QEP Co Inc

OTC:QEPC

Earnings Call Transcript 2019-Q2

[Operator]

Good day, and welcome to the Q.E.P. Co., Inc. Fiscal 2019 Second Quarter Investor Call. Today's conference is being recorded.

At this time, I would like to turn the call over to Stanley Berger. Please go ahead, sir.

[Stan Berger, executive]

Thank you, Sylia. I hope everyone can hear me okay. The call was breaking up as Sylia was making the introduction.

Starting off, on behalf of the management of Q.E.P. Inc., we are extremely pleased to have you participate in our call. And thank you for joining us to discuss the company's fiscal 2019 second quarter financial results.

Before I introduce management, I would like to remind everyone that some of the information provided during the course of this conference call may consist of forward-looking statements that involve risks and uncertainties, including but not limited to those regarding sales and sales growth, pricing and cost pressures, future market position and profitability, opportunities and benefits associated with potential and completed acquisitions, integration of acquisitions, cost and product changes -- product mix changes, success of product development and marketing endeavors, capital availability and currency fluctuation. The company assumes no obligation to update any forward-looking statements or information. It is important to remember that actual results and circumstances could differ materially from the current company expectation.

The company's news release announcing the fiscal 2019 second quarter financial results was issued Thursday. If you do not have a copy, it is posted along with the fiscal 2018 audited financial statement on the Investor Relations section of the company's website at www.qepcorporate.com. Alternatively, please call Paula Siegel at [phone], and she will e-mail or mail a copy to you.

Hosting the call today are Lewis Gould, QEP's Executive Chairman; Harry Schulman, Chief Executive Officer; and Mark Walter, QEP's Senior Vice President and Chief Financial Officer.

At this time, I will now turn the call over to Lewis. Lew?

[Lewis Gould, executive]

Stanley, thank you. And thank you for all of the investors that are on the call today, it's appreciated, especially [ Gary ] and [ Richard Hicks ]. We appreciate your support as we go forward.

This is a very unusual call for us. Actually, there are very few folks on the line, and we have a great deal of information to give to our shareholders. First, I will tell you that Harry has joined the company. He's been here since -- I think this is about 72 days that Harry has been with the company. And Harry will make a statement a little bit later, and we'll get a chance to speak to Harry and find out more about him. We're very pleased to have him on board as we go through this transformational process of building the company.

I also want to say that we have made some minor changes to our Board of Directors. Some of the folks that have been with us some time have now left the board, and there'll be, in the future, a new member. And you'll find out more about that as we got closer to our record date and our shareholders' meeting in December.

But this last 6 months, there's been enormous amount of noise that's happened to the company. We've been working with the acquisition of Kraus for almost 6 months. And remember, this is a carve-out as opposed to buying a company. And it will result in an annual sales roughly between $600 million and -- I'm sorry, between $460 million and $480 million roughly as we go forward.

Also, during this period of time, for those who have been following QEP, I want to give you some information. Obviously, sales are up because that's the way we are at QEP, but we have a closed off plant in Indiana that made [ veneer ] for our Johnson City plan. We sold, and we had to move our product and our inventory from Adelanto to Calhoun, which was costly.

In Calhoun, we have been leasing 100,000 feet roughly from another third party. And we moved our Halex facility. All of this changed when we opened up a new facility in Phoenix -- or Tolleson, Arizona, where we're putting in brand-new equipment that will manufacture adhesives and cartridges for us, not counting the super legal costs that we've had involved in all of these, including our acquisition, our accounting cost, which have been extremely substantial, making sure that we protect the company the right way.

We've also invested a lot of money in Tolleson, going into a new business that we call the cartridge business that we'll have.

At the same time this is happening, we struggled. Although it's not a major struggle for us, we've had the tariff increases on approximately 250 items. We've recovered a lot of the 10% that has been in the form of tariffs, and we have successfully, I think, swallowed that. There's some uncertainty, what will happen in the future with the 25%, but we haven't reached that point now where we know what will happen.

On the acquisition, I want to tell you that this acquisition has legs, and I think that this will make a big difference to the company.

I want to tell you about our philosophy but not the strategy because I do want to tell all of our competitors exactly what we're going to do. But philosophically, we've been in market, and a lot of our products have become commodity products. What we're looking is to be a giant in the smaller industries and be able to have some pricing structure and some pricing power as we go forward.

As a result of the acquisition, our debt-to-equity ratio is roughly 50% right now, but we're still borrowing totally under that 4% range. So I think that we're going to do just fine as the integration goes forward. We've only owned Kraus roughly for couple of weeks right now. We have some good people working at Kraus. And we want to thank, certainly, the management of Kraus that stayed with us for all of the hard work and dedication they've had. And also, I want to acknowledge, on our side, the wonderful, I guess, amount of time spent by Mark, [ Jamie, ] Harry, et cetera, to make this happen successfully as we go forward.

We think that we are on the right track. We're investing in our businesses that we know best. And many of the issues that [ we've had in grand strategy of our concentration ] , so our customers have become less important to us as we go forward.

We also want to acknowledge the deep banking relationships that we've had. I understand that there is a few folks from our major bank on the line. We want to thank you for the number of years that we've been together. And as we go forward, certainly, with the right track.

Where we're headed is, we want to continue on this path. I want to assure the folks that I'm healthy, as far as I know. And I can't do the day-to-day anymore because Harry is much better at it than I am. And we want to concentrate -- or I want to concentrate on things that have to do with M&A activities and building the company up where we can have a goal that we've set and managed, let's say, many, many times over the last number of years.

We want to get to be bigger, and we want to get more profitable. And I do want to tell you that during this period of time, the amount of noise that's going on is just quite incredible. But I do want to tell you that we're confident as we go forward that we're going to be in a good place. I feel that very, very strongly. And the management team Harry is looking at, we've reinforced some of that. We have some of our folks in Canada right now, working very closely with the folks at Kraus. And I think that this is going to be -- having the right [ to ] point sales and profitability.

So I'd like to turn this over to Harry so you can find out more about Harry because, remember, this is only 70-some-odd days. So after Harry speaks, we'll open this up for questions, and we'll try to satisfy those hungry questions from investors. Please, Harry.

[Harry Schulman, executive]

Thanks, Lewis. And I'm happy to be part of the QEP team that has been working closely with Lewis and the board in these really exciting times. I think Lewis talked a little bit about the acquisition activity that's occurred, especially over the last 6 months, with the acquisition of Naturally Aged Flooring in California, our acquisition of PR Floors in Australia and our journey over the last almost 6 months in the acquisition of Kraus, which we closed on October 5.

We have been very, very focused as a team in a few key areas. Number one is looking at our business trends over the last 6 months. We are working very hard to improve efficiencies; acquire and leverage the acquisitions that the company has made; and also, transform, operationally, the Indiana Veneer plant that was closed just a few months ago; the new operations that we're setting up in Johnson City in forward fashion wood. And our capabilities will be expanded to make the latest and greatest products in the wood area. Also, even though wood is a small part of the overall flooring industry, it's still important, and especially important in this world of tariffs. Being a U.S. manufacturer of wood products right in the heart of the Midwest gives us some great advantages.

And then what -- as Lewis talked about, in Phoenix, setting up a West Coast solution for our distribution, our manufacturing of new products and existing adhesives and the consolidation will really show in the coming months of 2019 and '20.

The Kraus acquisition, I'll talk a little bit about. A little bit for those who don't know me, I've been involved in consumer products and industrial products manufacturing and -- both China sourcing and manufacturing in U.S. for over 40 years. The experiences that I've -- I bring here in the areas of integration are something that I love doing. And the team here is -- at QEP, has been very supportive. And as we move forward in the acquisition of Kraus, the beauty of the acquisition is not only in the assets that we purchased that are tangible, but the intangibles, such as the people and the breadth and reach that we now have in North America.

As far as Kraus, just to talk a little bit more, adding on to Lewis' statements, Kraus is based west of Toronto. They're a leading distributor of flooring products. In Canada and the United States, they have a 60-year history. And they have almost 15,000 customers across North America. We acquired a distribution center in Georgia in Dalton, and we took over operations of almost 16 other Kraus locations throughout North America. These include many [ cross-stock ] operations, but they include third-party lease facilities in the Pacific Northwest in Toronto, in Winnipeg, in Mississauga and in Pennsylvania here in the United States.

This is really a strategic opportunity for us to grow and better service the flooring market. And probably 3 things that I can say about Kraus and the acquisition is, number one, they have a strong sales force with North American distribution infrastructure. The sales team is well trained and they're motivated. And they have great strategic locations and distribution centers in Canada and also in the U.S. to give them, and now us, the ability to have optimal delivery times and capabilities.

They -- we also have acquired a large and loyal North American customer base. Kraus' 60-year history has a reoccurring customer base. They include both, main street, commercial and residential sales and homebuilders. And thirdly, we have entrenched supplier relationships coming from Kraus, which, with the great reputation that QEP has, both in North America and around the world, China, the long years of good, solid mutual trust and understandings really create a great, on-trend, premium product platform from some of the best suppliers around the world.

We are looking forward to taking the various assets that we have in our business, Naturally Aged Flooring, our Indiana Johnson City mill, and we're putting together, going forward, a lot of interesting places in which we can compete and be a part of.

And with that, I turn it over back to Lewis.

[Lewis Gould, executive]

Okay, thank you very much, Harry. I appreciate it. And we'll open this up to questions. Please, operator.

[Operator]

[Operator Instructions] And we have a question from Gary Winston, private investor.

[Unknown Attendee]

Congratulations. I've got a couple...

[Harry Schulman, executive]

Thank you.

[Unknown Attendee]

You deserved it. I've got a question about the Kraus acquisition. So I take it, before the acquisition, QEP did not supply product to Kraus?

[Lewis Gould, executive]

That's correct.

[Unknown Attendee]

And is it your plan to supply a lot of your own products to Kraus from your own manufacturing facilities in Dalton?

[Lewis Gould, executive]

Very limited amount. They do carry a few products that they have been private labeling under the Kraus brand for quite some time. We have a great distributor partner in Canada that we're partnering with who does buy from us right now. We don't want to destroy that chain. And we have distribution in the United States. We're working, generally, with both sides. It'll be very limited to begin with what Kraus sells.

[Unknown Attendee]

Got it. And then in terms of the taxation in Canada, I understand they have something similar, like a federal tax and a state tax. In their tax situation, are you allowed to deduct the state taxes from the federal taxes that they impose there?

[Lewis Gould, executive]

Yes.

[Unknown Attendee]

And what are the -- the provisional.

[Lewis Gould, executive]

[indiscernible]

[Unknown Attendee]

Are the rate listings...

[Lewis Gould, executive]

I'm sorry.

[Unknown Attendee]

Go ahead.

[Lewis Gould, executive]

Another thing that's quite important, there are no tariffs in Canada right now. Canada and China apparently are working together closely. That's one of our major goals to work with nontariff areas.

[Unknown Attendee]

Okay. And is the corporate rate of taxation lower in Canada than it is in the U.S.?

[Harry Schulman, executive]

It's actually higher at this point after the new federal tax law passed.

[Unknown Attendee]

Okay. And then, effectively, what do you anticipate the rate to be in Canada?

[Lewis Gould, executive]

Yes, it's probably -- on a blended basis, it's probably 28% to 30%, [indiscernible] provincial to federal.

[Unknown Attendee]

Okay. Are you at liberty to say what you paid for the Kraus acquisition?

[Harry Schulman, executive]

Still to be determined because it still has to be settled out. So we'll have those numbers available at the end of next quarter, most likely.

[Lewis Gould, executive]

So we did pay a depreciated net asset value. The exact number will be forthcoming shortly, but it was not a multiple.

[Unknown Attendee]

Okay. And how many in these 16 locations that you -- that Harry mentioned in Winnipeg, Mississauga, how many employees did you add as a result of the acquisition?

[Lewis Gould, executive]

Yes, we added about 170 employees in total. They're spread throughout both Canada and United States. There's about 100 in Canada, there's about 70 in the United States.

[Unknown Attendee]

Okay. And then I know the accounting costs and legal fees and all that were quite expensive over the last 6 months. Can you quantify? Was that about $3.9 million, the increase that we saw in G&A?

[Lewis Gould, executive]

No, no. I mean, the accounting and legal fees through the end of the quarter were about -- for acquisition-related work, through the end of the second quarter were about $800,000. So within the press release, you'll see that is going to be an add-back in the disclosure table. There's other fees that we [indiscernible] that were deferred in the third quarter and we're still totaling this up. We'll disclose those in Q3.

[Operator]

And at this time, we have no further -- we'll go back to Gary Winston.

[Unknown Attendee]

Lew, how many people are on the call this morning, do you know?

[Lewis Gould, executive]

Yes, we were disappointed in the number. It appears right now, from the poll that we took before it started, that there are only 8 folks on the call.

[Unknown Attendee]

Okay. So in your opening remarks, you mentioned that you were expecting after the Kraus acquisition that we would be doing $460 million to $480 million in revenue. And I recall a couple of conference calls ago when Jamie said, "Hey, Lew, what are we going to be when we grow up?" And you mentioned the forward-looking statements at that time that it was your hope that in the not-too-distant future, in the next year or so, that we would be approaching on $500 million of revenue with a $30 million of EBITDA. Is that still your belief?

[Lewis Gould, executive]

I think that we're a work in process right now because we're looking at -- we're very acquisitive right now. So we're right smack in the middle of looking at something else that will probably achieve that goal. We've been -- this particular quarter, we've looked at the tariff impact, we've looked at the accounting impact. We have enormous amount of soft costs that have gone on in Arizona. So the EBITDA probably on a run rate, assuming that the things happen, next year, I think that we're getting very close to those numbers. Not now, but next year because our investments right now are enormous and they have to go through the integration costs, et cetera, et cetera, all the things that are happening. But I feel comfortable. And we'll have to upgrade this as we go into next quarter and take a look at what our costs are and how the integration is going. But I'm positive. I think this is a right move for the company.

[Unknown Attendee]

Is the Tolleson move, is that working out? Is that according to expectation?

[Lewis Gould, executive]

We're -- we had good and bad. The answer is [ we should be closing ] right now. At the -- in the next month, we'll finally be making adhesives. Every time there's a new operation, you deal with the local city that says you need the fire extinguisher system, you need to have a wood vacuuming system. Every time we go through this, it puts us back a week here, a week there, a weak there. But we're operating from the facility. Remember, we closed our facility in Adelanto, which is our major facility. So we're getting there. I'm guessing that in the next 30 to 45 days, we'll be fully operational. Right now, we're not. We're absorbing a lot of costs as we continue to build out our adhesive plant, which is going to be absolutely magnificent.

[Unknown Attendee]

Wonderful. The 170 employees that you added because of the acquisition, are -- is corporate headquarters in Boca, have you -- are you going to be hiring more [ H&R ] to deal with the U.S. side? Or are you having to hire more folks in Canada to run Canada? Who stuck around from the original Kraus that's kind of helping you manage the business?

[Lewis Gould, executive]

I'm going to give you an overview, and then I'll let Harry give the specifics. When we bought the carve-out, they had a great management team, which we retained. Here in Boca, we've added on a couple of key positions.

And let me just turn this over to Harry, who'll give you some color on this.

[Harry Schulman, executive]

Sure. Thanks, Lewis. Gary, what's occurring right now is that, as Lewis mentioned, this was a carve-out from the original Kraus flooring and a broad loom business. We addressed the ongoing business, go-forward business of Kraus, by working with their senior management team. Their CEO, [ Sean Davis ] , and a select few of his executives, who then went through in a very, very intense detail to come up with the sales force, operating team and people that are necessary to run this new business. Right now, they're headquartered in Waterloo, Canada, which is -- where their original -- where their current broad loom factory is, which is closed. [ Down in ] the next year or less, we will come up with a permanent location. The Kraus team will be operating this business, and we're integrating our knowledge, our know-hows in assisting them, both in our ability to have a China operation on the ground, which Q.E.P. has had for decades and Kraus hasn't, for example. So we're going to be able to leverage that. We have other efficiencies in our supply chain that we will assist with. And really, we haven't added many people here in Boca. We've hired a new VP of Human Resources, which was really needed whether or not we did the acquisition. But certainly, having Tim Bolton on board has been a big help. And I've been working -- I was on the board of the company since April when Lewis appointed me, and I started doing some onboard consulting work in helping Lewis and the team and looking at the acquisition of Kraus. So I've spent 5, 6 months with the organization, the Kraus team and the Q.E.P. team before I became CEO. And I think we've had a running start, at least knowing how we're going to look going forward. So these 170 people, they were hand-picked one at a time. And they're in the U.S., as Mark said, about 70 people in the U.S. and 100 people in Canada. And we're just going to leverage the resources. We don't want to duplicate or have overlap in our operating team. So basically, that's sort of how we're moving forward at this time.

[Unknown Attendee]

How is the industry in Canada? How does it differ than your business in United States in the sense, what are the demographics in terms of flooring and purchase patterns and marketing? How is their business different than ours?

[Lewis Gould, executive]

If you look at our business, we've been in Canada since the 1970s. And we have a company in Toronto called ROBERTS. And we've been selling primarily a [ one mass ] merchandiser and, we manufacture adhesives in Canada. And we have a distribution business. We have a great partner also located in Toronto in Montréal. It has about 50 locations right now in Canada. Previously, in Canada, we sold almost no flooring. We sold primarily the products that I had mentioned. With Kraus being our partner now, we now are selling to the architectural community. We're selling several famous brands that I don't want to mention right now because we are negotiating with them. But we're in the, what they call, the hard surface business. We're going to be expanding on manufacturing of wood to Kraus. They sell carpet tile, which we have not been involved in. And they sell LTV and some of the other items that we have not been involved in. We've been involved primarily in wood. So for us, the demographics are very different. Canada is about 10% of the U.S. market, only 30-some-odd million people up there. But I think the usage of flooring is a higher percentage than it is in the United States. So for us, Kraus represents a great opportunity for us not only in Canada, but half of their business approximately is located in the United States. And I don't want -- we picked up about 100 sales guys?

[Harry Schulman, executive]

No.

[Lewis Gould, executive]

Almost 100 sales guys. Our Jamie and then [ Rick, Harry ] have gone through person by person to make sure we've got the best of the best, if you will, going forward. So for us, this is transformational because our businesses of selling adhesive and selling the basic tools, it has been a very mature business. So we have to look to expand what we know best and something that's synergistic for us. And this certainly is. So that was the concept, the philosophy behind the acquisition.

[Unknown Attendee]

And on the last couple of conference calls ago, you were mentioning that you were making an investment in Germany and that you will report back. How's Germany working out for us?

[Lewis Gould, executive]

Germany consists of 2 people. It is a sales guy, who is a [ terrific ] expert and his assistant. We've been in Germany for approximately 6 months. Sales are not what we had hoped and anticipated right now, but we had some sales last month, our inventory arrived late [ to get into ] Germany. And it has not performed as well as I would like. But certainly, there's pressure on them is that Germany is the second-largest home improvement center in the world. And it's a work in process. It's not that we're getting killed in Germany, it's just that we haven't done as well as that we want to do in Germany.

[Unknown Attendee]

What about Australia? The acquisition that you made in Australia, is that turning out as you would had expected?

[Lewis Gould, executive]

Well, we're happy with the acquisition because it gave us [entree into] several things that are work in process. So I had to give you a longer story than I want to, but this is the story. In Australia, our business is about half mass merchandiser and our business is about half direct distribution to the contract of the installer, et cetera. We made a purchase of a company called PR Floors in Australia, which you're aware of. And we've continued to sell our products through a great, wonderful company in Australia. The great and wonderful company in Australia recently did us a favor and gave us a lot of brand-new business to reach the new rebate, I guess, level. And we had given them an enormous amount of money for that. So all of the work that we did will pay off in the future. In Australia, we also have partnered with a very large laminate company that is a worldwide company that will be distributing through our new company, PR Floors. Integration costs of that, you've seen it in the last 6 months. As we go forward, we're in a process of fine-tuning it. Could it be better? Yes, it could. It was unexpected the amount of money we had to give away, but we're still profitable but not as profitable as we would like to be. And we also include New Zealand when we say Australia. But it's the bigger part of our company right now, and it's getting more involved in flooring, which has to do a great deal with Kraus acquisition. I want you to know that Harry tomorrow is going to China for 10 days, and he's going to be working with our Australian people and putting together a more comprehensive worldwide program of flooring. So this is one of the philosophical pillars that we're looking at as we go forward.

[Unknown Attendee]

The Halex transaction, you were hoping that it would be synergistic that you wouldn't just be [ filling ] Halex products. How has that turned out?

[Lewis Gould, executive]

We like Halex because we need it for Kraus, we need it for major home-centric customers here and we need it generally to be in the business. We bought it for I think the expression we're looking for is [ buckless ] . And the company did well. And then a portion of the company was subject to 200% duty on some of the flooring. So we're recovering from that right now, the 200% duty, while we have looked at other sources to supply a portion of it. But the basic business of selling [ pack ] strip with Halex, et cetera, it's still a brand name, it's a great brand name, and we've done lots to improve it. That has moved into Arizona. But the problem is that we now need a wood dust collection system to operate fully there so we can balance the imports with some of the American-made high-priced products. That's why I said there was a lot of noise going through this right now, but we like Halex a lot.

[Unknown Attendee]

And then the Naturally Aged Floor acquisition that you made, how is that doing?

[Lewis Gould, executive]

We love [ Jack ]. That's all I could say here. [ Jack ] sourcing is a lot in Cambodia and Vietnam that's not subject to duty or tariffs. So Jack has been on a tear. It's been a very good acquisition for us. The sales, on a run rate, are way above what we anticipated. His run rate was roughly $30 million, I think we're at $36 million run rate, if you will. And his products, they have a natural ability to find the -- exactly the right stuff for the market at this time. And our other businesses will capitalize on that. If you can look into the future, at the SURFACES show in Las Vegas, which is our show coming up, we're going to have significant presence there that includes Naturally Aged Flooring. But they're good people, great.

[Unknown Attendee]

With the -- with our footprint growing so rapidly in part of which is flooring, distribution, how do you view -- we manufacture very, very small percentage of what we actually sell, correct?

[Lewis Gould, executive]

No. We actually sell -- in the North America, we actually sell -- we import about 50% of what we sell because of the manufacture of adhesives, the manufacture of wood, the manufacture of [ underlayment ] those are all made domestically here. The imports consist of a lot of the parts and pieces that we bring in.

[Unknown Attendee]

So what part of our estimated $480 million in revenue is hardwood flooring and what percent in [ underlayment ] ? And what percentage of that do we make?

[Lewis Gould, executive]

We don't want to give that away to our competitors right now, but it's becoming an increasingly significant portion of what we do. I had mentioned that we are at a run rate about $36 million. Add that to our other wood businesses, and you'll come up with a good number. That's a strategic philosophical move for us.

[Unknown Attendee]

Mark mentioned on the prior conference call that, [ in some instances ] , it's just cheaper for us to outsource versus bringing on another shift. Are we now -- how many lines are we running and how many shifts are in our factories?

[Lewis Gould, executive]

We are making modifications to what we doing in Johnson City because since the closing of our Veneer plant, we're now heading towards our January goal, if you will, of manufacturing a new type of floor in [ wide ] wood. So there's a lot going on right now. We're operating 1 shift, which tends to fill in when we need extra help right now.

[Unknown Attendee]

Okay. My last 2 questions have to do with valuation and the future of -- direction of the company. So earlier, you mentioned that you're on target maybe within a year to still hit those metrics of what we spoke about a couple of conference calls ago of $30 million EBITDA, $500 million run rate business. Clearly, we're being valued at a tremendous discount of 3x EBITDA. [ I've done ] a lot of research that indicates that we could conceivably trade between 8x and 9x EBITDA, given the right circumstances in terms of actually having analyst coverage, having more flow, maybe selling the company, running it and showing numbers. What are your thoughts on the future direction in terms of getting us to an 8x EBITDA trading metric?

[Lewis Gould, executive]

Well, this is a forward-looking statement, safe harbor statement, and it's my own personal view on this. I believe, I own a significant portion of the shares, so I want the company to continue to do well. And we're all in this together. We want the [ number ] to go up. I can tell you, we're looking at other acquisitions that will increase the size of the company generally, and that dealing is going to [ change us ] , [ with far ] more money.

I'm confident that if the world doesn't turn upside down and we don't have 50% tariffs in China, and et cetera, et cetera, that interest rates don't go up to an enormous amount of money that we're going to get there. So as you see, the next quarter, there'll be noise in the next quarter. But at year-end, we're positive, feel good about it. But next year, as we start to get all of the stuff together and Harry does his magic, you're going to start to see the numbers grow. And I think at that point, probably, because we'll be more visible from our shows that we're doing, PR that we're doing, et cetera, and the press announces that we'll make, whether it's borrowing or acquisitions, that we'll become a lot more visible to people. Frankly, I'm disappointed that the price of the stock is not higher. And I'm not allowed to buy right now because of the acquisitions and things going on. But strictly on a personal level, I'm all in as they say in [like Flynn], and we'll have to see as we go forward. That is not the time, right now, to go public, to sell the company, to do those things as we continue to put the pieces in the right pegs. We have a lot of good people now working very, very hard, and it would be a disappointment to them if we give the company away, and that is not going to happen. What's going happen is we're going to continue on the growth strategy and continue to make improvements worldwide.

Now the headwinds that are coming is, I don't know what's going to happen a year after Brexit. We're trying to defend ourselves, looking at maybe a small acquisition on the continent that is synergistic to us. The Australian dollar went into -- from $0.78 down to $0.70 roughly. That's a headwind in foreign currency. I don't know what will happen with [ devaluation ] of the RMB, but I can tell you that sales wise of what we're doing, you'll see an increase in that. And good sales cover a lot of problems that happen in life. We're adding good people like Harry and good people on generally. We've had people that have been working around the clock, the Kraus people have been doing that. And I do want to get off on a tangent, but I can tell you, our [ Herbert ], our ops guys, who's sitting here saying, "Hey, don't mention my name at all" that Herbert has been generally all over the world, China, back and forth, and looking at all of the locations. Some of the things that we're doing, like the warehouse we have in Seattle, we've signed up for that for more space than we need so we can save some money on incoming container freight or whatever. Jamie is in Canada. On the sales calls went up yesterday and has been working around the clock with [ Terry ] to do the sales side of this. We're in very, very high gear. And you could see all that when you come in through the door of our headquarters that this movement and the excitement that happens all the time. Leonard has done a bang-up job on Home Depot right now. We have new things going on with tile cutters, electric saws and reviews that are coming now on areas that we are [ now ] in, such as chemicals, floor cleaners, et cetera. And we're in the right space, and I feel confident. You look at the sales numbers, that's not magic, that's hard work, Gary.

[Unknown Attendee]

I've seen it. I mean, I'm watching it for 15 years. I mean, my thought at this point is, there's 4 of us that own 70% of this company. And the marketplace is never going to reward the company until it sold. And the cost of being public and without getting any recognition, there is no analyst coverage, there is no flow. I mean, would you consider buying out the little guys that own 500 shares, 1,000 shares and making it an S-corp and just running this business through the next decade or 2., and let those -- let the 4 shareholders that own 70% of the company enjoy the fruits of the success?

[Lewis Gould, executive]

That's an interesting question, and it's a real leading question. I don't want to be in trouble with the guys who [ don't own it ] . I can tell you, we have a buyback program. [ We had $1 million, and]there's even more available to buy stock back. There's been 2 events in the last few days. We bought from 1 shareholder 40,300 shares. That will appear in the next quarter. And we're negotiating right now with someone who has 27,000 shares. But we are looking at, if you have shares to sell and we can afford it, first go to Richard Hicks, then go to us, and let's see what is available. I'm afraid to say that we'll buy back, we'll do this, we'll do that. We're doing things at small increments. I don't want to get anybody's hopes up saying, we're going to go private or we're going to sell it. One of the fallback positions we always have as we borrow money, continue to build the company, we have the option because we've maintained very strict accounting rules and we have the right number of shareholders, right number of capital that with some cost and some changes to board, we can go back on NASDAQ. But that has not been a high priority. Right now, our priority is building the company and not being diverted to look at those things. If you remember, Gary, we did pay a dividend last year, which, we hope, rewarded the shareholders a little bit. And we want to continue to reward. I mean, you guys are our partners for 15 years, so we're aligned. Everybody is aligned to make the company more valuable.

[Unknown Attendee]

Can you share what you paid for the 40,300 shares?

[Lewis Gould, executive]

We're on -- we bought pretty much around market. I mean, that's who we are.

[Unknown Attendee]

[ You stole one ] .

[Lewis Gould, executive]

We can't use that [ tangible ] expression.

[Unknown Attendee]

You stole from the market. Okay. Thank you for all your hard work. I've told you many times, I retire, the day you retire. The business is incredible. The Growth, the execution, the team of hard-working employees. I mean, it's a wonderful thing, and you should be congratulated. All your hard work, your drive, it's been an amazing ride, and I really appreciate all you've done

[Lewis Gould, executive]

The thing about it is I'll tell you, a lot of noise is going through the balance sheet right now, whether you capitalize the expenses or you write the expenses off. You take advantages of the investment, tax credit. This has been very, very unusual. But I do want you to know that at the end of the day, the numbers, as we go through this, Harry now is the new CEO. And as we spend all of this money and look at it, he says, what about me? How do I look to the whole world that we're spending money, we're building. From your point of view, as an investor, I would say, the state-of-the-art facility in Arizona, which is new. We acquired a [indiscernible] property in Dalton, 90,000 feet that we bought below market, almost $1 million below market. There's a lot of noise that we're spending. I mean, Shakespeare was right when he had that reference to lawyers. And on the accounting side, we fully audited, as you know, for the banks. And we're paying fees to the banks. We're paying left and right and left and right. But this is investment for long term. So if you look at the investment, just compare the quarter-to-quarter numbers. And I started drinking scotch now. I gave up Vodka because I thought it was a more calming effect. But hang in, and we'll see what happens.

[Unknown Attendee]

We get it. Jamie and I get it. Rick gets it. You're building the company. There's costs to acquire and to integrate and make it better. And we know that we're going to see -- we'll see the outcome on the noise. And so Harry shouldn't worry about how we look to the world. If Harry looks to Rick, Jamie and I, and we understand what's going on, that's why we're here, quite frankly. How much is left on your line which you're borrowing for Kraus?

[Lewis Gould, executive]

It'll vary subsequent to the transaction. After the close, we had $16 million, and that'll grow.

[Operator]

And at this time, we have no further questions in queue.

[Lewis Gould, executive]

Okay. Well, the closing statement, Harry, do you want to make the closing statement?

[Harry Schulman, executive]

Well, thank you, everybody. Thanks for the good questions, Gary. And we are working hard, and you can be assured that when we get out of the other side of all of our work and our activity that we'll all have a company that we can be proud of. Mark?

[Lewis Gould, executive]

Mark, any closing statements? No?

[Harry Schulman, executive]

Thank you very much for joining us.

[Lewis Gould, executive]

We want to thank our shareholders, especially the guys who have been with us a long time. We appreciate it. And we want to tell you that on a serious note, we are working very hard. Not hardly working, but working very, very hard to make this happen. And the work doesn't stop at 5:00. You have a commitment that we're going to do this the right way. And we have a lot going on with the leases in the real estate and you name it, et cetera. So thank you for the shareholders, God bless America. We look forward to chatting with you guys next quarter. And read the proxy statement, you'll be -- you'll smile. Thank you.

[Operator]

And this does conclude today's conference. Ladies and gentlemen, we appreciate everyone's participation today.