreement 10
                 10.18              Amendment No. 5, dated as of June 30, 2002, to the Chase Loan Agreement 11
                 10.19              Amendment No. 6, dated as of September 22, 2003, to the Chase Loan Agreement 14
                 10.20              Amendment No. 7, dated as of November 17, 2003, to the Chase Loan Agreement 15
                 10.21              Amendment No. 8, dated as of May 10, 2004, to the Chase Loan Agreement 15
                 10.22              Amendment No. 9, dated as of July 2, 2004, to the Chase Loan Agreement 16
                 10.23              Amendment No. 10, dated as of December 9, 2004, to the Chase Loan Agreement 18
                 10.24              Amendment No. 11, dated as of March 8, 2005, to the Chase Loan Agreement 19
                 10.25              Promissory Note of Systemax Suwanee LLC, dated as of April 18, 2002
                                    payable to the order of New York Life Insurance Company in the original
                                    principal sum of $8,400,000 10
                 10.26              Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement,
                                    dated as of April 18, 2002 from Systemax Suwanee LLC to New York Life
                                    Insurance Company 10
                 10.27              Employment Agreement entered into on October 12, 2004 but effective as of June
                                    1, 2004 between the Company and Gilbert Fiorentino 17*
                 10.28              Restricted Stock Unit Agreement entered into on October 12, 2004 but effective
                                    as of June 1, 2004 between the Company and Gilbert Fiorentino 17*
                    14              Corporate Ethics Policy for Officers, Directors and Employees (revised as of
                                    March 30, 2005) 20
                    19              Specimen stock certificate of Registrant 9
                    21              Subsidiaries of the Registrant
                    23              Consent of experts and counsel: Consent of Independent Public Accountants
                  31.1              Certification  of the Chief  Executive  Officer  pursuant to Section 302 of the
                                    Sarbanes-Oxley Act of 2002
                  31.2              Certification  of the Chief  Financial  Officer  pursuant to Section 302 of the
                                    Sarbanes-Oxley Act of 2002
                  32.1              Certification  of the Chief  Executive  Officer  pursuant to Section 906 of the
                                    Sarbanes-Oxley Act of 2002
                  32.2              Certification  of the Chief  Financial  Officer  pursuant to Section 906 of the
                                    Sarbanes-Oxley Act of 2002
                  99.1              Charter of the Audit Committee of the Company's Board of Directors,  as revised
                                    February 28, 200312
                  99.2              Charter of the Compensation  Committee of the Company's Board of Directors,  as
                                    approved February 28, 200312
                  99.3              Charter  of the  Nominating/Corporate  Governance  Committee  of the  Company's
                                    Board of Directors, as approved February 28, 200312
                  99.4              Annual CEO Certification to the New York Stock Exchange, dated March 26, 200414

          (b)      Reports on Form 8-K.

    Signature                           Title                              Date
    ---------                           -----                              ----

/s/ RICHARD LEEDS         Chairman and Chief Executive Officer        April 15, 2005
- -----------------            (Principal Executive Officer)
    Richard Leeds

/s/ BRUCE LEEDS                     Vice Chairman                     April 15, 2005
- ---------------
    Bruce Leeds

/s/ ROBERT LEEDS                    Vice Chairman                     April 15, 2005
- ----------------
    Robert Leeds

/s/ STEVEN M. GOLDSCHEIN    Senior Vice President and Chief           April 15, 2005
- ------------------------           Financial Officer
    Steven Goldschein        (Principal Financial Officer)

/s/ MICHAEL J. SPEILLER      Vice President and Controller            April 15, 2005
- -----------------------      (Principal Accounting Officer)
    Michael J. Speiller

/s/ GILBERT FIORENTINO                 Director                       April 15, 2005
- ----------------------
    Gilbert Fiorentino

/s/ ROBERT D. ROSENTHAL                Director                       April 15, 2005
- -----------------------
    Robert D. Rosenthal

/s/ STACY DICK                         Director                       April 15, 2005
- --------------
    Stacy Dick

/s/ ANN R. LEVEN                       Director                       April 15, 2005
- ----------------
    Ann R. Leven

                                                                                        2004            2003
                                                                                        ----            ----
ASSETS:
   CURRENT ASSETS:
      Cash and cash equivalents                                                      $36,257         $38,702
      Accounts receivable, net of allowances of $11,318 (2004) and $10,000 (2003)    153,724         152,435
      Inventories                                                                    176,227         133,905
      Prepaid expenses and other current assets                                       24,888          26,849
     Deferred income tax assets, net                                                   8,812          10,132
                                                                                    --------        --------
           Total current assets                                                      399,908         362,023

   PROPERTY, PLANT AND EQUIPMENT, net                                                 65,563          68,647
   DEFERRED INCOME TAX ASSETS, net                                                    18,268          15,673
   OTHER ASSETS                                                                          561             376
                                                                                    --------        --------

              TOTAL                                                                 $484,300        $446,719
                                                                                    ========        ========

LIABILITIES AND SHAREHOLDERS' EQUITY:
   CURRENT LIABILITIES:
      Short-term borrowings, including current portions of long-term debt            $16,560         $20,814
       Accounts payable                                                              161,864         144,662
       Accrued expenses and other current liabilities                                 60,756          51,037
                                                                                    --------        --------
          Total current liabilities                                                  239,180         216,513
                                                                                    --------        --------

   LONG-TERM DEBT                                                                     17,099          18,353
   OTHER LIABILITIES                                                                   1,505           1,768

   COMMITMENTS AND CONTINGENCIES

   SHAREHOLDERS' EQUITY:
   Preferred stock, par value $.01 per share, authorized 25 million shares, issued none
   Common stock, par value $.01 per share, authorized 150 million shares, issued
       38,231,990 shares; outstanding 34,432,799 (2004) and 34,288,068 (2003) shares     382             382
   Additional paid-in capital                                                        180,530         175,343
   Accumulated other comprehensive income, net of tax                                  4,093           1,933
   Retained earnings                                                                  91,307          78,757
   Common stock in treasury at cost - 3,799,191 (2004) and 3,943,922 (2003) shares   (44,630)        (46,330)

   Unearned restricted stock compensation                                             (5,166)              -
                                                                                    --------        --------
                        Total shareholders' equity                                   226,516         210,085
                                                                                    --------        --------

                TOTAL                                                               $484,300        $446,719
                                                                                    ========        ========

See notes to consolidated financial statements.

                                                                               2004             2003             2002
                                                                               ----             ----             ----
Net sales                                                                $1,927,835       $1,657,778       $1,551,517
Cost of sales                                                             1,637,452        1,392,745        1,285,929
                                                                     ---------------  ---------------  ---------------
Gross profit                                                                290,383          265,033          265,588
Selling, general and administrative expenses                                260,111          251,460          256,075
Restructuring and other charges                                               7,356            1,726           17,294
Goodwill impairment                                                                            2,560
                                                                     ---------------  ---------------  ---------------
Income (loss) from operations                                                22,916            9,287           (7,781)
Interest and other income, net                                                 (630)            (755)            (427)
Interest expense                                                              3,073            2,344            1,653
                                                                     ---------------  ---------------  ---------------
Income (loss) before income taxes                                            20,473            7,698           (9,007)
Provision (benefit) for income taxes                                          7,923            4,352           (1,039)
                                                                     ---------------  ---------------  ---------------
Income (loss) before cumulative effect of change in accounting
    principle, net of tax                                                    12,550            3,346           (7,968)
Cumulative effect of change in accounting principle, net of tax                                               (50,971)
                                                                     ---------------  ---------------  ---------------
Net income (loss)                                                           $12,550           $3,346         $(58,939)
                                                                     ===============  ===============  ===============

Net income (loss) per common share, basic:
Income (loss) before cumulative effect of change in accounting
    principle, net of tax                                                      $.37             $.10            $(.23)
Cumulative effect of change in accounting principle, net of tax                                                 (1.50)
                                                                     ---------------  ---------------  ---------------
Net income (loss)                                                              $.37             $.10           $(1.73)
                                                                     ===============  ===============  ===============

Net income (loss) per common share, diluted:
Income (loss) before cumulative effect of change in accounting
principle, net of tax                                                          $.35             $.10            $(.23)
Cumulative effect of change in accounting principle, net of tax                                                 (1.50)
                                                                     ---------------  ---------------  ---------------
Net income (loss)                                                              $.35             $.10           $(1.73)
                                                                     ===============  ===============  ===============

Weighted average common and common equivalent shares:
   Basic                                                                     34,373           34,164           34,104
                                                                     ===============  ===============  ===============
   Diluted                                                                   35,489           34,880           34,104
                                                                     ===============  ===============  ===============

See notes to consolidated financial statements.

                               Common Stock
                              ---------------
                               Number                              Accumulated
                                 of                                   Other                  Unearned
                               Shares         Additional          Comprehensive   Treasury  Restricted  Comprehensive
                              Outstand         Paid-in   Retained Income (Loss),   Stock,     Stock     Income (Loss),
                                ing    Amount  Capital   Earnings   Net of Tax     At Cost Compensation   Net of Tax
                              -------- ------ ---------- -------- --------------  -------- ------------ --------------

Balances, January 1, 2002       34,104   $382   $176,743 $134,350        $(8,038) $(48,489)

Change in cumulative
    translation adjustment                                                 5,908                                $5,908
Net loss                                                  (58,939)                                             (58,939)
                              -------- ------ ---------- -------- --------------  -------- ------------ --------------

Total comprehensive loss                                                                                      $(53,031)
                                                                                                        ==============

Balances, December 31, 2002     34,104    382    176,743   75,411         (2,130)  (48,489)

Change in cumulative
    translation adjustment                                                 4,063                                $4,063
Exercise of stock options          184            (1,740)                            2,159
Tax benefit of employee
    stock plans                                      340
Net income                                                  3,346                                                3,346
                              -------- ------ ---------- -------- --------------  -------- ------------ --------------

Total comprehensive income                                                                                      $7,409
                                                                                                        ==============

Balances, December 31, 2003     34,288    382    175,343   78,757          1,933   (46,330)

Change in cumulative
    translation adjustment                                                 2,160                                $2,160
Exercise of stock options          145              (741)                            1,700
Tax benefit of employee
    stock plans                                      188
Grant of restricted stock
    units                                          5,740                                        $(5,740)
Amortization of unearned
    restricted stock
    compensation                                                                                    574
Net income                                                 12,550                                               12,550
                              -------- ------ ---------- -------- --------------  -------- ------------ --------------

Total comprehensive income                                                                                     $14,170
                                                                                                        ==============
Balances, December 31, 2004     34,433   $382   $180,530  $91,307         $4,093  $(44,630)     $(5,166)
                              ======== ====== ========== ======== ==============  ======== ============

See notes to consolidated financial statements.

                                                                                2004            2003           2002
                                                                                ----            ----           ----
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
   Net income (loss)                                                         $12,550          $3,346       $(58,939)
   Adjustments to reconcile net income (loss) to net cash provided by
   (used in) operating activities:
       Cumulative effect of change in accounting principle, net of tax                                       50,971
       Goodwill impairment                                                                     2,560
       Loss on dispositions and abandonment                                    1,444             595         14,843
       Depreciation and amortization, net                                     11,314          13,938         13,652
       Provision for deferred income taxes                                    (3,585)         (2,818)        (3,475)
       Tax benefit of employee stock plans                                       188             340
       Provision for returns and doubtful accounts                             7,159           3,906          4,581
       Compensation expense related to equity compensation plans               1,374
   Changes in operating assets and liabilities:
       Accounts receivable                                                    (2,230)          6,182         (5,922)
       Inventories                                                           (39,936)        (30,089)        (2,644)
       Prepaid expenses and other current assets                               2,507           7,972         (8,422)
       Income taxes payable/receivable                                         8,966          (3,915)         7,755
       Accounts payable, accrued expenses and other current liabilities       12,873          (8,624)        (7,532)
                                                                          -----------     -----------   ------------
           Net cash provided by (used in) operating activities                12,624          (6,607)         4,868
                                                                          -----------     -----------   ------------

CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
   Investments in property, plant and equipment                               (8,583)         (8,699)       (15,367)
   Proceeds from disposals of property, plant and equipment                      247              11            635
   Purchase of minority interest                                                              (2,560)
                                                                          -----------     -----------   ------------
           Net cash used in investing activities                              (8,336)        (11,248)       (14,732)
                                                                          -----------     -----------   ------------

CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
   Issuance of long-term borrowings and capital lease obligations                              1,534         18,879
   Proceeds (repayments) of borrowings from banks                             (5,254)         (2,951)        15,253
   Repayments of long-term debt and capital lease obligations                 (1,768)         (1,257)          (348)
   Issuance of common stock                                                      331             419
                                                                          -----------     -----------   ------------
           Net cash provided by (used in) financing activities                (6,691)         (2,255)        33,784
                                                                          -----------     -----------   ------------

EFFECTS OF EXCHANGE RATES ON CASH                                                (42)         (4,183)         2,611
                                                                          -----------     -----------   ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                          (2,445)        (24,293)        26,531
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR                                 38,702          62,995         36,464
                                                                          -----------     -----------   ------------

CASH AND CASH EQUIVALENTS - END OF YEAR                                      $36,257         $38,702        $62,995
                                                                          ===========     ===========   ============

Supplemental disclosures:
       Interest paid                                                          $3,385          $2,697         $1,375
                                                                          ===========     ===========   ============
       Income taxes paid                                                      $4,676         $13,840         $5,397
                                                                          ===========     ===========   ============

Supplemental disclosures of non-cash investing and financing activities:
       Deferred stock-based compensation related to restricted unit stock
       granted                                                                $5,740               -              -
                                                                          ===========     ===========  =============

See notes to consolidated financial statements

                                                         Years ended December 31,
                                                     2004          2003          2002
                                                     ----          ----          ----
          Balance, beginning of year              $10,000       $11,275       $11,120
          Charged to expense                        7,159         3,906         4,581
          Deductions                               (5,841)       (5,181)       (4,426)
                                                   ------        ------        ------
          Balance, end of year                    $11,318       $10,000       $11,275
                                                  =======       =======       =======

                                                                         2004            2003             2002
                                                                         ----            ----             ----
     Net income (loss) - as reported                                  $12,550          $3,346         $(58,939)
     Stock-based employee compensation expense determined under
         fair value based method, net of related tax effects              409             544              713
                                                                       ------           -----           ------
     Pro forma net income (loss)                                      $12,141          $2,802         $(59,652)
                                                                      =======          ======         ========

     Basic net income (loss) per common share:
     Net income (loss) - as reported                                     $.37           $ .10           $(1.73)
                                                                         ====           =====           ======
     Net income (loss) - pro forma                                       $.35           $ .08           $(1.75)
                                                                         ====           =====           ======

     Diluted net income (loss) per common share:
     Net income (loss) - as reported                                     $.35           $ .10           $(1.73)
                                                                         ====           =====           ======
     Net income (loss) - pro forma                                       $.34           $ .08           $(1.75)
                                                                         ====           =====           ======

                                                          2004          2003          2002
                                                          ----          ----          ----
     Expected dividend yield                                0%            0%            0%
     Risk-free interest rate                              5.5%          5.9%          5.6%
     Expected volatility                                 46.0%         76.0%         71.0%
     Expected life in years                               2.36          2.41          2.52

                                                                                    2004      2003
                                                                                    ----      ----
     Land and buildings                                                          $48,580   $46,898
     Furniture and  fixtures, office, computer and other equipment and software   71,653    78,327
     Leasehold improvements                                                       11,187    14,010
                                                                                  ------    ------
                                                                                 131,420   139,235
     Less accumulated depreciation and amortization                               65,857    70,588
                                                                                  ------    ------
     Property, plant and equipment, net                                          $65,563   $68,647
                                                                                 =======   =======

                                                                2004          2003
                                                                ----          ----
     Mortgage note payable (a)                               $ 8,012       $ 8,170
     Term loan payable (b)                                     9,713        10,338
     Capitalized equipment lease obligations                   1,185         1,591
                                                               -----         -----
                                                              18,910        20,099
     Less: current portion                                     1,811         1,746
                                                               -----         -----
                                                             $17,099       $18,353
                                                             =======       =======

                               2005         2006         2007         2008         2009     After 2009
                               ----         ----         ----         ----         ----     ----------
         Maturities          $1,811       $1,817       $1,747       $1,587       $1,482        $10,466

     Years ended December 31,                                 2004          2003          2002
     ------------------------                                 ----          ----          ----
     2004 United States Streamlining Plan                   $3,743
     2003 United States Warehouse Consolidation Plan           642          $713
     2002 United Kingdom Consolidation Plan                    467         2,173        $4,051
     Software development write-off                                                     13,243
     Litigation settlement on software development                        (1,272)
     Other severance and exit costs                          2,504           112             -
                                                             -----           ---        ------
     Total restructuring and other charges                  $7,356        $1,726       $17,294
                                                            ======        ======       =======

                                          Severance and          Asset           Other
                                        Personnel Costs    Write-downs      Exit Costs        Total
                                        ---------------    -----------      ----------        -----
     Charged to expense in 2004                  $3,153           $483            $107       $3,743
     Amounts utilized                            (2,520)          (483)            (95)      (3,098)
                                                 ------           ----             ---       ------
     Accrued at December 31, 2004                  $633           $  -             $12         $645
                                                   ====           ====             ===         ====

                                          Severance and          Other
                                        Personnel Costs     Exit Costs        Total
                                        ---------------     ----------        -----
     Accrued at December 31, 2003                  $ 63           $650         $713
     Charged to expense in 2004                                    642          642
     Amounts utilized                               (63)          (659)        (722)
                                                    ---           ----         ----
     Accrued at December 31, 2004                   $ -           $633         $633
                                                    ===           ====         ====

                                            Other Exit Costs
                                            ----------------
       Accrued at December 31, 2003                   $2,312
       Charged to expense in 2004                        467
       Amounts utilized                               (2,028)
                                                      ------
       Accrued at December 31, 2004                     $751
                                                        ====

                                                    For Shares        Option Prices
                                                    ----------        -------------
               Outstanding, January 1, 2002          1,675,491      $  1.95 to $39.06
               Granted                                 591,375      $  3.05 to $ 3.39
               Cancelled                              (175,551)     $  1.95 to $18.41
                                                      --------      -----------------
               Outstanding, December 31, 2002        2,091,315      $  1.95 to $39.06
               Granted                               1,072,700      $  1.76 to $ 3.36
               Exercised                              (184,341)     $  1.76 to $ 3.05
               Cancelled                              (158,372)     $  1.76 to $39.06
                                                      --------      -----------------
               Outstanding, December 31, 2003        2,821,302      $  1.76 to $18.41
               Granted                                 780,267      $  5.30 to $ 6.34
               Exercised                              (144,168)     $  1.76 to $ 3.05
               Cancelled                              (216,150)     $  1.76 to $18.41
                                                      --------      -----------------
               Outstanding, December 31, 2004        3,241,251      $  1.76 to $18.41
                                                     =========

                                                   2004                         2003                        2002
                                         ------------------------     ------------------------    ------------------------
                                                 Weighted-Average             Weighted Average            Weighted Average
                                         Shares   Exercise Price      Shares   Exercise Price     Shares   Exercise Price
                                         ------   --------------      ------   --------------     ------   --------------
     Outstanding at beginning of year. 2,821,302     $ 3.70         2,091,315     $ 5.01        1,675,491     $ 6.05
     Granted..........................   780,267     $ 5.38         1,072,700     $ 1.80          591,375     $ 3.05
     Exercised........................  (144,168)    $ 2.28          (184,341)    $ 2.27
     Cancelled........................  (216,150)    $ 6.82          (158,372)    $ 9.68         (175,551)    $ 8.36
                                       ---------                     --------                    --------
     Outstanding at end of year....... 3,241,251     $ 3.96         2,821,302     $ 3.70        2,091,315     $ 5.01
                                       =========                    =========                   =========

     Options exercisable at year end.. 1,756,517                    1,483,287                   1,093,294
     Weighted average fair value per
        option granted during the year     $1.61                        $0.81                       $0.67

     Range of                             Weighted-Average  Weighted-Average               Weighted-Average
     Exercise                   Number        Remaining         Exercise         Number        Exercise
      Price                  Outstanding  Contractual Life        Price       Exercisable        Price
     --------                -----------  ----------------  ----------------  -----------  ----------------
     $  1.76 to $  5.00        1,934,184        7.44            $  2.14        1,159,633        $  2.37
     $  5.01 to $ 15.00        1,248,967        7.68            $  6.15          538,784        $  7.17
     $ 15.01 to $ 18.41           58,100        1.46            $ 17.63           58,100        $ 17.63
                               ---------                                       ---------
     $  1.76 to $ 18.41        3,241,251        7.42            $  3.96        1,756,517        $  4.35
                               =========                                       =========

     Years Ended December 31                    2004          2003          2002
     -----------------------                    ----          ----          ----
     United States                           $37,275       $18,359       $(6,731)
     Foreign                                 (16,802)      (10,661)       (2,276)
                                             -------       -------       -------
     Total                                   $20,473        $7,698       $(9,007)
                                             =======       =======       =======

     Years Ended December 31                    2004          2003          2002
     -----------------------                    ----          ----          ----
     Current:
          Federal                             $9,793        $5,247       $(3,037)
          State                                  571           709           758
          Foreign                               (442)        1,214         4,715
                                               -----         -----         -----
          Total current                        9,922         7,170         2,436
                                              ------         -----         -----
     Deferred:
          Federal                                868         1,932        (3,800)
          State                                 (639)         (864)         (604)
          Foreign                             (2,228)       (3,886)          929
                                              ------        ------           ---
          Total deferred                      (1,999)       (2,818)       (3,475)
                                              ------        ------        ------

     TOTAL                                    $7,923        $4,352       $(1,039)
                                              ======        ======       =======

     Years Ended December 31                               2004        2003        2002
     -----------------------                               ----        ----        ----
     Income tax (benefit) at Federal statutory rate      $7,165      $2,694     $(3,152)
     State and local income taxes (benefits), net of
         federal tax benefit                                (67)       (100)        100
     Foreign taxes in excess of U.S. rate and foreign
         losses with no benefit recognized, net           2,392         384       2,620
     Non-deductible goodwill impairment                                 900
     Tax credits                                           (599)       (660)       (906)
     Adjustment for prior year taxes                       (588)      1,311
     Other items, net                                      (380)       (177)        299
                                                           ----        ----         ---
                                                         $7,923      $4,352     $(1,039)
                                                         ======      ======     =======

                                                                 2004           2003
                                                                 ----           ----
     Current:
           Deductible assets                                    $(699)         $(640)
           Accrued expenses and other liabilities               9,143         11,069
           Non-deductible assets                                1,125            837
           Other                                                 (358)          (436)
           Valuation allowances                                  (399)          (698)
                                                                 ----           ----
               Total current                                    8,812         10,132
                                                                -----         ------

     Non-current:
           Net operating loss and credit carryforwards         17,176         18,170
           Foreign currency translation adjustments            (2,816)        (1,635)
           Accelerated depreciation                             1,622         (1,539)
           Intangible and other assets                         12,042         13,630
           Other                                                  766
           Valuation allowances                               (10,522)       (12,953)
                                                              -------        -------
               Total non-current                               18,268         15,673
                                                               ------         ------

     TOTAL                                                    $27,080        $25,805
                                                              =======        =======

                                                            Third Party   Related Party
                                              Capitalized    Operating      Operating
                                                 Leases        Leases         Lease      Total
                                                 ------        ------         -----      -----
     2005                                          $403        $8,170          $612     $9,185
     2006                                           388         7,597           612      8,597
     2007                                           299         6,960           612      7,871
     2008                                           125         5,691                    5,816
     2009                                                       5,326                    5,326
     2010-2014                                                  6,924                    6,924
                                                 ------         -----         -----      -----

     Total minimum lease payments                 1,215        40,668        $1,836     43,719
     Less: sublease rental income                               1,741        ======      1,741
                                                               ------                   ------
     Lease obligation net of subleases                        $38,927                  $41,978
                                                              =======                  =======
     Less amount representing interest               30
                                                 ------
     Present value of minimum capitalized
     lease payments (including current
     portion of $387)                            $1,185
                                                 ======

                                                              December 31,
                                                              ------------
                                                            2004        2003
                                                            ----        ----
        Furniture and fixtures,  office, computer
            and other equipment                           $1,680      $1,680
        Accumulated amortization                             503         123
                                                           -----       -----
                                                          $1,177      $1,557
                                                          ======      ======

                                                    Net Sales
                                   ----------------------------------------------
                                          2004         2003           2002
                                          ----         ----           ----

     North America                 $ 1,231,586   $ 1,026,233   $   963,805
     Europe                            696,249       631,545       587,712
                                       -------       -------       -------
     Consolidated                  $ 1,927,835   $ 1,657,778   $ 1,551,517
                                   ===========   ===========   ===========
          Revenues are attributed to countries based on location of selling subsidiary.

                                          Long-Lived Assets
                                          -----------------
                                          2004         2003
                                          ----         ----
     North America                    $ 34,654     $ 36,571
     Europe                             30,909       32,076
                                        ------       ------
     Consolidated                     $ 65,563     $ 68,647
                                      ========     ========

Three months ended:                March 31, 2004                   June 30, 2004                  September 30, 2004
                                   --------------                   -------------                  ------------------
                            As Previously                    As Previously                    As Previously
                              Reported       As Restated       Reported       As Restated       Reported       As Restated
                              --------       -----------       --------       -----------       --------       -----------
Cost of sales                 $410,916         $411,597        $363,172         $363,854        $387,047         $387,786
Gross profit                   $74,820          $74,139         $67,818          $67,136         $73,224          $72,485
Income from operations          $5,203           $4,522          $2,744           $2,062          $5,782           $5,043
Income before income taxes      $4,556           $3,875          $2,318           $1,636          $5,067           $4,328
Provision for income taxes      $2,144           $1,940          $1,647           $1,441          $2,375           $2,155
Net income                      $2,412           $1,935            $671             $195          $2,692           $2,173

Net income per common share:
Basic                             $.07             $.06            $.02             $.01            $.08             $.06
Diluted                           $.07             $.05            $.02             $.01            $.08             $.06

                                             First Quarter     Second Quarter    Third Quarter  Fourth Quarter
     2004:                                      (As restated)     (As restated)  (As restated)
     Net Sales                                       $485,736          $430,990       $460,271         $550,838
     Gross profit                                     $74,139           $67,136        $72,485          $76,623
     Net income                                        $1,935              $195         $2,173           $8,247
     Net income per common share:
           Basic                                         $.06              $.01           $.06             $.24
           Diluted                                       $.05              $.01           $.06             $.23

     2003:
     Net Sales                                       $426,461          $388,798       $405,011         $437,508
     Gross profit                                     $71,851           $62,919        $66,064          $64,199
     Net income (loss)                                 $4,597           $(2,288)        $1,174            $(137)
     Net income (loss) per common share:
           Basic                                         $.13             $(.07)          $.03             $.--
           Diluted                                       $.13             $(.07)          $.03             $.--