Proxy Statement and
2015 Annual Report to Stockholders
Dear Fellow Stockholders,
The past year has been a period of significant activity highlighted by our strategic exit from the
North American Technology business. While this exit impacted our 2015 financial performance, this
transformative shift will improve the financial health of the company moving forward. It also allows us to
sharpen our focus on driving value in our growing business areas.
Systemax today operates two value-added business-to-business distribution businesses: Industrial Products
Group (“IPG”), an industrial MRO business serving the North America market, and EMEA Technology
Products Group, an IT products and services business serving Europe. We believe both of these businesses
have substantial opportunities for future growth. To capitalize on the opportunities ahead, over the past
several years we have strengthened and built out infrastructure, improved operating efficiencies, expanded
product and service offerings and enhanced customer service levels. Today they are well-positioned for
2016 and beyond.
IPG continues to deliver strong performance and generated almost $700 million in revenue in 2015, up
26% from the prior year. This revenue increase was driven by the addition of the Plant Equipment Group
or P.E.G, as well as double digit organic growth which continues to significantly outpace the general
MRO industry. IPG enters 2016 poised to benefit from the investments and efforts of the past year. P.E.G.
has been fully integrated, and our co-branding initiatives, which will allow us to leverage the power
of our brands and enhance our recognition in the marketplace, have been well received by customers.
With our new distribution center in Las Vegas and the addition of P.E.G. assets, we now have a national
distribution footprint that is operating on an integrated logistics platform. In the year ahead we look
forward to additional integration benefits and believe we are well- positioned to deliver continued growth.
In EMEA Technology, we improved our performance in 2015, particularly in the fourth quarter where we
delivered revenue growth on a constant currency basis and made progress towards achieving a breakeven
bottom line. France, our largest market, had an outstanding year as it continued to grow its top-line much
greater than the market and nearly doubled its operating income. While performance across other markets
was mixed, our new leadership team is executing their turnaround strategy and have implemented a number
of operational improvements to drive efficiencies, streamline o erations and improve performance.
The strategic and operational steps taken in 2015 position us to enhance our performance and execute
our operating plans. In North America we are now solely focused on our growing IPG business and in
EMEA we are committed to returning the business to consistent profitabilit . With this refined strategy
in place, we recently completed a senior management succession plan where Richard Leeds transitioned
to Executive Chairman to focus on long-term strategy and new product development and Larry Reinhold
assumed the role of Chief Executive Office . Larry, who is in his tenth year as part of the Systemax family,
will retain his position as Chief Financial Officer on an interim basis until his successor is determined.
This plan is designed to ensure the continuity of senior leadership and our operating plan. We have a
strong balance sheet, are positioned to continue to invest in our businesses and are focused on improving
performance.
We would like to thank our employees and stockholders for their support and look forward to keeping you
updated on our progress.
Sincerely,
Richard Leeds
Executive Chairman
Larry Reinhold
President and Chief Executive Office
TO RECEIVE ADDITIONAL INFORMATION ON THE COMPANY
PLEASE SEND A WRITTEN REQUEST TO:
CORPORATE HEADQUARTERS:
Systemax Inc.
11 Harbor Park Drive
Port Washington, NY 11050
516-608-7000 ext. 7181
Email: investinfo@systemax.com
Web Site: http://www.systemax.com
INVESTOR RELATIONS:
Brainerd Communicators, Inc.
1370 Broadway, 14th Floor
New York, NY 10018
Attention: Mike Smargiassi
(212) 986-6667
Email: smarg@braincomm.com
Website: http://www.braincomm.com
TRANSFER AGENT:
American Stock Transfer & Trust Company LLC
6201 15th Avenue
Brooklyn, NY 11219
(800) 937-5449
Email: info@amstock.com
Web Site: http://www.amstock.com
SEND CERTIFICATES FOR TRANSFER AND ADDRESS CHANGES TO:
American Stock Transfer & Trust Company LLC
6201 15th Avenue
Brooklyn, NY 11219
STOCK EXCHANGE:
The Company’s shares are traded on the
New York Stock Exchange under the symbol SYX.
CORPORATE GOVERNANCE
Copies of the Company’s 2015 Annual Report on Form 10-K, Proxy Statement for the 2016 Annual Meeting,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the Securities and Exchange
Commission are available online at www.systemax.com or to stockholders without charge upon written
request to the Company’s address listed above, Attention: Investor Relations. In addition, on the Corporate
Governance page of the Company’s website, www.systemax.com, stockholders can view the Company’s
Corporate Ethics Policy, Audit Committee Charter, Compensation Committee Charter, Nominating/
Corporate Governance Committee Charter and Corporate Governance Guidelines and Principles.
Systemax Inc. (www.systemax.com), a Fortune 1000 company, sells industrial and technology
products through a system of branded e-Commerce websites and relationship marketers in North
America and Europe. The primary brands are Global Industrial, C&H, MISCO and Inmac Wstore.
Systemax Inc.
11 Harbor Park Drive
Port Washington, New York 11050
April 25, 2016
Dear Stockholders:
You are cordially invited to attend the 2016 Annual Meeting of Stockholders of Systemax Inc. (the “Company”) which
will be held at the Company’s corporate offices, located at 11 Harbor Park Drive, Port Washington, New York at 12:00 p.m. on
Monday, June 6, 2016. We look forward to greeting those stockholders who are able to attend. On the following pages you will
find the formal Notice of Annual Meeting and Proxy Statement.
For the Annual Meeting, we are pleased to use the “Notice Only” rule adopted by the Securities and Exchange
Commission to furnish proxy materials to stockholders over the Internet. We believe this process will provide you with an
efficient and quick way to access your proxy materials and vote your shares, while allowing us to reduce the environmental
impact and the costs of printing and distributing the proxy materials. On or about April 25, 2016, we mailed to most stockholders
a Notice of Internet Availability of Proxy Materials that tells them how to access and review information contained in the proxy
materials and our Annual Report on Form 10-K for fiscal year 2015 and vote electronically over the Internet. If you received
only the Notice in the mail, you will not receive a printed copy of the proxy materials in the mail unless you request the materials
by following the instructions included in the Notice.
At the Annual Meeting, you will be asked to: (1) elect seven Directors; (2) ratify the appointment of Ernst & Young
LLP as the Company’s independent registered public accountants for fiscal year 2016; and (3) approve, on a non-binding,
advisory basis, the termination of certain corporate governance restrictions imposed under a 2006 class action settlement
agreement. Your Board of Directors recommends that you vote your shares “FOR” proposals (1), (2) and (3). These proposals
are more fully described in the accompanying proxy statement.
Whether or not you plan to attend the meeting in person, it is important that your shares be represented and voted at the
Annual Meeting. Accordingly, please vote your shares over the internet at www.proxyvote.com or by telephone at (800) 690-
6903 until 11:59 PM Eastern Time on June 5, 2016, or if you received a paper proxy card, date, sign and return the proxy card as
soon as possible in the envelope provided or to the address set forth in the voting instructions therein. Your cooperation will
ensure that your shares are voted.
If your shares are held in “street name” in a stock brokerage account or by a bank or other nominee, you must
provide your broker with instructions on how to vote your shares in order for your shares to be voted on important
matters presented at the Annual Meeting. If you do not instruct your broker on how to vote in the election of directors
and on compensation matters, your shares will not be voted on these matters.
We hope that you will attend the Annual Meeting, and we look forward to seeing you there.
Sincerely,
RICHARD LEEDS
Executive Chairman
LAWRENCE REINHOLD
President and Chief Executive Officer
Systemax Inc.
11 Harbor Park Drive
Port Washington, New York 11050
____________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On June 6, 2016
Dear Stockholders:
The 2016 Annual Meeting of the Stockholders of Systemax Inc. (the “Company”) will be held at the Company’s
offices, 11 Harbor Park Drive, Port Washington, New York, on Monday June 6, 2016 at 12:00 p.m. for the following purposes, as
more fully described in the accompanying proxy statement:
1.
2.
3.
4.
To elect the Company’s Board of Directors;
To consider and vote upon a proposal to ratify the appointment of Ernst & Young LLP
as the Company’s independent registered public accountants for fiscal year 2016;
To approve, on a non-binding, advisory basis, the termination of certain corporate
governance restrictions imposed under a 2006 class action settlement agreement; and
To transact such other business as may properly come before the meeting and any and
all adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 14, 2016 as the record date for the determination of the
stockholders entitled to notice of and to vote at the meeting and at any adjournment or postponement thereof.
Stockholders are invited to attend the meeting. Whether or not you expect to attend, we urge you to vote your shares.
YOU CAN VOTE YOUR SHARES OVER THE INTERNET AT www.proxyvote.com OR BY TELEPHONE AT (800) 690-
6903 UNTIL 11:59 PM EASTERN TIME ON JUNE 5, 2016. IF YOU RECEIVED A PAPER PROXY CARD BY MAIL, YOU
MAY ALSO VOTE BY SIGNING, DATING, AND RETURNING THE PROXY CARD IN THE ENVELOPE PROVIDED OR
TO THE ADDRESS SET FORTH IN THE VOTING INSTRUCTIONS CONTAINED THEREIN. If you attend the meeting,
you may vote your shares in person, which will revoke any previously executed proxy.
If your shares are held of record by a broker, bank or other nominee and you wish to attend the meeting you must
obtain a letter from the broker, bank or other nominee confirming your beneficial ownership of the shares and bring it to the
meeting. In order to vote your shares at the meeting, you must obtain from the record holder a proxy issued in your name.
Regardless of how many shares you own, your vote is very important. PLEASE VOTE YOUR SHARES OVER THE
INTERNET OR BY TELEPHONE OR IF YOU RECEIVED A PAPER PROXY CARD BY MAIL, SIGN, DATE, AND
RETURN THE PROXY CARD IN THE ENVELOPE PROVIDED TODAY.
Sincerely,
ERIC LERNER
Senior Vice President and General Counsel
Port Washington, New York
April 25, 2016
3
TABLE OF CONTENTS
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON JUNE 6, 2016. .................................................................................................................... 5
Voting Procedures ............................................................................................................................................................. 6
PROPOSAL NO. 1 ELECTION OF DIRECTORS .......................................................................................................................... 9
CORPORATE GOVERNANCE .................................................................................................................................................... 11
Independence of Directors .............................................................................................................................................. 11
Meetings of Non-Management Directors ........................................................................................................................ 11
Corporate Governance Guidelines .................................................................................................................................. 11
Corporate Ethics Policy .................................................................................................................................................. 12
Communications with Directors...................................................................................................................................... 12
Director Attendance at Annual Stockholders Meetings .................................................................................................. 12
Board Meetings ............................................................................................................................................................... 12
Committees of the Board ................................................................................................................................................ 12
Board Leadership Structure............................................................................................................................................. 14
Risk Oversight ................................................................................................................................................................ 15
REPORT OF THE AUDIT COMMITTEE* .................................................................................................................................. 17
EXECUTIVE OFFICERS .............................................................................................................................................................. 18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT .................................................... 19
Section 16(a) Beneficial Ownership Reporting Compliance ........................................................................................... 20
TRANSACTIONS WITH RELATED PERSONS ......................................................................................................................... 21
EQUITY COMPENSATION PLAN INFORMATION ................................................................................................................. 22
EXECUTIVE COMPENSATION .................................................................................................................................................. 23
Compensation Discussion and Analysis.......................................................................................................................... 23
Compensation Committee Report to Stockholders* ....................................................................................................... 35
Compensation Committee Interlocks and Insider Participation ...................................................................................... 35
SUMMARY COMPENSATION TABLE ...................................................................................................................... 36
GRANTS OF PLAN-BASED AWARDS ....................................................................................................................... 37
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2015........................................................................ 38
OPTION EXERCISES AND STOCK VESTED ............................................................................................................ 38
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL ................................................... 39
Termination of Employment Without Change In Control ............................................................................................... 40
Change In Control Payments .......................................................................................................................................... 41
DIRECTOR COMPENSATION .................................................................................................................................................... 42
Director Compensation For Fiscal Year 2015 ................................................................................................................. 42
PROPOSAL NO. 2 RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS.................................... 43
PROPOSAL NO. 3 NON-BINDING ADVISORY VOTE ............................................................................................................. 44
TO TERMINATE CERTAIN CORPORATE GOVERNANCE RESTRICTIONS ....................................................................... 44
ADDITIONAL MATTERS ............................................................................................................................................................ 46
4
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 6, 2016.
Our Proxy Statement and Annual Report are available online at:
www.proxyvote.com
5
Systemax Inc.
11 Harbor Park Drive
Port Washington, New York 11050
______________
PROXY STATEMENT
______________
This proxy statement is furnished in connection with the solicitation of proxies on behalf of the Board of Directors (the
“Board”) of Systemax Inc., a Delaware corporation (the “Company”), for the 2016 Annual Meeting of Stockholders of the
Company to be held on June 6, 2016 (the “Annual Meeting”). The Company has made the proxy materials available to
stockholders of record as of the close of business on April 14, 2016 at www.proxyvote.com beginning on April 25, 2016 and is
first mailing such materials to stockholders that requested printed copies of such materials on or about April 25, 2016.
You can ensure that your Shares of common stock of the Company (the “Shares”) are voted at the meeting by voting
your Shares over the internet at www.proxyvote.com or by telephone at (800) 690-6903 until 11:59 PM Eastern Time on June 5,
2016 or by signing, dating and promptly returning a proxy, if you received a proxy by mail, in the envelope provided or to the
address contained in the voting instructions therein. Voting your Shares over the internet, by telephone or by sending in a signed
proxy will not affect your right to attend the meeting and vote in person.
The Company’s principal executive offices are located at 11 Harbor Park Drive, Port Washington, New York 11050.
Voting Procedures
Proxies will be voted as specified by the stockholders. Where specific choices are not indicated, proxies will be voted,
per the Board of Directors’ recommendations, FOR Proposals 1, 2 and 3. If any other matters properly come before the Annual
Meeting, the persons named in the proxy will vote at their discretion.
Under the Delaware General Corporation Law and the Company’s Amended and Restated Certificate of Incorporation
and By-Laws, (1) the affirmative vote of a plurality of the outstanding Shares entitled to vote and present, in person or by
properly executed proxy, at a meeting at which a quorum is present will be required to elect the nominated directors of the Board
(Proposal 1); (2) the affirmative vote of a majority of the outstanding Shares entitled to vote and present, in person or by properly
executed proxy, at a meeting at which a quorum is present will be required to ratify the appointment of Ernst & Young LLP as
the Company’s independent registered public accountants (Proposal 2); and (3) a majority of the outstanding Shares entitled to
vote and present, in person or by properly executed proxy, at a meeting at which a quorum is present and not beneficially owned
by directors or officers of the Company will be required to approve on a non-binding advisory basis, the termination of certain
corporate governance restrictions (Proposal 3).
Messrs. Richard, Bruce and Robert Leeds (each a director and officer of the Company), together with trusts for the
benefit of certain members of their respective families and other entities controlled by them, as applicable, beneficially owned as
of our record date more than 50% of the Shares outstanding, and they have each separately advised us that they intend to vote all
of such Shares they each have the power to vote in accordance with the recommendations of the Board of Directors on each of
the Proposals identified above, which will be sufficient to constitute a quorum and to determine the outcome of each Proposal.
However, their Shares will not be counted for purposes of the vote for Proposal 3.
A quorum is representation in person or by proxy at the Annual Meeting of at least a majority of the outstanding
Shares. Abstentions will have no effect on the election of directors (Proposal 1). Abstentions on other matters will be treated as
votes cast on particular matters as well as Shares present and represented for purposes of establishing a quorum, with the result
that an abstention has the same effect as a negative vote regarding such other matters. Where nominee record holders do not vote
on specific issues because they did not receive specific instructions on such issues from the beneficial owners, such broker non-
votes will not be treated as votes cast on a particular matter, and will therefore have no effect on the vote, but will be treated as
Shares present or represented for purposes of establishing a quorum.
If your Shares are held through a broker, bank or other nominee, you must provide voting instructions to such record
holder in accordance with such record holder’s requirements in order to ensure that your Shares are properly voted. Please note
that the rules regarding how brokers may vote your Shares have changed. Brokers may no longer vote your Shares on the election
of directors, or any other non-routine matters, in the absence of your specific instructions as to how to vote. We encourage you to
provide instructions to your broker regarding the voting of your Shares. If you do not provide your broker or other nominee with
instructions on how to vote your “street name” Shares, your broker or nominee will not be permitted to vote them on such non-
routine matters (a broker “non-vote”). Please note that Proposal 1 (Election of Directors) and Proposal 3 (Termination of
Governance Restrictions) are non-routine matters, and so Shares subject to a broker “non-vote” will not be considered entitled to
vote with respect to Proposal 1 and Proposal 3 and will not affect the outcome of the vote on those Proposals.
6
A list of stockholders of the Company satisfying the requirements of Section 219 of the Delaware General Corporation
Law shall be available for inspection for any purpose germane to the Annual Meeting during normal business hours at the offices
of the Company at least ten days prior to the Annual Meeting.
Revocability of Proxies
Any person signing a proxy in the form accompanying this proxy statement has the power to revoke it prior to the
Annual Meeting or at the Annual Meeting prior to the vote pursuant to the proxy.
A proxy for a stockholder of record may be revoked by any of the following methods:
•
•
•
by writing a letter delivered to Mr. Eric Lerner, Senior Vice President and General Counsel of the Company,
stating that the proxy is revoked;
by submitting another proxy with a later date (i.e., by signing and submitting a new proxy card or by re-voting by
phone or by Internet as instructed above); only your latest proxy card, phone or Internet vote will be counted; or
by attending the Annual Meeting and voting in person.
Beneficial holders whose Shares are held of record by a broker, bank or other nominee may revoke their proxy at any
time before it is voted by following the instructions of their broker, bank or other nominee. In addition, please note, that if a
stockholder’s Shares are held of record by a broker, bank or other nominee and that stockholder wishes to vote at the Annual
Meeting, the stockholder must bring to the Annual Meeting a letter from the broker, bank or other nominee confirming that
stockholder’s beneficial ownership of the Shares.
On April 14, 2016, the record date, there were outstanding and entitled to vote (excluding Company treasury Shares)
36,877,688 Shares, entitled to one vote per Share. Only stockholders of record at the close of business on the record date will be
entitled to vote at the Annual Meeting and at any and all adjournments or postponements thereof. Stockholders will not be
entitled to appraisal rights in connection with any of the matters to be voted on at the Annual Meeting.
Internet Posting of Proxy Materials
Why did I receive a notice regarding the internet availability of proxy materials instead of paper copies of the proxy
materials?
We have implemented the Securities and Exchange Commission, or SEC, “Notice Only” rule that allows us to furnish
our proxy materials over the Internet to our stockholders instead of mailing paper copies of those materials to each stockholder.
As a result, beginning on or about April 25, 2016, we sent to most of our stockholders by mail a Notice of Internet Availability of
Proxy Materials containing instructions on how to access our proxy materials over the Internet and vote online. This notice is not
a proxy card and cannot be used to vote your Shares. If you received a notice this year, you will not receive paper copies of the
proxy materials unless you request the materials by following the instructions on the notice or on the website referred to in the
notice.
If you own Shares of common stock in more than one account—for example, in a joint account with your spouse and in
your individual brokerage account—you may have received more than one notice. To vote all of your Shares by proxy, please
follow each of the separate proxy voting instructions that you received for your Shares of common stock held in each of your
different accounts.
How can I access the proxy materials over the Internet?
Your Notice of the Internet Availability of the proxy materials, proxy card or voting instruction card will contain
instructions on how to view our proxy materials for the Annual Meeting on the Internet. Our proxy materials and Annual Report
on Form 10-K for fiscal year 2015, as well as the means to vote by Internet, are available at www.proxyvote.com
How may I obtain a paper copy of the proxy materials?
If you receive a Notice of the Internet Availability of the proxy materials, you will find on your notice instructions
about how to obtain a paper copy of the proxy materials. If you did not receive the notice, you will receive a paper copy of the
proxy materials by mail.
7
What is “householding”?
SEC rules allow a single copy of the proxy materials or the Notice of Internet Availability of Proxy Materials to be
delivered to multiple stockholders sharing the same address and last name, or who we reasonably believe are members of the
same family in a manner provided by such rules. This practice is referred to as “householding” and can result in significant
savings of paper and mailing costs. In accordance with SEC rules, stockholders sharing the same address and last name, or who
we reasonably believe are members of the same family, will receive one copy of the proxy materials or Notice of Internet
Availability of Proxy Materials.
How can I find voting results of the Annual Meeting?
We will announce preliminary voting results at the Annual Meeting and we will publicly disclose the results on a Form
8-K within four business days of the Annual Meeting, as required by SEC rules.
8
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Annual Meeting, seven Directors are to be elected to serve until their successors have been elected and qualified.
Information regarding such nominees is set forth below. Each of the nominees served as a director during fiscal year 2015.
The accompanying proxy will be voted for the election of the Board’s nominees unless contrary instructions are given.
If any Board nominee is unable to serve, which is not anticipated, the persons named as proxies intend to vote, unless the Board
of Directors reduces the number of nominees, for such other person or persons as the Board of Directors may designate.
If voting by proxy with respect to the election of Directors, stockholders may vote in favor of all nominees, withhold
their votes as to all nominees or withhold their votes for specific nominees.
There are no family relationships among any of our Directors or executive officers or nominees for Director or
executive officer, except that Messrs. Richard, Bruce and Robert Leeds are brothers. Except as disclosed herein, regarding
Messrs. Richard, Bruce and Robert Leeds, there were no arrangements or understandings between any Director or nominee for
Director and any other person pursuant to which such person was selected as a Director or nominee for Director.
Nominees
Name of Nominee
Richard Leeds
Bruce Leeds
Robert Leeds
Lawrence Reinhold
Robert D. Rosenthal
Principal Occupation
Executive Chairman of the Company∗
Vice Chairman of the Company
Vice Chairman of the Company
President, Chief Executive Officer and Interim Chief Financial
Officer of the Company*
Chairman and Chief Executive Officer of First Long Island
Investors LLC
Stacy Dick
Chief Financial Officer of Julian Robertson Holdings
Marie Adler-Kravecas Retired President of Myron Corporation
Age
56
Director Since
April 1995
60
60
56
67
59
56
April 1995
April 1995
March 2009
July 1995
November 1995
June 2009
Richard Leeds joined the Company in 1982. In March 2016, Mr. Leeds assumed the role of Executive Chairman, and
will help guide the Company’s long-term strategic direction and the development of new products and services. From April 1995
to March 2016, he served as Chairman and Chief Executive Officer of the Company. He also served as President of the
Company’s Industrial Products group until 2011. Mr. Leeds, together with his brothers Messrs. Bruce and Robert Leeds, are the
majority stockholders of the Company and the sons of one of the Company’s founders. Mr. Leeds was selected to serve as
Executive Chairman of our Board due to his experience and depth of knowledge of the Company and the direct marketing,
computer and industrial products industries, his role in developing and managing the Company’s business strategies and
operations, as well as his exceptional business judgment and leadership qualities.
Bruce Leeds joined the Company in 1977 and has served as Vice Chairman of the Company since April 1995. He also
served as President of the Company’s International Operations until 2005. Mr. Leeds, together with his brothers Messrs. Richard
and Robert Leeds, are the majority stockholders of the Company and the sons of one of the Company’s founders. Mr. Leeds was
selected to serve as a director on our Board due to his experience and depth of knowledge of the Company and the direct
marketing, computer and industrial products industries, his role in developing and managing the Company’s business strategies
and operations, his experience in international business as well as his exceptional business judgment.
Robert Leeds joined the Company in 1977 and has served as Vice Chairman of the Company since April 1995. He also
served as President of the Company’s Domestic Operations until 2005 and as Chief Executive of the North American Technology
Products Group from 2013 to 2015. Mr. Leeds, together with his brothers Messrs. Richard and Bruce Leeds, are the majority
stockholders of the Company and the sons of one of the Company’s founders. Mr. Leeds was selected to serve as a director on
our Board because of his experience and depth of knowledge of the Company and the direct marketing, computer and industrial
products industries, his role in developing and managing the Company’s business strategies and operations, his significant
computer and technology industry experience as well as his exceptional business judgment.
∗ New position effective March 10, 2016.
9
Lawrence Reinhold joined the Company in January 2007 as its Chief Financial Officer. Mr. Reinhold has served as a
Director since March 2009. In March 2016 he was appointed the Company’s President and Chief Executive Officer. He will
continue to serve as the Company’s Chief Financial Officer on an interim basis. In this expanded role, he assumed overall
responsibility for the Company's operations, including all lines of business and functional groups. Additionally, prior to joining
the Company, Mr. Reinhold was the Chief Financial Officer of a publicly traded developer and manufacturer of medical devices;
the Chief Financial Officer of a publicly traded communications software company; and a regional Managing Partner of a Big 4
International Public Accounting Firm. Mr. Reinhold is a Certified Public Accountant. From 2011 through 2013, he also served
on the board of directors and audit committee of Pulse Electronics, a publicly traded electronics manufacturer. Mr. Reinhold was
selected to serve as a director on our Board due to his contributions since joining the Company and his extensive experience and
expertise in business, strategy, finance, accounting, SEC reporting, public company management, mergers and acquisitions and
financial systems as well as his serving as a CFO of other public technology companies and a partner with an international
accounting firm.
Robert D. Rosenthal has served as an independent Director of the Company since July 1995. He has been the lead
independent director since October 2006. Mr. Rosenthal is Chairman and Chief Executive Officer of First Long Island Investors
LLC, which he co-founded in 1983. Mr. Rosenthal is the Chairman and CEO of a wealth management company that invests in
numerous public companies and is also an attorney and member of the bar of the State of New York. Mr. Rosenthal was selected
to serve as a director on our Board due to his financial, investment and legal experience and acumen.
Stacy Dick has served as an independent Director of the Company since November 1995. Mr. Dick has served as Chief
Financial Officer of Julian Robertson Holdings since November 2008 and, since 2011, as Chief Financial Officer of Tiger
Management Advisors LLC. Mr. Dick was a Managing Director of Rothschild Inc. from 2001 to 2008 and served as an
executive of other entities controlled by Rothschild family interests. He has served as an adjunct professor of finance at the Stern
School of Business (NYU) since 2004 and adjunct professor of law at NYU Law School since 2012. Mr. Dick was selected to
serve as a director on our Board due to his exceptional knowledge and experience in the areas of business, finance and
economics.
Marie Adler-Kravecas has served as an independent Director of the Company since June 2009. Ms. Adler-Kravecas
joined Myron Corporation, an international, business-to-business direct marketing company, in 1984 and served as President
from 1999 to 2004. In 2005, Ms. Adler-Kravecas founded Wellconnected, LLC, a consumer direct marketing company which
was sold in 2008. Ms. Adler-Kravecas is currently retired. She has been a member of the Young President’s Organization since
2003 and The Executive Group from 2004 to 2008. Ms. Adler-Kravecas has been on the Board of the Children’s Aid and Family
Service since 2004. Ms. Adler-Kravecas was selected to serve as a director on our Board due to her practical experience in direct
marketing and international business.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF ALL THE
DIRECTOR NOMINEES, WHICH IS DESIGNATED AS PROPOSAL NO. 1.
10
Independence of Directors
CORPORATE GOVERNANCE
In connection with its annual review of director independence, the Board has determined that each of the following
Directors or nominees of the Company meets the standards for independence required by the New York Stock Exchange and
Securities and Exchange Commission rules: Mr. Rosenthal, Mr. Dick and Ms. Adler-Kravecas. The Board made this
determination based on (a) the absence of any of the express disqualifying criteria relating to director independence set forth in
Section 303A of the Corporate Governance Rules of the New York Stock Exchange and (b) the criteria for independence
required of audit committee directors by Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended, which we refer
to as the Exchange Act.
Although the Board has not adopted categorical standards of materiality for independence purposes (other than those
set forth in the NYSE listing standards and the Exchange Act), information provided by the Directors to the Company did not
indicate any relationships (e.g., commercial, industrial, banking, consulting, legal, accounting, charitable, or familial) which
would impair the independence of any of the non-employee Directors. The Board has determined that there is no material
relationship between the Company and each of Mr. Rosenthal, Mr. Dick and Ms. Adler-Kravecas (directly or as a partner,
stockholder, or officer of an organization that has a relationship with the Company) and that each of them is independent
pursuant to the NYSE listing standards. In making its determination, the Board took into consideration that certain Systemax
directors and executive officers have each invested funds with or through a private investment firm, of which Mr. Rosenthal is
Chairman and CEO (and which firm receives fees in respect of such investments), and may continue to do so in the future. The
Board (in each case with Mr. Rosenthal and the investing directors being recused) determined that such relationship was not
material to Mr. Rosenthal. In addition in making its determination, the Board took into consideration that the asset management
firm of which Mr. Dick is the CFO invests proprietary and third-party capital in a number of investment funds that are managed
by independent investment advisory firms. Some Systemax executive officers and directors have made investments in these
independently managed funds. Mr. Dick does not receive any direct or indirect compensation from any of these funds or their
independent advisory firms. The Board (in each case with Mr. Dick and the investing directors being recused) determined that
such relationship was not material to Mr. Dick.
As a “controlled company,” the Company is exempt from the New York Stock Exchange requirement that listed
companies have a majority of independent directors. A “controlled company” is defined by the New York Stock Exchange as a
company of which more than 50% of the voting power for the election of directors is held by an individual, group or other
company. The Company is a “controlled company” in that more than 50% of the voting stock for the election of directors of the
Company, in the aggregate, is owned by certain members of the Leeds family (including Messrs. Richard, Bruce and Robert
Leeds, each of whom is an officer and Director of the Company) and certain Leeds’ family trusts and other entities controlled by
them (collectively, the “Leeds Group”). The members of the Leeds Group have entered into a Stockholders Agreement with
respect to certain Shares they each own. See “Transactions with Related Persons” below.
Meetings of Non-Management Directors
The New York Stock Exchange requires the “non-management directors” or independent directors of a NYSE-listed
company to meet at regularly scheduled executive sessions without management and to disclose in their annual proxy statements
(1) the name of the non-management director who is chosen to preside at all regularly-scheduled executive sessions of the non-
management members of the board of directors and (2) a method for all interested parties to communicate directly with the
presiding director or with the non-management directors as a group (this method is described below under “Communications
with Directors”). The Board’s non-management or independent directors meet separately in executive sessions, chaired by the
Lead Independent Director (currently Mr. Rosenthal), at least quarterly.
Corporate Governance Guidelines
The Company has adopted Corporate Governance Guidelines, which are available on the Corporate Governance page
of our website at www.systemax.com. The Corporate Governance Guidelines were last amended in April 2010.
Our Corporate Governance Guidelines establish our corporate governance principles and practices on a variety of
topics, including the responsibilities, composition and functioning of the Board. The Nominating/Corporate Governance
Committee assesses the Guidelines annually and makes recommendations to the Board on any changes to implement. Our
Guidelines address, among other things:
•
•
•
the role and functions of our Board of Directors and management;
director qualifications, including our director independence standards and director nomination and selection;
the requirement to hold separate executive sessions of the independent directors;
11
•
•
•
•
•
the conduct of Board meetings;
policies for setting director compensation;
director orientation and continuing education;
policies regarding director access to management, employees and independent advisors; and
the annual self-assessment of the Board to evaluate its own effectiveness.
Corporate Ethics Policy
The Company has adopted a Corporate Ethics Policy that applies to all employees of the Company, including the
Company’s Chief Executive Officer, Chief Financial Officer and Controller, its principal accounting officer. The Corporate
Ethics Policy is designed to deter wrongdoing and to promote honest and ethical conduct, compliance with applicable laws and
regulations, full and accurate disclosure of information requiring public disclosure and the prompt reporting of Policy violations.
The Company’s Corporate Ethics Policy is available on the Company’s website (www.systemax.com). We intend to disclose on
our website, in accordance with applicable laws and regulations, amendments to, or waivers from, our Corporate Ethics Policy.
Our Corporate Ethics Policy was last amended in January 2016.
Communications with Directors
Stockholders of the Company who wish to communicate with the Board or any individual Director can write to
Systemax Inc., Attention: Investor Relations, 11 Harbor Park Drive, Port Washington, NY 11050 or send an email to
investinfo@systemax.com. Your letter or email should indicate that you are a stockholder of the Company. Depending on the
subject matter of your inquiry, management will forward the communication to the Director or Directors to whom it is addressed;
attempt to handle the inquiry directly, as might be the case if you request information about the Company or it is a stockholder
related matter; or not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant
topic. Interested parties, including non-stockholders wishing to communicate directly with the Lead Independent Director or the
non-management members of the Board as a group should address their inquiries by mail sent to the attention of Mr. Robert D.
Rosenthal, Lead Independent Director, at the Company’s principal executive office located at 11 Harbor Park Drive, Port
Washington, NY 11050. All communications will be promptly relayed to the appropriate recipient(s).
Interested parties, including non-stockholders wishing to communicate directly with the Chairman of the Audit
Committee or the Audit Committee as a group should address their inquiries by mail to the attention of Mr. Stacy Dick, Audit
Committee Chairman, at the Company’s principal executive office located at 11 Harbor Park Drive, Port Washington, NY 11050.
All communications will be promptly relayed to the appropriate recipient(s).
Director Attendance at Annual Stockholders Meetings
At last year’s annual meeting of stockholders held on June 8, 2015, two Directors attended the meeting. The Company
does not have a policy with regards to Directors’ attendance at the Company’s annual meeting of stockholders.
Board Meetings
During fiscal year 2015, the Board of Directors held ten meetings, the Audit Committee held nine meetings (eight of
these meetings were ordinary course meetings and one of the meetings was a special meeting held with independent outside
counsel regarding the investigation by the U.S. Attorney’s Office into allegations arising from the Fiorentino investigation); the
Compensation Committee held five meetings; the Nominating/Corporate Governance Committee held five meetings; and the
Executive Committee held no meetings. All of the Directors attended all of the meetings of the Board and 80% of the committee
meetings of the Board of which they were members.
Committees of the Board
The Board of Directors has the following standing committees:
Audit Committee
The Audit Committee is appointed by the Board to assist the Board with oversight of (i) the integrity of the financial
statements of the Company, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the independence and
qualifications of the Company’s external auditors, and (iv) the performance of the Company’s internal audit function and external
auditors. It is the Audit Committee’s responsibility to retain or terminate the Company’s independent registered public
12
accountants, who audit the Company’s financial statements, and to prepare the Audit Committee report that the Securities and
Exchange Commission requires to be included in the Company’s Annual Proxy Statement. (See “Report of the Audit
Committee” below.) As part of its activities, the Audit Committee meets with the Company’s independent registered public
accountants at least annually to review the scope and results of the annual audit and quarterly to discuss the review of the
quarterly financial results. In addition, the Audit Committee receives and considers the independent registered public
accountants’ comments and recommendations as to internal controls, accounting staff, management performance and auditing
procedures. The Audit Committee is also responsible for establishing procedures for (i) the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting controls and auditing matters and (ii) the
confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing
matters.
In addition, the Audit Committee is responsible for reviewing, and discussing with management and reporting to the
Board regularly, the Company’s risk assessment and risk management processes. While it is the job of senior management to
assess and manage the Company’s exposure to risk under the oversight of the Board of Directors, the Audit Committee reviews
and discusses with management the Company’s risk management process. In addition, the Audit Committee works together with
the Compensation Committee regarding the Company’s compensation policies for all of the Company’s employees as the
policies relate to the Company’s risk management goals and objectives. The Audit Committee also discusses with management
the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures.
The Audit Committee Charter was last amended in August 2012. A copy of the Audit Committee Charter is available
on the Company’s website, www.systemax.com.
The current members of the Audit Committee are Mr. Dick (Chairman), Mr. Rosenthal and Ms. Adler-Kravecas. None
of the current members or nominees of the Audit Committee are officers or employees of the Company. The Committee meets
regularly both with and without management participation. As noted above, in the judgment of the Board, each of the members
of the Audit Committee meets the standards for independence required by the rules of the Securities and Exchange Commission
and the New York Stock Exchange. In addition, the Board has determined that Mr. Dick and Mr. Rosenthal are “audit committee
financial experts” as defined by regulations of the Securities and Exchange Commission.
The Company does not have a standing policy on the maximum number of audit committees of other publicly owned
companies on which the members of the Audit Committee may serve. However, if a member of the Audit Committee
simultaneously serves on the audit committee of more than two other publicly-owned companies, the Board must determine
whether such simultaneous service would impair the ability of such member to effectively serve on the Audit Committee. Any
such determination will be disclosed in the Company’s annual proxy statement.
Nominating/Corporate Governance Committee
The Nominating/Corporate Governance Committee’s responsibilities include, among other things (i) identifying
individuals qualified to become Board members and recommending to the Board nominees to stand for election at any meeting of
stockholders, (ii) identifying and recommending nominees to fill any vacancy, however created, in the Board, and (iii)
developing and recommending to the Board a code of business conduct and ethics and a set of corporate governance principles
(including director qualification standards, responsibilities and compensation) and periodically reviewing the code and principles.
The current members of the Nominating/Corporate Governance Committee are Mr. Rosenthal (Chairman), Mr. Dick and Ms.
Adler-Kravecas. In nominating candidates to become Board members, the Committee shall take into consideration such factors
as it deems appropriate, including the experience, skill, integrity and background of the candidates. The Committee may consider
candidates proposed by management or stockholders but is not required to do so. The Committee does not have any formal
policy with regard to the consideration of any Director candidates recommended by the security holders or any minimum
qualifications or specific procedure for identifying and evaluating nominees for Director as the Board does not believe that such a
formalistic approach is necessary or appropriate at this time.
The Nominating/Corporate Governance Committee is responsible for developing and recommending to the Board a set
of risk management policies and procedures, including the Company’s compensation policies for all its employees as they relate
to risk management, and to review these policies and procedures annually.
The Nominating/Corporate Governance Committee, in seeking qualified Board members, does not have a policy
regarding utilizing diversity, however defined, in its selection process. The Nominating/Corporate Governance Committee looks
for individuals who have very high integrity, significant business experience and a deep genuine interest in the Company. We
believe that each of the director nominees and other directors bring these qualifications to our Board of Directors. Moreover,
they provide our board with a diverse complement of specific business skills, experience and perspectives.
The Nominating/Corporate Governance Committee Charter was
last amended
in August 2012.
The
Nominating/Corporate Governance Committee Charter is available on the Company’s website (www.systemax.com).
13
Stockholder Nominations for Director
Stockholders may propose candidates for Board membership by writing
to Systemax Inc., Attention:
Nominating/Corporate Governance Committee, 11 Harbor Park Drive, Port Washington, NY 11050 so that the nomination is
received by the Company by December 26, 2016 to be considered for the 2017 annual meeting. Any such proposal shall contain
the name, Company security holdings (direct or indirect; of record and/or beneficially) and contact information of the person
making the nomination; a description of all direct and indirect related party transactions, compensation and other material
monetary arrangements, agreements or understandings during the past three years, and any other material relationship, if any,
between the stockholder and its respective affiliates or associates, or others with whom they are acting in concert, on the one
hand, and the nominee and his or her respective affiliates, associates and others with whom they are acting in concert, on the
other hand; the nominee’s name, age, address and other contact information; any direct or indirect holdings, beneficially and/or
of record, of the Company’s securities by the nominee; any information regarding the nominee required to be disclosed about
directors under applicable securities laws and/or stock exchange requirements; information regarding related party transactions
with the Company and/or the stockholder submitting the nomination and/or the nominee; any actual or potential conflicts of
interest; the nominee’s biographical data, current public and private company affiliations, employment history (including current
principal employment) and qualifications and status as “independent” under applicable securities laws and stock exchange
requirements. Nominees proposed by stockholders will receive the same consideration as other nominees.
Compensation Committee
The Compensation Committee’s responsibility is to review and approve corporate goals relevant to the compensation
of the Chief Executive Officer and, after an evaluation of the Chief Executive Officer’s performance in light of such goals, to set
the compensation of the Chief Executive Officer. The Compensation Committee also approves (a) the annual compensation of
the other executive officers of the Company, (b) the annual compensation of certain subsidiary managers, and (c) all individual
stock-based incentive grants. The Committee is also responsible for reviewing and making periodic recommendations to the
Board with respect to the general compensation, benefits and perquisite policies and practices of the Company including the
Company’s incentive-based and equity-based compensation plans. The Compensation Committee also prepares an annual report
on executive compensation for inclusion in the annual proxy statement. (See “Compensation Committee Report to Stockholders”
below). The Compensation Committee also reviews and approves the performance and compensation of the Company’s
Executive Chairman and Vice Chairmen. The current members of the Compensation Committee are Mr. Rosenthal (Chairman),
Mr. Dick and Ms. Adler-Kravecas.
In addition, it is the Compensation Committee’s responsibility to consider, and work together with the Company’s
Audit Committee regarding, the Company’s compensation policies for all its employees in the context of how such policies affect
and promote the Company’s risk management goals and objectives.
The Compensation Committee Charter was last amended in May 2013. The Compensation Committee Charter is
available on the Company’s website (www.systemax.com).
Executive Committee
The Executive Committee consists of the Executive Chairman of the Board and any Vice Chairman and such other
Directors as may be named thereto by the Board. The current members of the Executive Committee are Messrs. Richard Leeds,
Bruce Leeds, Robert Leeds and Robert D. Rosenthal, the Lead Independent Director. Among other duties as may be assigned by
the Board from time to time, the Executive Committee is authorized to oversee the operations of the Company, supervise the
executive officers of the Company, review and make recommendations to the Board regarding the strategic direction of the
Company and review and make recommendations to the Board regarding all possible acquisitions or other significant business
transactions. The Executive Committee is also authorized to manage the affairs of the Corporation between meetings of the
Board; the Committee has all of the powers of the Board not inconsistent with any provisions of the Delaware General
Corporation Law, the Company’s Certificate of Incorporation or By-Laws or other resolutions adopted by the Board, but does not
generally exercise such authority.
Board Leadership Structure
As noted above, our Board currently includes three independent Directors. Our independent directors have designated
Mr. Rosenthal, one of the independent directors, to be the Lead Independent Director. We believe that the current mix of
employee directors and non-employee independent directors that make up our Board, along with the independent oversight of our
Lead Independent Director, benefits the Company and its stockholders.
Although the Board does not have an express policy on whether or not the roles of Chief Executive Officer and
Executive Chairman of the Board should be separate and if they are to be separate, whether the Executive Chairman of the Board
should be selected from the non-employee Directors or be an employee, the Board believes that it should have the flexibility to
make a determination from time to time in a manner that is in the best interests of the Company and its stockholders at the time of
14
such determination. Our Board of Directors believes that the most effective Board leadership structure for our Company at the
present time following the exit in 2015 from our North American technology business, is for the roles of Chief Executive Officer
and Executive Chairman of the Board to be separated, so that our Executive Chairman and Chief Executive Officer can focus
their attention on different aspects of the strategic and operating challenges and opportunities ahead for our Global Industrial and
European businesses. Therefore, as noted above, in March 2016 the Board approved an executive management succession plan
and effective March 10, 2016, Mr. Reinhold assumed the role as the Company’s President and Chief Executive Officer (and will
continue to serve as the Company’s Chief Financial Officer on an interim basis). In this expanded role, he assumed overall
responsibility for the Company’s operations, including all lines of business and functional groups. Mr. Richard Leeds assumed
the role of Executive Chairman and will help guide the Company’s long-term strategic direction and the development of new
products and services. Mr. Leeds possesses in-depth knowledge of the issues and challenges facing the Company and its
businesses and is thus best positioned to identify and develop the strategic opportunities to be considered by the Board and the
matters that are most critical to the Company and its stockholders.
The Board believes that the independent directors provide effective oversight of management. Moreover, in addition to
feedback provided during the course of Board meetings, the independent directors have regular executive sessions. Following an
executive session of independent directors, the Lead Independent Director acts as a liaison between the independent directors and
the Executive Chairman regarding any specific feedback or issues, provides the Executive Chairman with input regarding agenda
items for Board and Committee meetings, and coordinates with the Executive Chairman regarding information to be provided to
the independent directors in performing their duties.
Lead Independent Director
The independent Directors elect one independent Director to serve as a Lead Independent Director. In addition to
presiding at executive sessions of nonemployee Directors, the Lead Independent Director has the responsibility to coordinate the
activities of the independent Directors, and to perform the following functions: (a) advise the Executive Chairman of the Board as
to an appropriate schedule of Board meetings, seeking to ensure that the independent Directors can perform their duties
responsibly while not interfering with the flow of the Company’s operations; (b) provide the Executive Chairman with input as to
the preparation of agendas for the Board and committee meetings; (c) advise the Executive Chairman as to the quality, quantity,
and timeliness of the flow of information from the Company’s management that is necessary for the independent directors to
effectively and responsibly perform their duties, and although the Company’s management is responsible for the preparation of
materials for the Board, the Lead Independent Director may specifically request the inclusion of certain material; (d) recommend
to the Executive Chairman the retention of consultants who report directly to the Board; (e) assist the Board and the Company’s
officers in assuring compliance with and implementation of the corporate governance policies; and be principally responsible for
recommending revisions to the corporate governance policies; (f) coordinate and develop the agenda for, and moderate executive
sessions of, the independent directors of the Board, and act as principal liaison between the independent directors and the
Executive Chairman on sensitive issues; and (g) recommend to the Executive Chairman the membership of the various Board
committees.
Our Board conducts an annual evaluation in order to determine whether it and its committees are functioning
effectively. As part of this annual self-evaluation, the Board evaluates whether the current leadership structure continues to be
optimal for the Company and its stockholders. Our Corporate Governance Guidelines, as amended in April 2010, provide the
flexibility for our Board to modify or continue our leadership structure in the future, as it deems appropriate. As noted above, in
March 2016 the Board approved an executive management succession plan and effective March 10, 2016, Mr. Richard Leeds
assumed the role of Executive Chairman and Mr. Reinhold assumed the role as the Company’s President and Chief Executive
Officer (and will continue to serve as the Company’s Chief Financial Officer on an interim basis)) and Messrs. Robert and Bruce
Leeds will continue to serve as Vice Chairmen.
Risk Oversight
Our Board as a whole is responsible for overseeing the Company’s risk management process. The Board focuses on the
Company’s general risk management strategy, the most significant risks facing the Company, and seeks to ensure that
appropriate risk mitigation strategies are implemented by management. Risk management is a recurring Audit Committee and
Board quarterly agenda item, and is considered part of strategic planning. The Board is also apprised of particular risk
management matters in connection with its general oversight and approval of corporate matters and receives information relating
to material Company risk from management and from the Company’s Legal, Risk Management/Insurance and Internal Audit
Departments.
The Board has delegated to each of its committees oversight of certain aspects of the Company’s risk management
process. Among its duties, the Audit Committee reviews with management (a) Company processes with respect to risk
assessment and management of risks that may be material to the Company, (b) the Company’s system of disclosure controls and
system of internal controls over financial reporting, and (c) the Company’s compliance with legal and regulatory requirements.
The Compensation Committee is responsible for considering and working together with the Audit Committee regarding the
Company’s compensation policies for all its employees in the context of how such policies affect and promote the Company’s
risk management goals and objectives. The Nominating/Corporate Governance Committee is responsible for developing and
15
recommending to the Board a set of risk management policies and procedures, including the Company’s compensation policies
for all its employees as they relate to risk management, and to review these policies and procedures annually. All committees
report to the full Board as appropriate, including when a matter rises to the level of a material or enterprise level risk.
The Company’s senior management is responsible for day-to-day risk management. Our Internal Audit Department
serves as the primary monitoring and testing function for company-wide policies and procedures, and manages the day-to-day
oversight of the risk management strategy for the ongoing business of the Company. This oversight includes identifying,
evaluating, and addressing potential risks that may exist at the enterprise, strategic, financial, operational, compliance and
reporting levels. The Internal Auditor reports directly to our Chief Financial Officer and Audit Committee quarterly, and the
Audit Committee considers risk management issues as part of its quarterly agenda.
We believe the division of risk management responsibilities described above is an effective approach for addressing the
risks facing the Company and that our Board leadership structure supports this approach.
16
REPORT OF THE AUDIT COMMITTEE*
The Audit Committee of the Board operates under its Charter, which was originally adopted by the Board in 2000 and
was most recently revised in August 2012. As set forth in its Charter, the Audit Committee’s job is one of oversight.
Management is responsible for the Company’s financial statements, internal accounting and financial controls, the financial
reporting process, the internal audit function and compliance with the Company’s policies and legal requirements. The
Company’s independent registered public accountants are responsible for performing an independent audit of the Company’s
consolidated financial statements in accordance with standards of the Public Company Accounting Oversight Board (United
States) and for issuance of a report thereon, and for monitoring the effectiveness of the Company’s internal controls; they also
perform limited reviews of the Company’s unaudited quarterly financial statements.
The Audit Committee’s responsibility is to engage the independent registered public accountants, monitor and oversee
these accounting, financial and audit processes and report its findings to the full Board. It also investigates matters related to the
Company’s financial statements and controls as it deems appropriate. In the performance of these oversight functions, the
members of the Audit Committee rely upon the information, opinions, reports and statements presented to them by Company
management and by the independent registered public accountants, as well as by other experts that the Committee hires.
The Audit Committee met with the Company’s independent auditors to review and discuss the overall scope and plans
for the audit of the Company’s consolidated financial statements for the year ended December 31, 2015. The Audit Committee
has considered and discussed with management and the independent auditors (both alone and with management present) the
audited financial statements as well as the independent auditors’ evaluation of the Company’s internal controls and the overall
quality of the Company’s financial reporting.
Management represented to the Audit Committee that the Company’s consolidated financial statements for fiscal year
2015 were prepared in accordance with U.S. generally accepted accounting principles. In connection with these responsibilities,
the Audit Committee met with management and Ernst & Young LLP to review and discuss the December 31, 2015 audited
consolidated financial statements. The Audit Committee also discussed with Ernst & Young LLP the matters required to be
discussed by Statement on Auditing Standards No. 61 Communication with Audit Committees), as amended and as adopted by
the Public Company Accounting Oversight Board in Rule 3200T. The Audit Committee also received written disclosures and the
letter from Ernst & Young LLP required by Rule 3526 of the Public Company Accounting Oversight Board (Communications
with Audit Committees Concerning Independence), and the Audit Committee discussed with Ernst & Young LLP the firm’s
independence.
Based on the review of the representations of management, the discussions with management and the independent
registered public accountants and the review of the Report of Ernst & Young LLP, Independent Registered Public Accounting
Firm, to the Committee, the Audit Committee recommended to the Board that the financial statements of the Company for fiscal
year 2015 as audited by Ernst & Young LLP be included in the Company’s Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
AUDIT COMMITTEE
Stacy Dick (Chairman)
Robert D. Rosenthal
Marie Adler-Kravecas
*
The information contained in this Audit Committee Report shall not be deemed to be “soliciting material” or to be “filed”
with the SEC, nor shall such information be incorporated by reference into any filings under the Securities Act of 1933, as
amended, which we refer to as the Securities Act, or under the Exchange Act, except to the extent that we specifically
incorporate this information by reference into any such filing.
17
EXECUTIVE OFFICERS
There are no arrangements or understandings between any officer and any other person pursuant to which such person
was selected as an officer.
The following table sets forth certain information with respect to the executive officers of the Company as of April 14, 2016.
Name
Richard Leeds
Bruce Leeds
Robert Leeds
Lawrence Reinhold
Robert Dooley
Simon Taylor
Eric Lerner
Thomas Axmacher
Manoj Shetty
Age
Position
56
60
60
56
62
55
58
57
55
Executive Chairman; Director
Vice Chairman; Director
Vice Chairman; Director
President, Chief Executive Officer and Interim Chief
Financial Officer; Director
President of the Company’s Industrial Products Group
President of the Company’s European Technology Products
Group
Senior Vice President and General Counsel
Vice President and Controller
Senior Vice President and Chief Information Officer
For biographical information about Messrs. Richard Leeds, Bruce Leeds, Robert Leeds and Lawrence Reinhold, see pages 9 and
10 of this Proxy Statement.
Robert Dooley was appointed President of the Company’s Industrial Products Group in January 2012. Mr. Dooley
originally joined the Company in 1982 and served in numerous roles until March 2004, including Senior Vice President,
Worldwide Computer Sales and Marketing. He also was a Director of the Company from June 1995 through March 2004. Mr.
Dooley left the Company in 2004 but returned in December 2007 as Vice President, Internet Marketing for the Global Industrial
business.
Simon Taylor joined Systemax as President of its European Technology Products Group in 2015. He was previously
Senior Vice President of Insight Enterprises’ EMEA business for 14 years. Prior to Insight, Mr. Taylor worked for Invensys and
Eaton Corporation in General Manager and Controller roles.
Eric Lerner was appointed Senior Vice President and General Counsel in May 2012. He was previously a senior
corporate partner at Kramer Levin Naftalis & Frankel, a corporate partner, Co-Chair of the National Corporate Department and
member of the Board of Directors of Katten Muchin Zavis Rosenman, and a corporate partner and Chair of the Corporate
Department of Rosenman & Colin.
Thomas Axmacher was appointed Vice President and Controller of the Company in October 2006. He was previously
Chief Financial Officer of Curative Health Services, Inc., a publicly traded health care company, and Vice President and
Controller of Tempo Instrument Group, an electronics manufacturer.
Manoj Shetty was appointed Senior Vice President and Chief Information Officer of the Company in August 2014.
Mr. Shetty originally joined the Company in 2000 and has served in several Information Technology roles since that time. Prior
to joining Systemax, Mr. Shetty was employed at Mercator (ultimately acquired by IBM) and in the manufacturing sector.
18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table provides certain information regarding the beneficial ownership of the Shares as of April 14, 2016,
by (i) each of the Directors, (ii) each of the Named Executive Officers listed in the Summary Compensation table, (iii) all current
Directors and executive officers as a group and (iv) each person known to the Company to be the beneficial owner of more than
5% of any class of the Company’s voting securities.
As used in this table “beneficial ownership” means the sole or shared power to vote or direct the voting or to dispose or
direct the disposition of any security. A person is deemed as of any date to have “beneficial ownership” of any security that such
person owns or has a right to acquire within 60 days after such date. Any security that any person named above has the right to
acquire within 60 days is deemed to be outstanding for purposes of calculating the ownership percentage of such person, but is
not deemed to be outstanding for purposes of calculating the ownership percentage of any other person. Unless otherwise stated,
each person owns the reported Shares directly and has the sole right to vote and determine whether to dispose of such Shares.
The address for each beneficial owner, unless otherwise noted is c/o Systemax Inc., 11 Harbor Park Drive, Port Washington, NY
11050.
A total of 36,877,688 Shares were outstanding as of April 14, 2016.
Richard Leeds (1)
Bruce Leeds (2)
Robert Leeds (3)
Lawrence Reinhold (4)
Eric Lerner (5)
Robert D. Rosenthal (6)
Stacy Dick (7)
Marie Adler-Kravecas (8)
All current Directors and executive officers of the Company (12 persons) (9)
Other Beneficial Owners of 5% or More of the Company’s Voting Stock
Prescott General Partners LLC (10)
2200 Butts Road, Suite 320
Boca Raton, FL 33431
Amount and
Nature of
Beneficial
Ownership
(a)
12,643,830
11,277,452
12,384,752
424,083
62,500
75,193
48,069
30,965
25,678,614
Percent of
Class
34.3%
30.6%
33.6%
1.1%
*
*
*
*
69.6%
2,118,192
5.7%
(a)
Amounts listed in this column may include Shares held in partnerships or trusts that are counted in more than one individual’s total.
*
less than 1%
(1)
(2)
(3)
(4)
Includes 2,574,732 Shares owned by Mr. Richard Leeds directly, 1,295,148 Shares owned by the Richard Leeds 2016 GRAT,
906,745 Shares owned by the Richard Leeds 2015 GRAT, 542,969 Shares owned by the Richard Leeds 2012 GRAT and 32,482
Shares owned by the Richard Leeds 2011 GRAT. Also includes 1,838,583 Shares owned by a limited partnership of which Mr.
Richard Leeds is a general partner, 235,850 Shares owned by a limited partnership of which a limited liability company controlled
by Mr. Richard Leeds is the general partner, 4,697,521 Shares owned by trusts for the benefit of his brothers’ children for which Mr.
Richard Leeds acts as co-trustee and 519,800 Shares owned by a limited partnership in which Mr. Richard Leeds has an indirect
pecuniary interest.
Includes 2,196,209 Shares owned by Mr. Bruce Leeds directly, 1,805,224 Shares owned by the Bruce Leeds 2016 GRAT, 423,148
Shares owned by the Bruce Leeds 2015 GRAT, 342,785 Shares owned by the Bruce Leeds 2012 GRAT, and 19,696 Shares owned
by the Bruce Leeds 2011 GRAT. Also includes 1,838,583 Shares owned by a limited partnership of which Mr. Bruce Leeds is a
general partner, 4,132,007 Shares owned by trusts for the benefit of his brothers’ children for which Mr. Bruce Leeds acts as co-
trustee and 519,800 Shares owned by a limited partnership in which Mr. Bruce Leeds has an indirect pecuniary interest.
Includes 830,556 Shares owned by Mr. Robert Leeds directly, 1,564,897 Shares owned by the Robert Leeds 2016 GRAT, 1,269,444
Shares owned by the Robert Leeds 2015 GRAT, 1,000,000 Shares owned by the Robert Leeds 2015 GRAT, 639,218 Shares owned
by the Robert Leeds 2012 GRAT and 36,598 Shares owned by the Robert Leeds 2011 GRAT. Also includes 1,838,583 Shares
owned by a limited partnership of which Mr. Robert Leeds is a general partner, 4,685,656 Shares owned by trusts for the benefit of
his brothers’ children for which Mr. Robert Leeds acts as co-trustee and 519,800 Shares owned by a limited partnership in which
Mr. Robert Leeds has an indirect pecuniary interest.
Includes options to acquire a total of 250,000 Shares that are currently exercisable or become exercisable within 60 days pursuant to
the terms of the Company’s 1999 Long-Term Stock Incentive Plan, options to acquire a total of 50,000 Shares that are currently
exercisable or become exercisable within 60 days pursuant to the terms of the Company’s 2010 Long-Term Incentive Plan and
17,500 restricted stock units granted pursuant to the Company’s 2010 Long-Term Incentive Plan that will vest within 60 days. Also
includes 5,000 Shares held by Mr. Reinhold’s spouse, of which Mr. Reinhold disclaims beneficial ownership.
19
(5)
(6)
(7)
(8)
(9)
(10)
Includes options to acquire a total of 62,500 Shares that are currently exercisable or become exercisable within 60 days pursuant to
the terms of the Company’s 2010 Long-Term Incentive Plan.
Includes options to acquire a total of 5,000 Shares that are currently exercisable or become exercisable within 60 days pursuant to
the terms of the Company’s 2006 Stock Incentive Plans for Non-Employee Directors and 2,538 restricted stock units granted
pursuant to the Company’s 2006 Stock Incentive Plan for Non-Employee Directors that will vest within 60 days.
Includes options to acquire a total of 5,000 Shares that are currently exercisable or become exercisable within 60 days pursuant to
the terms of the Company’s 2006 Stock Incentive Plans for Non-Employee Directors and 2,538 restricted stock units granted
pursuant to the Company’s 2006 Stock Incentive Plan for Non-Employee Directors that will vest within 60 days.
Includes options to acquire a total of 5,000 Shares that are currently exercisable or become exercisable within 60 days pursuant to
the terms of the Company’s 2006 Stock Incentive Plan for Non-Employee Directors and 2,538 restricted stock units granted
pursuant to the Company’s 2006 Stock Incentive Plan for Non-Employee Directors that will vest within 60 days.
Includes options to acquire a total of 52,500 Shares that are currently exercisable or become exercisable within 60 days pursuant to
the terms of the Company’s 1999 Long-Term Stock Incentive Plan and options to acquire a total of 110,000 Shares that are currently
exercisable or become exercisable within 60 days pursuant to the terms of the Company’s 2010 Long-Term Incentive Plan.
Based on information supplied by Prescott General Partners LLC (“PGP”), Prescott Associates L.P., Thomas W. Smith and Scott J.
Vassalluzzo in a Schedule 13G/A filed with the SEC on February 13, 2015. The address of the parties is 2200 Butts Road, Suite 320,
Boca Raton, FL 33431. Prescott General Partners LLC, Prescott Associates L.P. and Messrs. Smith and Vassalluzzo have the shared
power to vote or dispose or to direct the vote or the disposal of 2,118,192; 2,044,691; 768,518; and 192,018, respectively. PGP, as
the general partner of three private investment limited partnerships (the “Partnerships ”), may be deemed to share the power to vote
or to direct the vote and to dispose or to direct the disposition of 2,118,192 Shares held by the Partnerships. Mr. Smith has the sole
power to vote or to direct the vote of and to dispose or to direct the disposition of 600,000 Shares. Mr. Vassalluzzo has the sole
power to vote or to direct the vote of and to dispose or to direct the disposition of no Shares. In their capacities as investment
managers for certain managed accounts, Messrs. Smith and Vassalluzzo may be deemed to have the shared power to vote or to
direct the vote of 168,518 and 92,018 Shares, respectively, and to dispose or to direct the disposition of 168,518 and 192,018 Shares,
respectively. Voting and investment authority over investment accounts established for the benefit of certain family members and
friends of Messrs. Smith and Vassalluzzo is subject to each beneficiary’s right, if so provided, to terminate or otherwise direct the
disposition of the investment account. The 13G/A is Amendment No. 6 to the joint filing on Schedule 13G by Thomas W. Smith,
Scott J. Vassalluzzo and Steven M. Fischer originally filed with the SEC on July 13, 2009, as amended by Amendment No. 1 filed
with the SEC on February 16, 2010, Amendment No. 2 filed with the SEC on February 14, 2011, Amendment No. 3 filed with the
SEC on January 5, 2012, Amendment No. 4 filed with the SEC on February 14, 2013 and Amendment No. 5 filed with the SEC on
February 14, 2014.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company’s executive officers and Directors and persons who own more
than ten percent of a registered class of the Company’s equity securities to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Executive officers, Directors and ten-percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on its review of the copies of
Section 16(a) forms received by it, or written representations from certain reporting persons, the Company believes its Executive
Officers, Directors and ten-percent stockholders complied with all such filing requirements for fiscal year 2015; except for the
following filing made on behalf of the named persons that were inadvertently filed late by the Company: a Form 4 for Simon
Taylor filed with the SEC on July 10, 2015.
20
TRANSACTIONS WITH RELATED PERSONS
Under the Company’s Corporate Ethics Policy, all officers, Directors and employees (collectively the “Company
Representatives”) are required to avoid conflicts of interest, appearances of conflicts of interest and potential conflicts of interest.
A “conflict of interest” occurs when a Company Representative’s private interest interferes in any way with the interests of the
Company. A conflict can arise when a Company Representative takes actions or has interests that may make it difficult to
perform his or her Company work objectively and effectively. Conflicts of interest also arise when a Company Representative,
or a member of his or her family, receives improper personal benefits as a result of his or her position in the Company. Company
Representatives cannot allow any consideration such as the receipt of gifts or financial interests in other businesses or personal or
family relationships to interfere with the independent exercise of his or her business judgment and work activities to the benefit
of the Company. Loans to, or guarantees of obligations of, Company Representatives are prohibited unless permitted by law and
authorized by the Board or a Committee designated by the Board. If a Company Representative becomes aware of a potential
conflict of interest he or she must communicate such potential conflict of interest to the Company.
The Company’s written corporate approval policy requires transactions with related persons, including but not limited
to leases with related persons and sales or purchases of Company assets by related persons, to be reviewed and approved or
ratified by the Company’s Nominating/Corporate Governance Committee as well as by the Company’s Chief Executive Officer,
Chief Financial Officer and General Counsel. In this regard, all such transactions are first discussed with the Chief Financial
Officer and are submitted to the General Counsel’s office, including for an initial determination of whether such further related
person transaction review is required. The Company utilizes the definition of related persons under applicable SEC rules, defined
as any executive officer, director or nominee for director of the Company, any beneficial owner of more than 5% of the
outstanding Shares of the Company’s common stock, or any immediate family member of any such person. In reviewing these
transactions, the Company strives to assure that the terms of any agreement between the Company and a related party is at arm’s
length, fair and at least as beneficial to the Company as could be obtained from third parties. The Nominating/Corporate
Governance Committee, in its discretion, may consult with third party appraisers, valuation advisors or brokers to make such
determination.
Leases
The Company has leased its facility in Port Washington, NY since 1988 from an entity owned by Messrs. Richard, Bruce and
Robert Leeds, Directors of the Company. Lease payments totaled $975,088 for fiscal year 2015. The Company believes that at
the time the lease was last amended in 2007, these payments were no higher than would be paid to an unrelated lessor for
comparable space.
Stockholders Agreement
Certain members of the Leeds family (including Messrs. Richard, Bruce and Robert Leeds) and family trusts of Messrs.
Richard, Bruce and Robert Leeds entered into a stockholders agreement pursuant to which the parties agreed to vote in favor of
the nominees for the Board designated by the holders of a majority of the Shares held by such stockholders at the time of the
Company’s initial public offering of the Shares. In addition, the agreement prohibits the sale of the Shares without the consent of
the holders of a majority of the Shares held by all parties to the agreement, subject to certain exceptions, including sales pursuant
to an effective registration statement and sales made in accordance with Rule 144. The agreement also grants certain drag-along
rights in the event of the sale of all or a portion of the Shares held by holders of a majority of the Shares. As of the end of fiscal
year 2015, the parties to the stockholders agreement beneficially owned 25,286,700 Shares subject to such agreement
(constituting approximately 68.6% of the Shares outstanding).
Pursuant to the stockholders agreement, the Company granted to the parties demand and incidental, or “piggy-back,”
registration rights with respect to the Shares. The demand registration rights generally provide that the holders of a majority of
the Shares may require, subject to certain restrictions regarding timing and number of Shares that the Company register under the
Securities Act all or part of the Shares held by such stockholders. Pursuant to the incidental registration rights, the Company is
required to notify such stockholders of any proposed registration of any Shares under the Securities Act and if requested by any
such stockholder to include in such registration any number of Shares of Shares held by it subject to certain restrictions. The
Company has agreed to pay all expenses and indemnify any selling stockholders against certain liabilities, including under the
Securities Act, in connection with the registration of Shares pursuant to such agreement.
21
EQUITY COMPENSATION PLAN INFORMATION
Information for our equity compensation plans in effect as of the end of fiscal year 2015 is as follows:
(a)
(b)
Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights
Weighted-average
exercise price of
outstanding
options, warrants
and rights(1)
(c)
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities
reflected in
column (a))
Plan category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
954,625
—
954,625
$15.98
—
$15.98
6,703,586
—
6,703,586
(1) The weighted-average exercise price does not take into account the Shares issuable upon outstanding restricted stock
units vesting, which have no exercise price.
22
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
In this section, we discuss the material elements of our compensation programs and policies, including the objectives of
our compensation programs and the reasons why we pay each element of our executives’ compensation. Following this
discussion, you will find a series of tables containing more specific details about the compensation earned by, or awarded to, the
following individuals, whom we refer to as the Named Executive Officers or NEOs. As noted above, in connection with the
approval of an executive management succession plan, the titles of certain Named Executive Officers changed effective as of
March 10, 2016; the following discussion relates to the NEOs and their titles for our 2015 fiscal year.*
Under SEC rules, the disclosure on executive compensation is being provided for each of the following:
•
•
each person who served as chief executive officer or chief financial officer at any time during 2015; and
the three other most highly compensated persons serving as executive officers at year end.
Our NEOs in 2015 (based on the criteria noted above) were as follows:
Name of NEO
Richard Leeds
Bruce Leeds
Robert Leeds
Lawrence Reinhold
Eric Lerner
Position
Chairman and Chief Executive Officer*
Vice Chairman
Vice Chairman
Executive Vice President and Chief Financial
Officer*
Senior Vice President and General Counsel
Central Objectives and Philosophy of Our Executive Compensation Programs
The Company’s executive compensation programs are designed to achieve a number of important objectives, including
attracting and retaining individuals of superior ability and managerial talent, rewarding individual contributions to the
achievement of the Company’s short and long-term financial and business objectives, promoting integrity and good corporate
governance, and motivating our executive officers to manage the Company in a manner that will enhance its growth and financial
performance for the benefit of our stockholders, customers and employees. Accordingly, in determining the amount and mix of
compensation, the Compensation Committee seeks both to provide a competitive compensation package and to structure annual
and long-term incentive programs that reward achievement of performance goals that directly correlate to the enhancement of
sustained, long-term stockholder value, as well as to promote executive retention.
Our Compensation Committee seeks to design compensation programs with features that mitigate risk without
diminishing the incentive nature of the compensation. The Company’s variable pay programs are designed to reward outstanding
individual and team performance while mitigating risk taking behavior that might affect financial results. Risk taking behavior
includes the risk that an executive will take action that is detrimental to the Company’s long-term interest in order to increase the
executive’s short-term performance-based compensation. We believe our programs encourage and reward prudent business
judgment and appropriate risk-taking over the long-term. We believe the following factors are effective in mitigating risk
relating to our compensation programs:
• Multiple Performance Factors. We use multiple performance factors that encourage executives to focus on the
overall health of the business rather than a single financial measure.
• Award Cap. Our 2013, 2014, 2015 and 2016 NEO Cash Bonus Plans each cap the maximum award payable to
any individual.
• Clawback Provision. Our NEO Cash Bonus Plans provide the Company the ability to recapture all or a portion of
cash awards (i) from our executive officers to the extent a bonus resulted from reported financial results that upon
restatement of such results (other than as a result of changes in accounting principles) would not have generated
the bonus or would have generated a lower bonus or (ii) from an executive officer if the Board learns of any
* Effective March 10, 2016, Mr. Reinhold became the Company’s President and Chief Executive Officer. He will continue to serve as the
Company’s Chief Financial Officer on an interim basis. Mr. Richard Leeds assumed the role of Executive Chairman and will help guide the
Company’s long-term strategic direction and the development of new products and services.
23
misconduct by the executive officer that contributed to the Company having to restate all or a portion of its
financial statements. In addition, the Board may recapture cash bonus awards from an executive if the Board
determines that the executive engaged in serious ethical misconduct.
• Management Processes. Board and management processes are in place to oversee risk associated with the
Company’s operations. Our Board as a whole is responsible for overseeing the Company’s risk management
process. The Board focuses on the Company’s general risk management strategy, the most significant risks facing
the Company, and seeks to ensure that appropriate risk mitigation strategies are implemented by management.
Risk management is a recurring Audit Committee and Board quarterly agenda item, and is considered part of
strategic planning. The Board is also apprised of particular risk management matters in connection with its
general oversight and approval of corporate matters and receives information relating to material risks affecting
the Company from management and from our Legal, Risk Management/Insurance and Internal Audit departments.
•
Long-Term Equity Compensation. A number of factors mitigate risks inherent in long-term equity compensation,
specifically the vesting period for stock options and restricted stock unit grants, which we believe causes our
executives to focus on long-term achievements and on building stockholder value.
We believe that our compensation policies for employees generally throughout our organization are not reasonably
likely to have a material adverse effect on our company. From time to time a limited number of key managers are eligible to
receive stock options and/or restricted stock units in varying amounts based in the discretion of the Compensation Committee.
However, all awards are subject to years long vesting periods.
Elements of Our Executive Compensation Programs
To promote the objectives described above, our executive compensation programs consist of the following principal
elements:
• Base salary;
• Non-equity incentive cash compensation, referred to for discussion purposes as bonuses;
•
Stock–based incentives; and
• Benefits, perquisites and other compensation.
The Committee does not maintain formal policies for specifically allocating compensation among current and long-
term compensation or among cash and non-cash compensation elements. Instead, the Committee maintains flexibility and adjusts
different elements of compensation based upon its evaluation of the Company’s key compensation goals set forth above. The
Company does not have a formal policy regarding internal pay equity.
Base Salary - Salary levels are subjectively determined based on individual and Company performance as well as an
objective assessment of prevailing salary levels for comparable companies, derived from widely available published reports of
the average of prevailing salary levels for comparable companies (based on industry, revenues, number of employees, and similar
factors) in the Company’s geographic regions. Such reports do not identify the component companies. Mr. Reinhold’s and Mr.
Lerner’s minimum salary is set pursuant to their respective employment agreements.
Cash Bonuses - Incentive cash compensation of the Company’s NEOs under the 2013, 2014, 2015 and 2016 NEO Cash
Bonus Plans described below (and implemented under our 2010 Long-Term Incentive Plan, described below), is disclosed in the
Summary Compensation table below as Non-Equity Incentive Compensation, and is based primarily upon an evaluation of
Company performance as it relates to three general business areas:
• Operational and Financial Performance (utilizing standard metrics such as net sales, operating income,
consolidated net income, earnings before interest and taxes (“EBIT”), gross margin, operating margin, earnings
per share, working capital, return on invested capital, stockholder equity and peer group comparisons);
•
Strategic Accomplishments (including growth in the business, implementation of systems, process and technology
improvements, and growth in the value of the Company’s assets, including through strategic acquisition
transactions); and
• Corporate Governance and Oversight (encompassing legal and regulatory compliance and adherence to Company
policies including the timely filing of periodic reports with the SEC, the Sarbanes-Oxley Act, environmental,
employment and safety laws and regulations and the Company’s corporate ethics policy).
24
In addition, Mr. Lerner has a portion of his cash bonus tied to specific business unit or personal objectives, as described
below.
Pursuant to SEC rules, and except for disclosure of any actually achieved 2015 and future financial targets and the
Company’s actual performance relative to any such achieved 2015 and future targets, the Company is not disclosing the specific
performance targets and actual performance measures for the goals used in its 2013, 2014, 2015 and 2016 NEO Cash Bonus
Plans because they represent confidential financial information that the Company does not disclose to the public, and the
Company believes that disclosure of this information would cause us competitive harm. Targets are set such that only
exceptional performance will result in payouts above the target incentive and poor performance will result in diminished or no
incentive payment. The Company believes that these performance goals were reasonably challenging to achieve. We set the
target performance goals at a level for which there is a reasonable chance of achievement based upon forecasted performance.
Scenarios were developed based upon a range of assumptions used to build our annual budget. We did not perform specific
analysis on the probability of the achievement of the target performance goals given that the market is difficult to predict.
Rather, we relied upon our experience in setting the goals guided by our objective of setting a reasonably attainable and
motivationally meaningful goal.
In determining the compensation of a particular executive, consideration is given to the specific corporate
responsibilities that such executive is charged with as they relate to the foregoing business areas.
Stock-Based Incentives - Stock-based incentives, at the present time consisting of (a) non-qualified stock options
granted at 100% of the stock’s fair market value on the grant date (based on the NYSE closing price of the Company’s common
stock on that date) and/or (b) restricted stock units granted subject to certain conditions, constitute the long-term portion of the
Company’s executive compensation package. Stock based compensation provides an incentive for executives to manage the
Company with a view to achieving results which would increase the Company’s stock price over the long-term and, therefore, the
return to the Company’s stockholders. Stock option, restricted stock and restricted stock unit grants must be approved by the
Compensation Committee; however, the Compensation Committee is permitted to delegate this authority to officers of the
Company regarding awards to employees who are not officers or directors of the Company and who are not, and are not expected
to become, “covered employees” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). We do
not use any specific allocation percentage or formula in determining the size of the cash and equity based components of
compensation in relation to each other.
The Compensation Committee is cognizant of the timing of the grant of stock based compensation in relation to the
publication of Company earnings releases and other public announcements. Stock based compensation grants generally will not
be made effective, until after the Company has disclosed, and the market has had an opportunity to react to, material, potentially
market-moving, information concerning the Company.
Messrs. Richard, Bruce and Robert Leeds have not historically received stock options or other stock-based incentives
as part of their compensation since the Company’s initial public offering, and did not receive any such compensation in 2013,
2014 or 2015. As described below, Mr. Lerner received stock options in 2013, 2014 and 2015 pursuant to his employment
agreement.
Benefits, Perquisites and Other Compensation - The Company provides various employee benefit programs to its
employees, including NEOs. These benefits include medical, dental, life and disability insurance benefits and our 401(k) plan,
which includes Company contributions. The Company also provides Company-owned or leased cars or automobile allowances
and related reimbursements to certain NEOs and certain other Company managers which are not provided to all employees.
Certain Company executives also have or are entitled to receive severance payments, and/or change of control payments pursuant
to negotiated employment agreements they have with the Company (see below). The Company does not provide to executive
officers any (a) pension benefits or (b) deferred compensation under any defined contribution or other plan on a basis that is not
tax-qualified.
Tax Deductibility Considerations - It is our policy generally to qualify compensation paid to executive officers for
deductibility under section 162(m) of the Code. Section 162(m) generally prohibits deducting the compensation of executive
officers that exceeds $1,000,000 unless that compensation is based on the satisfaction of objective performance goals. Our long-
term incentive plans (the 1995 Long-Term Stock Incentive Plan, the 1999 Long-Term Stock Incentive Plan, as amended, the
1995 Stock Option Plan for Non-Employee Directors, the 2006 Stock Incentive Plan for Non-Employee Directors, and the 2010
Long-Term Incentive Plan) are structured to permit awards under such plans to qualify as performance-based compensation and
to maximize the tax deductibility of such awards. However, we reserve the discretion to pay compensation to our executive
officers that may not be deductible.
25
Role of the Compensation Committee and CEO in Compensation Decisions
The Compensation Committee’s responsibility is to review and approve corporate goals relevant to the compensation
of the Chief Executive Officer and, after an evaluation of the Chief Executive Officer’s performance in light of such goals, to set
the compensation of the Chief Executive Officer. The Compensation Committee also approves, upon the recommendation of the
Chief Executive Officer (following consultation with the Executive Chairman, two Vice Chairmen, the Chief Financial Officer,
the President of the Company’s Industrial Products Group and the President of the Company’s European Technology Products
Group), (a) the annual compensation of the other executive officers of the Company, (b) the annual compensation of certain
subsidiary managers, and (c) all individual stock incentive grants to other executive officers. The Compensation Committee is
also responsible for reviewing and making periodic recommendations to the Board with respect to the general compensation,
benefits and perquisite policies and practices of the Company, including the Company’s stock-incentive based compensation
plans. The Compensation Committee has the authority to retain third party compensation consultants to provide assistance with
respect to compensation strategies, market practices, market research data and the Company’s compensation goals. The
Compensation Committee did not retain any such consultant in 2013, 2014 or 2015.
2010 Long-Term Incentive Plan
In 2010, the Board of Directors approved, and the stockholders of the Company approved at the 2010 Annual Meeting,
the 2010 Long-Term Incentive Plan in order to promote the interests of the Company and its stockholders by (i) attracting and
retaining exceptional executive personnel and other key employees, including consultants and advisors to the Company and its
affiliates; (ii) motivating such employees, consultants and advisors by means of performance-related incentives to achieve longer-
range performance goals; and (iii) enabling such employees, consultants and advisors to participate in the long-term growth and
financial success of the Company.
The 2010 Long-Term Incentive Plan provides for the granting of incentive stock options, non-qualified stock options,
stock appreciation rights, restricted stock, restricted stock units, performance awards (which may be in the form of cash) or other
stock-based awards. Any of the foregoing is referred to as an “Award.” Subject to adjustment in the case of certain corporate
changes, Awards may be granted under the 2010 Long-Term Incentive Plan with respect to an aggregate of 7,500,000 Shares of
the Company’s Common Stock. During a calendar year, Awards may be granted to any individual only with respect to a
maximum of 1,500,000 Shares (or $10,000,000 in the case of cash performance awards).
Any employee of the Company or of any affiliate and any individual providing consulting or advisory services to the
Company or an affiliate, is eligible to receive an award under the 2010 Long-Term Incentive Plan. The Compensation
Committee administers the Plan and determines, in its sole discretion, the terms and conditions of any Award. The
Compensation Committee or the Board of Directors may delegate to one or more officers or managers of the Company the
authority to designate the individuals who will receive Awards under the Plan provided that the Compensation Committee shall
itself grant all Awards to those individuals who could reasonably be considered to be subject to the insider trading provisions of
Section 16 of the 1934 Act or whose Awards could reasonably be expected to be subject to the deduction limitations of Section
162(m) of the Code.
The Compensation Committee determines the persons who will receive Awards, the type of Awards granted, and the
number of Shares subject to each Award. The Compensation Committee also determines the prices, expiration dates, vesting
schedules, forfeiture provisions and other material features of Awards. The Compensation Committee has the authority to
interpret and construe any provision of the Plan and to adopt such rules and regulations for administering the Plan as it deems
necessary or appropriate. All decisions and determinations of the Compensation Committee are final, binding and conclusive on
all parties.
The 2010 Long-Term Incentive Plan provides that granting or vesting of options, restricted stock, restricted stock units
and performance awards may be conditioned on the achievement of specified performance goals. These goals must be
established by the Compensation Committee within 90 days of the beginning of the year (or other period to which the
performance goals relate) or, if shorter, within the first 25% of the performance period.
The performance goals may be based on one or more of: share price, revenues, earnings (including but not limited to
EBITDA), earnings per share, return on equity, expenses, and objective strategic and governance business goals. Each such
performance goal may (1) be expressed with respect to the Company as a whole or with respect to one or more divisions or
business units, (2) be expressed on a pre-tax or after-tax basis, (3) be expressed on an absolute and/or relative basis, (4) employ
comparisons with past performance of the Company (including one or more divisions) and/or (5) employ comparisons with the
current or past performance of other companies, and in the case of earnings-based measures, may employ comparisons to capital,
stockholders’ equity and shares outstanding.
To the extent applicable, the measures used in performance goals set under the 2010 Long-Term Incentive Plan are
determined in a manner consistent with the methods used in the Company’s Forms 10-K and 10-Q, except that adjustments will
be made for certain items, including special, unusual or non-recurring items, acquisitions and dispositions and changes in
accounting principles.
26
2016 NEO Cash Bonus Plan
In 2016, pursuant to the 2010 Long-Term Incentive Plan previously adopted by the Board of Directors and by the
stockholders at the 2010 Annual Meeting, our Compensation Committee, with input from our Chief Executive Officer,
established our 2016 NEO Cash Bonus Plan (“2016 Bonus Plan”) providing for target cash bonuses for the NEOs based on the
achievement of certain financial and non-financial performance-based criteria in 2016. The 2016 Bonus Plan implements for
2016 the 2010 Long-Term Incentive Plan and pertains specifically to the payment of non-equity incentive compensation to NEOs
for 2016.
The following discussion applies to 100% of the 2016 total non-equity incentive compensation for each of Messrs.
Richard Leeds, Bruce Leeds, Robert Leeds and Lawrence Reinhold; and the 50% portion of Mr. Lerner’s 2016 total non-equity
incentive compensation that is based on the 2016 Bonus Plan.
For 2016, such financial and non-financial goals, the percentage of the executive’s entire cash bonus tied to such goals
and the weighting of each component under such goal, are as follows:
•
Financial Goals for 2016 (80% of total cash bonus target)
– Adjusted Operating Income Performance (60%): The Compensation Committee believes this is the most
important individual component and aligns the interests of our executives with those of our stockholders, in
addition to building long-term value. Adjusted Operating Income is defined as operating income adjusted for
unusual or nonrecurring items as determined by our Compensation Committee.
–
Sales Performance (20%): The Compensation Committee believes sales performance is key to our Company
achieving the scale necessary to remain competitive with larger companies. Sales are defined as sales
revenue net of returns on a constant currency basis. Sales are further adjusted for the impact of any
acquisition which is completed during the plan year.
• Non-Financial Goals for 2016 (20% of total cash bonus target)
–
Strategic Accomplishments (16%): Strategic goals were established surrounding accomplishments within
our Industrial Products Group, European Technology Products Group, and the Corporate and Other function.
These distinct goals relate to various strategic initiatives including optimizing our operations and improving
the profitability of our Industrial Products group; further growing our business in France, integrating our
Netherlands operations, and improving our UK operations within our European businesses; and cost
reduction initiatives within our Corporate and Other function.
– Corporate Governance Goals (4%): These goals relate to continuing improvements in our internal control
processes, ethics compliance procedures and safety protocols that the Compensation Committee believes will
generally benefit stockholders as evidenced by the absence of material weaknesses in internal controls and
financial reporting, prompt investigation and disposition of any ethical or governance issues that may arise,
and the absence of any serious OSHA matters.
Achievement of each of the target financial goals generates a variable target bonus payment (base case); reduced
bonuses are payable on a pro rata basis for each financial goal component. The bonus for the sales target financial component is
payable starting at achievement of in excess of 80% of the sales target financial goal component amount up to 140% of the sales
target financial goal component amount. Each 1% variance in actual achievement from the 100% level generates a 5% variance
in the target bonus amount. No bonus is payable in respect of this component if achievement is 80% or less of the sales target
while increased bonuses (up to 300% of the target bonus amount for this financial component) are payable on a pro rata basis for
over achievement of the sales target financial goal component. The adjusted operating income financial goal component is
payable at a level of 100% if the target is achieved. Each $1,000,000 variance in actual achievement below the 100% level will
generate a 5% negative variance in the target bonus amount. Each $1,000,000 variance in actual achievement above the 100%
level will generate a 5% positive variance in the target bonus amount up to 300% of the target bonus amount for this financial
component. The non-financial goals are measured based on whether or not the goal is either accomplished or not accomplished
during the fiscal year. Accomplishment can be measured at 0%, 25%, 50%, 75%, or 100% levels with target bonus paid out
accordingly.
27
Under the 2016 Bonus Plan, the Compensation Committee set the following cash bonus target amounts for each of Mr.
Richard Leeds, Mr. Bruce Leeds, Mr. Robert Leeds and Mr. Reinhold, assuming achievement of the 2016 Bonus Plan financial
and non-financial goals at 100% base case target levels; and in the case of Mr. Lerner achievement of such 2016 Bonus Plan
goals at 100% base case target levels (50% of the bonus) as well as achievement of performance objectives established for him
by the Company (50% of the bonus):
Richard Leeds
Bruce Leeds
Robert Leeds
Lawrence Reinhold
Eric Lerner
$1,050,000
$ 877,500
$ 877,500
$1,410,000
$ 275,000
The Compensation Committee believes these bonus levels are appropriate for each of our named executive officers. The 2016
salary levels discussed below reflect the Compensation Committee’s view that such levels are appropriate in light of the current
business performance and expected accomplishments in 2016.
The 2016 Bonus Plan imposes a cap on the total bonus that could be payable to any executive whose bonus is 100%
earned based upon the NEO plan at 260% of the target base case bonus. The cap on Mr. Lerner is 180% of the target base case
bonus. The Compensation Committee has the discretion to adjust financial targets based on such events as acquisitions or other
one-time charges or gains, or other unforeseen circumstances that can skew normal operating results. Targets and bonuses are
also subject to adjustment to prevent unreasonable results in the strict application of these formulas. Executives must generally
be employed with the Company at the time the bonuses are paid out to receive the bonus.
In addition, the Board can demand repayment to the Company of any cash bonuses paid in the event that (i) the
executive’s misconduct caused the Company to restate its reported financial results; (ii) the reported results created a bonus that
would not have been paid based on the restated results, or (ii) the executive engages in serious ethical misconduct.
As described above, 50% of Mr. Lerner’s cash bonus is tied to achievement of certain legal group objectives, 20% of
this portion of the bonus (10% of total target bonus) is tied to cost management and 80% of this portion of the bonus (40% of
total target bonus) is tied to achievement of individual strategic objectives including enhancing efficiency, automation and cost of
the contract and litigation management process.
2015 NEO Cash Bonus Plan
In 2015, pursuant to the 2010 Long-Term Incentive Plan previously adopted by the Board of Directors and by the
stockholders at the 2010 Annual Meeting, our Compensation Committee, with input from our Chief Executive Officer,
established our 2015 NEO Cash Bonus Plan (“2015 Bonus Plan”) providing for target cash bonuses for the NEOs based on the
achievement of certain financial and non-financial performance-based criteria in 2015. The 2015 Bonus Plan implements for
2015 the 2010 Long-Term Incentive Plan and pertains specifically to the payment of non-equity incentive compensation to NEOs
for 2015.
The following discussion applies to 100% of the 2015 total non-equity incentive compensation for each of Messrs.
Richard Leeds, Bruce Leeds, Robert Leeds and Lawrence Reinhold; and the 50% portion of Mr. Lerner’s 2015 total non-equity
incentive compensation that is based on the 2015 Bonus Plan.
For 2015, such financial and non-financial goals, the percentage of the executive’s entire cash bonus tied to such goals
and the weighting of each component under such goal, are as follows:
•
Financial Goals for 2015 (80% of total cash bonus target)
– Adjusted Operating Income Performance (60%): The Compensation Committee believes this is the most
important individual component and aligns the interests of our executives with those of our stockholders, in
addition to building long-term value. Adjusted Operating Income is defined as operating income adjusted for
unusual or nonrecurring items as determined by our Compensation Committee.
–
Sales Performance (20%): The Compensation Committee believes sales performance is key to our Company
achieving the scale necessary to remain competitive with larger companies. Sales are defined as sales
revenue net of returns on a constant currency basis. Sales are further adjusted for the impact of any
acquisition which is completed during the plan year.
• Non-Financial Goals for 2015 (20% of total cash bonus target)
–
Strategic Accomplishments (16%): Strategic goals were established surrounding accomplishments within
our Industrial Products Group, and our North American and European Technology Products Groups. These
28
distinct goals relate to various strategic initiatives including enhancing our worldwide information technology
systems by continued migration to a new platform specially designed for our needs; improving performance
and grow in our UK Operations as well as stabilizing the performance of and improving service levels in our
Shared Service Center in Europe; integration of the PEG Group acquisition and continued organic growth
within our Industrial Products Group, and successful completion of the previously announced B2B
restructuring activities for our North American Technology Products Group (“NA Tech”). The
Compensation Committee believes these initiatives will enhance the Company’s operational infrastructure
and efficiency.
– Corporate Governance Goals (4%): These goals relate to continuing improvements in our internal control
processes, ethics compliance procedures and safety protocols that the Compensation Committee believes will
generally benefit stockholders as evidenced by the absence of material weaknesses in internal controls and
financial reporting, prompt investigation and disposition of any ethical or governance issues that may arise,
and the absence of any serious OSHA matters.
Achievement of each of the target financial goals generates a variable target bonus payment (base case); reduced
bonuses are payable on a pro rata basis for each financial goal component. The bonus for the sales target financial component is
payable starting at achievement of in excess of 80% of the sales target financial goal component amount up to 140% of the sales
target financial goal component amount. Each 1% variance in actual achievement from the 100% level generates a 5% variance
in the target bonus amount. No bonus is payable in respect of this component if achievement is 80% or less of the sales target
while increased bonuses (up to 300% of the target bonus amount for this financial component) are payable on a pro rata basis for
over achievement of the sales target financial goal component. The adjusted operating income financial goal component is
payable at a level of 100% if the target is achieved. Each $1,000,000 variance in actual achievement below the 100% level will
generate a 5% negative variance in the target bonus amount. Each $1,000,000 variance in actual achievement above the 100%
level will generate a 5% positive variance in the target bonus amount up to 300% of the target bonus amount for this financial
component. The non-financial goals are measured based on whether or not the goal is either accomplished or not accomplished
during the fiscal year. Accomplishment can be measured at 0%, 25%, 50%, 75%, or 100% levels with target bonus paid out
accordingly.
Under the 2015 Bonus Plan, the Compensation Committee set the following cash bonus target amounts for each of
Messrs. Richard Leeds, Bruce Leeds, Robert Leeds and Lawrence Reinhold, assuming achievement of the 2015 Bonus Plan
financial and non-financial goals at 100% base case target levels; and in the case of Mr. Lerner achievement of such 2015 Bonus
Plan goals at 100% base case target levels (50% of the bonus) as well as achievement of performance objectives established for
him by the Company (50% of the bonus):
Richard Leeds
Bruce Leeds
Robert Leeds
Lawrence Reinhold
Eric Lerner
$1,400,000
$ 877,500
$ 877,500
$1,020,000
$ 265,000
The Compensation Committee believes these bonus levels are appropriate for each of our named executive officers. The 2015
salary increases discussed below reflect the Compensation Committee’s view that such increases are appropriate in light of the
current business performance and expected accomplishments in 2015.
The 2015 Bonus Plan imposes a cap on the total bonus that could be payable to any executive whose bonus is 100%
earned based upon the NEO plan at 260% of the target base case bonus. The cap on Mr. Lerner is 180% of the target base case
bonus. The Compensation Committee has the discretion to adjust financial targets based on such events as acquisitions or other
one-time charges or gains, or other unforeseen circumstances that can skew normal operating results, as occurred in 2015 and as
further discussed below under the heading Compensation of NEOS in 2015. Targets and bonuses are also subject to adjustment
to prevent unreasonable results in the strict application of these formulas. Executives must generally be employed with the
Company at the time the bonuses are paid out to receive the bonus.
In addition, the Board can demand repayment to the Company of any cash bonuses paid in the event that (i) the
executive’s misconduct caused the Company to restate its reported financial results; (ii) the reported results created a bonus that
would not have been paid based on the restated results, or (ii) the executive engages in serious ethical misconduct.
As described above, 50% of Mr. Lerner’s cash bonus is tied to achievement of certain legal group objectives, 20% of
this portion of the bonus (10% of total target bonus) is tied to cost management and 80% of this portion of the bonus (40% of
total target bonus) is tied to achievement of individual strategic objectives including enhancing efficiency, automation and cost of
the contract and litigation management process. The cost management and the strategic objectives were met or exceeded in
2015, resulting in a 100% payout of this bonus component.
29
2014 NEO Cash Bonus Plan
In 2014, pursuant to the 2010 Long-Term Incentive Plan previously adopted by the Board of Directors and by the
stockholders at the 2010 Annual Meeting, our Compensation Committee, with input from our Chief Executive Officer,
established our 2014 NEO Cash Bonus Plan (“2014 Bonus Plan”) providing for target cash bonuses for the NEOs based on the
achievement of certain financial and non-financial performance-based criteria in 2014. The 2014 Bonus Plan implements for
2014 the 2010 Long-Term Incentive Plan and pertains specifically to the payment of non-equity incentive compensation to NEOs
for 2014.
The following discussion applies to 100% of the 2014 total non-equity incentive compensation for each of Messrs.
Richard Leeds, Bruce Leeds, Robert Leeds and Lawrence Reinhold; and the 50% portion of Mr. Lerner’s 2014 total non-equity
incentive compensation that is based on the 2014 Bonus Plan.
For 2014, such financial and non-financial goals, the percentage of the executive’s entire cash bonus tied to such goals
and the weighting of each component under such goal, are as follows:
•
Financial Goals (80% of total cash bonus target)
– Adjusted Operating Income Performance (60%): The Compensation Committee believes this is the most
important individual component and aligns the interests of our executives with those of our stockholders, in
addition to building long-term value. Adjusted Operating Income is defined as operating income adjusted for
unusual or nonrecurring items as determined by our Compensation Committee.
–
Sales Performance (20%): The Compensation Committee believes sales performance is key to our Company
achieving the scale necessary to remain competitive with larger companies. Sales are defined as sales
revenue net of returns on a constant currency basis.
• Non-Financial Goals for 2014 (20% of total cash bonus target)
–
Strategic Accomplishments (16%): Strategic goals were established surrounding accomplishments within
our Industrial Products Group, and our North American and European Technology Products Groups. These
distinct goals relate to various strategic initiatives including enhancing our worldwide information technology
systems by continued migration to a new platform specially designed for our needs; transforming our EMEA
operating model to a Pan-European approach, including substantially completing the implementation of our
shared services center in Hungary; expanding the Industrial business through foreign sales initiatives and
continued organic growth; and continued shift to a B2B oriented operation along with a stabilization of a
profitable consumer business for our North American Technology Products Group. The Compensation
Committee believes these initiatives will enhance the Company’s operational infrastructure and efficiency.
– Corporate Governance Goals (4%): These goals relate to continuing improvements in our internal control
processes, ethics compliance procedures and safety protocols that the Compensation Committee believes will
generally benefit stockholders.
Achievement of each of the target financial goals generates a variable target bonus payment (base case); reduced
bonuses are payable on a pro rata basis for each financial goal component. The bonus for the sales target financial component is
payable starting at achievement of in excess of 80% of the sales target financial goal component amount up to 140% of the sales
target financial goal component amount. Each 1% variance in actual achievement from the 100% level generates a 5% variance
in the target bonus amount. No bonus is payable in respect of this component if achievement is 80% or less of the sales target
while increased bonuses (up to 300% of the target bonus amount for this financial component) are payable on a pro rata basis for
over achievement of the sales target financial goal component. The adjusted operating income financial goal component is
payable at a level of 100% if the target is achieved. Each $500,000 variance in actual achievement below the 100% level will
generate a 5% negative variance in the target bonus amount. Each $500,000 variance in actual achievement above the 100%
level will generate a 5% positive variance in the target bonus amount up to 300% of the target bonus amount for this financial
component. The non-financial goals are measured based on whether or not the goal is either accomplished or not accomplished
during the fiscal year.
30
Under the 2014 Bonus Plan, the Compensation Committee set the following cash bonus target amounts for each of
Messrs. Richard Leeds, Bruce Leeds, Robert Leeds and Lawrence Reinhold, assuming achievement of the 2014 Bonus Plan
financial and non-financial goals at 100% base case target levels; and in the case of Mr. Lerner achievement of such 2014 Bonus
Plan goals at 100% base case target levels (50% of the bonus) as well as achievement of performance objectives established for
him by the Company (50% of the bonus):
Richard Leeds
Bruce Leeds
Robert Leeds
Lawrence Reinhold
Eric Lerner
$1,340,000
$ 832,500
$ 832,500
$ 967,500
$ 255,000
The Compensation Committee believes these bonus levels are appropriate for each of our named executive officers. The 2014
salary increases discussed below reflect the Compensation Committee’s view that such increases are appropriate in light of the
current business performance and expected accomplishments in 2014.
The 2014 Bonus Plan imposes a cap on the total bonus that could be payable to any executive whose bonus is 100%
earned based upon the NEO plan at 260% of the target base case bonus. The cap on Mr. Lerner is 180% of the target base case
bonus. The Compensation Committee has the discretion to adjust financial targets based on such events as acquisitions or other
one-time charges or gains, or other unforeseen circumstances that can skew normal operating results. Targets and bonuses are
also subject to adjustment to prevent unreasonable results in the strict application of these formulas. Executives must generally
be employed with the Company at the time the bonuses are paid out to receive the bonus.
In addition, the Board can demand repayment to the Company of any cash bonuses paid in the event that (i) the
executive’s misconduct caused the Company to restate its reported financial results; (ii) the reported results created a bonus that
would not have been paid based on the restated results, or (ii) the executive engages in serious ethical misconduct.
As described above, 50% of Mr. Lerner’s cash bonus is tied to achievement of certain legal group objectives, 20% of
this portion of the bonus (10% of total target bonus) is tied to cost management and 80% of this portion of the bonus (40% of
total target bonus) is tied to achievement of individual strategic objectives including enhancing the contract management process,
enhancing the litigation management and budget process and strengthening the Company’s overall risk management function.
The cost management and the strategic objectives were met or exceeded in 2014, resulting in a 219% payout of this bonus
component.
2013 NEO Cash Bonus Plan
In 2013, pursuant to the 2010 Long-Term Incentive Plan previously adopted by the Board of Directors and by the
stockholders at the 2010 Annual Meeting, our Compensation Committee, with input from our Chief Executive Officer,
established our 2013 NEO Cash Bonus Plan (“2013 Bonus Plan”) providing for target cash bonuses for the NEOs based on the
achievement of certain financial and non-financial performance-based criteria in 2013. The 2013 Bonus Plan implements for
2013 the 2010 Long-Term Incentive Plan and pertains specifically to the payment of non-equity incentive compensation to NEOs
for 2013. The following discussion applies to 100% of the 2013 total non-equity incentive compensation for each of Messrs.
Richard Leeds, Bruce Leeds, Robert Leeds and Lawrence Reinhold; and to the 50% portion of Mr. Lerner’s 2013 total non-equity
incentive compensation that is based on the 2013 Bonus Plan.
For 2013, such financial and non-financial goals, the percentage of the executive’s entire cash bonus tied to such goals
and the weighting of each component under such goal, are as follows:
•
Financial Goals (80% of total cash bonus target)
– Adjusted Operating Income Performance (60%): The Compensation Committee believes this is the most
important individual component and aligns the interests of our executives with those of our stockholders, in
addition to building long-term value. Adjusted Operating Income is defined as operating income adjusted for
unusual or nonrecurring items as determined by our Compensation Committee.
–
Sales Performance (20%): The Compensation Committee believes top line sales growth is key to our
Company achieving the scale necessary to remain competitive with larger companies. Sales are defined as
sales revenue net of returns on a constant currency basis.
• Non-Financial Goals for 2013 (20% of total cash bonus target)
–
Strategic Accomplishments (16%): These goals relate to various strategic initiatives including enhancing both
the North American and European Technology Product Group’s information technology systems, reducing
our costs in Europe, including implementing our shared services center in Hungary, expanding the Industrial
31
business through foreign sales initiatives and the commercial launch of a new online revenue channel for the
Industrial business and the implementation of website enhancements and retail strategy initiatives to enhance
North American Technology performance. The Compensation Committee believes these initiatives will
enhance the Company’s operational infrastructure and efficiency.
– Corporate Governance Goals (4%): These goals relate to continuing improvements in our internal control
processes, ethics compliance procedures and safety protocols that the Compensation Committee believes will
generally benefit stockholders.
Achievement of each of the target financial goals generates a variable target bonus payment (base case); reduced
bonuses are payable on a pro rata basis for each financial goal component. The bonus for the sales target financial component is
payable starting at achievement of in excess of 80% of the sales target financial goal component amount up to 140% of the sales
target financial goal component amount. Each 1% variance in actual achievement from the 100% level generates a 5% variance
in the target bonus amount. No bonus is payable in respect of this component if achievement is 80% or less of the sales target
while increased bonuses (up to 300% of the target bonus amount for this financial component) are payable on a pro rata basis for
over achievement of the sales target financial goal component. The adjusted operating income financial goal component is
payable at a level of 100% if the target is achieved. Each $1 million variance in actual achievement below the 100% level will
generate a 5% negative variance in the target bonus amount. Each $750,000 variance in actual achievement above the 100%
level will generate a 5% positive variance in the target bonus amount up to 300% of the target bonus amount for this financial
component. The non-financial goals are measured based on whether or not the goal is either accomplished or not accomplished
during the fiscal year.
Under the 2013 Bonus Plan, the Compensation Committee set the following cash bonus target amounts for each of
Messrs. Richard Leeds, Bruce Leeds, Robert Leeds and Lawrence Reinhold, assuming achievement of the 2013 Bonus Plan
financial and non-financial goals at 100% base case target levels; and in the case of Mr. Lerner achievement of such 2013 Bonus
Plan goals at 100% base case target levels (50% of the bonus) as well as achievement of performance objectives established for
him by the Company at 100% base case target levels (50% of the bonus), as discussed above:
Richard Leeds
Bruce Leeds
Robert Leeds
Lawrence Reinhold
Eric Lerner
$1,100,000
$ 750,000
$ 750,000
$ 825,000
$ 248,000
The Compensation Committee believes these bonus levels are appropriate for each of our Named Executive Officers;
these bonus levels are the same as those that were set for the Named Executive Officers in 2012 (other than for Mr. Lerner). The
2013 salary increases reflect the Compensation Committee’s view that such increases are appropriate in light of 2013 NEO
bonuses being set at the same level as 2012.
The 2013 Bonus Plan imposed a cap on the total bonus that could be payable to any executive whose bonus is 100%
earned based upon the NEO plan at 260% of the target base case bonus. The cap on Mr. Lerner was 180% of the target base case
bonus. The Compensation Committee had the discretion to adjust financial targets based on such events as acquisitions or other
one-time charges or gains, or other unforeseen circumstances that can skew normal operating results. Targets and bonuses are
also subject to adjustment to prevent unreasonable results in the strict application of these formulas. Executives must generally
be employed with the Company at the time the bonuses are paid out to receive the bonus.
In addition, the Board can demand repayment to the Company of any cash bonuses paid in the event that (i) the
executive’s misconduct caused the Company to restate its reported financial results; (ii) the reported results created a bonus that
would not have been paid based on the restated results, or (ii) the executive engages in serious ethical misconduct.
As described above, 50% of Mr. Lerner’s cash bonus is tied to achievement of certain legal group objectives, 20% of
this portion of the bonus (10% of total target bonus) is tied to cost management and 80% of this portion of the bonus (40% of
total target bonus) is tied to achievement of individual strategic objectives including enhancing regulatory compliance,
implementing technology solutions, and new litigation management tools, and enhancing the interaction of the Legal Department
with the other business units. The cost management objective was achieved, and the strategic objectives were met or partially
met, resulting in an 85% payout of this bonus component.
32
Compensation of NEOs in 2015
In determining the compensation of the Company’s Chief Executive Officer for fiscal year 2015 and approving the
compensation of the Company’s other NEOs, the Committee considered, among the other factors discussed above, the
achievement of the performance based criteria established under the 2015 Bonus Plan.
The Compensation Committee determined that the Company and management had performed adequately, particularly
given trends in the general economic environment and in the technology products industry in which the Company’s North
American Technology Group formerly competed that had affected the Company’s business throughout fiscal year 2015. It was
the view of the Compensation Committee that management had executed acceptably on strategic business initiatives to position
the Company for growth while managing risk. Based on Company and individual performance, the Compensation Committee
believes that compensation levels for fiscal year 2015 were consistent with the philosophy and objectives of the Company’s
compensation programs. The Compensation Committee determined that the Company met its 2015 corporate governance non-
financial goals, including for the Industrial Products Group, described above, but did not achieve its NA Tech B2B restructuring
goals, and only achieved 50% of its European Technology Products Group objectives. The Compensation Committee also
exercised its discretion to reset the sales growth target and adjusted operating income growth target to eliminate the contribution
of the NA Tech business exited in 2015. The Company’s revised sales growth target of $1.905 billion was 99%% achieved after
adjusting for the exit from the NA Tech business and constant currency, resulting in a 95% payout of this bonus component.
Furthermore, the Company achieved its minimum 2015 adjusted operating income growth target, resulting in a 80% payment of
this bonus component. Accordingly, pursuant to the 2015 Bonus Plan formulas, 2015 non-equity incentive plan/bonus
compensation for each Named Executive Officer was paid at 80% of the target level (50% of which was waived by each of
Messrs. Richard, Robert and Bruce Leeds).
The 2015 threshold, target and maximum bonus amounts for each of our Named Executive Officers are found in the
Grants of Plan-Based Awards table on page 37.
Employment Arrangements of the Named Executive Officers
Richard Leeds
Richard Leeds has no employment agreement and is an “at will” employee. Base salary accounted for 55% and bonus
accounted for 42% of Mr. Leeds total cash compensation for 2015. Mr. Leeds’ bonus for 2015 was determined as described
above under the heading 2015 NEO Cash Bonus Plan; however, Mr. Leeds waived 50% ($560,000 of his 2015 bonus, and actual
2015 bonus paid was $560,000). Mr. Leeds salary for 2016 is set at $734,450.
Bruce Leeds
Bruce Leeds has no employment agreement and is an “at will” employee. Base salary accounted for 61% and bonus
accounted for 36% of Mr. Leeds total cash compensation for 2015. Mr. Leeds’ bonus for 2015 was determined as described
above under the heading 2015 NEO Cash Bonus Plan; however, Mr. Leeds waived 50% ($351,000 of his 2015 bonus, and actual
2015 bonus paid was $351,000). Mr. Leeds salary for 2016 is set at $600,000.
Robert Leeds
Robert Leeds has no employment agreement and is an “at will” employee. Base salary accounted for 61% and bonus
accounted for 36% of Mr. Leeds total cash compensation for 2015. Mr. Leeds’ bonus for 2015 was determined as described
above under the heading 2015 NEO Cash Bonus Plan; however, Mr. Leeds waived 50% ($351,000 of his 2015 bonus, and actual
2015 bonus paid was $351,000). Mr. Leeds salary for 2016 is set at $604,000.
Lawrence Reinhold
The Company entered into an employment agreement with Mr. Reinhold on January 17, 2007. The agreement provides
for a minimum base salary of $400,000 (which may be increased at the discretion of the Company) and a bonus (which the
agreement states is expected to be at least equal to 50% of the base salary) assuming Mr. Reinhold meets certain performance
objectives (including the Company’s financial performance objectives) established for him by the Company. He is entitled to
receive a car allowance or a Company-leased car.
Base salary accounted for 53% and bonus accounted for 45% of Mr. Reinhold’s total cash compensation for 2015. Mr.
Reinhold’s bonus for 2015 was determined as described above under the heading 2015 NEO Cash Bonus Plan.
Mr. Reinhold’s salary for 2016 is set at $717,000. In February 2016, Mr. Reinhold received a grant of 50,000 restricted
stock units under the 2010 Long-Term Incentive Plan, which vest in three installments: 16,667 Shares on February 1, 2017;
16,667 Shares on February 1, 2018 and 16,666 Shares February 1, 2019. In addition in February 2016, Mr. Reinhold was granted
33
an option to purchase 50,000 Shares of common stock pursuant to the 2010 Long-Term Incentive Plan (vesting over a period of
four years with 25% of the options vesting on the first, second, third and fourth anniversary dates of the grant date).
Compensation that may become payable following the termination of his employment or a change in control of the
company, and other terms of the employment agreement related to such events, are discussed below under “—Potential Payments
Upon Termination or Change in Control.”
Eric Lerner
The Company entered into an employment agreement with Mr. Lerner on April 12, 2012. The agreement provides for
a minimum base salary of $480,000 (which may be increased at the discretion of the Company) and a bonus (which the
agreement states is expected to be at least equal to 50% of the base salary) assuming Mr. Lerner meets certain performance
objectives (50% of such bonus is based on the performance objective for the Company under its NEO cash bonus plan for the
applicable year and 50% of such bonus is based on the achievement of performance objectives established for him by the
Company). He is entitled to receive a car allowance.
Base salary accounted for 65% and bonus accounted for 32% of Mr. Lerner total cash compensation for 2015. Mr.
Lerner’s non-equity incentive compensation for 2015 was determined as described above under the heading 2015 NEO Cash
Bonus Plan, except that Mr. Lerner also received a discretionary bonus of $169,000 in respect of his work on the disposition of
the NA Tech business.
Mr. Lerner’s salary for 2016 is set at $576,000. In February 2016, Mr. Lerner received a grant of 25,000 restricted
stock units under the 2010 Long-Term Incentive Plan, which vest in three installments: 8,334 Shares on February 1, 2017; 8,333
Shares on February 1, 2018 and 8,333 Shares February 1, 2019. In addition in February 2016, Mr. Reinhold was granted an
option to purchase 25,000 Shares of common stock pursuant to the 2010 Long-Term Incentive Plan (vesting over a period of four
years with 25% of the options vesting on the first, second, third and fourth anniversary dates of the grant date).
Pursuant to his employment agreement, in May 2012 Mr. Lerner was granted an option to purchase 25,000 Shares of
common stock pursuant to the 2010 Long-Term Incentive Plan (vesting over a period of four years with 25% of the options
vesting on the first, second, third and fourth anniversary dates of the grant date). In addition, his employment agreement provides
on each of the first, second and third anniversary dates of his commencement date he will receive an additional option to acquire
at least an additional 25,000 Shares of Company’s common stock (each grant will vest over a period of four years with 25% of
the options for each grant vesting on the first, second, third and fourth anniversary dates of such grant dates). The decision by the
Compensation Committee to award Mr. Lerner stock options was based on a desire to align his interests with those of the
Company’s stockholders.
Compensation that may become payable following the termination of his employment, and other terms of the
employment agreement related to such event, are discussed below under “—Potential Payments Upon Termination or Change in
Control.”
34
Compensation Committee Report to Stockholders*
The Compensation Committee of the Board has reviewed and discussed the Compensation Discussion and Analysis
required by Item 402(b) of Regulation S-K, which appears in this proxy statement, with our management. Based on this review
and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be
included in this proxy statement on Schedule 14A.
COMPENSATION COMMITTEE
Robert D. Rosenthal (Chairman)
Stacy Dick
Marie Adler-Kravecas
* The information contained in this Compensation Committee Report shall not be deemed to be “soliciting material” or
to be “filed” with the SEC, nor shall such information be incorporated by reference into any filings under the Securities
Act of 1933, as amended, which we refer to as the Securities Act, or under the Exchange Act, except to the extent that
we specifically incorporate this information by reference into any such filing.
Compensation Committee Interlocks and Insider Participation
The members of the Company’s Compensation Committee for fiscal year 2015 were Mr. Rosenthal, Mr. Dick and Ms.
Adler-Kravecas. The Company does not employ any member of the Compensation Committee and no member of the
Compensation Committee has ever served as an officer of the Company. In addition, none of our directors serving on the
Compensation Committee has any relationship that requires disclosure under SEC regulations.
35
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation earned by the Named Executive Officers for fiscal years 2013, 2014
Bonus
($)
Stock
Awards
($)
Option
Awards
($) (1)
Non-Equity
Incentive Plan
Compensation
($) (2)
All Other
Compensation
($)
and 2015:
Name and
Principal
Position
Richard Leeds
Executive Chairman
Bruce Leeds
Vice Chairman
Robert Leeds
Vice Chairman
Lawrence Reinhold
President, Chief Executive
Officer and Interim Chief
Financial Officer
Eric Lerner
Senior Vice President and
General Counsel
Year
2015
2014
2013
2015
2014
2013
2015
2014
2013
2015
2014
2013
2015
2014
2013
Salary
($)
731,000
701,000
670,000
599,000
568,000
547,000
607,000
577,000
554,000
694,000
660,000
632,000
560,000
150,000
100,000
351,000
100,000
100,000
351,000
100,000
100,000
816,000
580,500
268,125
106,000
185,000
149,000
29,200(3)
25,200
16,800
29,200(3)
25,200
24,000
29,200(3)
25,200
24,000
33,100(4)
29,100
28,000
21,900(5)
21,900
21,750
Total
($)
1,320,200
876,200
786,800
979,200
693,200
671,000
987,200
702,200
678,000
1,543,100
1,269,600
928,125
959,900
1,105,650
840,953
552,000
169,000
532,000
170,000
516,000
111,000
196,750
154,203
(1) This column represents the fair value of the stock option on the grant date determined in accordance with the provisions of ASC 718. As per
SEC rules relating to executive compensation disclosure, the amounts shown exclude the impact of forfeitures related to service based
vesting conditions. These amounts were calculated using the Black-Scholes option-pricing model. For additional information regarding
assumptions made in calculating the amount reflected in this column, please refer to Note 10 to our audited consolidated financial
statements, included in our Annual Report on Form 10-K for fiscal year 2015.
(2) The 2013 figures in this column represent the amount earned in fiscal year 2013 (although paid in fiscal year 2014) pursuant to the 2013
Bonus Plan, the 2014 figures in this column represent the amount earned in fiscal year 2014 (although paid in fiscal year 2015) pursuant to
the 2014 Bonus Plan and the 2015 figures in this column represent the amount earned in fiscal year 2015 (although paid in fiscal year 2016)
pursuant to the 2015 Bonus Plan. For more information, see the Grants of Plan-Based Awards table below. Because these payments were
based on predetermined performance metrics, these amounts are reported in the Non-Equity Incentive Plan column.
(3) Auto-related expenses.
(4) Includes auto-related expenses ($29,200) and Company 401(k) contributions ($3,900).
(5) Includes auto-related expenses ($18,000) and Company 401(k) contributions ($3,900).
36
GRANTS OF PLAN-BASED AWARDS
The following table sets forth the estimated possible payouts under the cash incentive awards granted to our Named
Executive Officers in respect of 2015 performance under the 2015 NEO Plan.
Name
Grant
Date
Estimated Future Payouts Under Non-Equity Incentive
Plan Awards (1)
Richard Leeds
Bruce Leeds
Robert Leeds
Threshold
($)
280,000
Target
($)
1,400,000
Maximum
($)
3,640,000
175,000
877,500
2,281,500
175,000
877,500
2,281,500
Lawrence Reinhold
204,000
1,020,000
2,652,000
Eric Lerner
5/2/15
53,000
265,000
477,000
All Other
Stock Awards:
Number of
Shares of
Stock or Units
(#)
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
Exercise or
Base Price of
Option Awards
($/Sh)
Grant Date
Fair Value of
Stock and
Option
Awards
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25,000(2)
$10.62
$4.44
(1)
(2)
Amounts presented assume payment of threshold, target and maximum awards at the applicable level.
The options awarded to Mr. Lerner in May 2015 vest in equal portions on the first, second, third and fourth anniversaries of the grant
date, subject to certain restrictions and acceleration events.
37
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2015
The following table sets forth information regarding stock option and restricted stock awards previously granted which
were outstanding at the end of fiscal year 2015.
The market value of the unvested stock award is based on the closing price of one share of our common stock as of
December 31, 2015, the last trading day of the 2015 fiscal year, which was $8.60.
Option Awards
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
Stock Awards
Number of
Shares
or Units of
Stock That
Have Not
Vested
(#)
Market Value
of Shares or
Units of Stock
That Have Not
Vested
($)
Option
Exercise
Price
($)
Option
Expiration
Date
100,000
50,000
100,000
50,000
18,750
12,500
6,250
-
-
-
-
-
6,250(1)
12,500 (1)
18,750(1)
25,000(1)
$20.15
$11.51
$13.19
$14.30
$14.55
$9.53
$16.61
$10.62
1/17/17
3/13/18
5/18/19
11/14/21
-
-
87,500(2)
60,000(3)
-
-
$752,500
$516,000
5/3/22
5/3/23
5/2/24
5/2/25
-
-
-
-
-
-
-
-
Name
Lawrence Reinhold
Eric Lerner
(1)
(2)
(3)
Options vest 25% per year over four years from date of grant.
Restricted stock units vest in ten equal annual installments of 17,500 beginning May 15, 2011.
Restricted stock units vest in ten equal annual installments of 10,000 beginning November 14, 2012.
OPTION EXERCISES AND STOCK VESTED
The following table sets forth information regarding exercise of options to purchase Shares of the Company’s common
stock and vesting of restricted stock units by the Named Executive Officers that exercised options or whose restricted stock units
vested during fiscal year 2015:
Option Awards
Stock Awards
Name
Lawrence Reinhold
Number of Shares
Acquired on Exercise
(#)
-
Value Realized on
Exercise
($)
-
Number of Shares
Acquired on Vesting
(#)
17,500(2)
10,000(3)
Value Realized
on Vesting
($) (1)
$169,575
$89,000
Eric Lerner
-
-
-
-
(1)
(2)
(3)
The amount in this column reflects the aggregate dollar amount realized upon the vesting of the restricted stock unit, determined by
the market value of the underlying Shares of common stock on the vesting date.
Pursuant to a grant of restricted stock units on August 25, 2010, the restricted stock units vest in ten equal annual installments of
17,500 units each, beginning on May 15, 2011.
Pursuant to a grant of restricted stock units on November 14, 2011, the restricted stock units vest in ten equal annual installments of
10,000 units each, beginning on November 14, 2012.
38
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Lawrence Reinhold
Mr. Reinhold’s employment agreement is terminable upon death or total disability, by the Company for “cause” (as
defined) or without cause, or by Mr. Reinhold voluntarily for any reason or for “good reason” (as defined). In the event of
termination for death, disability, cause or voluntary termination by Mr. Reinhold, the Company will owe no further payments
other than as applicable under disability or medical plans and any accrued but unused vacation time (up to four weeks). In the
event of termination for disability or death, Mr. Reinhold would also receive the pro rata portion of any bonus which would
otherwise be paid based on the average annual bonus received for the prior two years. If Mr. Reinhold resigns for good reason or
if the Company terminates him for any reason other than disability, death or cause, he shall also receive in addition to the
payments described above for other terminations, severance payments equal to 12 months’ base salary (or 24 months’ base salary
if termination is within 60 days prior to or one year following a “change of control,” as defined), one year’s bonus based on his
average annual bonus for the prior two years and a reimbursement of costs for COBRA insurance coverage. A “Change in
Control” means: (i) approval by the stockholders of the Company of (I) a reorganization, merger, consolidation or other form of
corporate transaction or series of transactions, in each case, with respect to which the Majority Stockholders (as defined) cease to
own, directly or indirectly, in the aggregate at least forty percent (40%) of the then outstanding shares of the Company’s common
stock or the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or
consolidated company’s then outstanding voting securities, in substantially the same proportions as their ownership immediately
prior to such reorganization, merger, consolidation or other transaction, or (II) the sale of all or substantially all of the assets of
the Company; (ii) the acquisition by any person, entity or “group”, within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act, of beneficial ownership within the meaning of Rule 13-d promulgated under the Securities Exchange
Act which would result in the Majority Stockholders ceasing to own, directly or indirectly, in the aggregate, at least forty percent
(40%) of the then outstanding shares of the Company’s common stock; or (iii) the approval by the stockholders of the Company
of the complete liquidation or dissolution of the Company.
If Mr. Reinhold is terminated for cause, any unvested portion of his restricted stock units will terminate and be
forfeited. In the event of a change in control, Mr. Reinhold will become immediately vested in all of the restricted stock units
held by him as of the date of the change in control. If Mr. Reinhold’s employment is terminated without cause or for good reason,
he will become immediately vested in all non-vested units and will become immediately entitled to a distribution of that number
of Shares of common stock of the Company that are represented by those vested restricted stock units. If Mr. Reinhold’s
employment is terminated due to disability or death, his estate or designated beneficiary(ies), whichever is applicable, will
become immediately vested in 50% of the non-vested restricted stock units.
Pursuant to the Company’s standard option agreements, in the event Mr. Reinhold’s employment is terminated for any
reason other than death, disability or cause, the vested portions of his options will be exercisable for up to three months, and the
unvested portion will be forfeited. In the event of death or disability, the vested portion of his option will be exercisable for up to
one year, and the unvested portion will be forfeited. In the event of termination for cause, all unexercised options (vested and
unvested) will be forfeited.
Eric Lerner
Mr. Lerner’s employment agreement is terminable upon death or total disability, by the Company for “cause” (as
defined) or without cause, or by Mr. Lerner voluntarily for any reason or for “good reason” (as defined). In the event of
termination for death, disability, cause or voluntary termination by Mr. Lerner, the Company will owe no further payments other
than as applicable under disability or medical plans and any accrued but unused vacation time (up to four weeks). In the event of
termination for disability or death, Mr. Lerner would also receive the pro rata portion of any bonus which would otherwise be
paid based on the average annual bonus received for the prior two years. If Mr. Lerner resigns for good reason or if the Company
terminates him for any reason other than disability, death or cause, he shall also receive in addition to the payments described
above for other terminations, severance payments equal to 12 months’ base salary, one year’s bonus based on his average annual
bonus for the prior two years and a reimbursement of costs for COBRA insurance coverage for twelve months.
Pursuant to the Company’s standard option agreements, in the event Mr. Lerner’s employment is terminated for any
reason other than death, disability or cause, the vested portions of his options will be exercisable for up to three months, and the
unvested portion will be forfeited. In the event of death or disability, the vested portion of his option will be exercisable for up to
one year, and the unvested portion will be forfeited. In the event of termination for cause, all unexercised options (vested and
unvested) will be forfeited. If Mr. Lerner’s employment is terminated without cause or for good reason within six months
following a “change in control”, he will become immediately vested in all outstanding unvested stock options, and all of Mr.
Lerner’s outstanding options shall remain exercisable in accordance with their terms, but in no event for less than 90 days after
such termination.
39
Termination of Employment Without Change In Control
The following table sets forth the severance payments that would have been made had the employment of Mr. Reinhold
or Mr. Lerner been terminated by the Company without cause or by them for “good reason” in a situation not involving a change
in control, based on a hypothetical termination date of January 2, 2016, the last day of the Company’s fiscal year 2015, and using
the closing price of our common stock on December 31, 2015, the last trading day of the 2015 fiscal year. These amounts are
estimates and the actual amounts to be paid can only be determined at the time of the termination of the officer’s employment.
Name
Lawrence Reinhold
Cash Compensation
(Salary and Bonus)
($)
1,392,250(1)
Value of
Accelerated Vesting
of Stock & Option Awards
($)
1,268,500(2)
Medical and
Other Benefits
($)
12,614(3)
Total
($)
2,673,364
Eric Lerner
867,000(4)
-
26,696(3)
893,696
(1)
(2)
(3)
(4)
Represents one year’s salary of $694,000 and an average yearly cash bonus of $698,250 paid to Mr. Reinhold for fiscal years 2014
and 2015. Mr. Reinhold would also receive the bonus amount in the event of his death or disability.
Represents accelerated vesting of 147,500 unvested restricted stock units granted to Mr. Reinhold if terminated without cause or for
good reason. In the event of Mr. Reinhold’s death or disability, 73,750 restricted stock units (50% of the unvested restricted stock
units at January 2, 2016) would vest, having a value of $634,250, based on a termination date of January 2, 2016 and using a closing
price of our stock on December 31, 2015, the last trading day of the 2015 fiscal year.
Represents reimbursement of medical and dental insurance payments under COBRA for twelve months.
Represents one year’s salary of $552,000 and an average yearly cash bonus of $315,000 paid to Mr. Lerner for fiscal years 2014 and
2015. Mr. Lerner would also receive the bonus amount in the event of his death or disability.
40
Change In Control Payments
The following table sets forth the change in control payments that would have been made based on a hypothetical
change of control date of January 2, 2016, the last day of the Company’s fiscal year 2015, and using the closing price of our
common stock on December 31, 2015, the last trading day of the 2015 fiscal year. These amounts are estimates and the actual
amounts to be paid can only be determined at the time of the change of control.
Name
Lawrence Reinhold
Eric Lerner
Cash Compensation
(Salary and Bonus)
($)
2,086,250(1)(2)
867,000 (5)
Value of
Accelerated Vesting
of Stock & Option Awards
($)
1,268,500 (3)
-(6)
Medical and
Other Benefits
($)
25,228 (4)
26,696 (7)
Total
($)
3,379,978
893,696
(1)
(2)
(3)
(4)
(5)
(6)
Represents two year’s salary of $694,000 and an average yearly cash bonus of $698,250 paid to Mr. Reinhold for fiscal years 2014
and 2015.
Payments are made to Mr. Reinhold only if he is terminated without “cause” or resigns for “good reason” within 60 days prior to, or
one year following, a Change of Control.
Represents accelerated vesting of 147,500 unvested restricted stock units.
Represents reimbursement of medical and dental insurance payments under COBRA for twenty-four months.
Represents one year’s salary of $552,000 and an average yearly cash bonus of $315,000 paid to Mr. Lerner for fiscal years 2014 and
2015.
Represents accelerated vesting of 62,500 unvested stock options (only if terminated without “cause” or resigns for “good reason”
within six months following a Change of Control). All of these options on the hypothetical change of control date of January 2, 2016
have no intrinsic value.
(7)
Represents reimbursement of medical and dental insurance payments under COBRA for twelve months.
41
DIRECTOR COMPENSATION
The Company’s policy is not to pay compensation to Directors who are also employees of the Company or its
subsidiaries. Each non-employee Director receives annual compensation as follows: $65,000 per year as base compensation,
$10,000 per year for each committee chair, except for the Audit Committee Chair who receives $20,000, and a grant each year of
Shares of Company stock (restricted for sale for two years) in an amount equal to $40,000 divided by the fair market value of
such stock on the date of grant. The Lead Independent Director, currently Mr. Rosenthal, also receives an additional $20,000 per
year. The restricted stock grants are made pursuant to the Company’s 2006 Stock Incentive Plan for Non-Employee Directors,
which was approved by the Company’s stockholders at the 2006 Annual Stockholders’ Meeting. Directors are reimbursed for
reasonable travel and out-of-pocket expenses incurred for attending Board and Committee meetings and are covered by our travel
accident insurance policy for such travel.
Director Compensation For Fiscal Year 2015
The following table sets forth compensation information regarding payments in 2015 to our non-employee Directors:
Name:
Robert D. Rosenthal
Stacy Dick
Marie Adler-Kravecas
Fees Earned
or Paid in
Cash
($)
105,000
85,000
65,000
Stock Awards
($)(1)
40,000
40,000
40,000
Total
($)
145,000
125,000
105,000
(1)
This column represents the fair value of the stock award on the grant date determined in accordance with the
provisions of ASC 718. As per SEC rules relating to executive compensation disclosure, the amounts shown
exclude the impact of forfeitures related to service based vesting conditions. For additional information
regarding assumptions made in calculating the amount reflected in this column, please refer to Note 10 to our
audited consolidated financial statements, included in our Annual Report on Form 10-K for fiscal year 2015.
The following table presents the aggregate number of unvested restricted stock awards and stock option awards held by
each of our non-employee Directors at the end of fiscal year 2015:
Name:
Robert D. Rosenthal
Stacy Dick
Marie Adler-Kravecas
Stock Awards
6,973
6,973
6,973
Option Awards
5,000
5,000
5,000
42
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
Action is to be taken at the Annual Meeting to ratify the selection of Ernst & Young LLP as independent registered
public accountants for the Company for fiscal year 2016.
Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and to be available to respond
to appropriate questions. They will have an opportunity to make a statement if they so desire.
Principal Accounting Fees and Services
The following are the fees billed by Ernst & Young LLP for services rendered during fiscal years 2014 and 2015:
Audit and Audit-related Fees
Ernst & Young billed the Company $3,081,000 for professional services rendered for the audit of the Company’s
annual consolidated financial statements for fiscal year 2015 and its reviews of the interim financial statements included in the
Company’s Forms 10-Q for that fiscal year and $2,649,900 for such services rendered for fiscal year 2014. Ernst & Young also
billed the Company $20,000 for audit related fees in 2015.
In accordance with the SEC’s definitions and rules, “audit fees” are fees that were billed to the Company by Ernst &
Young for the audit of the Company’s annual financial statements, to be included in the Form 10-K, and review of financial
statements included in the Form 10-Qs; for the audit of the Company’s internal control over financial reporting with the objective
of obtaining reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects; for the attestation of management’s report on the effectiveness of internal control over financial reporting; and for
services that are normally provided by the auditor in connection with statutory and regulatory filings or engagements. “Audit-
related fees” are fees for assurance and related services that are reasonably related to the performance of the audit or review of
the company’s financial statements and internal control over financial reporting, including services in connection with assisting
the company in its compliance with its obligations under Section 404 of the Sarbanes-Oxley Act and related regulations.
Tax Fees
Tax fees included services for international tax compliance, planning and advice. Ernst & Young LLP billed the
Company for professional services rendered for tax compliance, planning and advice in 2015 and 2014 an aggregate of $0 and
$40,000, respectively.
All Other Fees
Other fees (i.e., those that are not audit fees, audit related fees, or tax fees) of $2,167 were billed by Ernst & Young
LLP for each of the fiscal years 2014 and 2015.
The Audit Committee is responsible for approving every engagement of the Company’s independent registered public
accountants to perform audit or non-audit services on behalf of the Company or any of its subsidiaries before such accountants
can be engaged to provide those services. The Audit Committee does not delegate its pre-approval authority. The Audit
Committee has reviewed the services provided to the Company by Ernst & Young LLP and believes that the non-audit/review
services it has provided are compatible with maintaining the auditor’s independence.
Stockholder ratification of the selection of Ernst & Young LLP as the Company’s independent registered public
accountants is not required by the Company’s By-Laws or other applicable legal requirement. However, the Board is submitting
the selection of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders
fail to ratify the selection, the Audit Committee will reconsider whether or not to continue to retain that firm. Even if the
selection is ratified, the Audit Committee at its discretion may direct the appointment of different independent registered public
accountants at any time during the year or thereafter if it determines that such a change would be in the best interests of the
Company and its stockholders.
Vote Required for Approval
Ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accountants will
require the affirmative vote of the holders of a majority of the Shares present in person or by proxy and entitled to vote on the
issue. There are no rights of appraisal or dissenter’s rights as a result of a vote on this issue.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC
ACCOUNTANTS FOR FISCAL YEAR 2016, WHICH IS DESIGNATED AS PROPOSAL NO. 2.
43
PROPOSAL NO. 3
NON-BINDING ADVISORY VOTE
TO TERMINATE CERTAIN CORPORATE GOVERNANCE RESTRICTIONS
The Company strives to maintain the highest standards of corporate governance and internal controls, and as described
above under “Corporate Governance” follows many of the best practices currently in use among similar public companies, even
though the Company is a “controlled company” for which certain corporate governance activities are not required.
In 2006 the Company and several directors settled certain stockholder derivative actions brought in the United States
District Court for the Eastern District of New York (the “Court”) by agreeing, without admitting any liability, to a settlement
agreement (the “Settlement Agreement”), which among other things, requires us to adhere to certain corporate governance
requirements, as discussed below (the “Governance Restrictions”).
Because the Settlement Agreement was entered into ten years ago, at a time when best practices and corporate
governance standards were rapidly changing following adoption of the Sarbanes-Oxley Act, the Company believes the
Governance Restrictions no longer serve a valid “good governance” goal, and in fact over time have proven to be impediments to
good governance and unworkable in the current business environment. The Company believes that since 2006 the Governance
Restrictions have proven to be outdated and no longer serve their intended purpose, and have been effectively superseded by
newer regulations and advances in best practices and corporate governance.
Accordingly, with the cooperation of the plaintiffs’ counsel that negotiated the Settlement Agreement on behalf of the
derivative action plaintiffs, the Company intends to request the Court to relieve the Company from the obligation to continue to
observe the Governance Restrictions.
In this regard, the Company is requesting the holders of Shares not beneficially owned by officers or directors of the
Company to approve, on a non-binding advisory basis, the termination of the Governance Restrictions.
Governance Restrictions
The Settlement Agreement mandated certain restrictions (among others) on how we operate our business, as follows:
•
•
•
•
The Chief Executive Officer of the Company is prohibited from serving on the board of other public for-profit
companies (the “CEO Restriction”);
The Company must conduct a re-proposal process every five years for the engagement of the independent public
accountants hired to audit the Company’s financial results (The “Auditor Engagement Restriction”);
The independent auditing firm cannot provide consulting services to the Company other than tax consulting (the
“Auditor Consulting Restriction”); and
The Audit Committee must review the appropriateness and accounting treatment of all related party transactions,
including sales/disposition of assets greater than $300,000 (the “Related Party Restriction”).
CEO Restriction
The Company believes the CEO Restriction is no longer in the best interests of the Company or its stockholders. It
prevents the CEO gaining expertise for our benefit by being exposed to best business practices of other market participants,
gaining additional perspective and experience in managing a public company and by being able to assess other companies’
governance policies.
Auditor Engagement Requirement
The Company believes the Auditor Engagement Restriction, requiring the Company to go through the effort and
expense of seeking to change auditors every five years, even when the Board and the Audit Committee have no desire to do so
and are satisfied with the performance of its current independent auditors, is no longer in the best interests of the Company or its
stockholders. The Sarbanes-Oxley Act contains a number of protections relating to public companies’ relationships with their
auditors, with which we comply. Moreover, the number of leading accounting firms has dwindled over the years, and as the
Company may from time to time use certain other leading accounting firms on projects, those projects would prevent them
proposing on the audit as they would not be considered “independent” under applicable SEC regulations. The Company does
not believe it is in the best interests of its stockholders to go through the engagement solicitation process just in order to either
remain with the existing audit firm, or to engage a new firm that may not have the experience, scope, reputation and resources of
the leading audit firms the Company has used historically.
44
Auditor Consulting Restriction
Further, the Company does not believe the Auditor Consulting Restriction is necessary, in that today’s auditor
professional standards and SEC regulations set forth classes of consulting work that may be performed by independent auditors
without impairing or losing such independence. Accordingly, the Auditor Consulting Restriction is stricter than current auditor
independence regulations and standards, and places an unnecessary burden and cost on the Company by forcing it to use various
firms for discrete projects that could otherwise be performed by the existing independent auditors, but for the Auditor Consulting
Restriction under the Settlement Agreement.
Related Party Restriction
Finally, as described above under Transactions with Related Persons on page 21, the Company has an existing policy
regarding approvals of transactions with related persons and related processes to address the matters covered by the Related Party
Restriction, and in fact the Company’s policies and processes are stricter than those under the Related Party Restriction.
Request to Approve Termination of Governance Restrictions
The Company has determined to seek a non-binding advisory vote approving the termination of the Governance
Restrictions by a majority of the voting Shares not beneficially owned directly or indirectly by any officer or director of the
Company.
Because the Settlement Agreement did not place a termination date on the Governance Restrictions agreed to by the
Company, they remain in place today despite no longer serving their intended purpose. Accordingly, the Company has consulted
with the plaintiffs’ counsel who negotiated the Settlement Agreement, and counsel has advised the Company that it does not
object to the Company’s effort to terminate the Governance Restrictions as described above.
In this regard, following the vote on Proposal No. 3 at the Annual Meeting, the Company intends to submit to the Court
an amendment that would terminate the Governance Restrictions effective December 31, 2015 (the “Amendment”).
In the event the Governance Restrictions are terminated, the Company will make corresponding changes to the Audit
Committee Charter and to the Corporate Governance guidelines.
The affirmative vote of a majority of the Shares not beneficially owned by any of our directors or officers cast for this
proposal is required to approve, on a non-binding advisory basis, the termination of the Governance Restrictions.
As this is an advisory vote, the result will not be binding on the Company or the Board although we will consider the
outcome of the vote when evaluating whether to maintain or modify the Governance Restrictions, including in the event the
Amendment is approved by the Court and the Governance Restrictions are terminated. If the Court rejects the Amendment, the
Governance Restrictions will remain in place. Proxies submitted without direction pursuant to this solicitation will be voted
“FOR” the approval of the termination of the Governance Restrictions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
APPROVAL, ON A NON-BINDING ADVISORY BASIS, OF THE TERMINATION OF THE GOVERNANCE
RESTRICTIONS, AS DISCLOSED IN THIS PROXY STATEMENT, WHICH IS DESIGNATED AS PROPOSAL NO.
3.
45
Solicitation of Proxies
ADDITIONAL MATTERS
We are using the Securities and Exchange Commission, or SEC, “Notice Only” rule that allows us to furnish our proxy
materials over the internet to our stockholders instead of mailing paper copies of those materials to each stockholder. As a result,
beginning on or about April 25, 2016, we sent to most of our stockholders by mail a notice containing instructions on how to
access our proxy materials over the internet and vote online. This notice is not a proxy card and cannot be used to vote your
Shares. If you received only a notice this year, you will not receive paper copies of the proxy materials unless you request the
materials by following the instructions on the notice or on the website referred to in the notice.
The Proxy Statement and Annual Report on Form 10-K for fiscal year 2015 are available at www.proxyvote.com.
The cost of soliciting proxies for the Annual Meeting will be borne by the Company. In addition to solicitation by mail
and over the internet, solicitations may also be made by personal interview, fax and telephone. Arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries to send proxies and proxy material to their principals and the
Company will reimburse them for expenses in so doing. Consistent with the Company’s confidential voting procedure,
Directors, officers and other regular employees of the Company, as yet undesignated, may also request the return of proxies by
telephone or fax, or in person.
Stockholder Proposals
Stockholder proposals intended to be presented at the 2017 annual meeting, including proposals for the nomination of
Directors, must be received by December 26, 2016 to be considered for the 2017 annual meeting pursuant to Rule 14a-8 under
the Exchange Act. Stockholders proposals should be mailed to Systemax Inc., Attention: Investor Relations, 11 Harbor Park
Drive, Port Washington, NY 11050.
Other Matters
The Board does not know of any matter other than those described in this proxy statement that will be presented for action at
the meeting. If other matters properly come before the meeting, the persons named as proxies intend to vote the Shares they
represent in accordance with their judgment.
A COPY OF THE COMPANY’S FORM 10-K FOR FISCAL YEAR 2015 IS INCLUDED AS PART OF THE
COMPANY’S ANNUAL REPORT ALONG WITH THIS PROXY STATEMENT, WHICH ARE AVAILABLE AT
www.proxyvote.com.
Available Information
The Company maintains an internet web site at www.systemax.com. The Company files reports with the Securities and
Exchange Commission and makes available free of charge on or through this web site its Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, including all amendments to those reports. These are
available as soon as is reasonably practicable after they are filed with the SEC. All reports mentioned above are also available
from the SEC’s web site (www.sec.gov). The information on the Company’s web site or any report the Company files with, or
furnishes to, the SEC is not part of this proxy statement.
The Board has adopted the following corporate governance documents (the “Corporate Governance Documents”):
•
•
•
•
•
Corporate Ethics Policy for officers, Directors and employees;
Charter for the Audit Committee of the Board;
Charter for the Compensation Committee of the Board;
Charter for the Nominating/Corporate Governance Committee of the Board; and
Corporate Governance Guidelines and Principles.
In accordance with the corporate governance rules of the New York Stock Exchange, each of the Corporate
Governance Documents is available on the Company’s Company web site (www.systemax.com).
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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-K(Mark One)☒☒ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2015or☐☐TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from toCommission File Number: 1-13792Systemax Inc. (Exact name of registrant as specified in its charter)Delaware11-3262067(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)11 Harbor Park DrivePort Washington, New York 11050(Address of principal executive offices, including zip code)Registrant’s telephone number, including area code: (516) 608-7000Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, par value $ .01 per shareNew York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: NONEIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirementsfor the past 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the bestknowledge of the registrant, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form10-K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See thedefinitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):Large Accelerated Filer ☐Accelerated Filer ☒ Non-Accelerated Filer ☐Smaller reporting company ☐Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes ☐ No ☒The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2015, which is the last business day of the registrant’smost recently completed second fiscal quarter, was approximately $93,208,121. For purposes of this computation, all executive officers and directors of theRegistrant and all parties to the Stockholders Agreement dated as of June 15, 1995 have been deemed to be affiliates. Such determination should not be deemed tobe an admission that such persons are, in fact, affiliates of the Registrant.The number of shares outstanding of the registrant’s common stock as of March 10, 2016 was 36,877,688 shares.Documents incorporated by reference: Portions of the Proxy Statement of Systemax Inc. relating to the 2016 Annual Meeting of Stockholders are incorporated byreference in Part III hereof. TABLE OF CONTENTSPart IItem 1.Business4General4Products5Sales and Marketing5Customer Service, Order Fulfillment and Support6Suppliers7Competition and Other Market Factors7Employees7Environmental Matters7Financial Information About Foreign and Domestic Operations8Available Information8Item 1A.Risk Factors8Item 1B.Unresolved Staff Comments16Item 2.Properties17Item 3.Legal Proceedings17Item 4.Mine Safety Disclosures18Part IIItem 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities19Item 6.Selected Financial Data20Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations20Item 7A.Quantitative and Qualitative Disclosures About Market Risk36Item 8.Financial Statements and Supplementary Data37Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure37Item 9A.Controls and Procedures37Item 9B.Other Information38Part IIIItem 10.Directors, Executive Officers and Corporate Governance39Item 11.Executive Compensation39Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters39Item 13.Certain Relationships and Related Transactions, and Director Independence39Item 14.Principal Accounting Fees and Services39Part IVItem 15.Exhibits and Financial Statement Schedules39Signatures442 PART IUnless otherwise indicated, all references herein to Systemax Inc. (sometimes referred to as “Systemax,” the “Company,” or “we”) include its subsidiaries.Forward Looking StatementsThis report contains forward looking statements within the meaning of that term in the Private Securities Litigation Reform Act of 1995 (Section 27A of theSecurities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Additional written or oral forward looking statements may be made by theCompany from time to time in filings with the Securities and Exchange Commission or otherwise. Statements contained in this report that are not historical factsare forward looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statementsmay include, but are not limited to, projections or estimates of revenue, income or loss, exit costs, cash flow needs and capital expenditures, statements regardingfuture operations, expansion or restructuring plans, including our exit from and winding down of our North American Technology operations, financing needs,compliance with financial covenants in loan agreements, the implementation and performance of technology systems discussed below, the turnaround plans for ourUK operations, including the performance of our shared services center in Hungary, plans for acquisition or sale of assets or businesses, consolidation andintegration of operations of recently acquired businesses, including SCC/Misco Solutions in the Netherlands and the Plant Equipment Group in the US, and plansrelating to products or services of the Company, assessments of materiality, predictions of future events and the effects of pending and possible litigation, as wellas assumptions relating to the foregoing. In addition, when used in this report, the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans”and variations thereof and similar expressions are intended to identify forward looking statements.Forward looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified based on current expectations. Consequently, future events and results could differ materially from those set forth in, contemplated by, or underlying the forward looking statements contained inthis report. Statements in this report, particularly in “Item 1. Business,” “Item 1A. Risk Factors,” “Item 3. Legal Proceedings,” “Item 7. Management’sDiscussion and Analysis of Financial Condition and Results of Operations,” and the Notes to Consolidated Financial Statements describe certain factors, amongothers, that could contribute to or cause such differences.Other factors that may affect our future results of operations and financial condition include, but are not limited to, unanticipated developments in any one or moreof the following areas, as well as other factors which may be detailed from time to time in our Securities and Exchange Commission filings:·risks involved with e-commerce, including possible loss of business and customer dissatisfaction if outages or other computer-related problemsshould preclude customer access to our products and services·our ability to timely and efficiently exit and wind down the discontinued North American Technology Products operations·our ability to timely and efficiently integrate recently acquired businesses, such as SCC/Misco Solutions in the Netherlands and the Plant EquipmentGroup in the US·our information systems and other technology platforms supporting our sales, procurement and other operations are critical to our operations anddisruptions or delays, particularly as we continue to transition certain functions from our existing platforms to a new platform specifically developedfor our needs, have occurred and could occur in the future, and if not timely addressed would have a material adverse effect on us·general economic conditions, such as decreased consumer confidence and spending and reductions in manufacturing capacity have contributed to ourrecent failure to achieve our historical sales growth rates and profit levels and could continue to impact our business·technological change, such as the effect of mobile devices on sales of PCs and laptop computers, have had and can continue to have a material effecton our product mix and results of operations·the markets for our products and services are extremely competitive and if we are unable to successfully respond to our competitors’ strategies oursales and gross margins will be adversely affected·our ecommerce operations must compete with large, expanding ecommerce retailers·sales tax laws or government enforcement priorities may be changed which could result in ecommerce and direct mail retailers having to collect salestaxes in states where the current laws and interpretations do not require us to do so·our substantial international operations are subject to risks such as fluctuations in currency rates, foreign regulatory requirements, politicaluncertainty and the management of our expanding international operations infrastructure, including our ability to timely and effectively operate ourshared services center in Hungary·managing various inventory risks, such as being unable to profitably resell excess or obsolete inventory and/or the loss of product return rights andprice protection from our vendors3 ·meeting credit card industry compliance standards in order to maintain our ability to accept credit cards·timely availability of existing and new products·risks associated with delivery of merchandise to customers by utilizing common delivery services·borrowing costs or availability, including our ability to renew credit facilities·pending or threatened litigation and investigations·the availability of key personnel·the continuation of key vendor relationships·the ability to maintain satisfactory credit arrangementsReaders 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. Weundertake no obligation to publicly release the result of any revisions to these forward looking statements that may be made to reflect events or circumstances afterthe date hereof or to reflect the occurrence of unexpected events.Item 1.Business.GeneralSystemax Inc. is primarily a direct marketer of brand name and private label products. During 2015, our operations were organized in three reportable businesssegments — Industrial Products Group (“IPG”), EMEA Technology Products Group (“EMEA”) and what was our largest business in terms of revenue, NorthAmerica Technology Products Group (NATG”). EMEA and NATG were aggregated in prior years as they met the aggregation criteria. Smaller businessoperations and corporate functions are aggregated and reported as an additional segment – Corporate and Other (“Corporate”). On December 1, 2015, we soldcertain assets and liabilities of the NATG business and are currently winding down its remaining operations, as discussed below.Operating History and Recent Restructuring of NATG BusinessThe NATG segment sold products categorized as Information and Communications Technology (“ICT”) and Consumer Electronics (“CE”) products. Theseproducts included computers, computer supplies and consumer electronics which were marketed in North America. Most of these products were manufactured byother companies; however, the Company did offer a selection of products manufactured for our own design and marketed on a private label basis.In response to significant market pressures and poor operating performance, the Company initiated a series of actions to focus the NATG business on improvedprofitability. These actions included closing our PC manufacturing business in 2012, making “TigerDirect” our go to market brand, ceasing use of our“CompUSA” and “CircuitCity” brands and making efforts to transition their customers to TigerDirect. Additionally, the Company began to re-evaluate its “brickand mortar” retail consumer business, and it closed 10 unprofitable stores in 2012-2014. In this regard, due to market conditions and other factors described in ourprevious public filings which adversely impacted our retail and online consumer business, on March 10, 2015 the Company announced that it was taking additionalactions to focus our NATG business primarily on Business to Business (“B2B”) customers, and that NATG would be exiting the retail store business in order toaccelerate its focus on its B2B operations. This exit plan included the closing of 31 retail stores (leaving three remaining in operation), closing one of the NATGdistribution centers, and implementing a significant general workforce reduction to align available resources with a B2B focus, as well as transitioning retailcustomers to online consumer sales.At that time, the Company also began exploring strategic alternatives for the NATG business, while continuing its efforts to focus the NATG business on B2Bcustomers and returning the business to profitability. Among other alternatives being considered, the Company engaged an investment advisor to seek a purchaserfor the NATG business, and following solicitation and review of offers received, the Company negotiated the sale of certain assets and liabilities of the NATGbusiness to PCM, Inc. The sale closed on December 1, 2015, though delivery of certain IT, website and other related assets was deferred to and completed inFebruary 2016.As of this filing, the Company has completed most of the NATG wind down activities, including selling its remaining inventory, closing the two remaining retailstores and closing its remaining distribution center; employee reductions were primarily completed in the fourth quarter of 2015 and the first quarter of 2016 andcurrently approximately 30 employees remain at the Miami location. These employees are performing wind-down activities and it is anticipated these activitieswill be substantially complete by the end of the second quarter of 2016; any remaining activities after that date will be undertaken by the Company’s Corporatefunction in New York. The Company anticipates completing all wind down of remaining operations in 2016, other than settling of remaining lease obligations.4 As a result of the sale of the NATG business to PCM and the wind down of NATG remaining operations, as of the date of this filing, the NATG business isdiscontinued and the Company’s business is now comprised of IPG, EMEA and Corporate and other. For a discussion of the accounting for the March 2015 exitfrom our retail store operations and the December 2015 sale and winding down of the NATG business, see Note 1and Note 2 to the Consolidated FinancialStatements included in Item 15 of this Form 10-K.Industrial ProductsIPG sells a wide array of MRO products which are marketed in North America. Most of these products are manufactured by other companies; however, theCompany does offer a selection of products that are manufactured for our own design and marketed under the trademarks: Global™, GlobalIndustrial.com™,Nexel™ Relius™, Relius Elite™ and Hercules™. Industrial products accounted for 38%, 26% and 24% of our net sales from continuing operations in 2015, 2014and 2013, respectively reported on a U.S. Generally Accepted Accounting Principles (“GAAP”) basis.Technology Products – EMEAEMEA sells products categorized as Information and Communication Technology (“ICT”) and Consumer Electronics (“CE”). These products are marketed inEurope. Substantially all of these products are manufactured by other companies. EMEA accounted for 57%, 57% and 56% of our GAAP net sales fromcontinuing operations in 2015, 2014 and 2013, respectively.Technology Products – NATGNATG sold ICT and CE products. These products were marketed in North America. Substantially all of these products were manufactured by other companies;however, the Company did offer a selection of products that were manufactured for our own design and marketed on a private label basis. NATG accounted for5%, 17% and 20% of our GAAP net sales from continuing operations in 2015, 2014 and 2013, respectively.See Note 2 and Note 13 to the Consolidated Financial Statements included in Item 15 of this Form 10-K for additional financial information about our business aswell as information about our geographic operations.The Company was incorporated in Delaware in 1995. Certain predecessor businesses which now constitute part of the Company have been in business since 1949.Our headquarters office is located at 11 Harbor Park Drive, Port Washington, New York.ProductsWe offer over a million brand name and private label products. We endeavor to expand and keep current the breadth of our product offerings in order to fulfill theincreasingly wide range of product needs of our customers.MRO products offered by our IPG segment include electrical & bulbs; fasteners & hardware; foodservice & appliances; furniture & office; HVAC/R fans;janitorial & maintenance; material handling; medical & laboratory equipment; metalworking & cutting tools; motors & power transmission; office & schoolsupplies; outdoor & grounds maintenance; packaging & supplies; plumbing supplies; pneumatics & hydraulics; raw material & building supply; safety & security;storage and shelving; tools and instruments; vehicle maintenance and workbench and shop desks.ICT products offered by our EMEA segment include: computer & mobile devices; computer parts & memory; servers – storage & backup; computer componentsand accessories; networking & security; software; electronics and commercial and home networking. CE products include TV and video; audio; cameras andsurveillance; GPS; cell phones; video games and toys; home and electronics accessories.Sales and MarketingWe market our products primarily B2B, which include for-profit businesses, educational organizations and government entities. We have developed numerousproprietary customer and prospect databases. We have established a multi-faceted direct marketing system to business customers, consisting primarily of ourrelationship marketers, catalog mailings and proprietary internet websites, the combination of which is intended to maximize sales. Our discontinued NATGbusiness also marketed its products to individual consumers (“B2C”).5 Relationship MarketersOur relationship marketers focus their efforts on our business customers by establishing a personal relationship between such customers and a Systemax accountmanager. The goal of the relationship marketing sales force is to increase the purchasing productivity of current customers and to actively solicit newly targetedprospects to become customers. With access to the records we maintain, our relationship marketers are prompted with product suggestions to expand customerorder values. In certain countries, we also have the ability to provide such customers with electronic data interchange (“EDI”) ordering and customized billingservices, customer savings reports and stocking of specialty items specifically requested by these customers. Our relationship marketers’ efforts are supported by e-mail campaigns and periodic catalog mailings, both of which are designed to generate inbound telephone sales, and our interactive websites, which allowcustomers to purchase products directly over the Internet. We believe that the integration of our multiple marketing methods enables us to more thoroughlypenetrate our business, educational and government customer base. We believe increased internet exposure leads to more internet-related sales and also generatesmore inbound telephone sales; just as we believe catalog mailings and email campaigns which feature our websites results in greater internet-related sales.E-commerceWe currently operate multiple e-commerce sites, including:North AmericaEuropewww.globalindustrial.comwww.misco.co.ukwww.globalindustrial.cawww.misco.dewww.nexelwire.comwww.misco.frwww.chdist.comwww.misco.nlwww.avenuesupply.cawww.misco.itwww.industrialsupplies.comwww.misco.eswww.misco.sewww.misco.atwww.misco.chwww.misco.bewww.inmac-wstore.comwww.miscosolutions.nlWe are continually upgrading the capabilities and performance of these websites in our significant markets. Our internet sites feature millions of MRO and ICTproducts. Our customers have around-the-clock, online access to purchase products and we have the ability to create targeted promotions for our customers’interests.In addition to our own e-commerce websites, we have partnering agreements with several of the largest internet shopping and search engine providers who featureour products on their websites or provide “click-throughs” from their sites directly to ours. These arrangements allow us to expand our customer base at aneconomical cost.CatalogsAs IPG and EMEA have increased their focus on online and ecommerce advertising, marketing and sales activities, they have decreased their use of hard copycatalogs over the last several years, and currently distribute many fewer regular and specialty catalogs than in prior periodsCustomer Service, Order Fulfillment and SupportWe generally receive orders through the Internet, by telephone and by EDI. We generally provide toll-free telephone number access for our customers in countrieswhere it is customary. Certain domestic call centers are linked to provide telephone backup in the event of a disruption in phone service.Certain of our products are carried in stock, and orders for such products are fulfilled on a timely basis directly from our distribution centers, typically within oneday of the order. We utilize numerous sales and distribution facilities in North America and Europe. Orders are generally shipped by third-party delivery services. We maintain relationships with a number of large distributors in North America and Europe that also deliver products directly to our customers.We maintain a database of commonly asked questions for our technical support representatives, enabling them to respond quickly to similar questions. Weconduct regular on-site training seminars for our sales representatives to help ensure that they are well trained and informed regarding our latest product offerings.6 SuppliersWe purchase substantially all of our products and components directly from manufacturers and large wholesale distributors. Two vendors accounted for 10% ormore of our purchases in 2015 and 2014: one vendor accounted for 12.2% and 12.6%, respectively; another vendor accounted for 10.9% and 11.6%, respectively. In 2013, one vendor accounted for 13.9% of our purchases. Excluding NATG operations, no vendor accounted for 10% or more of our purchases in 2015, 2014 or2013. The loss of these vendors, or any other key vendors, could have a material adverse effect on us .Most private label products are manufactured by third parties to our specifications.Competition and Other Market FactorsIndustrial ProductsThe market for the sale of industrial products in North America is highly fragmented and is characterized by multiple distribution channels such as smalldealerships, direct mail distribution, internet-based resellers, large warehouse stores and retail outlets. We face competition from large diversified MROdistributors such as Grainger Inc., MSC Industrial Direct Inc., Fastenal Inc., and other large retailers, including ecommerce retailers such as Amazon. We also facecompetition from manufacturers’ own sales representatives, who sell industrial equipment directly to customers, and from regional or local distributors. Manyhigh volume purchasers, however, utilize catalog distributors as their first source of product. In the industrial products market, customer purchasing decisions areprimarily based on price, product selection, product availability, level of service and convenience. We believe that direct marketing via sales representatives,catalog and the Internet are effective and convenient distribution methods to reach mid-sized facilities that place many small orders and require a wide selection ofproducts. In addition, because the industrial products market is highly fragmented and generally less brand oriented, we believe it is well suited to private labelproducts.Technology ProductsThe market for selling technology product markets is highly competitive, with many U.S., European and Asian companies vying for market share. We facecompetition from large distributors such as Econocom, Computa Center, Insight and others. There are few barriers to entry, with these products being sold throughmultiple channels of distribution, including direct marketers, computer resellers, mass merchants, over the Internet local and national retail computer stores, and bycomputer and office supply superstores.Timely introduction of new products or product features are critical elements to remaining competitive. Other competitive factors include product performance,quality and reliability, technical support and customer service, marketing and distribution and price. Some of our competitors have stronger brand-recognition,broader product lines and greater financial, marketing, manufacturing and technological resources than us.Conditions in the EMEA market for technology products remain highly competitive, resulting in our frequent discounting of product sales price as well as offeringfree or highly discounted freight. These actions have and may continue to adversely affect our revenues and profits. Additionally, we rely in part upon theintroduction of new technologies and products by other manufacturers in order to sustain long-term sales growth and profitability. There is no assurance that therapid rate of such technological advances and product development will continue.EmployeesAs of December 31, 2015, we employed a total of approximately 3,300 employees, of whom 1,600 were in North America and 1,700 were in Europe and Asia. OnDecember 1, 2015 when the Company closed on the sale of certain assets and liabilities of its NATG segment to PCM and announced that it is winding down theremaining operations of NATG during early 2016, NATG employed approximately 1,000 employees. As of December 31, 2015, NATG employed approximately500 employees; as of the date of filing this Form 10-K, NATG employed approximately 30.SeasonalitySeasonality does not have a material effect on the Company’s continuing IPG and EMEA businesses.Environmental MattersUnder various national, state and local environmental laws and regulations in North America and Western Europe, Hungary and Asia, a current or previous owneror operator (including the lessee) of real property may become liable for the costs of removal or remediation of hazardous substances at such real property. Suchlaws and regulations often impose liability without regard to fault. We lease most of our facilities. In connection with such leases, we could be held liable for thecosts of removal or remedial actions with respect to hazardous substances. Although we have not been notified of, and are not otherwise aware of, any materialreal property environmental liability, claim or non-compliance, there can be no assurance that we will not be required to incur remediation or other costs inconnection with real property environmental matters in the future.7 Financial Information About Foreign And Domestic OperationsWe currently sell our products in North America (the United States, Puerto Rico, Canada and Mexico) and Europe. Approximately 63.5%, 65.6%, and 65.9% ofour GAAP net sales from continuing operations during 2015, 2014 and 2013, respectively were made by subsidiaries located outside of the United States. Forinformation pertaining to our international operations, see Note 13, “Segment and Related Information,” to the Consolidated Financial Statements included in Item15 of this Form 10-K. The following sets forth selected information with respect to our operations, excluding discontinued operations, in those two geographicmarkets (in millions):NorthAmericaEurope and AsiaTotal2015Net sales$801.8 $1,052.9 $1,854.7 Operating income (loss)$(13.5) $(10.6) $(24.1)Identifiable assets$470.3 $239.8 $710.1 2014Net sales$914.3 $1,189.9 $2,104.2 Operating income (loss)$9.4 $(23.1) $(13.7)Identifiable assets$582.9 $314.0 $896.9 2013Net sales$880.0 $1,095.4 $1,975.4 Operating income (loss)$(5.1) $(5.7) $(10.8)Identifiable assets$610.2 $332.0 $942.2 See Item 7, “Management’s Discussions and Analysis of Financial Condition and Results of Operations”, for further information with respect to our operations.Available InformationWe maintain an internet website at www.systemax.com. We file reports with the Securities and Exchange Commission (“SEC”) and make available free of chargeon or through this website our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, including all amendments to thosereports. These are available as soon as is reasonably practicable after they are filed with the SEC. All reports mentioned above are also available from the SEC’swebsite (www.sec.gov). The information on our website is not part of this or any other report we file with, or furnish to, the SEC.Our Board of Directors has adopted the following corporate governance documents with respect to the Company (the “Corporate Governance Documents”):·Corporate Ethics Policy for officers, directors and employees·Charter for the Audit Committee of the Board of Directors·Charter for the Compensation Committee of the Board of Directors·Charter for the Nominating/Corporate Governance Committee of the Board of Directors·Corporate Governance Guidelines and PrinciplesIn accordance with the listing standards of the New York Stock Exchange, each of the Corporate Governance Documents is available on our Company website(www.systemax.com).Item 1A.Risk Factors.There are a number of factors and variables described below that may affect our future results of operations and financial condition. Other factors of which we arecurrently not aware or that we currently deem immaterial may also affect our results of operations and financial position.8 Risks Related to the Economy and Our Industries·General economic conditions, such as decreased consumer confidence and spending and reductions in manufacturing capacity have and couldcontinue to result in our failure to achieve our historical sales growth rates and profit levels.Current economic conditions may cause the loss of consumer confidence in the Company’s domestic and international markets which we believeresulted in a decrease of spending in the categories of products we sell in 2015, 2014 and 2013, which mostly impacted our now discontinued NATGbusiness and to some extent our EMEA business. With conditions in the EMEA market for technology products remaining highly competitive,reductions in our selling prices, as we have experienced in recent years, have adversely affected our revenue and profits and could continue to do so inthe future. It is also possible that as manufacturers react to the marketplace they may reduce manufacturing capacity or allocations to their customerscreating shortages of product. Both we and our customers are subject to global political, economic and market conditions, including inflation, interestrates, energy costs, the impact of natural disasters, military action and the threat of terrorism. Our consolidated results of operations are directlyaffected by economic conditions in North America and Europe. We may experience a decline in sales as a result of poor economic conditions and thelack of visibility relating to future orders, which occurred in 2013 and 2014 in the discontinued NATG business and to some extent in our EMEAbusiness between 2014 and 2015. Our results of operations depend upon, among other things, our ability to maintain and increase sales volumes withexisting customers, our ability to limit price reductions and maintain our margins, our ability to attract new customers and the financial condition of ourcustomers. A decline in the economy that adversely affects our customers, causing them to limit or defer their spending, would likely adversely affectour sales, prices and profitability as well, which occurred in 2013 and 2014 in the discontinued NATG business and to some extent in our EMEAbusiness between 2014 and 2015. We cannot predict with any certainty whether we will be able to maintain or improve upon historical sales volumeswith existing customers, or whether we will be able to attract new customers.In response to economic and market conditions, from time to time we have undertaken initiatives to reduce our cost structure where appropriate, asoccurred in the discontinued NATG business and in certain EMEA operations. These initiatives, as well as any future workforce and facilitiesreductions, may not be sufficient to meet current and future changes in economic and market conditions and allow us to continue to achieve the growthrates and re-attain the levels of profitability we experienced prior to the recent market downturns. In addition, costs actually incurred in connectionwith our restructuring actions may be higher than our estimates of such costs and/or may not lead to the anticipated cost savings.See Operating History and Recent Restructuring of Our Business for a discussion of the closing of our NATG business in 2015.·The markets for our products and services are extremely competitive and if we are unable to successfully respond to our competitors’ strategies oursales and gross margins will be adversely affected.We may not be able to compete effectively with current or future competitors. The markets for our products and services are intensely competitive andsubject to constant technological change. The adverse impact of the boom in mobile device sales on PC and laptop sales, demonstrate how rapidtechnological change can significantly affect the markets for the products we sell, as occurred in our discontinued NATG business. We expect thiscompetition and technological change to further intensify in the future. Competitive factors include price, availability, service and support. Ourecommerce business faces pressure from competing with large, expanding ecommerce retailers. Many of our competitors are larger companies withgreater financial, marketing and product development resources than ours. The market for the sale of industrial products in North America is highlyfragmented and is characterized by multiple distribution channels such as small dealerships, direct mail distribution, internet-based resellers, largewarehouse stores and retail outlets. We face competition from large diversified MRO distributors such as Grainger Inc., MSC Industrial Direct Inc.,Fastenal Inc., and other large retailers, including ecommerce retailers such as Amazon.We also face competition from manufacturers’ own salesrepresentatives, who sell industrial equipment directly to customers, and from regional or local distributors. In addition, new competitors may enter ourmarkets. This may place us at a disadvantage in responding to competitors’ pricing strategies, technological advances and other initiatives, resulting inour inability to increase our revenues or maintain our gross margins in the future.In most cases our products compete directly with those offered by other manufacturers and distributors. If any of our competitors were to developproducts or services that are more cost-effective or technically superior, demand for our product offerings could decrease.9 Our gross margins are also dependent on the mix of products we sell and could be adversely affected by a continuation of our customers’ shift to lower-priced products.·Sales tax laws may be changed or interpreted differently which could result in ecommerce and direct mail retailers having to collect sales taxes instates where the current laws do not require us to do so. This could reduce demand for our products in such states and could result in us havingsubstantial tax liabilities for past sales.Our United States subsidiaries collect and remit sales tax in states in which the subsidiaries have physical presence or in which we believe sufficientnexus exists which obligates us to collect sales tax. Other states may, from time to time, claim that we have state-related activities constituting physicalnexus to require such collection. Additionally, many other states seek to impose sales tax collection or reporting obligations on companies that sellgoods to customers in their state, or directly to the state and its political subdivisions, regardless of physical presence. Such efforts by states haveincreased recently, as states seek to raise revenues without increasing the income tax burden on residents. We rely on United States Supreme Courtdecisions which hold that, without Congressional authority, a state may not enforce a sales tax collection obligation on a company that has no physicalpresence in the state and whose only contacts with the state are through the use of interstate commerce such as the mailing of catalogs into the state andthe delivery of goods by mail or common carrier. We cannot predict whether the nature or level of contacts we have with a particular state will bedeemed enough to require us to collect sales tax in that state nor can we be assured that Congress or individual states will not approve legislationauthorizing states to impose tax collection or reporting obligations on all e-commerce and/or direct mail transactions. A successful assertion by one ormore states that we should collect sales tax on the sale of merchandise could result in substantial tax liabilities related to past sales and would result inconsiderable administrative burdens and costs for us and may reduce demand for our products from customers in such states when we charge customersfor such taxes. See Legal Proceedings.·Events such as acts of war or terrorism, natural disasters, changes in law, or large losses could adversely affect our insurance coverage and insuranceexpense, resulting in an adverse affect on our profitability and financial condition.We insure for certain property and casualty risks consisting primarily of physical loss to property, business interruptions resulting from property losses,worker’s compensation, comprehensive general liability, and auto liability. Insurance coverage is obtained for catastrophic property and casualtyexposures as well as those risks required to be insured by law or contract. Although we believe that our insurance coverage is reasonable, significantevents such as acts of war and terrorism, economic conditions, judicial decisions, legislation, natural disasters and large losses could materially affectour insurance obligations and future expense.Risks Related to Our Company·We rely to a great extent on our information and telecommunications systems, and significant system failures or outages, or our failure to properlyevaluate, upgrade or replace our systems, or the failure of our security/safety measures to protect our systems and websites, could have an adverseeffect on our results of operations.We rely on a variety of information and telecommunications systems in our operations. Our success is dependent in large part on the accuracy andproper use of our information systems, including our telecommunications systems. To manage our growth, we continually evaluate the adequacy of ourexisting systems and procedures, and we have been engaged in transitioning key features of our current information and operating systems to a newplatform we have developed specifically for our needs; delays or operational problems in effectively implementing the transition could have a materialadverse effect on our operations. We have experienced some delays and operational problems in implementing new IT systems which have impactedtimely transition to the new platform. We anticipate that we will regularly need to make capital expenditures to upgrade and modify our managementinformation systems, including software and hardware, as we grow and the needs of our business change. The occurrence of a significant systemfailure, electrical or telecommunications outages or our failure to expand or successfully implement new systems could have a material adverse effecton our results of operations.Our information systems networks, including our websites, and applications could be adversely affected by viruses or worms and may be vulnerable tomalicious acts such as hacking. The availability and efficiency of sales via our websites could also be adversely affected by “denial of service” attacksand other unfair competitive practices. Although we take preventive measures, these procedures may not be sufficient to avoid harm to our operations,which could have an adverse effect on our results of operations.·We have exited our NATG business and could incur costs in excess of our estimated exit expenses.10 In response to significant market pressures described above under the heading Operating History and Recent Restructuring of Our Business, theCompany negotiated the sale of certain assets and liabilities of the NATG business to PCM. The sale transaction closed on December 1, 2015, thoughdelivery of certain IT, website and other related assets was deferred to and completed in February 2016. As of this filing, the Company has completedmost of the NATG wind down activities, including selling its remaining inventory, closing the two remaining TigerDirect retail stores, and closing itsremaining NATG distribution center. Employee reductions were primarily completed in the fourth quarter of 2015 and the first quarter of 2016 andcurrently approximately 30 employees remain at the Miami office. The Company expects that additional NATG wind-down costs incurred during 2016or later will aggregate between $15 and $25 million, which will be presented in discontinued operations.There can be no assurance the Company will be able to timely exit its existing lease commitments at expected costs levels. Failure to achieve theseexpectations will result in increased cash exit costs for the Company and could have a material adverse effect on its operating results.·We have recently completed two acquisitions; our operations will be impacted by our ability to timely and efficiently transition and integrate thoseacquisitions with the rest of our business in the US and EMEA.There are significant risks and uncertainties associated with effecting acquisition transactions, particularly in integrating and managing the combinedoperations, technologies, technology platforms and products of the acquired companies and realizing the anticipated economic, operational and otherbenefits in a timely manner. Our failure to do so could result in substantial costs and delays or other operational, technical or financial problems.Integration efforts also may divert management attention and resources.We have made two acquisitions in the past twenty four months, and there is a risk that integration difficulties or a significant decline in revenues of theacquired business may cause us not to realize expected benefits from the transactions and may affect our results. The success of these acquisitionsdepends on our ability to realize the anticipated benefits and cost savings from combining the acquired businesses with our existing business, includinggrowing the revenues of the acquired businesses through cross selling and other initiatives. We may not be able to achieve these objectives, in whole orin part, or be able to do so in a timely manner. Furthermore, the acquired businesses are, and will in the short term continue to be, engaged intransitioning their businesses from the existing IT platforms on which they operate (and which are licensed from the sellers of those businesses understandard transition services agreements) to our IT platforms. This transition is complicated and affects many inter-related business functions; if we areunable to timely and effectively affect the IT transition aspect of the integration, or fail to do so without disruption, the acquired businesses operationsand our results would be materially adversely affected. The integration process, and the issues that can arise, can be complex and unforeseen operatingchallenges or unbudgeted situations can occur. Additional risks in acquisition transactions may include our inability to timely and effectively integratethe acquired company’s accounting, human resource, and other administrative systems, and coordination of product, sales and marketing functions. Inthe case of foreign acquisitions, such as the acquisition of SCC/Misco Solutions, we will need to integrate operations across different cultures andlanguages and to address the particular economic, currency, political, and regulatory risks associated with specific countries. Subject to certainexceptions, generally we will be responsible for the liabilities and obligations of the acquired businesses incurred or occurring prior to acquisition,including contingent liabilities. In this regard, we rely heavily on the representations and warranties provided to us by the sellers of acquired companies,including as they relate to compliance with laws and contractual requirements. If any of these representations and warranties is inaccurate or breached,such inaccuracy or breach could result in costly litigation and assessment of liability for which there may not be adequate recourse against such sellers,in part due to contractual time limitations and limitations of liability.In addition difficulties in integrating acquired companies systems, controls, policies and procedures to comply with the internal control over financialreporting requirements of the Sarbanes-Oxley Act of 2002 may occur. Finally, potential accounting charges to the extent intangibles recorded inconnection with an acquisition, such as goodwill, trademarks, customer relationships or intellectual property, are later determined to be impaired andwritten down in value.11 ·The establishment and integration of our shared service center in Hungary exposes us to various technology, regulatory and economic risks.We opened our shared services center in Budapest, Hungary during the second quarter of 2013 to facilitate the continued growth of our EMEA businessthrough operational efficiencies and enhanced internal processes. This facility provides administrative and back office services for the existingEuropean business. As an incentive to locate in Hungary, the Hungarian Investment and Trade Agency (“HITA”) agreed to reimburse the Company forapproximately 8% of payroll costs, up to a maximum of approximately $3.1 million, for the first 505 employees hired at the shared service center. Thereimbursement is limited to the first twenty four months of employment for employees hired by December 2015 (or such lower number of employees asis negotiated with HITA) with all such reimbursements being completed by December 2017. In return for this incentive, the Company has committedto maintaining certain employment levels through 2020. The ongoing commitment is for less than 505 employees and accordingly the payroll costreimbursement will be proportionally less. Failure by the Company to maintain these employment levels will result in the repayment of a portion or allof the related reimbursements we may receive with interest.Our efforts to operate our European business in a more centralized manner, rather than on an individual country by country basis, requires us toimplement changes in our business processes, eliminate redundancies, relocate and/or hire new personnel, transition our information managementsystems, and integrate the new operation into our existing business seamlessly and without disruption to our operations, customers and vendors.However , delays or operational problems in transitioning our information management systems, a lower than expected impact of the facility on theCompany’s European operations, costs and capital expenditures, the ability to timely hire and train new employees in Hungary, and delays,impediments or other problems associated with its establishment could have a material adverse effect on our European operations and our results ofoperations.·We rely on third party suppliers for most of our products and services. The loss or interruption of these relationships could impact our sales volumes,the levels of inventory we must carry, and/or result in sales delays and/or higher inventory costs from new suppliers. Co-operative advertising andother sales incentives provided by our suppliers have decreased and could decrease further in the future thereby increasing our expenses and adverselyaffecting our results of operations and cash flows.We purchase a substantial portion of our products from major distributors and directly from large manufacturers who may deliver those productsdirectly to our customers. These relationships enable us to make available to our customers a wide selection of products without having to maintainlarge amounts of inventory. The termination or interruption of our relationships with any of these suppliers could materially adversely affect ourbusiness.We purchase a number of our products from vendors outside of the United States. Difficulties encountered by one or several of these suppliers couldhalt or disrupt production and delay completion or cause the cancellation of our orders. Delays or interruptions in the transportation network couldresult in loss or delay of timely receipt of product required to fulfill customer orders. Our ability to find qualified vendors who meet our standards andsupply products in a timely and efficient manner is a significant challenge, especially with respect to goods sourced from outside the U.S. Political orfinancial instability, merchandise quality issues, product safety concerns, trade restrictions, work stoppages, tariffs, foreign currency exchange rates,transportation capacity and costs, inflation, civil unrest, outbreaks of pandemics and other factors relating to foreign trade are beyond our control. Theseand other issues affecting our vendors could materially adversely affect our revenue and gross profit .Many product suppliers provide us with co-operative advertising support in exchange for featuring their products in our catalogs and on our internetsites. Certain suppliers provide us with other incentives such as rebates, reimbursements, payment discounts, price protection and other similararrangements. These incentives are offset against cost of goods sold or selling, general and administrative expenses, as applicable. The level of co-operative advertising support and other incentives received from suppliers has declined and may decline further in the future, increasing our cost ofgoods sold or selling, general and administrative expenses and have an adverse effect on results of operations and cash flows.·Goodwill and intangible assets may become impaired resulting in a charge to earnings.The Company has made acquisitions in the past of other businesses and these acquisitions resulted in the recording of significant intangible assetsand/or goodwill. We are required to test goodwill and intangible assets annually to determine if the carrying values of these assets are impaired or on amore frequent basis if indicators of impairment exist. If any of our goodwill or intangible assets are determined to be impaired we may be required torecord a significant charge to earnings in the period during which the impairment is discovered. Previously, impairment charges on goodwill andintangible assets occurred in 2014 and 2013 for the NATG business. No impairment charges have occurred in IPG and EMEA. Although the carryingamounts of intangible assets and goodwill are relatively small as of December 31, 2015, to the extent the Company makes acquisitions in the futurethere could again be material amounts of such assets recorded and subject to future impairment testing.12 ·Our substantial international operations are subject to risks such as fluctuations in currency rates (which can adversely impact foreign revenues andprofits when translated to US Dollars), foreign regulatory requirements, political uncertainty and the management of our growing internationaloperations .We operate internationally and as a result, we are subject to risks associated with doing business globally, such as risks related to the differing legal,political and regulatory requirements and economic conditions of many jurisdictions. Risks inherent to operating internationally include:·Changes in a country’s economic or political conditions·Changes in foreign currency exchange rates·Difficulties with staffing and managing international operations·Unexpected changes in regulatory requirements·Changes in transportation and shipping costs·Enforcement of intellectual property rightsThe functional currencies of our businesses outside of the U.S. are the local currencies. Changes in exchange rates between these foreign currencies andthe U.S. Dollar will affect the recorded levels of our assets, liabilities, net sales, cost of goods sold and operating margins and could result in exchangegains or losses. The primary currencies to which we have exposure are the European Union Euro, Canadian Dollar, British Pound Sterling, and the U.S.Dollar. Exchange rates between these currencies and the U.S. Dollar in recent years have fluctuated significantly and may do so in the future. Ouroperating results and profitability may be affected by any volatility in currency exchange rates and our ability to manage effectively our currencytransaction and translation risks. For example, we currently have operations located in numerous countries outside the United States, and non-U.S. salesaccounted for approximately 63.5% of our net sales from continuing operations during 2015. To the extent the U.S. dollar strengthens against foreigncurrencies, our foreign revenues and profits will be reduced when translated into U.S. dollars.·We are exposed to various inventory risks, such as being unable to profitably resell excess or obsolete inventory and/or the loss of product return rightsand price protection from our vendors; such events could lower our gross margins or result in inventory write-downs that would reduce reported futureearnings.Our inventory is subject to risk due to technological change and changes in market demand for particular products. If we fail to manage our inventoryof older products we may have excess or obsolete inventory. We may have limited rights to return purchases to certain suppliers and we may not beable to obtain price protection on these items. The elimination of purchase return privileges and lack of availability of price protection could lower ourgross margin or result in inventory write-downs.We also take advantage of attractive product pricing by making opportunistic bulk inventory purchases; any resulting excess and/or obsolete inventorythat we are not able to re-sell could have an adverse impact on our results of operations. Any inability to make such bulk inventory purchases maysignificantly impact our sales and profitability.·We depend on bank credit facilities to address our working capital and cash flow needs from time to time, and if we are unable to renew or replacethese facilities, or borrowing capacity were to be reduced our liquidity and capital resources may be adversely affected.We require significant levels of capital in our business to finance accounts receivable and inventory. We maintain credit facilities in the United Statesto finance increases in our working capital if available cash is insufficient. The amount of credit available to us at any point in time may be adverselyaffected by the quality or value of the assets collateralizing these credit lines. In addition, in recent years global financial markets have experienceddiminished liquidity and lending constraints. Our ability to obtain future and/or increased financing to satisfy our requirements as our business expandscould be adversely affected by economic and market conditions, credit availability and lender perception of our Company and industry . Although ourcurrent credit facility expires in October 2016, we currently have no reason to believe that we will not be able to renew or replace our facilities whenthey reach maturity.13 ·If we fail to observe certain restrictions and covenants under our credit facilities the lenders could refuse to waive such default, terminate the creditfacility and demand immediate repayment, which would adversely affect our cash position and materially adversely affect our operations.Our United States revolving credit agreement contains covenants restricting or limiting our ability to, among other things:·incur additional debt·create or permit liens on assets·make capital expenditures or investments·pay dividendsIf we fail to comply with the covenants and other requirements set forth in the credit agreement, we would be in default and would need to negotiate awaiver agreement with the lenders. Failure to agree on such a waiver could result in the lenders terminating the credit agreement and demandingrepayment of any outstanding borrowings, which could adversely affect our cash position and adversely affect the availability of financing to us, whichcould materially impact our operations.·Our European employees are represented by unions or workers’ councils or are employed subject to local laws that are less favorable to employersthan the laws of the U.S.As of December 31, 2015, we had approximately 1,700 employees located in Europe and Asia. We have workers’ councils representing the employeesof our France, Germany, and Netherlands operations, and trade unions representing our employees in Italy and Sweden and elected employeerepresentatives for our employees in the United Kingdom and Spain. Most of these European employees are employed in countries in whichemployment laws provide greater bargaining or other rights to employees than the laws of the U.S. Such employment rights require us to workcollaboratively with the legal representatives of the employees to effect any changes to labor arrangements. For example, most of our employees inEurope are represented by unions or workers’ councils that must approve certain changes in conditions of employment, including salaries and benefitsand staff changes, and may impede efforts to restructure our workforce. Although we believe that we have a good working relationship with ouremployees, a strike, work stoppage or slowdown by our employees or significant dispute with our employees could result in a significant disruption ofour operations or higher ongoing labor costs.·The failure to timely and satisfactorily process manufacturers’ and our own rebate programs could negatively impact our customer satisfaction levels .Similar to other companies in the technology products industry, we advertise manufacturers’ mail-in rebates on many products we sell and, in somecases, offer our own rebates. These rebates are processed through third party vendors and in house. If these rebates are not processed in a timely andsatisfactory manner by either third party vendors or our in house operations, our reputation in the marketplace could be negatively impacted.·We may be unable to reduce prices in reaction to competitive pressures, or implement cost reductions or new product line expansion to address grossprofit and operating margin pressures; failure to mitigate these pressures could adversely affect our operating results and financial condition .The B2B computer, service solutions and electronics industry in which EMEA participates is highly price competitive and gross profit margins arenarrow and variable. The Company’s ability to further reduce prices in reaction to competitive pressure is limited. Additionally, gross margins andoperating margins are affected by changes in factors such as vendor pricing, vendor rebate and/or price protection programs, product return rights, andproduct mix. In 2015 pricing pressure continued to be prevalent in the markets we serve and we expect this to continue. We may not be able tomitigate these pricing pressures and resultant declines in sales and gross profit margin with cost reductions in other areas or expansion into new productlines. If we are unable to proportionately mitigate these conditions our operating results and financial condition may suffer.14 ·We would be exposed to liability, including substantial fines and penalties and, in extreme cases, loss of our ability to accept credit cards, in the eventour privacy and data security policies and procedures are inadequate to prevent security breaches of our consumer personal information and creditcard information records.In processing our sales orders we often collect personal information and credit card information from our customers. The Company has privacy anddata security policies in place which are designed to prevent security breaches, however, if a third party or a rogue employee or employees are able tobypass our network security, “hack into” our systems or otherwise compromise our customers’ personal information or credit card information, wecould be subject to liability. This liability may include claims for identity theft, unauthorized purchases and claims alleging misrepresentation of ourprivacy and data security practices or other related claims. While the Company believes it conforms to appropriate Payment Card Industry (“PCI”)security standards where necessary for its various businesses, any breach involving the loss of credit card information may lead to PCI related fines inthe millions of dollars. In the event of a severe breach, credit card providers may prevent our accepting of credit cards. Any such liability related to theaforementioned risks could lead to reduced profitability and damage our brand(s) and/or reputation.·Failure to protect the integrity, security and use of our customers’ information could expose us to litigation and materially damage our standing withour customers.The use of individually identifiable consumer data is regulated at the state, federal and international levels and we incur costs associated withinformation security – such as increased investment in technology and the costs of compliance with consumer protection laws. Additionally, ourinternet operations and website sales depends upon the secure transmission of confidential information over public networks, including the use ofcashless payments. While we have taken significant steps to protect customer and confidential information, there can be no assurance that advances incomputer capabilities, new discoveries in the field of cryptography, the efforts of “hackers” and cyber criminals or other developments will prevent thecompromise of our customer transaction processing capabilities and our customers’ personal data. If any such compromise of our security were tooccur, it could have a material adverse effect on our reputation, operating results and financial condition and could subject us to litigation.·Sales to individual customers expose us to credit card fraud, which impacts our operations. If we fail to adequately protect ourselves from credit cardfraud, our operations could be adversely impacted.Failure to adequately control fraudulent credit card transactions could increase our expenses. Increased sales to individual consumers, which are morelikely to be paid for using a credit card, increases our exposure to fraud. We employ technology solutions to help us detect the fraudulent use of creditcard information. However, if we are unable to detect or control credit card fraud, we may suffer losses as a result of orders placed with fraudulentcredit card data, which could adversely affect our business.·Our business is dependent on certain key personnel.Our business depends largely on the efforts and abilities of certain key senior management. The loss of the services of one or more of such keypersonnel could have a material adverse effect on our business and financial results.·We are subject to litigation risk due to the nature of our business, which may have a material adverse effect on our results of operations and business.From time to time, we are involved in lawsuits or other legal proceedings arising in the ordinary course of our business. These may relate to, forexample, patent, trademark or other intellectual property matters, employment law matters, states sales tax claims on internet/ecommerce transactions,product liability, commercial disputes, consumer sales practices, or other matters. In addition, as a public company we could from time to time faceclaims relating to corporate or securities law matters. The defense and/or outcome of such lawsuits or proceedings could have a material adverse effecton our business. See “Legal Proceedings”.Following the previously reported independent investigation of Gilbert Fiorentino and Carl Fiorentino by our Audit Committee in 2011 (in response toa whistleblower report) for a variety of improper acts, the subsequent termination of their employment and the entering into by Gilbert Fiorentino of asettlement agreement with the SEC, on November 20, 2014 the United States Attorney’s Office (“USAO”) for the Southern District of Floridaannounced that Gilbert Fiorentino and Carl Fiorentino had been charged with mail fraud, wire fraud and money laundering in connection with a schemeto defraud TigerDirect and Systemax. Specifically, the charges set forth a scheme to obtain kickbacks and other benefits, and to conceal this illicitincome from the IRS, all while Gilbert Fiorentino and Carl Fiorentino were employed as senior executives at the Company’s North AmericaTechnology Products business. On December 2, 2014, the United States Attorney’s Office announced that Gilbert Fiorentino and Carl Fiorentino hadpled guilty to various charges, and on March 3, 2015, Gilbert Fiorentino and Carl Fiorentino were sentenced to sixty and eighty months imprisonments,respectively. Following completion of their sentences, each is to be placed on supervised release for a period of thirty-six months. On March 1, 2016,the United States District Court for the Southern District of Florida awarded the Company approximately $36 million in restitution from Gilbert andCarl Fiorentino, which the Company will utilize all available means to collect.15 The Company's Audit Committee, with the assistance of independent outside counsel, has been cooperating with a request by the USAO that it assistthe USAO’s investigation into allegations arising from the Fiorentino investigation regarding possible executive officer conflicts of interest and internalcontrols and books and records violations. The Company’s Audit Committee, along with the Audit Committee’s independent outside counsel,conducted an investigation of the allegations and its counsel presented the Audit Committee’s findings to the USAO in July 2015. The Company hasbeen advised that the Audit Committee investigation has found no evidence of executive officer conflicts of interest, and no material evidence ofinternal controls violations or books and records violations. The Audit Committee considers its investigation to be closed at this time and the Companyhas been advised there has been no further contact from the USAO. Notwithstanding, it is not possible at this time to predict if or when the USAO willconclude its investigation; what subject(s) will be investigated; what actions, if any, may be taken by the government as a result of its investigation; orwhether any of these matters will have a material adverse impact on the Company.·Our profitability can be adversely affected by changes in our income tax exposure due to changes in tax rates or laws, changes in our effective tax ratedue to changes in the mix of earnings among different countries, restrictions on utilization of tax benefits and changes in valuation of our deferred taxassets and liabilities.Changes in our income tax expense due to changes in the mix of U.S. and non-U.S. revenues and profitability, changes in tax rates or exposure toadditional income tax liabilities could affect our profitability. We are subject to income taxes in the United States and various foreign jurisdictions.Our effective tax rate has been in the past and could be in the future adversely affected by changes in the mix of earnings in countries with differingstatutory tax rates, restrictions on utilization of tax benefits, changes in the valuation of deferred tax assets and liabilities, changes in tax laws or bymaterial audit assessments. The carrying value of our deferred tax assets is dependent on our ability to generate future taxable income in thosejurisdictions. In addition, the amount of income taxes we pay is subject to audit in our various jurisdictions and a material assessment by a tax authoritycould affect our profitability.·Changes in accounting standards or practices, as well as new accounting pronouncements or interpretations, may require us to account for and reportour financial results in a different manner in the future, which may be less favorable than the manner used historically.A change in accounting standards or practices can have a significant effect on our reported results of operations. New accounting pronouncements andinterpretations of existing accounting rules and practices have occurred and may occur in the future. Changes to existing rules may adversely affect ourreported financial results.·Concentration of Ownership and Control Limits Stockholders Ability to Influence Corporate ActionsRichard Leeds, Robert Leeds, and Bruce Leeds (each are brothers and directors and executive officers of the Company), together with trusts for thebenefit of certain members of their respective families and other entities controlled by them, control approximately 68.6% of the voting power of ouroutstanding common stock. Due to such holdings, the Leeds brothers together with these trusts and entities are able to determine the outcome ofvirtually all matters submitted to stockholders for approval, including the election of directors, the appointment of management, amendment of ourarticles of incorporation, significant corporate transactions (such as a merger or other sale of our company or our assets), the payments of dividends onour common stock and the entering into of extraordinary transactions. Further, a s a "controlled company" under NYSE rules, the Company haselected to opt-out of certain New York Stock Exchange listing standards that, among other things, require listed companies to have a majority ofindependent directors on their board; the Company does however currently have an independent Audit, Compensation Committee and CorporateGovernance and Nominating Committees.·Risk of Thin Trading and Volatility of our Common Stock Could Impact Stockholder ValueOur common stock is currently listed on the NYSE and is thinly traded. Volatility of thinly traded stocks is typically higher than the volatility of moreliquid stocks with higher trading volumes. The trading of relatively small quantities of shares of common stock by our stockholders maydisproportionately influence the price of those shares in either direction. This may result in volatility in our stock price and could exacerbate the othervolatility-inducing factors described below. The market price of our common stock could be subject to significant fluctuations as a result of being thinlytraded.Item 1B.Unresolved Staff Comments.None.16 Item 2.Properties.We operate our business from numerous facilities in North America, Europe and Asia. These facilities include our headquarters location, administrative offices,telephone call centers, distribution centers and retail stores. Certain facilities handle multiple functions. Most of our facilities are leased; certain are owned by theCompany.North Americ aAs of December 31, 2015 we have seven operational distribution centers in North America which aggregate approximately 2.5 million square feet, all of which areleased. Six of the distribution centers are part of the IPG segment and total 2.1 million square feet. The remaining distribution center is part of the nowdiscontinued NATG segment and was closed during February 2016. In addition to these operational distribution centers, at December 31, 2015 we had two vacantdistribution centers which are being marketed for sublease.Our headquarters, administrative offices and call centers aggregate approximately 344,000 square feet, all of which are leased. The IPG segment accounts for232,000 square feet, the NATG segment 102,000 square feet, and approximately 10,000 square feet for the Corporate and Other segment.The following table summarizes the geographic location of our North America retail stores at the end of 2015:LocationStores Open – 12/31/14Store Openings/ (Store Closings)Stores Open – 12/31/15Delaware1(1)-Florida15(14)1Georgia1-1Illinois4(4)-North Carolina1(1)-Puerto Rico2(2)-Texas4(4)-Ontario, Canada6(6)-34(32)2EuropeAs of December 31, 2015, we have four distribution centers in EMEA Technology which aggregate approximately 185,000 square feet. Three of these,aggregating approximately 112,000 square feet are leased; one distribution center of approximately 73,000 square feet is owned by the Company. Ouradministrative offices and call centers aggregate approximately 310,000 square feet, of which 233,000 square feet are leased and 77,000 square feet are owned bythe Company.AsiaAs of December 31, 2015, we leased administrative offices in Asia of approximately 10,000 square feet. 7,000 square feet pertain to the Corporate and Othersegment. The remaining 3,000 square feet are part of the IPG segment.Please refer to Note 12 to the Consolidated Financial Statements for additional information about leased properties, including aggregate rental expense for theseproperties.Item 3.Legal Proceedings.The Company and its subsidiaries are involved in various lawsuits, claims, investigations and proceedings including commercial, employment, consumer, personalinjury and health and safety law matters, which are being handled and defended in the ordinary course of business. In addition, the Company is subject to variousassertions, claims, proceedings and requests for indemnification concerning intellectual property, including patent infringement suits involving technologies thatare incorporated in a broad spectrum of products the Company sells. The Company is also audited by (or has initiated voluntary disclosure agreements with)numerous governmental agencies in various countries, including U.S. Federal and state authorities, concerning potential income tax, sales tax and unclaimedproperty liabilities. These matters are in various stages of investigation, negotiation and/or litigation, and are being vigorously defended. The Company is alsobeing audited by an entity representing 45 states seeking recovery of “unclaimed property”. The Company is complying with the audit and is providing requestedinformation.17 Although the Company does not expect, based on currently available information, that the outcome in any of these matters, individually or collectively, will have amaterial adverse effect on its financial position or results of operations, the ultimate outcome is inherently unpredictable. Therefore, judgments could be renderedor settlements entered, that could adversely affect the Company’s operating results or cash flows in a particular period. The Company routinely assesses all of itslitigation and threatened litigation as to the probability of ultimately incurring a liability, and records its best estimate of the ultimate loss in situations where itassesses the likelihood of loss as probable and estimable. In this regard, the Company establishes accrual estimates for its various lawsuits, claims, investigationsand proceedings when it is probable that an asset has been impaired or a liability incurred at the date of the financial statements and the loss can be reasonablyestimated. At December 31, 2015 the Company has established accruals for certain of its various lawsuits, claims, investigations and proceedings based uponestimates of the most likely outcome in a range of loss or the minimum amounts in a range of loss if no amount within a range is a more likely estimate. TheCompany does not believe that at December 31, 2015 any reasonably possible losses in excess of the amounts accrued would be material to the financialstatements.Following the previously reported independent investigation of Gilbert Fiorentino and Carl Fiorentino by our Audit Committee in 2011 (in response to awhistleblower report) for a variety of improper acts, the subsequent termination of their employment and the entering into by Gilbert Fiorentino of a settlementagreement with the Securities and Exchange Commission, on November 20, 2014 the United States Attorney’s Office (“USAO”) for the Southern District ofFlorida announced that Gilbert Fiorentino and Carl Fiorentino had been charged with mail fraud, wire fraud and money laundering in connection with a scheme todefraud TigerDirect and Systemax. Specifically, the charges set forth a scheme to obtain kickbacks and other benefits, and to conceal this illicit income from theIRS, all while Gilbert Fiorentino and Carl Fiorentino were employed as senior executives at the Company’s North American Technology Products business. OnDecember 2, 2014, the United States Attorney’s Office announced that Gilbert Fiorentino and Carl Fiorentino had pled guilty to various charges, and on March 3,2015, Gilbert Fiorentino and Carl Fiorentino were sentenced to sixty and eighty months imprisonment, respectively. Following completion of their sentences, eachis to be placed on supervised release for a period of thirty-six months. On March 1, 2016, the United States District Court for the Southern District of Floridaawarded the Company approximately $36 million in restitution from Gilbert and Carl Fiorentino, which the Company will utilize all available means to collect.The Company's Audit Committee, with the assistance of independent outside counsel, has been cooperating with a request by the USAO that it assist the USAO’sinvestigation into allegations arising from the Fiorentino investigation regarding possible executive officer conflicts of interest and internal controls and books andrecords violations. The Company’s Audit Committee, along with the Audit Committee’s independent outside counsel, conducted an investigation of theallegations and its counsel presented the Audit Committee’s findings to the USAO in July 2015. The Company has been advised that the Audit Committeeinvestigation has found no evidence of executive officer conflicts of interest, and no material evidence of internal controls violations or books and recordsviolations. The Audit Committee considers its investigation to be closed at this time and the Company has been advised there has been no further contact from theUSAO. Notwithstanding, it is not possible at this time to predict if or when the USAO will conclude its investigation; what subject(s) will be investigated; whatactions, if any, may be taken by the government as a result of its investigation; or whether any of these matters will have a material adverse impact on theCompany.Item 4.Mine Safety Disclosures.Not applicable.18 PART IIItem 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesSystemax common stock is traded on the NYSE Euronext Exchange under the symbol “SYX.” The following table sets forth the high and low closing sales priceof our common stock as reported on the New York Stock Exchange for the periods indicated.HighLow2015First Quarter$14.74 $10.35 Second Quarter12.44 7.99 Third Quarter9.18 6.73 Fourth Quarter9.97 7.36 2014First Quarter$15.28 $10.86 Second Quarter18.25 14.12 Third Quarter16.41 12.30 Fourth Quarter16.21 12.28 On December 31, 2015 (closest date to our fiscal year end of January 2, 2016), the last reported sale price of our common stock on the New York Stock Exchangewas $8.60 per share. As of December 31, 2015, we had 168 shareholders of record.Depending in part upon profitability, the strength of our balance sheet, our cash position and the need to retain cash for the development and expansion of ourbusiness, we may decide to declare special dividends in the future, subject to availability limitations under our credit facilities. See “Management’s Discussion andAnalysis of Financial Condition and Results of Operations – Financial Condition, Liquidity and Capital Resources” and Note 6 of “Notes to Consolidated FinancialStatements”.Information regarding securities authorized for issuance under equity compensation plans and a performance graph relating to the Company’s common stock is setforth in the Company’s Proxy Statement relating to the 2016 Annual Meeting of Shareholders and is incorporated by reference herein.19 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 FinancialStatements and the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in thisreport. The selected statement of operations data, excluding discontinued operations, for fiscal years 2015, 2014 and 2013 and the selected balance sheet data as ofDecember 2015 and 2014 are derived from the audited consolidated financial statements which are included elsewhere in this report. The selected balance sheetdata as of December 2013, 2012 and 2011 and the selected statement of operations data for fiscal years 2012 and 2011 are derived from the audited consolidatedfinancial statements of the Company which are not included in this report. The results of operations shown here have been adjusted to reflect the presentation of theNATG discontinued operations (See Note 1 of the Notes to Consolidated Financial Statements).Years Ended December 31,(In millions, except per share data)20152014201320122011Statement of Operations Data:Net sales$1,854.7 $2,104.2 $1,975.4 $1,961.2 $1,923.7 Gross profit$342.7 $377.2 $360.7 $354.4 $352.5 Operating income (loss) from continuing operations$(24.1) $(13.7) $(10.8) $8.2 $33.1 Net income (loss) from continuing operations$(48.3) $(32.0) $(43.0) $17.8 $17.9 Per Share Amounts :Net income (loss) — diluted$(1.30) $(0.86) $(1.16) $0.48 $0.48 Weighted average common shares — diluted37.1 37.1 37.0 36.9 37.1 Cash dividends declared per common share$- $- $- $0.25 $- Balance Sheet Data:Working capital$214.2 $310.6 $345.8 $360.8 $354.8 Total assets$710.1 $896.9 $942.2 $962.3 $889.7 Long-term debt, excluding current portion$0.4 $1.1 $2.9 $5.4 $7.1 Shareholders’ equity$253.9 $359.6 $406.2 $446.3 $454.3 Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.OverviewSystemax is primarily a direct marketer of brand name and private label products. During 2015, our operations were organized in three reportable businesssegments — IPG, EMEA and our largest business in terms of revenue, NATG. EMEA and NATG were aggregated in prior years as they met the aggregationcriteria. Smaller business operations and corporate functions are aggregated and reported as an additional segment – Corporate. On December 1, 2015, we soldcertain assets and liabilities of the NATG business and are currently winding down its remaining operations. See History of and Recent Restructuring of our NATGBusiness above.The Company follows the guidance under Accounting Standards Update (“ASU”) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals ofComponents of an Entity, which raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinuedoperations and certain other disposals that do not meet the definition of a discontinued operation. Under ASU 2014-08 in order for a disposal to qualify fordiscontinued operations presentation in the financial statements the disposal must be a “major strategic shift” for the reporting entity . If the entity meets this newthreshold only the components that were in operation at the time of disposal will be presented as discontinued operations. In the Company’s case, the sale of theNATG business in December 2015 meets the major strategic shift criteria. As a result the B2B and Ecommerce business and the three remaining retail stores inoperation at the time of the sale are presented as discontinued operations in the accompanying financial statements presented in this Form 10-K. The 31 retail storesand warehouse which were closed in 2015 prior to the PCM transaction, along with allocations of common distribution and back office costs, are presented as partof the Company’s continuing operations for all periods; other NATG operations that were discontinued by the Company in previous periods are also presented ascontinued operations for all periods. In order to provide more meaningful information to investors which reflect the full exit of NATG, the Company is alsopresenting its results on a non-GAAP basis in the “Non-GAAP” operating results table. This non-GAAP presentation reflects the entire NATG segment as adiscontinued operation for all periods presented as well as including adjustments for non-recurring items, intangible amortization and equity compensation inrecurring operations.20 Management’s discussion and analysis that follows will include IPG, EMEA, NATG continuing operations and NATG discontinued operations.Industrial ProductsOur Industrial Products segment sells a wide array of MRO products which are marketed in North America. Most of these products are manufactured by othercompanies; however, the Company does offer a selection of products that are manufactured for our own design and marketed under the trademarks Global™ ,GlobalIndustrial.com™ and Nexel™ Relius™, Relius Elite™ and Hercules™, Paramount™ and Interion™. Industrial products accounted for 38%, 26% and 24% of our GAAP net sales from continuing operations in 2015, 2014 and 2013, respectively. In both of these product groups, we offer our customers a broadselection of products, prompt order fulfillment and extensive customer service.On January 30, 2015, the Company announced that its Industrial Products Group had completed its previously announced acquisition of the Plant EquipmentGroup, a business-to-business direct marketer of MRO products, from TAKKT America for $25.9 million in cash; post-closing working capital adjustments werede minimis. Integration of this acquired business is in process and proceeding timely and efficiently. This acquisition expands the Company’s regional footprintand its market share.EMEA Technology Products GroupOur EMEA Technology Products segment primarily sells ICT and CE products. These products are marketed in Europe. Most of these products are manufacturedby other companies. EMEA Technology products accounted for 57%, 57% and 56% of our GAAP net sales from continuing operations in 2015, 2014 and 2013,respectively.On June 12, 2014, the Company acquired Misco Solutions (f/k/a SCC Services B.V.), a supplier of business-to-business IT products and services with operations inthe Netherlands. This acquisition expanded the Company’s business in the Netherlands.NATG Technology Products GroupAs disclosed above, the Company sold certain B2B assets of NATG in December 2015 and will cease its operations in 2016. The NATG segment sold primarilyICT and CE products. These products were marketed in the United States, Canada and Puerto Rico. Most of these products were manufactured by othercompanies; however the Company did offer a selection of products that were manufactured to our own designs and marketed on a private label basis. NATG salesincluded in continuing operations accounted for 5%, 17% and 20% of our GAAP net sales from continuing operations in 2015, 2014 and 2013, respectively .Discontinued OperationsAs disclosed above, the B2B and Ecommerce business and the three remaining retail stores in operation at the time of the sale to PCM are presented asdiscontinued operations in the accompanying financial statements. Total GAAP net sales for the discontinued operations were $1,053.4 million, $1,338.6 millionand $1,376.9 million for the years ended 2015, 2014 and 2013, respectively. See Note 2 and 13 to the Consolidated Financial Statements included in Item 15 ofthis Form 10-K for additional financial information about our business segments as well as information about our geographic operations.Operating ConditionsThe North American industrial products market is highly fragmented and we compete against multiple distribution channels.The EMEA market for computer products and electronics is subject to intense price competition and is characterized by narrow gross profit margins. Distribution isworking capital intensive, requiring us to incur significant costs associated with the warehousing of many products, including the costs of maintaining inventory,leasing warehouse space, inventory management systems, and employing personnel to perform the associated tasks. We supplement our on-hand productavailability by maintaining relationships with major distributors and manufacturers, utilizing a combination of stock and drop-shipment fulfillment.21 The primary component of our operating expenses historically has been employee-related costs, which includes items such as wages, commissions, bonuses,employee benefits and stock option expenses. We continually assess our operations to ensure that they are efficient, aligned with market conditions and responsiveto customer needs.In the discussion of our results of operations we refer to business to business channel sales and period to period constant currency comparisons. Sales in theIndustrial Products segment, European Technology Products and Corporate and other are considered to be B2B sales. In the North American Technology Productsbusiness, we consider business to business (“B2B”) channel sales to be sales made direct to other businesses and government /public sector entities throughmanaged business relationships, outbound call centers and extranets. Consumer (“B2C”) channel sales are sales from retail stores, consumer websites, inbound callcenters and television shopping channels. Constant currency refers to the adjustment of the results of our foreign operations to exclude the effects of period toperiod fluctuations in currency exchange rates.Critical Accounting Policies and EstimatesOur significant accounting policies are described in Note 1 to the Consolidated Financial Statements included in Item 15 of this Form 10-K. Certain accountingpolicies 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 materially from those estimates. These judgments arebased on historical experience , observation of trends in the industry, information provided by customers and information available from other outside sources, asappropriate. Management believes that full consideration has been given to all relevant circumstances that we may be subject to, and the consolidated financialstatements of the Company accurately reflect management’s best estimate of the consolidated results of operations, financial position and cash flows of theCompany for the years presented. We identify below a number of policies that entail significant judgments or estimates, the assumptions and or judgments used todetermine those estimates and the potential effects on reported financial results if actual results differ materially from these estimates.Accounting policyAssumptions and uncertaintiesQuantification and analysis of effect onactual results if estimates differ materiallyRevenue Recognition. We recognize product saleswhen persuasive evidence of an order arrangementexists, delivery has occurred, the sales price is fixedor determinable and collectability is reasonablyassured. Generally, these criteria are met at the timeof receipt by customers when title and risk of lossboth are transferred, except in our IndustrialProducts segment where title and risk pass at timeof shipment. Sales are presented net of returns andallowances, rebates and sales incentives. Reservesfor estimated returns and allowances are providedwhen sales are recorded, based on historicalexperience and current trends. Our revenue recognition policy containsassumptions and judgments made by managementrelated to the timing and amounts of future salesreturns. Sales returns are estimated based uponhistorical experience and current known trends. We have not made any material changes to oursales return reserve policy in the past three yearsand we do not anticipate making any materialchanges to this policy in the future. However if ourestimates are materially different than our actualexperience we could have a material gain or lossadjustment.Allowance for Doubtful Accounts Receivable . Werecord an allowance for doubtful accounts to reflectour estimate of the collectability of our tradeaccounts receivable. While bad debt allowanceshave been within expectations and the provisionsestablished, there can be no guarantee that we willcontinue to experience the same allowance rate wehave in the past. Our allowance for doubtful accounts policycontains assumptions and judgments made bymanagement related to collectability of agedaccounts receivable and chargebacks from creditcard sales. We evaluate the collectability ofaccounts receivable based on a combination offactors, including an analysis of the age of customeraccounts and our historical experience withaccounts receivable write-offs. The analysis alsoincludes the financial condition of a specificcustomer or industry, and general economicconditions. In circumstances where we are aware ofcustomer credit card charge-backs or a specificcustomer’s inability to meet its financialobligations, a specific reserve for bad debtsapplicable to amounts due to reduce the netrecognized receivable to the amount managementreasonably believes will be collected is recorded. Inthose situations with ongoing discussions, theamount of bad debt recognized is based on thestatus of the discussions. We have not made any material changes to ourallowance for doubtful accounts receivable reservepolicy in the past three years and we do notanticipate making any material changes to thispolicy in the future. However if our estimates arematerially different than our actual experience wecould have a material gain or loss adjustment.A change of 10% in our allowance for doubtfulaccounts reserve at December 31, 2015 wouldimpact net income by approximately $1.0 million.22 Inventory valuation . We value our inventories atthe lower of cost or market; cost being determinedon the first-in, first-out method except in certainlocations in Europe and retail locations where anaverage cost is used. Excess and obsolete orunmarketable merchandise are written down basedon historical experience, assumptions about futureproduct demand and market conditions. If marketconditions are less favorable than projected or iftechnological developments result in acceleratedobsolescence, additional write-downs may berequired. While obsolescence and resultantmarkdowns have been within expectations, therecan be no guarantee that we will continue toexperience the same level of markdowns we have inthe past. Our inventory reserve policy contains assumptionsand judgments made by management related toinventory aging, obsolescence, credits that we mayobtain for returned merchandise, shrink andconsumer demand. We have not made any material changes to ourinventory reserve policy in the past three years andwe do not anticipate making any material changesto this policy in the future. However if ourestimates are materially different than our actualexperience we could have a material lossadjustment.A change of 10% in our inventory reserves atDecember 31, 2015 would impact net income byapproximately $1.6 million.Goodwill and Intangible Assets. We apply theprovisions of relevant accounting guidance in ourvaluation of goodwill, trademarks, domain names,client lists and other intangible assets. Relevantaccounting guidance requires that goodwill andindefinite lived intangibles be reviewed at leastannually for impairment or more frequently ifindicators of impairment exist. The amount of animpairment loss would be recognized as the excessof the asset’s carrying value over its fair value. Our impairment testing involves judgments anduncertainties, quantitative and qualitative, related tothe use of discounted cash flow models andforecasts of future results, both of which involvesignificant judgment and may not be reliable.Significant management judgment is necessary toevaluate the operating environment and economicconditions that exist to develop a forecast for areporting unit. Assumptions related to thediscounted cash flow models we use include theinputs used to determine the Company’s weightedaverage cost of capital including a market riskpremium, the beta of a reporting unit, reporting unitspecific risk premiums and terminal growth values.Critical assumptions related to the forecast inputsused in our discounted cash flow models includeprojected sales growth, same store sales growth,gross margin percentages, new businessopportunities, working capital requirements, capitalexpenditures and growth in selling, general andadministrative expense. We also use our Company'smarket capitalization and comparable companymarket data to validate our reporting unitvaluations. We have not made any material changes to ourgoodwill policy in the past three years and we donot anticipate making any material changes to thispolicy in the future.We recorded goodwill and intangible assets relatedto the January 2015 acquisition of P.E.G. ofapproximately $12.6 million. We haveapproximately in aggregate $18.8 million ingoodwill and intangible assets at December 31,2015. We do not believe it is reasonably likely thatthe estimates or assumptions used to determinewhether any of our remaining goodwill orintangible assets are impaired will changematerially in the future. However if the inputs usedin our discounted cash flow models or our forecastsare materially different than actual experience wecould incur impairment charges that are material.We recorded goodwill and intangible assets relatedto the June 2014 Misco Solutions (f/k/a SCCServices B.V.) acquisition of approximately $2.7million.23 Long-lived Assets. Management exercises judgmentin evaluating our long-lived assets for impairmentand in their depreciation and amortization methodsand lives including evaluating undiscounted cashflows. The impairment analysis for long lived assetsrequires management to make judgments aboutuseful lives and to estimate fair values of long livedassets. It may also require us to estimate future cashflows of related assets using discounted cash flowmodel. Our estimates of future cash flows involveassumptions concerning future operatingperformance and economic conditions. While webelieve that our estimates of future cash flows arereasonable, different assumptions regarding suchcash flows could materially affect our evaluations. We have not made any material changes to our longlived assets policy in the past three years and we donot anticipate making any material changes to thispolicy in the future.In 2015 the Company conducted an evaluation ofthe long-lived assets in its EMEA and nowdiscontinued NATG segment and concluded that animpairment charge of $0.7 million each, pre-tax, berecorded.In 2014 the Company conducted an evaluation ofthe long-lived assets in its now discontinued NorthAmerica Technology Products segment andconcluded that an impairment charge of $10.0million, pre-tax, be recorded.We do not believe it is reasonably likely that theestimates and assumptions used to determine longlived asset impairment will vary materially in thefuture. However if our estimates are materiallydifferent than our actual experience we could havea material gain or loss adjustment.A change of 10% in the carrying value of our longlived assets would impact net income byapproximately $3.8 million.Vendor Accruals. Our contractual agreements withcertain suppliers provide us with funding orallowances for costs such as price protection,markdowns and advertising as well as funds orallowances for purchasing volumes.Generally, allowances received as a reimbursementof identifiable costs are recorded as an expensereduction when the cost is incurred. Sales relatedallowances are generally determined by our level ofpurchases of product and are deferred and recordedas a reduction of inventory carrying value and areultimately included as a reduction of cost of goodswhen inventory is sold. Management makes assumptions and exercisesjudgment in estimating period end funding andallowances earned under our various agreements.Estimates are developed based on the terms of ourvendor agreements and using existing expendituresfor which funding is available, determiningproducts whose market price would indicatecoverage for markdown or price protection isavailable and estimating the level of ourperformance under agreements that provide fundsor allowances for purchasing volumes. Estimates offunding or allowances for purchasing volume willinclude projections of annual purchases which aredeveloped using current actual purchase data andhistorical purchase trends. Accruals in interimperiods could be materially different if actualpurchase volumes differ from projections. We have not made any material changes to ourvendor accrual policy in the past three years nor dowe anticipate making any material changes to thispolicy in the future.If actual results are different from the projectionsused we could have a material gain or lossadjustment.A change of 10% in our vendor accruals atDecember 31, 2015 would impact net income byapproximately $0.7 million.24 Income Taxes. We are subject to taxation fromfederal, state and foreign jurisdictions and thedetermination of our tax provision is complex andrequires significant management judgment.We conduct operations in numerous U.S. states andforeign locations. Our effective tax rate dependsupon the geographic distribution of our pre-taxincome or losses among locations with varying taxrates and rules. As the geographic mix of our pre-tax results among various tax jurisdictions changes,the effective tax rate may vary from period toperiod. We are also subject to periodic examinationfrom domestic and foreign tax authorities regardingthe amount of taxes due. These examinationsinclude questions regarding the timing and amountof deductions and the allocation of income amongvarious tax jurisdictions. We establish as needed,and periodically reevaluate, an estimated incometax reserve on our consolidated balance sheet toprovide for the possibility of adverse outcomes inincome tax proceedings. While managementbelieves that we have identified all reasonablyidentifiable exposures and whether or not a reserveis appropriate, it is possible that additionalexposures exist and/or that exposures may be settledat amounts different than the amounts reserved. The determination of deferred tax assets andliabilities and any valuation allowances that mightbe necessary requires management to makesignificant judgments concerning the ability torealize net deferred tax assets. The realization of netdeferred tax assets is dependent upon the generationof future taxable income. In estimating futuretaxable income there are judgments anduncertainties related to the development of forecastsof future results that may not be reliable. Significantmanagement judgment is also necessary to evaluatethe operating environment and economic conditionsthat exist to develop a forecast for a reporting unit.Where management has determined that it is morelikely than not that some portion or the entiredeferred tax asset will not be realized, we haveprovided a valuation allowance. If the realization ofthose deferred tax assets in the future is consideredmore likely than not, an adjustment to the deferredtax assets would increase net income in the periodsuch determination is made. We have not made any material changes to ourincome tax policy in the past three years and we donot anticipate making any material changes to thispolicy in the future.We do not believe it is reasonably likely that theestimates or assumptions used to determine ourdeferred tax assets and liabilities and relatedvaluation allowances will change materially in thefuture. However if our estimates are materiallydifferent than our actual experience we could havea material gain or loss adjustment.In 2015 the Company recorded non-cash valuationallowances against the deferred tax assets of certain of its subsidiaries in Europe and Canada inthe amount of approximately $0.8 million.During the fourth quarter of 2014 the Companyrecorded a non-cash valuation allowance against itsdeferred assets in the U.K. of approximately $1.7million.Special charges. We have recorded reorganization,restructuring and other charges in the past and couldin the future commence further reorganization,restructuring and other activities which result inrecognition in charges to income. The recording of reorganization, restructuring andother charges may involve assumptions andjudgments about future costs and timing foramounts related to personnel terminations, staybonuses, lease termination costs, lease subletrevenues, outplacement services, contracttermination costs, asset impairments and other exitcosts. Management may estimate these costs usingexisting contractual and other data or may rely onthird party expert data. When we incur a liability related to these actions,we estimate and record all appropriate expenses.We do not believe it is reasonably likely that theestimates or assumptions used to determine ourreorganization, restructuring and other charges willchange materially in the future. However if ourestimates are materially different than our actualexperience we could have a material gain or lossadjustment.The Company recorded special charges of $27.9million, $15.9 million and $16.2 million incontinuing operations related to reorganization,restructuring and asset impairment and othercharges for the years ended 2015, 2014 and 2013,respectively.25 Recently Adopted and Newly Issued Accounting PronouncementsPublic companies in the United States are subject to the accounting and reporting requirements of various authorities, including the Financial Accounting StandardsBoard (“FASB”) and the Securities and Exchange Commission (“SEC”). These authorities issue numerous pronouncements, most of which are not applicable tothe Company’s current or reasonably foreseeable operating structure. Below are the new authoritative pronouncements that management believes are relevant tothe Company’s current operations.In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts withCustomers (Topic 606), to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reportingcompanies under GAAP. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount thatreflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the revised guidance requires that reportingcompanies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The revised guidance is effectivefor the Company beginning in the quarter ending March 31, 2018; early adoption is allowed. The revised guidance is required to be applied retrospectively to eachprior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. The Company iscurrently evaluating the transition method that will be elected and the potential effect of the revised guidance will have on the Company’s consolidated financialstatements.I n September 2015, the FASB issued ASU 2015-16, Business Combinations - Simplifying the Accounting for Measurement-Period Adjustments (Topic 805). ASU2015-16 requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in whichthe adjustment amounts are determined. ASU 2015-16 is effective for interim and annual periods beginning after December 15, 2015, with early adoptionpermitted, and is to be applied on a prospective basis. The Company is currently in the process of evaluating the impact of the adoption of this standard on theCompany’s consolidated financial statements.In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes . ASU 2015-17 simplifies thepresentation of deferred income taxes by eliminating the separate classification of deferred income tax liabilities and assets into current and noncurrent amounts inthe consolidated balance sheet. The amendments in the update require that all deferred tax liabilities and assets be classified as noncurrent in the consolidatedbalance sheet. The amendments in this update are effective for annual periods beginning after December 15, 2016, and interim periods therein and may be appliedeither prospectively or retrospectively to all periods presented. Early adoption is permitted. The Company has early adopted this standard in the fourth quarter of2015 on a retrospective basis. Prior periods have been retrospectively adjusted.In February 2016, the FASB issued ASU 2016-02, Leases, which requires a lessee, in most leases, to initially recognize a lease liability for the obligation to makelease payments and a right-of-use asset for the right to use the underlying asset for the lease term. The guidance is effective for fiscal years beginning afterDecember 15, 2018, and interim periods within with those years. Early adoption is permitted. The Company is evaluating the effect of adopting thispronouncement.Highlights from 2015The discussion of our results of operations and financial condition that follows will provide information that will assist in understanding our financial statementsand information about how certain accounting principles and estimates affect the consolidated financial statements. This discussion should be read in conjunctionwith the consolidated financial statements included herein.·IPG sales grew 25.6%. On a constant currency basis and excluding P.E.G., sales grew 10.1%.·EMEA sales declined 11.5%. On a constant currency basis and excluding Misco Solutions, sales declined 1.9%.·The NATG business was sold in December 2015 for $14.0 million and the Circuit City name and trademarks were sold in November 2015 for $2.0million.26 GAAP Results of OperationsKey Performance Indicators* (in millions):Years Ended December 31,201520142013% Change2015/2014% Change2014/2013Net sales of continuing operations by segment:IPG $698.6 $556.0 $473.8 25.6%17.3%EMEA1,052.9 1,189.9 1,095.4 (11.5)%8.6%Corporate and other5.4 5.9 5.2 (8.5)%13.5%NATG- continuing operations97.8 352.4 401.0 (72.2)%(12.1)%Consolidated net sales $1,854.7 $2,104.2 $1,975.4 (11.9)%6.5%Consolidated gross profit $342.7 $377.2 $360.7 (9.1)%4.6%Consolidated gross margin18.5%17.9%18.3%0.6%(0.4)%Consolidated SG&A costs** $366.8 $390.9 $371.5 (6.2)%5.2%Consolidated SG&A costs** as % of sales19.8%18.6%18.8%1.2%(0.2)%Operating income (loss) from continuing operations bysegment :IPG $43.7 $41.0 $40.0 6.6%2.5%EMEA(10.8)(21.2)(4.2)(49.1)%404.8%Corporate and other(18.8)(15.6)(20.0)20.5%(22.0)%NATG – continuing operations(38.2)(17.9)(26.6)113.4%(32.7)%Consolidated operating (loss) $(24.1) $(13.7) $(10.8)75.9%26.9%Operating margin from continuing operations by segment:**IPG6.3%7.4%8.4%(1.1)%(1.0)%EMEA(1.0)%(1.8)% (0.4)%0.8%(1.4)%NATG(39.1)%(5.1)% (6.6)%(34.0)%1.5%Consolidated operating margin from continuing operations(1.3)%(0.7)% (0.6)%(0.6)%(0.2)%Effective income tax rate38.8%59.2%246.8%(20.4)%(187.6)%Net income (loss) from continuing operations $(48.3) $(32.0) $(43.0)50.9%(6.2)%Net margin from continuing operations(2.6)%(1.5)% (2.2)%(1.1)%0.2%Net income (loss) from discontinued operations $(51.5) $(5.5) $(0.8)836.4%587.5%Net margin from discontinuing operations(2.8)%(0.3)% (0.0)%(2.5)%0.3%*excludes discontinued operations (See Note 2 of Notes to Consolidated Financial Statements).** includes special charges, net (See Note 9 of Notes to Consolidated Financial Statements).27 Non-GAAP Results of OperationsSupplemental Non-GAAP Continuing Operation Business Unit Summary Results - UnauditedIndustrial Products GroupYear Ended December 31,% Change2015201420132015 vs. 20142014 vs. 2013Sales$698.6 $556.0 $473.8 25.6% 17.3%Gross profit$198.7 $163.4 $142.9 21.6% 14.3%Gross margin28.4% 29.4% 30.2% Operating income$44.0 $43.0 $40.4 2.3% 6.4%Operating margin6.3% 7.7% 8.5% EMEA Technology Products GroupYear Ended December 31,% Change2015201420132015 vs. 20142014 vs. 2013Sales$1,052.9 $1,189.9 $1,095.4 (11.5)% 8.6%Gross profit$129.8 $153.7 $151.0 (15.5)% 1.8%Gross margin12.3%12.9%13.8% Operating income (loss)$(9.0) $(7.8) $5.0 15.4%(256.0)%Operating margin(0.9)% (0.7)% 0.5% Corporate & OtherYear Ended December 31,% Change2015201420132015 vs. 20142014 vs. 2013Sales$5.4 $5.9 $5.2 (8.5)% 13.5%Gross profit$3.6 $3.9 $4.2 (7.7)% (7.1)%Gross margin66.7% 66.1% 80.8% Operating loss$(18.2) $(14.7) $(18.8)23.8%(21.8)%ConsolidatedYear Ended December 31,% Change2015201420132015 vs. 20142014 vs. 2013Sales$1,756.9 $1,751.8 $1,574.4 0.3%11.3%Gross profit$332.1 $321.0 $298.1 3.5%7.7%Gross margin18.9% 18.3% 18.9% Operating income$16.8 $20.5 $26.6 (18.0)% (22.9)%Operating margin1.0% 1.2% 1.7% 28 SYSTEMAX INC.Reconciliation of Segment GAAP Operating Income (Loss) from Continuing Operations to Non-GAAPOperating Income (Loss) from Continuing Operations - Unaudited (In millions)Year Ended December 31,201520142013IPG$43.7 $41.0 $40.0 EMEA(10.8)(21.2)(4.2)NATG(38.2)(17.9)(26.6)Corporate and Other(18.8)(15.6)(20.0)GAAP operating loss(24.1)(13.7)(10.8)Non-GAAP adjustments:Industrial Products:Integration costs1.0 0.4 (0.2)Intangible asset amortization0.3 0.0 0.0 Stock-based and other special compensation(1.0)1.6 0.6 Total Non-GAAP Adjustments – Industrial Products0.3 2.0 0.4 Technology Products - EMEA:Severance and other reorganization related charges0.7 12.3 8.2 Asset impairment charges0.7 0.0 0.0 Stock based compensation0.1 0.3 0.3 Intangible asset amortization0.3 0.8 0.7 Total Non-GAAP Adjustments: Technology Products EMEA1.8 13.4 9.2 Technology Products - NA:Reverse results of NATG included in GAAP continuing operations38.2 17.9 26.6 Total Non-GAAP Adjustments : Technology Products NA38.2 17.9 26.6 Corporate and Other:Severance and other reorganization related charges0.0 0.1 0.0 Stock based compensation0.6 0.8 1.2 Total Non-GAAP Adjustments: Corporate and Other0.6 0.9 1.2 IPG44.0 43.0 40.4 EMEA(9.0)(7.8)5.0 NATG0.0 0.0 0.0 Corporate and Other(18.2)(14.7)(18.8)Non-GAAP operating income$16.8 $20.5 $26.6 29 Management’s discussion and analysis that follows will include IPG, EMEA, NATG continuing operations and NATG discontinued operations. The discussion isbased upon the GAAP Results of Operations table.NET SALESSEGMENTS:The IPG segment net sales benefited from continued growth across most product lines and incremental sales from the P.E.G. acquisition, which contributed $89.1million in sales and approximately $1.1 million of pretax earnings during 2015, as well as investment in hiring sales personnel and subject matter experts whobring specific technical knowledge to our customers. On a constant currency basis, and excluding P.E.G., net sales increased 10.1% during 2015.The IPG segment net sales increase in 2014 was attributable to the expansion of the product assortment in new and core product categories, the expansion of theprivate label and brand name selections as well as investment in hiring expert sales personnel. On a constant currency basis, sales increased 17.7% during 2014.The EMEA segment net sales decrease is attributable to unfavorable currency movements and a challenging market in the United Kingdom which more than offsetthe performance in other markets. Our France operations continued its strong performance (local currency increase of 19.1%), benefiting from continued growth inits core businesses. On a constant currency basis and excluding Misco Solutions, EMEA segment net sales decreased 1.9% for 2015.The EMEA segment sales increase in 2014 was due to a benefit from the June 2014 Misco Solutions (f/k/a SCC Services B.V.) acquistion, strong sales growth inFrance, improved BTB sales from certain markets, and favorable exchange rates. On a constant currency basis, and excluding the Misco Solutions acqusition, netsales increased 0.9% for 2014.The Corporate and Other segment net sales decrease is attributable to the decrease in rebate processing business which was impacted by the exit from our NATGoperations for 2015.The Corporate and Other segment net sales increase in 2014 was 13.5% primarily due to increased sales in the rebate processing business for 2014.Sales in NATG continuing operations represent the sales of the retail stores closed during the first half of 2015. Sales for 2014 represent full year sales of retailstores closed in 2015 and sales of stores closed during 2014. Sales for 2013 represent full year sales of retail stores closed in 2015 and 2014 and sales of storesclosed during 2013.GROSS MARGINConsolidated gross profit totaled $342.7 million, $377.2 million and $360.7 million for the years ended December 31, 2015, 2014 and 2013, respectively. Grossmargin is dependent on variables such as product mix, competition, pricing strategy, cooperative advertising funds classified as a reduction to cost of sales, freightand supply/chain sourcing decisions, discounting and other variables, any or all of which may result in fluctuations in gross margin.The IPG segment gross margin was negatively impacted by increased distribution costs associated with the opening of a new distribution center in the third quarterof 2015 and reduced freight margin. We anticipate that this new facility will result in improved gross margins from freight cost reductions to west coast customersand improved efficiency at the other distribution centers. Product margin improved marginally, driven by growth of certain higher margin categories, and ourprivate label offering.The IPG segment gross margin decline in 2014 was driven by product mix to more domestically sourced products in comparison to 2013.The EMEA segment gross margin decline is related to reduced selling margins driven by customer shifts from commercial to public sector accounts, and lowerfreight revenues.The EMEA segment gross margin decline in 2014 was related to reduced selling margins, particularly in the United Kingdom in comparison to 2013.30 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (“SG&A”), EXCLUDING SPECIAL CHARGESConsolidated selling, general and administrative expenses totaled $338.9 million, $375.0 million and $355.3 million for the years ended December 31, 2015, 2014and 2013, respectively.The IPG segment incurred increased costs of approximately $29.9 million in 2015 compared to 2014 including costs incurred by P.E,G. since the date ofacquisition. Significant expense increases include approximately $14.1 million on increased salary and related costs of additional sales headcount, of which $11.3million related to P.E.G. costs. IPG also recorded increased net internet advertising spending of approximately $10.3 million, of which $5.8 million related toP.E.G. costs, as it continues to expand its online product offerings and its ecommerce presence, and increased rent and related expenses of $1.2 million related tothe P.E.G. acquisition during 2015.The IPG segment SG&A expense increases for 2014 over 2013 were primarily attributable to increased salary and related costs of approximately $5.6 million dueto increased sales and product management headcount, and increased internet advertising spending of approximately $8.5 million compared to 2013.In the EMEA segment, during 2015 we incurred lower salary and related costs of approximately $16.7 million due to the consolidation of positions from countrylocations to the European shared services center. EMEA also had decreased net internet advertising spending of approximately $0.9 million and decreased rent andrelated expenses of $1.1 million.The EMEA segment had increased SG&A expenses during 2014 primarily due to a continued overlap in costs as we transitioned functions from individual countryoperations to our European shared services center. The significant expense increases included approximately $4.4 million of increased salary and related costs ofadditional sales personnel and additional headcount for the shared services center, partially offset by $0.6 million in reimbursements for shared service centersalaries under the incentive agreement with the Hungarian business development agencies, recorded in the second quarter of 2014. Additionally, in Europe, for2014 we had less vendor supported advertising revenue of approximately $3.7 million, increased computer and telephone maintenance of approximately $1.1million and insurance, rent and related expense increases of approximately $2.6 million, offset by reduced internet advertising spend of approximately $1.9 million.Corporate and other segment incurred increased costs of approximately $3.3 million for 2015. The increase is primarily attributable to increased overhead expensesprimarily as a result of increased personnel costs.Corporate and other segment recorded a benefit of approximately $1.3 million in lower personnel costs and a decrease in professional fees of approximately $0.7million in 2013.NATG continuing operations SG&A expense for 2015 totaled approximately $23.1 million compared to $70.6 million in 2014. NATG continuing operationsSG&A expense is primarily payroll costs, credit card fees, rent and utilities. Lower costs in 2015 are the result the closure of 31 retail stores and a warehouse in2015. Lower costs in 2014 are associated with the closure of 2 retail stores in 2014 and 5 stores in 2013.NATG continuing operations SG&A expense for 2013 totaled approximately $81.2 million and were primarily related to salary and related costs, credit card fees,rent, consulting fees and computer and telephone maintenance charges. NATG discontinued operations SG&A expense totaled $109.9 million, $119.5 millionand $126.0 million for each of 2015, 2014 and 2013, respectively.SPECIAL CHARGES, NETThe Company incurred special charges of approximately $27.9 million in continuing operations in 2015. These charges included approximately $25.6 millionattributable to the NATG segment for severances and lease termination costs related to the closing of 31 retail stores and a warehouse during 2015. Other chargesincurred in 2015 include costs for additional legal and professional fees related to the previously disclosed investigation and settlement with former officers andemployees and long-lived asset impairment charges.The Company expects that additional NATG wind-down costs incurred during 2016 or later will aggregate between $15 and $25 million, which will be presentedin discontinued operations.31 Special charges included in NATG discontinued operations totaled approximately $1.6 million.IPG recorded special charges of approximately $1.0 million during the year related to severance costs associated with the integration of P.E.G. of $0.4 million and$0.6 million for lease termination costs related to one of their leased facilities.EMEA incurred special charges of approximately $1.3 million during the year. These charges included $0.7 million related to the previously disclosed exit of theChief Executive of the EMEA Technology operations and an impairment charge of $0.7 million related to the long-lived assets in Germany, Italy, Spain andSweden operations. The impairment charge resulted from negative cash flows in 2015 and a forecast for continued cash use in these entities. A favorable severanceaccrual adjustment of $0.1 million was also recorded during the year.The Company incurred special charges of approximately $15.9 million in continuing operations in 2014. The NATG segment charges included approximately $3.5million related to the final sale of the exited PC manufacturing business, changes in the estimate of lease valuation accruals and the buyout of the two retail storeleases that were exited in 2013 prior to lease expiration (other exit costs) and charges for additional legal and professional fees related to the previously disclosedinvestigation and settlement with former officers and employees. In addition, as a result of negative cash flows in its operations in the United States and Canada in2014 and a forecast for continued cash use, the Company conducted an evaluation of the long-lived and intangible assets in those operations and concluded thatthose assets were impaired. Consequently an impairment charge was recorded.In EMEA, the Company incurred special charges in 2014 related to the restructure of certain small market operations in 2014. These charges, estimates of whichwere previously disclosed, included approximately $11.7 million in estimated workforce reductions related to the restructuring of our European operations and$0.5 million in continued recruitment costs to staff the European shared services center.Corporate and other segment incurred $0.1 million of special charges related to severance costs in 2014.Special charges included in NATG discontinued operations totaled approximately $8.5 million in 2014.The Company incurred special charges of approximately $16.2 million in continuing operations in 2013. The NATG segment charges included approximately $8.2million related to lease termination costs (calculated using the net present value of contractual gross lease payments net of estimated sublease rental income, or inthe case of negotiated settlements, the buyout amount), fixed asset write offs related to the closing of underperforming retail stores, one-time impairment chargesrelated to intangible assets of the CompUSA brand in Puerto Rico, workforce reduction charges for senior management changes in the North American operations,reserve adjustments related to the facility closing and exit from the PC manufacturing business and additional legal and professional fees related to the previouslydisclosed completed investigation and settlement with a former officer and director.In EMEA, the Company incurred special charges in 2013 related to the European shared services center implementation and European workforce reductions. These charges included approximately $5.9 million in workforce reductions and other exit costs, $1.8 million related to start up costs of the European sharedservices center and $0.5 million in continued recruitment costs for the European shared services center.The Company’s IPG segment incurred special charges in 2013 of approximately $0.1 million for personnel costs and benefited from an adjustment to leasetermination costs of approximately $0.3 million related to the planned closing and relocation of one of its smaller distribution centers to a new, significantly largerdistribution and call center in the second quarter of 2012.Special charges included in NATG discontinued operations totaled approximately $6.0 million in 2013.OPERATING MARGINThe decline in IPG operating margin in 2015 was primarily attributable to reduced freight margins and increased distribution costs associated with the opening of anew distribution center in the third quarter of 2015 . The Company anticipates that this new facility will result in improved profitability from freight cost reductionsto west coast customers and improved efficiency at the other distribution centers.32 The decline in operating margin in EMEA Technology Products segment for 2015 was primarily related to reduced selling margins in Europe, particularly in theUnited Kingdom, increased expenses in Europe resulting from a temporary duplication of local functions and other redundancies as we completed the transition offunctions from each country to the European shared services center and special charges related to the exit from the consumer and retail business partially offset bylower SG&A expenses in North America.The decrease in operating margin in Industrial Products segment for 2014 reflect the increased internet advertising spending compared to 2013 to drive traffic,hiring of subject matter experts to bring additional value to our customers and a slight decline in gross product margin driven by product mix as we have begunstocking more domestically sourced products.The decline in NATG operating margin from continuing operations reflects the reduced selling prices in connection with the liquidation pricing strategy in theretail stores exited.Consolidated operating margin was impacted by special charges of $27.9 million, $15.9 million and $16.2 million in 2015, 2014 and 2013, respectively.INTEREST EXPENSEInterest expense was $1.0 million, $1.0 million, and $1.5 million for 2015, 2014 and 2013, respectively. The interest expense is attributable to decreasing balancesowed on the Recovery Zone Bond facility and outstanding capital lease obligations.INCOME TAXESThe Company’s tax expense is presented in both continuing and discontinued operations in 2015 and 2014. Tax expense included in continuing operations wasapproximately $13.5 million in 2015 versus $11.9 million in 2014. Tax expense in 2015 was driven primarily by tax expense in EMEA, Canada, Puerto Rico andcertain U.S. states in both 2015 and 2014. The increase in tax expense in 2015 is primarily attributable to higher taxable income in EMEA in 2015.The Company’s effective tax rate was 15.0% in 2014 as compared to a 100.9% benefit in 2013. The high effective income tax rate in 2015 was primarily due tothe establishment of a valuation allowance for U.S. federal deferred tax assets of approximately $20.5 million and for state deferred tax assets of approximately$3.9 million. These valuation allowances were recorded primarily as a result of the three year cumulative loss recorded in the U.S. Additionally full valuationallowances of approximately $2.5 million were recorded against the deferred tax assets of the Company’s subsidiaries in Sweden and Italy in 2013.Financial Condition, Liquidity and Capital ResourcesSelected liquidity data (in millions):December 31,20152014$ ChangeCash$215.1 $165.0 $50.1 Accounts receivable, net$266.3 $354.5 $(88.2)Inventories$144.4 $292.9 $(148.5)Prepaid expenses and other current assets$14.5 $15.9 $(1.4)Accounts payable$346.5 $419.5 $(73.0)Accrued expenses and other current liabilities$79.0 $95.4 $(16.4)Current portion of long term debt$0.6 $2.8 $(2.2)Working capital$214.2 $310.6 $(96.4)33 Our primary liquidity needs are to support working capital requirements in our business, including working capital for integrating P.E.G. and Misco Solutions withour business, exit from and winding down of our NATG operations, funding cash requirements of certain European businesses for previously accrued workforcereduction costs and transition costs, implementing new inventory and warehouse functions in North America, funding capital expenditures, continuing investmentin upgrading and expanding our technological capabilities and information technology infrastructure (including upgrading and transitioning of P.E.G. and MiscoSolutions technology infrastructure), repaying outstanding debt, and funding acquisitions. We rely principally upon operating cash flows to meet these needs. Webelieve that cash flow available from these sources and our availability under credit facilities will be sufficient to fund our working capital and other cashrequirements for the next twelve months. We believe our current capital structure and cash resources are adequate for our internal growth initiatives. To the extentour growth initiatives expand, including major acquisitions, we would seek to raise additional capital. We believe that, if needed, we can access public or privatefunding alternatives to raise additional capital.Our working capital decreased due to cash used for the P.E.G. acquisition and the net loss incurred in 2015. Accounts receivable days outstanding were at 38.1 in2015 up from 37.5 in 2014. This trend reflects slower receivables collection in Europe as we transitioned collections to the Hungarian shared services center and ahigher proportion of our sales coming from B2B channels, where most customers do business with us on open credit account, and a lower proportion of our salesbeing B2C channels, where most customers purchase from us using credit cards. Inventory turns were 11.3 in 2015 compared to 9.5 in 2014 and accounts payabledays outstanding were 53.4 in 2015 compared to 51.2 in 2014. We expect that future accounts receivable, inventory and accounts payable balances will fluctuatewith net sales and the mix of our net sales between consumer and business customers.Net cash provided by operating activities from continuing operations was $135.6 million resulting from changes in our working capital accounts, which provided$158.7 million in cash compared to $0.3 million used in 2014, primarily the result of the liquidation of inventories at our retail stores, fluctuation in our accountsreceivable and accounts payable balances. Cash generated from net income (loss) adjusted by other non-cash items used $23.1 million compared to $0.9 millionprovided by these items in 2014, primarily related to the increased net loss from operations, fluctuations in depreciation and amortization charges, change in assetimpairment charges and the utilization of net operating loss carryforwards from our France operations. Net cash provided by operating activities from continuingoperations was $0.8 million and $42.1 million during 2014 compared to 2013, primarily resulting from changes in working capital accounts, which used $0.1million in cash compared to $33.9 million provided in 2013, primarily the result of fluctuation in our accounts receivable, inventory, and income tax payable(receivable) balances. Cash generated from net income (loss) adjusted by other non-cash items provided $0.9 million compared to $8.2 million provided in 2013,primarily the result of establishment of valuation allowances against deferred tax assets for U.S. entities in 2013, change in asset impairment charges, depreciationand amortization offset by improvement of net loss from operations and fluctuation in our provision adjustments for returns and doubtful accounts in 2014compared to 2013. Net cash used in operating activities from discontinued operations was $49.1 million and $0.9 million for 2015 and 2014, respectively andcash provided by operating activities from discontinued operations was $4.7 million for 2013.Net cash used in investing activities totaled $34.7 million, $12.5 million and $13.4 million for 2015, 2014 and 2013, respectively. Acquisition of P.E.G. in 2015used $24.8 million, net of cash acquired of $1.1 million and in 2014, $6.4 million was used for the Misco Solutions acquisition, net of cash acquired of $0.9million (see Note 3) along with $0.9 million of proceeds from the sale of our former PC manufacturing facility. In 2015 other investing activities include leaseholdimprovements for racking, equipment and build out of our additional warehouse space for IPG segment, new office space for our France operations, expendituresfor our inventory and warehousing functions in EMEA and IPG and information and communications systems hardware and software, aggregating $11.3 million. In 2014, other investing activities include office expansions related to our Industrial Products segment, expenditures for the European shared services center,computer and office equipment expenditures for the sales and administrative offices in the United Kingdom, expenditures for our inventory and warehousingfunctions in Europe, and information and communications systems hardware and software, totaling approximately $7.1 million in 2014. In 2013, net cash used ininvesting activities was $13.4 million for warehouse racking systems for the new distribution center, network upgrades, fabrication equipment, expenditures for anew retail store opening and upgrades and enhancements to our information and communications systems hardware.Net cash used in financing activities was $3.0 million, $2.3 million in 2014 and $2.6 million for 2015, 2014 and 2013, respectively. In 2015, we repaidapproximately $2.8 million of capital lease obligations and repurchased approximately $0.2 million of treasury stock. In 2014, we repaid approximately $2.6million of capital lease obligations and net proceeds and excess tax benefit from stock option exercises provided $0.3 million. In 2013, we repaid approximately$2.8 million of capital lease obligations. Net proceeds and excess tax benefits from stock option exercises provided $0.2 million.34 The Company maintains a $125.0 million (which may be increased to $200.0 million, subject to certain conditions) secured revolving credit agreement with agroup of financial institutions which provides for borrowings in the United States. The credit facility was scheduled to expire in October 2015 and the Companyentered into an amended and restated revolving credit facility on October 13, 2015. The new facility has a maturity date of October 31, 2016. Borrowings aresecured by substantially all of the Company’s assets, including accounts receivable, inventory and certain other assets, subject to limited exceptions. The creditagreement contains certain operating, financial and other covenants, including limits on annual levels of capital expenditures, availability tests related to paymentsof dividends and stock repurchases and fixed charge coverage tests related to acquisitions. The revolving credit agreement requires that a minimum level ofavailability be maintained. If such availability is not maintained, the Company will be required to maintain a fixed charge coverage ratio (as defined). Theborrowings under the agreement are subject to borrowing base limitations of up to 85% of eligible accounts receivable and up to 40% of qualified inventories. Theinterest rate under this facility is computed at applicable market rates based on LIBOR or the Prime Rate, plus an applicable margin. The applicable margin variesbased on borrowing base availability. As of December 31, 2015, eligible collateral under this agreement was $37.9 million, total availability was $33.0 million,total outstanding letters of credit were $4.9 million and there were no outstanding advances. The Company was in compliance with all of the covenants under thisfacility as of December 31, 2015.The Company (through a subsidiary) had an outstanding Bond financing with the Development Authority of Jefferson, Georgia (the “Authority”). This facility waspaid off in November 2015.Levels of earnings and cash flows are dependent on factors such as consolidated gross margin and selling, general and administrative costs as a percentage of sales,product mix and relative levels of domestic and foreign sales. Unusual gains or expense items, such as special (gains) charges and settlements, may impactearnings and are separately disclosed. We expect that past performance may not be indicative of future performance due to the competitive nature of our EMEATechnology Products segment where the need to adjust prices to gain or hold market share is prevalent.Macroeconomic conditions, such as business and consumer sentiment, may affect our revenues, cash flows or financial condition. However, we do not believe thatthere is a direct correlation between any specific macroeconomic indicator and our revenues, cash flows or financial condition. We are not currently interest ratesensitive, as we have significant cash balances and minimal debt.The expenses, capital expenditures and exit activities described above will require significant levels of liquidity, which we believe can be adequately funded fromour currently available cash resources. In 2016 we anticipate capital expenditures of approximately $15.0 million, though at this time we are not contractuallycommitted to incur these expenditures. Over the past several years we have engaged in opportunistic acquisitions, choosing to pay the purchase price in cash, andmay do so in the future as favorable situations arise. However, a deep and prolonged period of reduced consumer and/ or business to business spending couldadversely impact our cash resources and force us to either forego future acquisition opportunities or to pay the purchase price in shares of our common stock,which could have a dilutive effect on our earnings per share. In addition we anticipate cash needs for implementation of the financial systems. We believe that ourcash balances, future cash flows from operations and our availability under credit facilities will be sufficient to fund our working capital and other cashrequirements for at least the next twelve months.We maintain our cash and cash equivalents primarily in non-interest bearing cash accounts that partially offset banking fees as the earnings credit for doing soexceeds current money market yields. As of December 31, 2015, we had no investments with maturities of greater than three months. Accordingly, we do notbelieve that our cash balances have significant exposure to interest rate risk. At December 31, 2015 cash balances held in foreign subsidiaries totaledapproximately $66.6 million. These balances are held in local country banks and are not readily available to the U.S. parent company on a tax efficient basis. TheCompany would need to accrue and pay income taxes on any cash repatriated to the U.S. parent company. The Company has made the decision to indefinitelyreinvest earnings in its foreign tax jurisdictions. The Company had in excess of $248 million of liquidity (cash and undrawn line of credit) in the U.S. as ofDecember 31, 2015, which is sufficient to fund its U.S. operations and capital needs, including any dividend payments, for the foreseeable future.We are obligated under non-cancelable operating leases for the rental of most of our facilities and certain of our equipment which expires at various dates through2032. We have sublease agreements for unused space we lease in the United States. In the event the sub lessee is unable to fulfill its obligations, we would beresponsible for rents due under the leases.35 Following is a summary of our contractual obligations for future principal payments on our debt, minimum rental payments on our non-cancelable operating leasesand minimum payments on our other purchase obligations as of December 31, 2015 (in millions):TotalLess than1 year1-3 years3-5 yearsMore than5 yearsContractual Obligations:Capital lease obligations$1.0 0.6 0.4 - - Non-cancelable operating leases, net of subleases 170.3 23.0 63.0 35.6 48.7 Purchase & other obligations57.8 42.7 7.6 7.5 - Total contractual obligations$229.1 66.3 71.0 43.1 48.7 Our purchase and other obligations consist primarily of product purchase commitments, certain employment agreements and service agreements.In addition to the contractual obligations noted above, we had $4.9 million of standby letters of credit outstanding as of December 2015.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 ourconsolidated financial statements.Tax contingencies are related to uncertain tax positions taken on income tax returns that may result in additional tax, interest and penalties being paid to taxingauthorities. As of December 31, 2015, the Company had no material uncertain tax positions.Off-Balance Sheet ArrangementsWe 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 ourbusiness. We do not have any arrangements or relationships with entities that are not consolidated into the financial statements that are reasonably likely tomaterially affect our liquidity or the availability of capital resources.Item 7A.Quantitative and Qualitative Disclosures 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 BritishPounds Sterling, European Union Euros and Canadian Dollars) as measured against the U.S. Dollar and each other.The translation of the financial statements of our operations located outside of the United States is impacted by movements in foreign currency exchange rates.Changes in currency exchange rates as measured against the U.S. dollar may positively or negatively affect income statement, balance sheet and cash flows asexpressed in U.S. dollars. Sales would have fluctuated by approximately $134.5 million and pretax loss would have fluctuated by approximately $3.4 million ifaverage foreign exchange rates changed by 10% in 2015. We have limited involvement with derivative financial instruments and do not use them for tradingpurposes. We may enter into foreign currency options or forward exchange contracts aimed at limiting in part the impact of certain currency fluctuations, but as ofDecember 31, 2015 we had no outstanding forward exchange contracts.36 Our exposure to market risk for changes in interest rates relates primarily to our variable rate debt. Our variable rate debt consists of short-term borrowings underour credit facilities. As of December 31, 2015, there were no outstanding balances under our variable rate credit facility. A hypothetical change in average interestrates of one percentage point is not expected to have a material effect on our financial position, results of operations or cash flows over the next fiscal year.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 PartIV.Item 9.Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.None.Item 9A.Controls and Procedures.Evaluation of Disclosure Controls and ProceduresUnder the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer,the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of December 31,2015. Based upon this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls andprocedures are effective.Inherent Limitations of Internal Controls over Financial ReportingThe Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control overfinancial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles, and that the Company’s receipts and expenditures are being made only inaccordance with authorizations of the Company’s management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the Company’s financial statements.Management, including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s internal controls will prevent ordetect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectivesof 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 beconsidered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance thatall control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk thatthose internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures maydeteriorate.Management’s Report on Internal Control Over Financial ReportingThe Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with theparticipation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of thedesign and operation of its internal control over financial reporting based on the framework established in Internal Control - Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on that evaluation, the Company’s Chief Executive Officer andChief Financial Officer concluded that the Company’s internal control over financial reporting was effective as of December 31, 2015.The Company’s independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on the effectiveness of the Company’s internalcontrol over financial reporting as of December 31, 2015, a copy of which is included in this report on Form 10-K.37 Changes in Internal Control Over Financial ReportingOn January 31, 2015, the Company acquired the Plant Equipment Group. The Company has begun to integrate policies, processes, people, technology andoperations of Plant Equipment Group with those of the Company and is evaluating and will continue to evaluate the impact of any changes to internal control overfinancial reporting. Except for any changes in internal controls related to the integration of Plant Equipment Group into the post acquisition combined Company,there has been no change in the Company’s internal controls over financial reporting for the quarter ended December 31, 2015 that have materially affected, or arereasonably likely to materially affect, the Company’s internal control over financial reporting.Item 9B.Other Information.None.38 PART IIIItem 10. Directors, Executive Officers and Corporate Governance.The information required by Item 10 of Part III is hereby incorporated by reference to the Company’s Proxy Statement for the 2015 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 to 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 to the Proxy Statement.Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information required by Item 13 of Part III is hereby incorporated by reference to the Proxy Statement.Item 14. Principal Accounting Fees and Services.The information required by Item 14 of Part III is hereby incorporated by reference to the Proxy Statement.PART IVItem 15. Exhibits and Financial Statement Schedules.(a)1.Consolidated Financial Statements of Systemax Inc.ReferenceReports of Ernst & Young LLP Independent Registered Public Accounting Firm45Consolidated Balance Sheets as of December 31, 2015 and 201447Consolidated Statements of Operations for the years ended December 31, 2015, 2014 and 201348Consolidated Statements of Comprehensive Loss for the years ended December 31, 2015, 2014 and 201349Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 201350Consolidated Statements of Shareholders’ Equity for the Years ended December 31, 2015, 2014 and 201351Notes to Consolidated Financial Statements522.Financial Statement Schedules:The following financial statement schedule is filed as part of this report and should be read together with our consolidated financialstatements:Schedule II — Valuation and Qualifying Accounts70Schedules not included with this additional financial data have been omitted because they are not applicable or the requiredinformation is shown in the consolidated financial statements or notes thereto.39 Item 15. Exhibits and Financial Statement Schedules.3.ExhibitsExhibit No.Description3.1Composite Certificate of Incorporation of Registrant, as amended (incorporated by reference to the Company’s annualreport on Form 10-K for the year ended December 31, 2001).3.2Amended and Restated By-laws of Registrant (effective as of December 29, 2007, incorporated by reference to theCompany’s annual report on Form 10-K for the year ended December 31, 2007).3.3Amendment to the Bylaws of the Registrant (incorporated by reference to the Company’s report on Form 8-K dated March3, 2008).4.1Stockholders Agreement (incorporated by reference to the Company’s quarterly report on Form 10-Q for the quarterlyperiod ended September 30, 1995).10.1*Form of 1995 Long-Term Stock Incentive Plan (incorporated by reference to the Company’s registration statement on FormS-1) (Registration No. 333-1852).10.2*Form of 1995 Stock Plan for Non-Employee Directors (incorporated by reference to the Company’s registration statementon Form S-1) (Registration No. 333-1852).10.3*Form of 1999 Long-Term Stock Incentive Plan as amended (incorporated by reference to the Company’s report on Form 8-K dated May 20, 2003).10.4*Form of 2006 Stock Incentive Plan for Non-Employee Directors (incorporated by reference to the Company’s annual reporton Form 10-K for the year ended December 31, 2006).10.5*Form of 2005 Employee Stock Purchase Plan (incorporated by reference to the Company’s annual report on Form 10-K forthe year ended December 31, 2006).10.6Lease Agreement dated September 20, 1988 between the Company and Addwin Realty Associates (Port Washingtonfacility) (incorporated by reference to the Company’s registration statement on Form S-1) (Registration No. 33-92052).10.7First Amendment to Lease Agreement dated September 20, 1998 between the Company and Addwin Realty Associates(Port Washington facility) (incorporated by reference to the Company’s annual report on Form 10-K for the year endedDecember 31, 1998).10.8Second Amendment to Lease Agreement dated September 20, 1988 between the Company and Addwin Realty Associates(Port Washington facility) (incorporated by reference to the Company’s annual report on Form 10-K for the year endedDecember 31, 2007).10.9Build-to-Suit Lease Agreement dated April, 1995 among the Company, American National Bank and Trust Company ofChicago (Trustee for the original landlord) and Walsh, Higgins & Company (Contractor) (“Naperville Illinois FacilityLease”) (incorporated by reference to the Company’s registration statement on Form S-1) (Registration No. 33-92052).10.10First Amendment, dated as of February 1, 2006, to the Naperville Illinois Facility Lease between the Company andAmbassador Drive LLC (current landlord) (incorporated by reference to the Company’s annual report on Form 10-K for theyear ended December 31, 2005).10.11Lease Agreement dated September 17, 1998 between Tiger Direct, Inc. and Keystone Miami Property Holding Corp.(Miami facility) (incorporated by reference to the Company’s quarterly report on Form 10-Q for the quarterly period endedSeptember 30, 1998).10.12First Amendment, dated as of September 5, 2003, to the Lease Agreement between Tiger Direct, Inc. and Keystone MiamiProperty Holding Corp. (Miami facility) (incorporated by reference to the Company’s annual report on Form 10-K for theyear ended December 31, 2010).10.13Second Amendment, dated March 22, 2007, to the Lease Agreement between Tiger Direct, Inc. and Keystone MiamiProperty Holding Corp. (Miami facility) (incorporated by reference to the Company’s annual report on Form 10-K for theyear ended December 31, 2010).40 10.14Third Amendment, dated as of June 26, 2009, to the Lease Agreement between Tiger Direct, Inc. and Mota AssociatesLimited Partnership (successor in interest to landlord Keystone Miami Property Holding Corp.) (Miami facility)(incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2010).10.15Lease Agreement, dated December 8, 2005, between the Company and Hamilton Business Center, LLC (Buford, Georgiafacility) (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2005).10.16First Amendment, dated as of June 12, 2006, to the Lease Agreement between the Company and Hamilton Business Center,LLC (Buford, Georgia facility) (incorporated by reference to the Company’s annual report on Form 10-K for the year endedDecember 31, 2005).10.17*Employment Agreement, dated as of January 17, 2007, between the Company and Lawrence P. Reinhold (incorporated byreference to the Company’s annual report on Form 10-K for the year ended December 31, 2006).10.18*Amendment No. 1, dated December 30, 2009, to the Employment Agreement between the Company and Lawrence P.Reinhold (incorporated by reference to the Company’s report on Form 8-K dated December 30, 2009).10.19Second Amended and Restated Credit Agreement, dated as of October 27, 2010, by and among Systemax Inc. and certainaffiliates thereof and JPMorgan Chase Bank, N.A., as U.S. Administrative Agent, J.P. Morgan Europe Limited, as UKAdministrative Agent, J.P. Morgan Securities, Inc. as Sole Bookrunner and Sole Lead Arranger, and the lenders from timeto time party thereto (incorporated by reference to the Company’s report on Form 8-K dated November 2, 2010).10.20Amendment No. 1 and Waiver, dated as of December 15, 2011, to the Second Amended and Restated Credit Agreement byand among Systemax Inc. and certain affiliates thereof and JPMorgan Chase Bank, N.A., as U.S. Administrative Agent, J.P.Morgan Europe Limited, as UK Administrative Agent and the lenders from time to time party thereto (incorporated byreference to the Company’s annual report on Form 10-K for the year ended December 31, 2011).10.21Lease Agreement, dated April 16, 2010, between Jefferson Project I LLC as Landlord and SYX Distribution Inc. as Tenant(incorporated by reference to the Company’s quarterly report on Form 10-Q for the quarterly period ended March 31,2012).10.22First Amendment, dated August 24, 2010, to the Lease Agreement, dated April 2010, between Jefferson Project I LLC asLandlord and SYX Distribution Inc. as Tenant (Jefferson, GA facility) (incorporated by reference to the Company’squarterly report on Form 10-Q for the quarterly period ended March 31, 2012).10.23Lease Agreement, dated February 27, 2012 between PR I Washington Township NJ, LLC as Landlord and GlobalEquipment Company Inc. as Tenant (Robbinsville, NJ facility) (incorporated by reference to the Company’s quarterlyreport on Form 10-Q for the quarterly period ended March 31, 2012).10.24*Form of 2010 Long Term Incentive Plan (incorporated by reference to the Company’s Definitive Proxy Statement filedApril 29, 2010).10.25*Bonus Agreement, dated as of March 10, 2014, among Global Industrial Services, Inc., Systemax Inc. and Robert Dooley(incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2013).10.26*Employment Agreement, dated April 12, 2012, between Systemax Inc. and Eric Lerner (incorporated by reference to theCompany’s quarterly report on Form 10-Q for the quarterly period ended March 31, 2012).10.27Amendment No. 2 and Waiver, dated as of August 7, 2013, to the Second Amended and Restated Credit Agreement by andamong Systemax Inc. and certain affiliates thereof and JPMorgan Chase Bank, N.A., as U.S. Administrative Agent and thelenders from time to time party thereto (incorporated by reference to the Company’s quarterly report on Form 10Q for thequarter ended September 30, 2013).10.28Amendment No. 3 and Waiver, dated as of October 31, 2013 with an effective date of September 28, 2013, to the SecondAmendment and Restated Credit Agreement by and among Systemax Inc. and certain affiliates thereof and JPMorganChase Bank, N.A., as U.S. Administrative Agent and the lenders from time to time party thereto (incorporated by referenceto the Company’s quarterly report on Form 10Q for the quarter ended September 30, 2013).41 10.29Amendment No. 4, dated as of August 28, 2014, to the Second Amendment and Restated Credit Agreement by and amongSystemax Inc. and certain affiliates thereof and JPMorgan Chase Bank, N.A., as U.S. Administrative Agent and the lendersfrom time to time party thereto (incorporated by reference to the Company’s report on Form 8-K dated August 28, 2014).10.30Lease Agreement, dated December 10, 2014, between Prologis, L.P., as Landlord and Global Industrial Distribution Inc, asTenant (Las Vegas, NV facility) (incorporated by reference to the Company’s annual report on Form 10-K for the yearended December 31, 2015). .10.31Purchase Agreement dated December 31, 2014, by and among TAKKT America Holding, LLC, Global Industrial HoldingsLLC and Global Industrial Mexico Holdings LLC (incorporated by reference to the Company’s annual report on Form 10-Kfor the year ended December 31, 2015).10.32Amendment No. 1 to Purchase Agreement dated January 30, 2015, by and among TAKKT America Holding, LLC, GlobalIndustrial Holdings LLC and Global Industrial Mexico Holdings LLC (incorporated by reference to the Company’s annualreport on Form 10-K for the year ended December 31, 2015) .10.33*Amendment to the Term of the 2010 Long Term Incentive Plan (incorporated by reference to the Company’s SupplementalProxy Material filed May 18, 2015).10.34Amendment No. 5, dated as of October 13, 2015, to the Second Amendment and Restated Credit Agreement by and amongSystemax Inc. and certain affiliates thereof and JPMorgan Chase Bank, N.A., as U.S. Administrative Agent and the lendersfrom time to time party thereto (incorporated by reference to the Company’s report on Form 8-K dated October 15, 2015) .10.35Asset Purchase Agreement, dated November 17, 2015, by and among Intelligent IT, Inc., Acrodex Inc., PCM, Inc.,Systemax Inc., and TigerDirect, Inc., TigerDirect CA, Inc., Global Gov/Ed Solutions, Inc., Infotel Distributors Inc., TekServ Inc., Global Computer Supplies, Inc., SYX Distribution Inc., SYX Services Inc., SYX North American Tech Holdings,LLC, Software Licensing Center, Inc. and Pocahontas Corp. (filed herewith).10.36Amendment No. 1 to Asset Purchase Agreement, December 1, 2015, by and among Intelligent IT, Inc., Acrodex Inc., PCM,Inc., Systemax Inc., and TigerDirect, Inc., TigerDirect CA, Inc., Global Gov/Ed Solutions, Inc., Infotel Distributors Inc.,Tek Serv Inc., Global Computer Supplies, Inc., SYX Distribution Inc., SYX Services Inc., SYX North American TechHoldings, LLC, Software Licensing Center, Inc. and Pocahontas Corp. (filed herewith).10.37Amendment No. 2 to Asset Purchase Agreement, January 21, 2016, by and among Intelligent IT, Inc., Acrodex Inc., PCM,Inc., Systemax Inc., and TigerDirect, Inc., TigerDirect CA, Inc., Global Gov/Ed Solutions, Inc., Infotel Distributors Inc.,Tek Serv Inc., Global Computer Supplies, Inc., SYX Distribution Inc., SYX Services Inc., SYX North American TechHoldings, LLC, Software Licensing Center, Inc. and Pocahontas Corp. (filed herewith).10.38Amendment No. 3 to Asset Purchase Agreement, dated February 14, 2016, by and among Intelligent IT, Inc., Acrodex Inc.,PCM, Inc., Systemax Inc., and TigerDirect, Inc., TigerDirect CA, Inc., Global Gov/Ed Solutions, Inc., Infotel DistributorsInc., Tek Serv Inc., Global Computer Supplies, Inc., SYX Distribution Inc., SYX Services Inc., SYX North American TechHoldings, LLC, Software Licensing Center, Inc. and Pocahontas Corp. (filed herewith).14Corporate Ethics Policy for Officers, Directors and Employees (revised as of January 2016) (filed herewith).21Subsidiaries of the Registrant (filed herewith).23Consent of Independent Registered Public Accounting Firm (filed herewith).31.1Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).31.2Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).32.1Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).32.2Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).42 101.INSXBRL Instance Document 101.SCHXBRL Taxonomy Extension Schema Document 101.CALXBRL Taxonomy Extension Calculation Linkbase Document 101.DEFXBRL Taxonomy Extension Definition Linkbase Document 101.LABXBRL Taxonomy Extension Label Linkbase Document 101.PREXBRL Taxonomy Extension Presentation Linkbase Document*Exhibit is a management contract or compensatory plan or arrangement43 SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.SYSTEMAX INC.By: /s/ LAWRENCE REINHOLDLawrence ReinholdChief Executive OfficerDate: March 17, 2016Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and inthe capacities and on the dates indicated.SignatureTitleDate/s/ RICHARD LEEDSExecutive Chairman and DirectorMarch 17, 2016Richard Leeds/s/ BRUCE LEEDSVice Chairman and DirectorMarch 17, 2016Bruce Leeds/s/ ROBERT LEEDSVice Chairman and DirectorMarch 17, 2016Robert Leeds/s/ LAWRENCE REINHOLDPresident and Chief Executive OfficerMarch 17, 2016Lawrence Reinholdand Director(Principal Executive and Financial Officer)/s/ THOMAS AXMACHERVice President and ControllerMarch 17, 2016Thomas Axmacher(Principal Accounting Officer)/s/ ROBERT ROSENTHALDirectorMarch 17, 2016Robert Rosenthal/s/ STACY DICKDirectorMarch 17, 2016Stacy Dick/s/ MARIE ADLER-KRAVECASDirectorMarch 17, 2016Marie Adler-Kravecas44 Report of Independent Registered Public Accounting FirmThe Board of Directors and Shareholders of Systemax Inc.We have audited Systemax Inc. and subsidiaries (the “Company”) internal control over financial reporting as of December 31, 2015, based on criteria establishedin Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSOcriteria). The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectivenessof internal control over financial reporting included in the accompanying Management’s Report. Our responsibility is to express an opinion on the Company’sinternal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in thecircumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financialreporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on theeffectiveness of internal control over financial reporting did not include the internal controls of Plant Equipment Group which is included in the 2015 consolidatedfinancial statements of Systemax Inc. and subsidiaries and constituted $40.1 million and $32.0 million of total and net assets, respectively, as of December 31,2015 and $89.1 million and $1.1 million of revenues and pretax income, respectively, for the year then ended. Our audit of internal control over financial reportingof Systemax Inc. and subsidiaries also did not include an evaluation of the internal control over financial reporting of the Plant Equipment Group.In our opinion, Systemax Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015,based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets ofSystemax Inc. and subsidiaries as of December 31, 2015 and 2014 and the related consolidated statements of operations, comprehensive loss, shareholders' equityand cash flows for each of the three years in the period ended December 31, 2015 and our report dated March 17, 2016 expressed an unqualified opinion thereon./s/ Ernst & Young LLPNew York, New YorkMarch 17, 201645 Report of Independent Registered Public Accounting FirmThe Board of Directors and Shareholders of Systemax Inc.We have audited the accompanying consolidated balance sheets of Systemax Inc. and subsidiaries (the “Company”) as of December 31, 2015 and 2014, and therelated consolidated statements of operations, comprehensive loss, shareholders' equity and cash flows for each of the three years in the period ended December 31,2015. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and financial statement schedule are theresponsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining,on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basisfor our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Systemax Inc. andsubsidiaries at December 31, 2015 and 2014, and the consolidated results of their operations and their cash flows for each of the three years in the period endedDecember 31, 2015, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, whenconsidered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Systemax Inc.’s internal control overfinancial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission (2013 framework) and our report dated March 17, 2016 expressed an unqualified opinion thereon./s/ Ernst & Young LLPNew York, New YorkMarch 17, 201646 SYSTEMAX INC.CONSOLIDATED BALANCE SHEETS(in millions, except for share data)December 31,20152014ASSETS:Current assets:Cash$215.1 $165.0 Accounts receivable, net of allowances of $15.7 and $15.8266.3 354.5 Inventories144.4 292.9 Prepaid expenses and other current assets14.5 15.9 Total current assets640.3 828.3 Property, plant and equipment, net38.3 41.2 Deferred income taxes8.6 15.2 Goodwill and intangibles18.8 7.4 Other assets4.1 4.8 Total assets$710.1 $896.9 LIABILITIES AND SHAREHOLDERS’ EQUITY:Current liabilities:Accounts payable$346.5 $419.5 Accrued expenses and other current liabilities79.0 95.4 Current portion of long term debt0.6 2.8 Total current liabilities426.1 517.7 Long-term debt0.4 1.1 Deferred income tax liability0.4 - Other liabilities29.3 18.5 Total liabilities456.2 537.3 Commitments and contingenciesShareholders’ equity:Preferred stock, par value $.01 per share, authorized 25 million shares; issued noneCommon stock, par value $.01 per share, authorized 150 million shares; issued 38,861,992 and 38,861,992 shares;outstanding 36,872,688 and 36,808,158 shares0.4 0.4 Additional paid-in capital184.4 184.3 Treasury stock at cost —1,989,304 and 2,053,834 shares(24.5)(25.4)Retained earnings109.4 209.2 Accumulated other comprehensive loss(15.8)(8.9)Total shareholders’ equity253.9 359.6 Total liabilities and shareholders’ equity$710.1 $896.9 See notes to consolidated financial statements.47 SYSTEMAX INC.CONSOLIDATED STATEMENTS OF OPERATIONS(in millions, except per share data)Year Ended December 31,201520142013Net sales$1,854.7 $2,104.2 $1,975.4 Cost of sales1,512.0 1,727.0 1,614.7 Gross profit342.7 377.2 360.7 Selling, general and administrative expenses338.9 375.0 355.3 Special charges, net27.9 15.9 16.2 Operating loss from continuing operations(24.1)(13.7)(10.8)Foreign currency exchange loss9.8 5.3 0.5 Interest and other income, net0.9 1.1 1.1 Loss from continuing operations before income taxes(34.8)(20.1)(12.4)Provision for income taxes13.5 11.9 30.6 Net loss from continuing operations(48.3)(32.0)(43.0)Loss from discontinued operations, net of tax(51.5)(5.5)(0.8)Net loss$(99.8) $(37.5) $(43.8)Basic and diluted EPS:Net loss per share from continuing operations$(1.30) $(0.86) $(1.16)Net loss per share fom discontinued operations$(1.39) $(0.15) $(0.02)Net loss per share, basic and diluted$(2.69) $(1.01) $(1.18)Weighted average common and common equivalent shares:Basic and diluted37.1 37.1 37.0 See notes to consolidated financial statements.48 SYSTEMAX INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(in millions)Year Ended December 31,201520142013Net loss$(99.8) $(37.5) $(43.8)Other comprehensive loss:Foreign currency translation gain (loss)………………………..(6.9)(11.1)1.2 Total comprehensive loss$(106.7) $(48.6) $(42.6)See notes to consolidated financial statements.49 SYSTEMAX INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in millions)Year Ended December 31,201520142013CASH FLOWS FROM OPERATING ACTIVITIES:Loss from continuing operations$(48.3) $(32.0) $(43.0)Adjustments to reconcile loss from continuing operations to net cash provided by (used in) operatingactivities:Depreciation and amortization9.3 11.5 13.1 Asset impairment1.4 10.2 4.1 Provision for deferred income taxes5.5 0.7 27.1 Provision for returns and doubtful accounts7.9 8.9 4.0 Compensation expense related to equity compensation plans1.2 1.5 2.9 Excess tax benefit from exercises of stock options- - (0.1)(Gain) loss on dispositions and abandonment(0.1)0.1 0.1 Changes in operating assets and liabilities:Accounts receivable70.7 (54.0)(23.4)Inventories153.5 23.9 46.1 Prepaid expenses and other current assets2.7 (1.0)(1.4)Income taxes payable (receivable)(0.3)14.4 (8.7)Accounts payable(62.7)10.1 12.2 Accrued expenses and other current liabilities(5.2)6.5 9.1 Net cash provided by operating activities from continuing operations135.6 0.8 42.1 Net cash provided by (used in) operating activities from discontinued operations(49.1)(0.9)4.7 Net cash provided by (used in) operating activities86.5 (0.1)46.8 CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property, plant and equipment(11.3)(7.1)(13.7)Proceeds from disposals of property, plant and equipment1.4 1.0 0.3 Acquisitions net of cash acquired(24.8)(6.4)- Net cash used in investing activities(34.7)(12.5)(13.4)CASH FLOWS FROM FINANCING ACTIVITIES:Repayments of capital lease obligations(2.8)(2.6)(2.8)Proceeds from issuance of common stock- 0.3 0.1 Repurchase of treasury stock(0.2)- - Excess tax benefit from exercises of stock options- - 0.1 Net cash used in financing activities(3.0)(2.3)(2.6)EFFECTS OF EXCHANGE RATES ON CASH1.3 (1.5)(0.1)NET INCREASE (DECREASE) IN CASH50.1 (16.4)30.7 CASH – BEGINNING OF YEAR165.0 181.4 150.7 CASH – END OF YEAR$215.1 $165.0 $181.4 Supplemental disclosures:Interest paid$0.7 $1.1 $1.2 Income taxes paid$4.1 $5.2 $8.1 Supplemental disclosures of non-cash investing and financing activities:Acquisitions of equipment through capital leases$- $0.8 $- See notes to consolidated financial statements.50 SYSTEMAX INC.CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY(in millions, except share data in thousands)Common StockNumberof SharesOutstanding AmountAdditionalPaid-inCapitalTreasuryStock,At CostRetainedEarningsAccumulatedOtherComprehensiveIncome (Loss)TotalEquityBalances, December 31, 201236,555 $0.4 $183.0 $(28.6) $290.5 $1.0 $446.3 Stock-based compensation expense2.9 2.9 Issuance of restricted stock140 (1.9)1.8 (0.1)Exercise of stock options34 (0.3)0.4 0.1 Surrender of fully vested options andrestricted stock(0.4)(0.4)Change in cumulative translationadjustment1.2 1.2 Net loss(43.8)(43.8)Balances, December 31, 201336,729 $0.4 $183.3 $(26.4) $246.7 $2.2 406.2 Stock-based compensation expense1.5 1.5 Issuance of restricted stock45 (0.3)0.6 0.3 Exercise of stock options34 (0.1)0.4 0.3 Surrender of fully vested options(0.1)(0.1)Change in cumulative translationadjustment(11.1)(11.1)Net loss(37.5)(37.5)Balances, December 31, 201436,808 $0.4 $184.3 $(25.4) $209.2 $(8.9)359.6 Stock-based compensation expense1.2 1.2 Issuance of restricted stock86 (1.1)1.1 - Exercise of stock options4 - - - Repurchase of treasury stock(25)(0.2)(0.2)Change in cumulative translationadjustment(6.9)(6.9)Net loss(99.8)(99.8)Balances, December 31, 201536,873 $0.4 $184.4 $(24.5) $109.4 $(15.8) $253.9 See notes to consolidated financial statements.51 SYSTEMAX INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESSystemax Inc. is primarily a direct marketer of brand name and private label products. During 2015, the Company’s operations were organized in threereportable business segments — Industrial Products Group (“IPG”), EMEA Technology Products Group (“EMEA”) and what was the largest business interms of revenue, North America Technology Products Group (“NATG”). EMEA and NATG were aggregated in prior years. Smaller business operationsand corporate functions are aggregated and reported as an additional segment – Corporate and Other (“Corporate”).On December 1, 2015, the Company sold the business operations and certain assets and liabilities of the NATG business to PCM, Inc. (“PCM”) forapproximately $14 million (See Note 2). As a result, the operations of NATG are now reported both within continuing operations and as discontinuedoperations in this Form 10-K. The Company follows the guidance under Accounting Standards Update (“ASU”) 2014-08, Reporting Discontinued Operationsand Disclosures of Disposals of Components of an Entity, which requires disclosures of both discontinued operations and certain other disposals that do notmeet the definition of a discontinued operation. Under ASU 2014-08 in order for a disposal to qualify for discontinued operations presentation in the financialstatements the disposal must be a “strategic shift” with a major impact for the reporting enity. If the entity meets this threshold, only the components thatwere in operation at the time of disposal are presented as discontinued operations. The sale of the NATG business in December 2015 had a major impact onthe Company and therefore met the strategic shift criteria. The NATG components in operaton at the time of the sale were the B2B and Ecommerce businessesand the three remaining retail stores. Accordingly, these components and the results of operations have been adjusted in the accompanying financial statementsto reflect the presentation of the discontinued operations.As part of the March 31, 2015 announcement of restructuring the business the Company closed 31 retail stores and a warehouse during the second quarter offiscal 2015. The Company assessed the disposal group under ASU 2014-08 and concluded the closure of the disposal group to be a "strategic shift". However,this strategic shift was not determined to be a "major" strategic shift based on the portion of the consolidated business that the disposal group represented.Accordingly this disposal group, which includes all the operations that were ceased prior to the December 2015 sale to PCM is not presented in theaccompanying financial statements as discontinued operations and remains in continuing operations for the twelve months ended December 31, 2015 and priorperiods. Pretax losses for this disposal group were $39.0 million, $17.9 million and $26.8 million for the year ended December 31, 2015, 2014 and 2013,respectively.Principles of Consolidation — The accompanying consolidated financial statements include the accounts of Systemax Inc. and its wholly-owned subsidiaries(collectively, the “Company” or “Systemax”). All significant intercompany accounts and transactions have been eliminated in consolidation.Reclassifications — Certain prior year amounts were reclassified to conform to current year presentation.Fiscal Year — The Company’s fiscal year ends at midnight on the Saturday closest to December 31. For clarity of presentation herein, all fiscal years arereferred to as if they ended on December 31. The fiscal year is divided into four fiscal quarters that each end at midnight on a Saturday. Fiscal quarters willtypically include 13 weeks, but the fourth quarter will include 14 weeks in a 53 week fiscal year. For clarity of presentation herein, all fiscal quarters arereferred to as if they ended on the traditional calendar month. The full year of 2015 included 53 weeks compared to 2014 and 2013 which included 52 weeks.Use of Estimates In Financial Statements — The preparation of financial statements in conformity with GAAP requires management to make estimates andassumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company bases its estimates on historicalexperience, current business factors, and various other assumptions that the Company believes are necessary to consider, to form a basis for making judgmentsabout the carrying values of assets and liabilities, the recorded amounts of revenue and expenses, and the disclosure of contingent assets and liabilities. TheCompany is subject to uncertainties such as the impact of future events, economic and political factors, and changes in the Company’s business environment;therefore, actual results could differ from these estimates.52 Changes in estimates are made when circumstances warrant. Such changes in estimates and refinements in estimation methodologies are reflected in reportedresults of operations; if material, the effects of changes in estimates are disclosed in the notes to the consolidated financial statements. Significant estimatesand assumptions by management affect the allowance for doubtful accounts, sales return returns and allowances, inventory reserves, allowances forcooperative advertising, vendor drop shipments, the carrying value of long‑lived assets (including goodwill and intangible assets), the carrying value,capitalization and amortization of software development costs, the provision for income taxes and related deferred tax accounts, certain accrued liabilities,revenue recognition, contingencies, sub-rental lease income, litigation and related legal accruals and the value attributed to employee stock options and otherstock‑based awards.Foreign Currency Translation — The Company has operations in numerous foreign countries. The functional currency of each foreign country is the localcurrency. The financial statements of the Company’s foreign entities are translated into U.S. dollars, the reporting currency, using year-end exchange rates forassets and liabilities, year to date average exchange rates for the statement of operations items and historical rates for equity accounts. Translation gains orlosses are recorded as a separate component of shareholders’ equity.Cash — The Company considers amounts held in money market accounts and other short-term investments, including overnight bank deposits, with anoriginal maturity date of three months or less to be cash. Cash overdrafts are classified in accounts payable.Inventories — Inventories consist primarily of finished goods and are stated at the lower of cost or market value. Cost is determined by using the first-in, first-out method except in certain locations in Europe and retail locations where an average cost is used.Property, Plant and Equipment — Property, plant and equipment is stated at cost. Furniture, fixtures and equipment, including equipment under capital leases,are depreciated using the straight-line or accelerated method over their estimated useful lives ranging from three to ten years. Buildings are depreciated usingthe straight-line method over estimated useful lives of 30 to 50 years. Leasehold improvements are amortized over the shorter of the useful lives or the termof the respective leases.Maintenance and repairs are charged to expense as incurred, and improvements are capitalized. When assets are retired or otherwise disposed of, the cost andaccumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in the consolidated statement of operations in the periodrealized.Internal-Use Software - Internal‑use software is included in fixed assets and is amortized on a straight‑line basis over 3 years. The Company capitalizes costsincurred during the application development stage. Costs related to minor upgrades, minor enhancements and maintenance activities are expensed as incurred.Evaluation of Long-lived Assets — Long lived assets are assets used in the Company’s operations and include, definite-lived intangible assets leaseholdimprovements, warehouse and retail store fixtures and similar property used to generate sales and cash flows. Long lived assets are tested for impairmentutilizing a recoverability test. The recoverability test compares the carrying value of an asset group to the undiscounted cash flows directly attributable to theasset group over the life of the primary asset. If the undiscounted cash flows of an asset group is less than the carrying value of the asset group, the fair valueof the asset group is then measured. If the fair value is also determined to be less than the carrying value of the asset group, the asset group is impaired. As aresult of negative cash flows in its now discontinued NATG operations and its EMEA operations in Germany, Italy, Spain and Sweden, and a forecast forcontinued use of cash in 2015, the Company conducted an evaluation of the long-lived assets in those operations and concluded that those assets wereimpaired. Accordingly an impairment charge of approximately $1.4 million, pre-tax, was recorded during the year ended December 31, 2015. In 2014, NATGoperations recorded an impairment charge of $10.0 million, pre-tax, after the Company conducted an evaluation of its long-lived assets and determined thatthose assets were impaired.Business Combinations — The Company accounts for its business combinations using the acquisition method of accounting. The cost of an acquisition ismeasured as the aggregate of the acquisition date fair values of the assets transferred and liabilities assumed by the Company to the sellers and equityinstruments issued. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed aremeasured separately at their fair values as of the acquisition date. The excess of (i) the total costs of acquisition over (ii) the fair value of the identifiable netassets of the acquiree is recorded as goodwill.53 Goodwill and Intangible Assets — Goodwill represents the excess of the cost of acquired assets over the fair value of assets acquired. The Company performsa qualitative assessment of goodwill and non-amortizing intangibles to determine whether it is more likely than not that the fair value of a reporting unit is lessthan its carrying amount. If the qualitative assessment shows that the fair value of the reporting unit exceeds its carrying amount, the company is not requiredto complete the annual two step goodwill impairment test. If a quantitative analysis is required to be performed for goodwill, the fair value of the reportingunit to which the goodwill has been assigned is determined using a discounted cash flow model. A discounted cash flow model is also used to determine fairvalue of indefinite-lived intangibles using projected cash flows of the intangible. Unobservable inputs related to these discounted cash flow models includeprojected sales growth, same store sales growth, gross margin percentages, new business opportunities, working capital requirements, capital expenditures andgrowth in selling, general and administrative expense.Income Taxes — The Company accounts for income taxes using the liability method, under which deferred tax assets and liabilities are determined based onthe future tax consequences attributable to differences between the financial reporting carrying amounts of existing assets and liabilities and their respectivetax bases and tax credit carry forwards and net operating loss carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates that areexpected to be in effect when the differences are expected to reverse.The Company assesses the likelihood that deferred tax assets will be recovered from future taxable income, and a valuation allowance is established whennecessary to reduce deferred tax assets to the amounts more likely than not expected to be realized.The Company recognizes and measures uncertain tax positions using a two‑step approach. The first step is to evaluate the tax position taken or expected to betaken by determining if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained in an audit, includingresolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to berealized upon ultimate settlement. Significant judgment is required to evaluate uncertain tax positions. The Company evaluates its uncertain tax positions on aregular basis. Its evaluations are based on a number of factors, including changes in facts and circumstances, changes in tax law, correspondence with taxauthorities during the course of audit and effective settlement of audit issues. The Company’s policy is to include interest and penalties related tounrecognized tax benefits as income tax expense in the consolidated statements of operations.Revenue Recognition and Accounts Receivable — The Company recognizes sales of products, including shipping revenue, when persuasive evidence of anorder arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectibility is reasonably assured. Generally, these criteria aremet at the time the product is received by the customers when title and risk of loss have transferred except in our Industrial Products segment where title andrisk pass at time of shipment. Allowances for estimated subsequent customer returns, rebates and sales incentives are provided when revenues are recorded.Revenues exclude sales tax collected. The Company evaluates collectability of accounts receivable based on numerous factors, including past transactionhistory with customers and their credit rating and provides a reserve for accounts that are potentially uncollectible. Trade receivables are generally written offonce all collection efforts have been exhausted. Accounts receivable are shown in the consolidated balance sheets net of allowances for doubtful collectionsand subsequent customer returns.Shipping and Handling Costs — The Company recognizes shipping and handling costs in cost of sales.Advertising Costs — Expenditures for internet, television, local radio and newspaper advertising are expensed in the period the advertising takes place.Catalog preparation, printing and postage expenditures are amortized over the period of catalog distribution during which the benefits are expected, generallyone to four months.Net advertising expenses were $74.4 million, $68.1 million and $60.1 million during 2015, 2014 and 2013, respectively, and are included in the accompanyingconsolidated statements of operations. Of the previously mentioned amounts, NATG operations net advertising expenses totaled $7.5 million, $10.7 millionand $14.1 million during 2015, 2014 and 2013, respectively. The Company utilizes advertising programs to support vendors, including catalogs, internet andmagazine advertising, and receives payments and credits from vendors, including consideration pursuant to volume incentive programs and cooperativemarketing programs. The Company accounts for consideration from vendors as a reduction of cost of sales unless certain conditions are met showing that thefunds are used for specific, incremental, identifiable costs, in which case the consideration is accounted for as a reduction in the related expense category, suchas advertising expense. The amount of vendor consideration recorded as a reduction of selling, general and administrative expenses totaled $20.2 million,$38.8 million and $45.9 million during 2015, 2014 and 2013, respectively. Of the previously mentioned amounts, NATG operations vendor considerationrecorded as a reduction of selling, general and administrative expenses totaled $12.1 million, $24.9 million and $28.3 million, respectively.54 Stock Based Compensation — The fair value of employee share options is recognized in expense over the vesting period of the options, using the gradedattribution method. The fair value of employee share options is determined on the date of grant using the Black-Scholes option pricing model. The Companyhas used historical volatility in its estimate of expected volatility. The expected life represents the period of time (in years) for which the options granted areexpected to be outstanding. The risk-free interest rate is based on the U.S. Treasury yield curve. Stock-based compensation expense includes an estimate forforfeitures and is recognized over the expected term of the award.Net Income (Loss) Per Common Share – Net income per common share - basic is calculated based upon the weighted average number of common sharesoutstanding during the respective periods presented using the two class method of computing earnings per share. The two class method was used as theCompany has outstanding restricted stock with rights to dividend participation for unvested shares. Net income per common share - diluted was calculatedbased upon the weighted average number of common shares outstanding and included the equivalent shares for dilutive options outstanding during therespective periods, including unvested options. The dilutive effect of outstanding options and restricted stock issued by the Company is reflected in net incomeper share - diluted using the treasury stock method. Under the treasury stock method, options will only have a dilutive effect when the average market price ofcommon stock during the period exceeds the exercise price of the options.Basic and diluted net loss per share was the same for each period presented as the inclusion of all potential shares of common stock of the Companyoutstanding would have been anti‑dilutive. The weighted average number of stock options and restricted stock awards outstanding excluded from thecomputation of diluted earnings (loss) per share was 1.0 million shares, 0.8 million shares and 1.3 million shares for the years ended December 31, 2015, 2014and 2013, respectively, due to their antidilutive effect.Employee Benefit Plans - The Company’s U.S. subsidiaries participate in a defined contribution 401(k) plan covering substantially all U.S. employees. Employees may invest 1% or more of their eligible compensation, limited to maximum amounts as determined by the Internal Revenue Service. TheCompany provides a matching contribution to the plan, determined as a percentage of the employees’ contributions. Aggregate expense to the Company forcontributions to such plans was approximately $0.9 million in 2015, 2014 and 2013, respectively and of these amounts, NATG operations expense was $0.4million, $0.5 million and $0.5 million in each of 2015, 2014 and 2013, respectively.Fair Value Measurements - Financial instruments consist primarily of investments in cash, trade accounts receivable, debt and accounts payable. TheCompany estimates the fair value of financial instruments based on interest rates available to the Company. At December 31, 2015 and 2014, the carryingamounts of cash, accounts receivable and accounts payable are considered to be representative of their respective fair values due to their short-term nature.Cash is classified as Level 1 within the fair value hierarchy. The Company’s debt is considered to be representative of its fair value because of its variableinterest rate. The weighted average interest rate on short-term borrowings was 4.3%, 4.3%, and 4.3% in 2015, 2014 and 2013, respectively.The fair value of goodwill, non-amortizing intangibles and long lived assets is measured in connection with the Company’s annual impairment testing asdiscussed above.Significant Concentrations - Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and accountsreceivable. The Company’s excess cash balances are invested with money center banks. Concentrations of credit risk with respect to accounts receivable arelimited due to the large number of customers and their geographic dispersion comprising the Company’s customer base. The Company also performs on-going credit evaluations and maintains allowances for potential losses as warranted.The Company purchases substantially all of our products and components directly from manufacturers and large wholesale distributors. Two vendorsaccounted for 10% or more of our purchases in 2015 and 2014: one vendor accounted for 12.2% and 12.6%, respectively; another vendor accounted for 10.9%and 11.6%, respectively. In 2013, one vendor accounted for 13.9% of our purchases. Excluding NATG operations, no vendor accounted for 10% or more ofour purchases in 2015, 2014 or 2013.55 Recent Accounting PronouncementsPublic companies in the United States are subject to the accounting and reporting requirements of various authorities, including the Financial AccountingStandards Board (“FASB”) and the Securities and Exchange Commission (“SEC”). These authorities issue numerous pronouncements, most of which are notapplicable to the Company’s current or reasonably foreseeable operating structure. Below are the new authoritative pronouncements that management believesare relevant to Company’s current operations.In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts withCustomers (Topic 606), to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied byreporting companies under GAAP. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in anamount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the revised guidancerequires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Therevised guidance is effective for the Company beginning in the quarter ending March 31, 2018; early adoption is allowed. The revised guidance is required tobe applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date ofinitial application. The Company is currently evaluating the transition method that will be elected and the potential effect the revised guidance will have on theCompany’s consolidated financial statements.I n September 2015, the FASB issued ASU 2015-16, Business Combinations - Simplifying the Accounting for Measurement-Period Adjustments (Topic 805).ASU 2015-16 requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting periodin which the adjustment amounts are determined. ASU 2015-16 is effective for interim and annual periods beginning after December 15, 2015, with earlyadoption permitted, and is to be applied on a prospective basis. The Company is currently in the process of evaluating the impact of the adoption of thisstandard on the Company’s consolidated financial statements.In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes . ASU 2015-17 simplifies thepresentation of deferred income taxes by eliminating the separate classification of deferred income tax liabilities and assets into current and noncurrentamounts in the consolidated balance sheet. The amendments in the update require that all deferred tax liabilities and assets be classified as noncurrent in theconsolidated balance sheet. The amendments in this update are effective for annual periods beginning after December 15, 2016, and interim periods thereinand may be applied either prospectively or retrospectively to all periods presented. Early adoption is permitted. The Company has early adopted this standardin the fourth quarter of 2015 on a retrospective basis. Prior periods have been retrospectively adjusted. As a result of the adoption of ASU 2015-17, theCompany reclassified $1.7 million of net current deferred tax assets and $1.9 million of noncurrent deferred tax liabilities in the 2014 balance sheet.In February 2016, the FASB issued ASU 2016-02, Leases , which requires a lessee, in most leases, to initially recognize a lease liability for the obligation tomake lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. The guidance is effective for fiscal years beginningafter December 15, 2018, and interim periods within those years. Early adoption is permitted. The Company is evaluating the effect of adopting thispronouncement.2.DISPOSITIONIn March 2015 the Company announced a restructuring of its NATG business and closed 31 retail stores and a warehouse during the second quarter of fiscal2015. The Company assessed the disposal group under ASU 2014-08 and concluded the closure of the disposal group to be a "strategic shift". However, thisstrategic shift was not determined to be a "major" strategic shift based on the portion of our consolidated business that the disposal group represented.Accordingly this disposal group is not presented in the accompanying financial statements as discontinued operations and remains in continuing operations forthe twelve months ended December 31, 2015 and prior periods.On November 17, 2015 the Company and PCM entered into an asset purchase agreement under which PCM acquired certain business to business assets ofNATG, including the TigerDirect brand, for $14 million in cash and the assumption of certain liabilities. The proceeds from the sale are recorded in specialcharges, net within NATG discontinued operations loss. PCM did not acquire cash, accounts receivable, inventory or assume trade payables in connectionwith the transaction. This transaction closed on December 1, 2015 and on that date, the parties entered into a transition services agreement to facilitate anorderly transition of the purchased assets and for the provision of various IT and back office support services. The Company announced that after the sale andcertain transition services agreements with PCM were completed, the Company would completely exit the remaining NATG operations during early 2016.This exit plan included the closing of the three remaining retail stores and management operations, the closing of its NATG distribution center, andimplementing a general workforce reduction representing a major strategic shift, and, as a result the B2B and Ecommerce business and the three remainingretail stores in operation at the time of the sale are presented as discontinued operations.56 A reconciliation of pretax loss of Discontinued Operations to the Net Loss of Discontinued Operations is as follows:Year Ended December 31,201520142013Net sales$1,053.4 $1,338.6 $1,376.9 Cost of sales997.1 1,222.6 1,254.7 Gross profit56.3 116.0 122.2 Selling, general and administrative expenses109.9 119.7 126.0 Special charges, net1.6 8.5 6.0 Foreign currency exchange (gain) loss(0.5)0.1 (0.4)Interest and other income, net0.1 0.2 - Loss of discontinued operations before income taxes(54.8)(12.5)(9.4)Benefit for income tax(3.3)(7.0)(8.6)Net loss from discontinued operations(51.5)(5.5)(0.8)3.ACQUISITIONSOn January 30, 2015, IPG acquired all of the outstanding equity interests of the Plant Equipment Group (“PEG”) from TAKKT America, a business-to-business direct marketer of maintenance, repair and operations (“MRO”) products with operations in North America for approximately $25.9 million in cash,$1.9 million of which was placed into an escrow account for one year to secure the sellers’ indemnification obligations under the purchase agreement. Thisacquisition expanded the IPG segment presence in the MRO market in North America. The acquisition is considered an asset acquisition for tax purposes andas such, the goodwill resulting from this acquisition is tax deductible. The total associated transaction costs of the acquisition were $0.4 million and wererecorded in selling, general and administrative expense. The acquisition was accounted for using the acquisition method of accounting, which requires, amongother things, the assets acquired and the liabilities assumed be recognized at their fair values as of the acquisition date.The following table summarizes the fair value of the assets acquired and liabilities assumed (in millions):Purchase price$25.9 Less:Cash1.1 Accounts receivable10.0 Inventory11.8 Fixed assets1.2 Prepaid expenses0.6 Leases, net0.8 Client lists2.1 Trademarks4.1 Accounts payable(7.5)Accrued expenses(3.7)Other liabilities(0.2)Goodwill$5.6 The amount allocated to goodwill reflects the benefits the Company expects to realize from the growth of the acquisition’s operations.For the twelve months ended December 31, 2015 PEG generated approximately $89.1 million in revenue and approximately $1.1 million of pretax income. The Company’s unaudited pro forma revenue and net loss for the years ended December 31, 2015 and 2014 below have been prepared as if PEG had beenpurchased on January 1, 2014 (in millions).57 Unaudited Pro Forma20152014Revenue$1,861.5 $2,204.4 Net loss$(48.3) $(32.4)The unaudited pro forma financial information above is not necessarily indicative of what the Company’s consolidated results actually would have been if theacquisitions had been completed at the beginning of the respective periods. In addition, the unaudited pro forma information above does not attempt to projectthe Company’s future results.On June 12, 2014, the Company acquired Misco Solutions (f/k/a SCC Services B.V.), a supplier of business-to-business IT products and services withoperations in the Netherlands. The purchase price (after giving effect to the conversion of Euros to U.S. dollars) was approximately $7.3 million in cash (5.4million Euro), $0.6 million (0.4 million Euro) of which was placed into an escrow account for one year to secure the sellers’ indemnification obligations underthe purchase agreement. The Company completed its purchase price allocation and recorded assets of approximately $1.5 million for Goodwill, $1.0 millionfor Client Lists and $0.2 million for Trademarks. The operating results of Misco Solutions are included in the accompanying consolidated statements ofoperations from the date of acquisition in the EMEA segment. The Company has determined that this was not a material acquisition for further financialstatement disclosure purposes.4.GOODWILL AND INTANGIBLESGoodwill :The following table provides information related to the carrying value of goodwill (in millions):December 31,December 31,20152014Balance, January 1$3.9 $2.4 Additions associated with acquisition5.6 1.5 Foreign currency translation(0.3) - Balance, December 31$9.2 $3.9 Indefinite-lived intangible assets: The following table summarizes information related to indefinite-lived intangible assets (in millions):December 31,December 31,20152014Balance January 1$2.3 $2.3 Additions associated with acquisition4.1 - Balance December 31$6.4 $2.3 58 Definite-lived intangible assets:The following table summarizes information related to definite-lived intangible assets (in millions):December 31,December 31,20152014AmortizationPeriod (Years)GrossCarryingAmountAccumulatedAmortizationWeightedavguseful lifeGrossCarryingAmountAccumulatedAmortizationWeighted avguseful lifeClient lists5-10 yrs$5.5 $3.0 8.3 $3.6 $2.6 7.3 Leases3-6 yrs0.8 0.1 4.7 - - - Trademark1 yr0.2 0.2 - 0.2 - - Total$6.5 $3.3 7.3 $3.8 $2.6 7.3 The aggregate amortization expense for these intangibles was approximately $0.7 million in 2015. The estimated amortization for future years endingDecember 31 is as follows (in millions):2016$0.5 20170.5 20180.4 2019 and after1.8 Total$3.2 5.PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment, net consist of the following (in millions):December 31,20152014Land and buildings$17.7 $18.6 Furniture and fixtures, office, computer and other equipment and software108.7 127.6 Leasehold improvements21.8 26.8 148.2 173.0 Less accumulated depreciation and amortization109.9 131.8 Property, plant and equipment, net$38.3 $41.2 Included in property, plant and equipment are assets under capital leases, as follows (in thousands):20152014Office, computer and other equipment$17.5 $17.7 Less: Accumulated amortization16.3 14.6 $1.2 $3.1 Depreciation charged to operations for property, plant and equipment including capital leases in 2015, 2014, and 2013 was $11.1 million, $15.4 million and$17.4 million, respectively. NATG operations accounted for $3.1 million, $8.5 million and $11.9 million, of these amounts in 2015, 2014 and 2013,respectively.6.CREDIT FACILITIESThe Company maintains a $125.0 million (which may be increased to $200.0 million, subject to certain conditions) secured revolving credit agreement with agroup of financial institutions which provides for borrowings in the United States. The credit facility was scheduled to expire in October 2015 and theCompany entered into an amended and restated revolving credit facility on October 13, 2015. The new facility has a maturity date of October 31, 2016.Availability is subject to a borrowing base formula that takes into account eligible receivables and eligible inventory. Borrowings are secured by substantiallyall of the Company’s assets, including accounts receivable, inventory and certain other assets, subject to limited exceptions. The credit agreement containscertain operating, financial and other covenants, including limits on annual levels of capital expenditures, availability tests related to payments of dividendsand stock repurchases and fixed charge coverage tests related to acquisitions. The revolving credit agreement requires that a minimum level of availability bemaintained. If such availability is not maintained, the Company will be required to maintain a fixed charge coverage ratio (as defined). The borrowings underthe agreement are subject to borrowing base limitations of up to 85% of eligible accounts receivable and up to 40% of qualified inventories. The interest rateunder this facility is computed at applicable market rates based on LIBOR or the Prime Rate, plus an applicable margin. The applicable margin varies based onborrowing base availability. As of December 31, 2015, eligible collateral under this agreement was $37.9 million, total availability was $33.0 million, totaloutstanding letters of credit were $4.9 million and there were no outstanding advances. The Company was in compliance with all of the covenants under thisfacility as of December 31, 2015.59 7.ACCRUED EXPENSES AND OTHER CURRENT LIABILITIESAccrued expenses and other current liabilities consist of the following (in millions):December 31,20152014Payroll and employee benefits$31.0 $34.6 Advertising7.6 11.9 Sales and VAT tax payable5.1 9.3 Freight5.6 8.0 Reorganization costs6.3 4.7 Deferred revenue5.4 5.1 Other18.0 21.8 $79.0 $95.4 8.LONG-TERM DEBTThe Company (through a subsidiary) had an outstanding Bond financing with the Development Authority of Jefferson, Georgia (the “Authority”). The Bondswere issued by the Authority and purchased by GE Government Finance Inc., and were to mature on October 1, 2018. The proceeds from the Bond were usedto finance capital equipment purchased for the Company’s distribution facility located in Jefferson, Georgia. The purchase and installation of the equipmentfor the facility was completed by December 31, 2011. Pursuant to the transaction, the Company transferred to the Authority, for consideration consisting of theBond proceeds, ownership of the equipment and the Authority leased the equipment to the Company’s subsidiary pursuant to a capital equipment leaseexpiring October 1, 2018. Under the capital equipment lease, the Company has the right to acquire ownership of the equipment at any time for a purchaseprice sufficient to pay off all principal and interest on the Bonds, plus $1.00. The Company exercised this right in November 2015 paying off all outstandingprincipal plus $1.00 and acquired title to all of the capital equipment. This facility was paid off in November 2015.Long-term debt consists of (in millions):December 31,20152014Warehouse capitalized equipment lease$- $2.2 Other capitalized equipment lease1.0 1.7 Subtotal1.0 3.9 Less: current portion0.6 2.8 $0.4 $1.1 The aggregate maturities of long-term debt outstanding at December 31, 2015 are as follows (in millions):201620172018Maturities$0.6 $0.3 $0.1 60 9.SPECIAL CHARGES, NETThe Company’s NATG segment incurred special charges of approximately $27.2 million for the year, of which $25.6 million is included in continuingoperations, $1.6 million is included in discontinued operations. Charges incurred included approximately $29.9 million for lease termination costs for the retailstores and warehouse closures, $5.5 million in workforce reductions, $3.3 million in consulting expenses and net asset impairment charges of $0.1 million.These charges were offset by approximately $14.1 million, net from the sale of the NATG business and Circuit City name and trademarks. Amounts related tothe exit from NATG operations that are unpaid at December 31, 2015 are recorded in Accounts payable, Accrued expenses and other current liabilities andOther liabilities in the accompanying Consolidated Balance Sheets. The Company expects that additional NATG wind-down costs incurred during 2016 orlater will aggregate between $15 and $25 million, which will be presented in discontinued operations.Included in the charges noted above is $2.5 million for the year of professional costs, net of $1.0 million from an insurance recovery settlement related to theinvestigation, settlement, prosecution, and restitution proceedings related to the former NATG executives; and professional costs related to the investigationconducted at the request of the US Attorney for the Southern District of Florida .EMEA incurred special charges of approximately $0.7 million in 2015 related to the termination of the Chief Executive of EMEA. Amounts related to thisaction that are unpaid at December 31, 2015 are recorded in Accrued expenses and other current liabilities in the accompanying Consolidated Balance Sheets.EMEA recorded $0.1 million benefit from adjustments to previously accrued workforce reductions and personnel costs.The following table details the associated liabilities incurred related to the Technology Products segments special charges (in millions):EMEA-WorkforceReductions andPersonnel CostsNATG-WorkforceReductionsNATG-Other ExitCostsTotalBalance, January 1, 2015$4.7 - $- $4.7 Charged to expense0.4 5.5 33.0 38.9 Paid or otherwise settled(4.8) (2.8) (16.7) (24.3)Balance, December 31, 2015$0.3 2.7 $16.3 $19.3 The Company conducted an evaluation of its long-lived assets in certain EMEA locations (Germany, Italy, Spain and Sweden) and, as a result of negative cashflows in 2015 and a forecast for continued cash use, concluded that those assets were impaired and as a result, an impairment charge of approximately $0.7million was recorded to adjust the long-lived assets to fair market value.IPG incurred special charges of approximately $1.0 million during 2015. In the fourth quarter, IPG recorded $0.6 million for lease termination costs related toone of their leased facilities. In the first quarter of 2015, IPG recorded $0.4 million of special charges related to severance costs associated with the integrationof PEG. The unpaid severance cost and unpaid lease costs are included in the Condensed Consolidated Balance Sheet within Accrued expenses and othercurrent liabilities and Other liabilities.10.SHAREHOLDERS’ EQUITYStock-Based Compensation PlansThe Company currently has four equity compensation plans which reserve shares of common stock for issuance to key employees, directors, consultants andadvisors to the Company. The following is a description of these plans:The 1995 Stock Option Plan for Non-Employee Directors - This plan, adopted in 1995, provides for automatic awards of non-qualified options to directors ofthe Company who are not employees of the Company or its affiliates. All options granted under this plan will have a ten year term from grant date and areimmediately exercisable. A maximum of 100,000 shares may be granted for awards under this plan. The ability to grant new awards under this plan ended onOctober 12, 2006 but awards granted prior to such date continue until their expiration. No options were outstanding under this plan as of December 31, 2015.61 The 1999 Long-term Stock Incentive Plan, as amended (“1999 Plan”) - This plan was adopted in October 1999 with substantially the same terms andprovisions as the 1995 Long-term Stock Incentive Plan. The number of shares that may be granted under this plan to a maximum of 7,500,000. The maximumnumber of shares granted per type of award to any individual may not exceed 1,500,000 in any calendar year and 3,000,000 in total. The ability to grant newawards under this plan ended on December 31, 2009 but awards granted prior to such date continue until their expiration. A total of 492,750 options wereoutstanding under this plan as of December 31, 2015.The 2006 Stock Incentive Plan For Non-Employee Directors - This plan, adopted by the Company’s stockholders in October, 2006, replaces the 1995 StockOption Plan for Non-Employee Directors. The Company adopted the plan so that it could offer directors of the Company who are not employees of theCompany or of any entity in which the Company has more than a 50% equity interest (“independent directors”) an opportunity to participate in the ownershipof the Company by receiving options to purchase shares of common stock at a price equal to the fair market value at the date of grant of the option andrestricted stock awards. Awards for a maximum of 200,000 shares may be granted under this plan. A total of 15,000 options were outstanding under this planas of December 31, 2015.The 2010 Long-term Stock Incentive Plan (“2010 Plan”) - This plan was adopted in April, 2010 with substantially the same terms and provisions as the 1999Long-term Stock Incentive Plan. The maximum number of shares granted per type of award to any individual may not exceed 1,500,000 in any calendar year.Restricted stock grants and common stock awards reduce stock options otherwise available for future grant. Awards for a maximum of 7,500,000 shares maybe granted under this plan. A total of 446,875 options and 206,120 restricted stock units were outstanding under this plan as of December 31, 2015.Shares issued under our share-based compensation plans are usually issued from shares of our common stock held in the treasury.Compensation cost related to non-qualified stock options recognized in operating results (selling, general and administrative expense) for 2015, 2014 and 2013was $0.2 million, $0.7 million, and $1.1 million respectively, and of these amounts NATG segment’s compensation cost related to non-qualified stock optionswas de minimis in 2015 and 2014 and $0.2 million in 2013. The related future income tax benefits recognized for 2015, 2014 and 2013 were $0.1 million,$0.2 million and $0.4 million, respectively.Stock OptionsThe following table presents the weighted-average assumptions used to estimate the fair value of options granted in 2015, 2014 and 2013:201520142013Expected annual dividend yield0% 0% 0%Risk-free interest rate1.73% 2.02% 1.66%Expected volatility40.2% 46.9% 41.1%Expected life in years6.3 6.2 7.9 The following table summarizes information concerning outstanding and exercisable options:Weighted Average201520142013SharesExercisePriceSharesExercisePriceSharesExercisePriceOutstanding at beginning ofyear1,127,250 $16.12 1,175,499 $16.11 1,353,059 $15.88 Granted25,000 $10.62 90,000 $13.56 60,000 $9.54 Exercised(4,000) $6.30 (33,749) $9.78 (34,310) $3.04 Cancelled or expired(193,625) $16.29 (104,500) $15.83 (203,250) $14.84 Outstanding at end of year954,625 $15.98 1,127,250 $16.12 1,175,499 $16.11 Options exercisable at yearend832,125 839,500 772,749 Weighted average fair valueper option granted duringthe year$4.44 $6.46 $4.44 62 The total intrinsic value of options exercised was de minimis for 2015 and $0.2 million for 2014 and 2013.The following table summarizes information about options vested and exercisable or nonvested that are expected to vest (nonvested outstanding less expectedforfeitures) at December 31, 2015:Range of Exercise PricesNumberExercisableWeightedAverageExercisePriceWeighted AverageRemainingContractual LifeAggregateIntrinsicValue (inmillions)$5.00to$10.00 47,202 $9.51 7.46 $- $10.01to$15.00 390,950 $12.84 4.98 - $15.01to$20.00 431,763 $18.22 3.93 - $20.01to$20.15 100,000 $20.15 1.04 - $5.00to$20.15 969,915 $15.83 4.22 $- The aggregate intrinsic value in the tables above represents the total pretax intrinsic value (the difference between the closing stock price on the last day oftrading in 2015 and the exercise price) that would have been received by the option holders had all options been exercised on December 31, 2015. This valuewill change based on the fair market value of the Company’s common stock.The following table reflects the activity for all unvested stock options during 2015:SharesWeightedAverage Grant-Date Fair ValueUnvested at January 1, 2015287,750 $8.21 Granted25,000 $4.44 Vested(132,125) $8.67 Forfeited(58,125) $7.22 Unvested at December 31, 2015122,500 $7.40 At December 31, 2015, there was approximately $0.2 million of unrecognized compensation costs related to unvested stock options, which is expected to berecognized over a weighted average period of 1.48 years. The total fair value of stock options vested during 2015, 2014 and 2013 was $1.1 million, $1.2million and $1.6 million, respectively.Restricted Stock and Restricted Stock UnitsIn August 2010, the Company granted 175,000 RSUs under the 2010 Plan to a key employee who is also a Company director. These RSUs have none of therights as other shares of common stock, other than rights to cash dividends, until common stock is distributed. This RSU award was a non-performance awardwhich vests in ten equal annual installments of 17,500 units beginning May 15, 2011 and each May 15, thereafter. Compensation expense related to this RSUaward was approximately $0.2 million during each of 2015 and 2014 and $0.3 million in 2013.In October 2011, the Company granted 100,000 RSUs under the 2010 Plan to, at that time, a key employee. This RSU award was a non-performance awardwhich vested in ten equal annual installments of 10,000 units beginning October 3, 2012 and each October 3 thereafter. The termination without cause of thiskey employee during 2013 caused the accelerated vesting of the remaining 90,000 shares in accordance with the restricted stock agreement with the Company.Compensation expense related to these restricted stock awards was zero during each of 2015 and 2014 and approximately $0.8 million in 2013.In November 2011, the Company granted 100,000 RSUs under the 2010 Plan to a key employee who is also a Company director. This RSU award was a non-performance award which vests in ten equal annual installments of 10,000 units beginning November 14, 2012 and each November 14 thereafter. Compensation expense related to this RSU award was approximately $0.2 million during each of 2015, 2014 and 2013.63 In January 2012 and March 2012, the Company granted 50,000 RSUs under the 2010 Plan to each of two key employees. These RSU awards were non-performance awards which vest in ten equal annual installments of 10,000 units beginning January 3, 2013 and March 1, 2013, respectively, and each January3 and March 1, thereafter. The termination without cause of one of these key employees during 2015 caused the accelerated vesting of the remaining 35,000shares in accordance with the restricted stock agreement with the Company. Compensation expense related to these RSU awards were approximately $0.4million, $0.3 million and $0.4 million during each of 2015, 2014 and 2013, respectively.In July 2015, the Company granted 23,620 RSUs under the 2010 Plan to a key employee. This RSU award was a non-performance award which vests in fourequal annual installments of 5,905 units beginning July 6, 2015 and each July 6 thereafter. Compensation expense related to this RSU award wasapproximately $0.1 million in 2015.Share-based compensation expense for restricted stock issued to Directors was $0.1 million in each of 2015, 2014 and 2013.11.INCOME TAXESThe components of income (loss) from continuing operations before income taxes are as follows (in millions):Year Ended December 31,201520142013United States$(14.5) $1.9 $(11.1)Foreign(20.3) (22.0)(1.3)Total$(34.8) $(20.1) $(12.4)The (benefit) provision for income taxes from continuing operations consists of the following (in millions):Year Ended December 31,201520142013Current:Federal$3.1 $7.6 $(0.3)State0.6 0.4 0.4 Foreign4.3 3.2 3.4 Total current8.0 11.2 3.5 Deferred:Federal0.1 - 20.5 State- (0.3)5.3 Foreign5.4 1.0 1.3 Total deferred5.5 0.7 27.1 TOTAL$13.5 $11.9 $30.6 Tax benefit from discontinued operations was $(3.3) million, $(7.0) million and $(8.6) million for the years ended December 31, 2015, 2014 and 2013,respectively.Income taxes are accrued and paid by each foreign entity in accordance with applicable local regulations.A reconciliation of the difference between the income tax expense and the computed income tax expense based on the Federal statutory corporate rate is asfollows (in millions):Year Ended December 31 ,201520142013Income tax at Federal statutory rate$(12.2)(35.0)% $(7.1)(35.0)% $(4.3)(35.0)%Foreign taxes at rates different from theU.S. rate7.7 22.2 5.2 25.9 2.2 18.1 State and local income taxes, net of federaltax benefit(1.4)(3.9)1.6 8.2 0.5 3.9 Impact of state rate changes0.7 1.9 - - - - Changes in valuation allowances18.8 54.2 12.4 61.5 33.5 271.7 Change in deferred tax liability- - - - (1.2)(9.6)Non-deductible items0.1 0.2 - - 0.1 0.3 Other items, net(0.2)(0.8)(0.2)(1.1)(0.2)(1.4)Income tax$13.5 38.8% $11.9 59.5% $30.6 248.0%64 The deferred tax assets and liabilities are comprised of the following (in millions):December 31,20152014Assets:Accrued expenses and other liabilities$12.4 $9.0 Inventory5.6 4.2 Depreciation0.8 2.4 Intangible & other13.0 13.4 Net operating loss and credit carryforwards57.4 35.0 Valuation allowances(80.6) (48.8)Total non-current deferred tax assets8.6 15.2 Liabilities :Non-current:Other$0.4 $- Total non-current liabilities$0.4 $- During the current year the Company recorded valuation allowances against deferred tax assets of approximately $18.8 million. These valuation allowanceswere recorded against U.S. federal deferred tax assets of approximately $8.7 million, foreign deferred tax assets of $9.0 million and state deferred tax assetvaluation allowances of approximately $1.1 million. These valuation allowances were recorded primarily as a result of Managements’ belief that the deferredassets are not likely to be realized due to recent losses.The Company has not provided for federal income taxes applicable to the undistributed earnings of its foreign subsidiaries of approximately $50.0 million asof December 31, 2015, since these earnings are considered indefinitely reinvested. The Company has gross foreign net operating loss carryforwards of $108.1million which expire through 2031 and gross U.S. federal net operating loss carry forwards of $53.6 million which expire through 2035. The Company recordsthese benefits as assets to the extent that utilization of such assets is more likely than not; otherwise, a valuation allowance has been recorded. The Companyhas also provided valuation allowances for certain state deferred tax assets and net operating loss carryforwards where it is not likely they will be realized.As of December 31, 2015, the Company has approximately $1.6 million in federal tax credit carryforwards expiring in years through 2025 and variousamounts of state and foreign net operating loss carryforwards expiring through 2035. The Company has recorded valuation allowances of approximately$80.6 million, including valuations against the federal and state deductibility of temporary differences including net operating losses of $43.6 million and $9.8million respectively, foreign tax credits of $1.6 million and tax effected temporary differences and net operating loss carryforwards in foreign jurisdictions of$25.6 million.The Company is routinely audited by federal, state and foreign tax authorities with respect to its income taxes. The Company regularly reviews and evaluatesthe likelihood of audit assessments. The Company’s federal income tax returns have been audited through 2013. The Company has not signed any consent toextend the statute of limitations for any subsequent years. The Company’s significant state tax returns have been audited through 2007. The Companyconsiders its significant tax jurisdictions in foreign locations to be the United Kingdom, Canada, France, Italy and Germany. The Company remains subject toexamination in the United Kingdom for years after 2011, in Canada for years after 2013, in France for years after 2012, in Italy for years after 2009 and inGermany for years after 2012.65 In accordance with the guidance for accounting for uncertainty in income taxes the Company recognizes the tax benefits from an uncertain tax position only ifit is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The taxbenefit of an uncertain tax position that meets the more-likely-than-not recognition threshold is measured as the largest amount that is greater than 50% likelyto be realized upon settlement with the tax authority. To the extent we prevail in matters for which accruals have been established or are required to payamounts in excess of accruals, our effective tax rate in a given financial statement period could be affected. As of December 31, 2015 the Company had nouncertain tax positions. Interest and penalties, if any, are recorded in income tax expense. There were no accrued interests or penalty charges related tounrecognized tax benefits recorded in income tax expense in 2015 or 2014.12.COMMITMENTS, CONTINGENCIES AND OTHER MATTERSLeases - The Company is obligated under operating lease agreements for the rental of certain office and warehouse facilities and equipment which expire atvarious dates through August 2032. The Company currently leases its headquarters office/warehouse facility in New York from an entity owned by theCompany’s three principal shareholders and senior executive officers. The Company believes that these payments were no higher than would be paid to anunrelated lessor for comparable space. The Company also acquires certain computer, communications equipment, and machinery and equipment pursuant tocapital lease obligations.At December 31, 2015, the future minimum annual lease payments for capital leases and related and third-party operating leases were as follows (in millions):CapitalLeasesOperatingLeasesTotal20160.6 $24.8 $25.4 20170.3 25.0 25.3 20180.1 22.1 22.2 2019- 20.2 20.2 2020- 16.3 16.3 2021-2025- 44.2 44.2 2026-2030- 22.5 22.5 Thereafter- 4.4 4.4 Total minimum lease payments1.0 179.5 180.5 Less: sublease rental income- 9.2 9.2 Lease obligation net of subleases1.0 $170.3 171.3 Less: amount representing interest0.0 Present value of minimum capital lease payments (including currentportion of $0.6)$1.0 Annual rent expense aggregated approximately $26.4 million, $31.5 million and $34.6 million in 2015, 2014 and 2013, respectively. Included in rent expensewas $1.0 million in 2015, $0.9 million in 2014 and 2013, to related parties. Rent expense is net of sublease income of $0.1 million for 2015, $0.0 million for2014, and $0.1 million for 2013, respectively. NATG operations annual rent expense totaled approximately $10.7 million, $18.3 million and $20.6 million for2015, 2014 and 2013, respectively.The operating lease agreements generally provide for rental payments on a graduated basis and for options to renew, which could increase future minimumlease payments if exercised. The Company recognizes rent expense on a straight‑line basis over the lease period and has accrued for rent expense incurred butnot paid. Deferred rent represents the difference between actual operating lease payments due and straight‑line rent expense. The excess is recorded as adeferred rent liability in the early periods of the lease, when cash payments are generally lower than straight‑line rent expense, and are reduced in the laterperiods of the lease when payments begin to exceed the straight‑line expense. The Company also accounts for leasehold improvement incentives within itsdeferred rent liability.66 Other MattersThe Company and its subsidiaries are involved in various lawsuits, claims, investigations and proceedings including commercial, employment, consumer,personal injury and health and safety law matters, which are being handled and defended in the ordinary course of business. In addition, the Company issubject to various assertions, claims, proceedings and requests for indemnification concerning intellectual property, including patent infringement suitsinvolving technologies that are incorporated in a broad spectrum of products the Company sells. The Company is also audited by (or has initiated voluntarydisclosure agreements with) numerous governmental agencies in various countries, including U.S. Federal and state authorities, concerning potential incometax, sales tax and unclaimed property liabilities. These matters are in various stages of investigation, negotiation and/or litigation, and are being vigorouslydefended. The Company is also being audited by an entity representing 45 states seeking recovery of “unclaimed property”. The Company is complying withthe audit and is providing requested information.Although the Company does not expect, based on currently available information, that the outcome in any of these matters, individually or collectively, willhave a material adverse effect on its financial position or results of operations, the ultimate outcome is inherently unpredictable. Therefore, judgments couldbe rendered or settlements entered, that could adversely affect the Company’s operating results or cash flows in a particular period. The Company routinelyassesses all of its litigation and threatened litigation as to the probability of ultimately incurring a liability, and records its best estimate of the ultimate loss insituations where it assesses the likelihood of loss as probable and estimable. In this regard, the Company establishes accrual estimates for its various lawsuits,claims, investigations and proceedings when it is probable that an asset has been impaired or a liability incurred at the date of the financial statements and theloss can be reasonably estimated. At December 31, 2015 the Company has established accruals for certain of its various lawsuits, claims, investigations andproceedings based upon estimates of the most likely outcome in a range of loss or the minimum amounts in a range of loss if no amount within a range is amore likely estimate. The Company does not believe that at December 31, 2015 any reasonably possible losses in excess of the amounts accrued would bematerial to the financial statements.Following the previously reported independent investigation of Gilbert Fiorentino and Carl Fiorentino by our Audit Committee in 2011 (in response to awhistleblower report) for a variety of improper acts, the subsequent termination of their employment and the entering into by Gilbert Fiorentino of a settlementagreement with the Securities and Exchange Commission, on November 20, 2014 the United States Attorney’s Office (“USAO”) for the Southern District ofFlorida announced that Gilbert Fiorentino and Carl Fiorentino had been charged with mail fraud, wire fraud and money laundering in connection with ascheme to defraud TigerDirect and Systemax. Specifically, the charges set forth a scheme to obtain kickbacks and other benefits, and to conceal this illicitincome from the IRS, all while Gilbert Fiorentino and Carl Fiorentino were employed as senior executives at NATG. On December 2, 2014, the United StatesAttorney’s Office announced that Gilbert Fiorentino and Carl Fiorentino had pled guilty to various charges, and on March 3, 2015, Gilbert Fiorentino and CarlFiorentino were sentenced to sixty and eighty months’ imprisonment, respectively. On March 1, 2016, the United States District Court for the SouthernDistrict of Florida awarded the Company approximately $36 million in restitution from Gilbert and Carl Fiorentino, which the Company will utilize allavailable means to collect.The Company's Audit Committee, with the assistance of independent outside counsel, has been cooperating with a request by the USAO that it assist theUSAO’s investigation into allegations arising from the Fiorentino investigation regarding possible executive officer conflicts of interest and internal controlsand books and records violations. The Company’s Audit Committee, along with the Audit Committee’s independent outside counsel, conducted aninvestigation of the allegations and its counsel presented the Audit Committee’s findings to the USAO in July 2015. The Company has been advised that theAudit Committee investigation has found no evidence of executive officer conflicts of interest, and no material evidence of internal controls violations orbooks and records violations. The Audit Committee considers its investigation to be closed at this time and the Company has been advised there has been nofurther contact from the USAO. Notwithstanding, it is not possible at this time to predict if or when the USAO will conclude its investigation; what subject(s)will be investigated; what actions, if any, may be taken by the government as a result of its investigation; or whether any of these matters will have a materialadverse impact on the Company.67 13.SEGMENT AND RELATED INFORMATIONThe Company operated and is internally managed in three reportable business segments— Industrial Products Group (“IPG”), EMEA Technology ProductsGroup (“EMEA”) and what was the Company’s largest business in terms of revenue, North America Technology Products Group (NATG”). EMEA andNATG were aggregated in certain prior years as they met the aggregation criteria Smaller business operations and corporate functions are aggregated andreported as an additional segment – Corporate and Other (“Corporate”). On December 1, 2015, we sold certain assets of the NATG business and are currentlywinding down its remaining operations.The Company’s chief operating decision-maker is the Company’s Chief Executive Officer (“CEO”). The CEO, in his role as Chief Operating Decision Maker(“CODM”), evaluates segment performance based on operating income (loss) from continuing operations. The CODM reviews assets and makes significantcapital expenditure decisions for the Company on a consolidated basis only. The accounting policies of the segments are the same as those of the Company.Corporate costs not identified with the disclosed segments are grouped as “Corporate and other expenses.”Financial information relating to the Company’s continuing operations by reportable segment was as follows (in millions):Year Ended December 31,201520142013Net Sales:IPG$698.6 $556.0 $473.8 EMEA1,052.9 1,189.9 1,095.4 NATG97.8 352.4 401.0 Corporate and other5.4 5.9 5.2 Consolidated$1,854.7 $2,104.2 $1,975.4 Depreciation and Amortization Expense:IPG$3.8 $2.1 $2.2 EMEA3.9 4.0 2.9 NATG0.6 4.1 7.0 Corporate and other1.0 1.3 1.0 Consolidated$9.3 $11.5 $13.1 Operating Income (Loss):IPG$43.7 $41.0 $40.0 EMEA(10.8) (21.2)(4.2)NATG(38.2) (17.9)(26.6)Corporate and other expenses(18.8) (15.6)(20.0)Consolidated$(24.1) $(13.7) $(10.8)Total AssetsIPG$175.3 $135.5 $110.0 EMEA238.3 313.3 331.5 NATG26.6 187.6 266.6 Corporate and other269.9 260.5 234.1 Consolidated$710.1 $896.9 $942.2 68 Financial information relating to the Company’s operations by geographic area was as follows (in millions):Year Ended December 31,201520142013Net Sales:United States$676.8 $723.2 674.2 United Kingdom335.7 471.9 468.5 France382.6 383.2 335.4 Other Europe334.5 334.8 291.5 Other North America125.1 191.1 205.8 Consolidated$1,854.7 $2,104.2 1,975.4 Long-lived Assets:United States$18.1 $17.1 $32.3 United Kingdom15.6 17.5 18.7 France1.1 0.8 0.9 Other Europe and Asia3.5 5.5 6.4 Other North America- 0.3 1.1 Consolidated$38.3 $41.2 $59.4 Net sales are attributed to countries based on location of selling subsidiary.14.QUARTERLY FINANCIAL DATA (UNAUDITED)Quarterly financial data, excluding discontinued operations, is as follows (in millions, except for per share amounts):First Quarter Second Quarter Third Quarter Fourth Quarter2015:Net sales$512.1 $454.1 $423.2 $465.3 Gross profit$86.5 $87.0 $82.3 $86.9 Net income (loss)$(18.6) $(19.9) $1.8 $(11.6)Net loss per common share:Basic$(0.50) $(0.54) $0.05 $(0.31)Diluted$(0.50) $(0.54) $0.05 $(0.31)2014:Net sales$541.2 $505.6 $505.4 $552.0 Gross profit$98.2 $93.3 $89.9 $95.8 Net loss$(0.3) $(7.5) $(2.4) $(21.8)Net loss per common share:Basic$(0.01) $(0.20) $(0.06) $(0.59)Diluted$(0.01) $(0.20) $(0.06) $(0.59)15.SUBSEQUENT EVENTS (UNAUDITED)In January 2016 PCM exercised its option (for approximately $0.4 million) to acquire the consumer customer lists and related information used in connection withor generated by the NATG web business in the United States. In February 2016, the Company and PCM completed delivery of the remaining assets.As of this filing, the Company has completed most of the NATG wind down activities, including selling its remaining inventory, closing the two remaining retailstores and closing its remaining distribution center; employee reductions were primarily completed in the fourth quarter of 2015 and the first quarter of 2016 andcurrently approximately 30 employees remain at the Miami location. These employees are performing wind-down activities and it is anticipated these activitieswill be substantially complete by the end of the second quarter of 2016; any remaining activities after that date will be undertaken by the Company’s Corporatefunction in New York. The Company anticipates completing all wind down of remaining operations in 2016, other than settling of remaining lease obligations.69 SYSTEMAX INC.SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTSFor the years ended December:(in millions)DescriptionBalance atBeginning ofPeriodCharged toExpensesWrite-offsOtherBalance atEnd of PeriodAllowance for doubtful accounts2015$6.5 $7.9 $(4.8) $0.2(1) $9.8 2014$5.8 $8.9 $(8.3) $0.1(2) $6.5 2013$6.3 $4.0 $(4.5) $- $5.8 Allowance for sales returns2015$9.3 $5.9 $- $(9.3)(3) $5.9 2014$10.9 $9.3 $- $(10.9)(3) $9.3 2013$9.2 $10.9 $- $(9.2)(3) $10.9 Allowance for inventory returns2015$(7.8) $(4.9) $- $7.8(3) $(4.9)2014$(9.2) $(7.8) $- $9.2(3) $(7.8)2013$(8.0) $(9.2) $- $8.0(3) $(9.2)Allowance for deferred tax assets2015Noncurrent$48.8 $35.8 $- $(4.0) $80.6 2014Noncurrent$39.7 $9.1 $- $- $48.8 2013Noncurrent$11.1 $28.6 $- $- $39.7 (1) Other relates to P.E.G.acquisition allowance for doubtful accounts as of acquisition date.(2) Other relates to Misco Solutions (f/k/a SCC Services B.V.) acquisition allowance for doubtful accounts as of acquisition date.(3) Amounts represent gross revenue and cost reversals to the estimated sales returns and allowances accounts.70 Stock Performance Graph
Financial Summary
(In millions except Diluted Net Income Per Share)
2011
2012
2013
2014 2015
Net sales from continuing operations
$1,923.7 $1961.2
$1,975.4
$2,104.2
$1854.7
Operating income (loss) from continuing operations $ 33.1 $ 8.2 $ (10.8) $ (13.7) $ (24.1)
Net income from continuing operations
$ 17.9 $ 17.8 $ 43.0 $ (32.0) $ (48.3)
Diluted net income (loss) per share
$ 0.48 $ 0.48 $ (1.16) $ (0.86) $ (1.30)
Forward-Looking Statements: Certain statements in this Annual Report constitute “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements include known and unknown risks, uncertainties and other factors as set forth within the Form 10K forming a
part of this document.
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ANNUAL MEETING OF SHAREHOLDER:
The 2016 Annual Meeting will be held on
Monday, June 6, 2016 at 12:00 p.m. at
Systemax Inc.
11 Harbor Park Drive
Port Washington, NY 11050
STOCK EXCHANGE:
The Company’s shares are traded on the
New York Stock Exchange under the symbol SYX.
INDEPENDENT AUDITORS:
ERNST & YOUNG LLP
New York, NY
DIRECTORS
Richard Leeds
Executive Chairman
Bruce Leeds
Vice Chairman
Robert Leeds
Vice Chairman
Lawrence Reinhold
Chief Executive Officer, President and
Interim Chief Financial Officer
Robert D. Rosenthal
Chairman and Chief Executive Officer,
First Long Island Investors LLC
Stacy Dick
Chief Financial Officer
Julian Robertson Holdings
Marie Adler-Kravecas
Retired President of Myron Corporation
CORPORATE EXECUTIVE OFFICERS
Richard Leeds
Executive Chairman
Bruce Leeds
Vice Chairman
Robert Leeds
Vice Chairman
Lawrence Reinhold
Chief Executive Officer, President and
Interim Chief Financial Officer
Eric Lerner
Senior Vice President and General Counsel
Thomas Axmacher
Vice President and Controller
Manoj Shetty
Senior Vice President and Chief Information Officer
SEGMENT EXECUTIVE MANAGEMENT
Robert Dooley
President, Industrial Products Group
Simon Taylor
President, European Technology Products Group
Systemax Inc. Corporate Headquarters
11 Harbor Park Drive, Port Washington, NY 11050
Industrial Products Headquarters
11 Harbor Park Drive, Port Washington, NY 11050
European Technology Products Headquarters
10-14 Darby Close
Park Farm Industrial Estate
Wellingborough
NN8 6XH United Kingdo
2015 Annual Report