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Good day, and welcome to the Q.E.P. Co., Inc. Fiscal Third Quarter 2019 Investor Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Stanley Berger. Please go ahead, sir.
Thank you, Brian. On behalf of the management of Q.E.P. Co., 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 third 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 risk 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 mix changes, success of product development and marketing endeavors, capital availability and currency fluctuations. 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 current company expectations.
The company's news release announcing the fiscal 2019 third quarter financial results was issued on Monday. If you do not have a copy, it is posted along with the fiscal 2018 audited financial statements on the Investor Relations section of the company's website at www.qepcorporate.com. Alternatively, please call Paula Siegel at (561) 994-5550, and she will e-mail or mail you a copy.
Hosting the call today are Lewis Gould, Q.E.P.'s Chairman and Chief Executive Officer; and Mark Walter, Q.E.P.'s Senior Vice President and Chief Financial Officer.
At this time, I will turn the call over to Lewis. Lewis?
Stanley, thank you, and welcome to our investors on the conference call. It's appreciated that you're taking the time to visit with us. The last quarter for us was a transitional quarter. If you remember what Q.E.P. was for a great number of years, our market share and our market channel had become quite matured as we went forward, and it was time for the company to make significant investments in becoming a more, I guess, important company in the flooring industry.
And as a result, we've made several acquisitions, which you're aware of. We purchased Naturally Aged Flooring, a terrific California company. And then we purchased the assets of a company called Kraus, which is in the United States and Canada. We've made some extremely significant investments in the last quarter and probably continue a little bit into the next quarter on making these the companies that will be profitable for the future and setting the groundwork for the way we want to go.
But I want to give you some examples and some ideas of the magnitude of what we have done. When we purchased NAF, we started to grow the business, and growing the business consisted of new product lines and new additions to that lines. We've also invested heavily in people: salespeople, administrative people, et cetera. And we entered a new business for NAF, which was the luxury vinyl tile, and we started selling, I guess, significant amounts of that as we go forward.
We recently purchased, less than 3 months ago, the operations of Kraus which we call, I guess, Kraus because it's not a real company. It is what we identify as the flooring division, the accessories and the hard surface of a very large company that was a manufacturer also of carpets. So the investment on the Kraus side of the business has been in anything from people, systems, warehousing, a new roof, a variety of other things while we go forward and put this together.
At the same time this has been going on, as we've been going through the integration, we have just about completed our property in Arizona. And in fact, while I speak with you, they are running a test run and making the cartridges, which is a new product line for us, which will happen very, very shortly. I think the test will be okay and the initial stuff we're looking at looks great.
We've also made an agreement with Congoleum, which you're aware of if you refer to the press release, which should add significant volume and margin to the company. In addition to that, we've looked at everything from our travel policies and we have a major new product launch that will be available for people to look at, at our Surfaces show at the end of this month in Las Vegas. This is the revised new lineup of our wood products, which everybody here in the outside have seen it, looks that it should be absolutely phenomenal.
We also have a lot of headwinds -- FX headwinds, including the Brexit possibility that may represent some difficulty in the future. We've got through with the tariff issues. We've gotten 10% now. What the company did was heavily invested in a great deal of inventory. If the tariffs go in, we're brilliant and smart, you'd love us. If the new tariffs don't go in, in March, we're done, we're overinventoried. But I think it will work out, in any case, in the next quarter where any of the inventory issues won't be issues anymore and they turn out to be good things.
As we had mentioned in our last conference call, we've closed our Indiana facility. We actually have a continuing obligation until April when that completes. Looking right now at our organizational structure and starting the real basic process of putting our stuff -- our various companies together so they work in one team, and we're waiting until after the Surfaces show to see what our customers react to this.
Also, I want to make one comment in December. It was probably the worst month we had. Although sales were good, the weather was brutal in December. And also if you look at the timing, New Year's was on a Tuesday. Christmas, I forget, was on a Thursday? A Tuesday also, so we may have lost a day or 2 on that. Our gross margin was impacted by tariffs, freight issues, a variety of other things. I think probably, at this point, we're over with those.
On a much larger strategic sale -- strategic -- strategy, we're looking at selling off one of our divisions, and we're about halfway done with that so we can concentrate more on being a matriculated flooring company that has all the accessories.
Now that's basically some of the things going on. I can't tell you that we've done a lot of the right things. We have -- we modernized the company. We've looked at the software. We've looked at a variety of things that will make a difference in the future and we've invested heavily for the future, and I think that's the right thing to do.
If we're looking at other folks in the industry that have recently, for now, I guess, researched. And I think we're in better shape than most of the other people. I want to assure everybody that we continue to grow, we continue to work and we have a lot of opportunities. Most of the opportunities you'll see will be forthcoming in the next quarter and the quarter after that. Traditionally, the fourth quarter is our worst quarter. It's usually 1, 2, 3, 4, or 2, 1, 3, 4.
But as you've noticed, the good part that I've saved for the last is that we know how to sell. Our sales are up almost $35 million for year-to-year, and we've only owned Kraus for about 3 months. So this is the beginning. And I think one of our investors is on the line. Mr. Hicks said that -- or Jamie, that sales will make a lot of things better. And on that side, we're there.
I also want to tell you that we've made investments in our e-commerce and our business-to-business side of life, and that will continue as we get better. And the big thing that will happen is our consolidations as we go on, especially with Arizona, that is a beautiful facility where we'll be making [ room ] tack strip, cartridges, et cetera, just about done. We've invested very, very heavily in making that happen.
We also are looking at the possibility of putting in some more warehousing space generally as our business increases. But we're here. Our sales are up. We're making money and we're investing heavily in the future. So that's the important thing to remember. Change is very difficult for everybody, including myself, but we're here and we're going to make those changes.
I'd like to open this up for questions.
[Operator Instructions] We will now take our first question from Jamie Wilen from Wilen Management.
Lew, a lot of things happening. I just want to go through the income statement a little bit. And obviously, your expenses are way, way up from doing all these transactions. I'm looking at other things, and there's a lot of integration to happen. But when I look at the operating expenses, your shipping expenses are up 15%, your G&A and your selling and marketing are up 1/3 with sales up 25%. How much of that are onetime things or just various things that you have to do to integrate the operations and the various onetime deal expenses and extra expenses incurred in doing that?
It's a very good question to begin with, and we've looked at the question very, very carefully on a regular basis. There's an awful lot of one-timers. I'd rather not go into any of the exact numbers. But I can tell you that the cost of acquisition was significant, the cost of moving things around when we bought this. We had extra warehouse space in Canada. We had to close a warehouse, move a warehouse, open a warehouse. We had to close our warehouse in Dalton, Georgia and move it to Calhoun. The freight expenses have been quite enormous, along with the increase in inventory that we bought. The container cost, the inbound freight was enormous. We've gone from a couple of thousand containers a year up to about 8,000 containers, maybe 12,000 on an annualized basis. We've also enhanced the income of lawyers, accountants and various others. Where we are right now, our onetime is probably -- are almost gone. That was in the past quarter where we made these purchases. Now the investments that we're making will be more on the marketing side, et cetera. On the G&A, you have to remember, we picked up an awful lot of employees. We've provided a great deal of benefits. We picked up a lot of travel cost in doing this. And I think a lot of what we did in the last quarter probably is significantly over. We're looking forward to this quarter ready with new products; new warehousing; lower freight rates, which we've negotiated; better pricing from our overseas suppliers, hope it stays; and we've had some stabilization generally on the sales side. Sales is still strong. So what we have to do is we have to look very carefully, as you know, on where we're spending our money. But the one-timers were absolutely enormous and very, very disturbing. And -- but they were one-timers, that's why they were identified like that. And also, in Indiana, we've had some continuing cost of rent and some other folks that will go on. But remember, we've moved around warehousing. We've moved 100,000-foot, 150,000-foot warehouse in Dalton into our new warehouse in Calhoun. We've moved 3 warehouses into 1 warehouse in Arizona. We bought new equipment to make the cartridges. And the new product line that we're coming out with on Harris Wood, which everyone believes is certainly going to be a winner, will be available for show -- at the Surfaces show next week, and we've invested heavily also in that. A million here and a million there gets to be real money at the end of the day. So I think a lot of the investment have been one-timers. And it makes me crazy, it makes everybody crazy, the upfront cost of just getting into a new type of business. We're going to be a real factor in the flooring business, and we're going to provide both commercial, direct selling, et cetera. We're going have as many as 15,000 dealers shortly. So e-commerce is going to be an important part of what we do. But we've also picked up a number of employees and things like custom service warehousing operations. We've taken the first steps in integration, where Mark has done magnificent job of capturing their accounting, the cost associated with us. We've identified a lot of that. We've done a tremendous amount of work on the operations side because we have a very, very large footprint now in North America, where warehousing has really increased in size. We recently signed a lease in Seattle to double our warehouse space, et cetera. So good things are happening. And probably, there'll be a little bit more investment on the e-commerce side and the marketing side as we go forward. And I think the new lines that will be available, that we're showing, will have a significant impact to the company as we go forward. And remember, we're not just the wood business, we're in the LTV, we're in carpet squares now, we're in hardwood a little bit, we're in engineered wood up to our eyeballs, et cetera. So I think we're properly positioned to go forward. And to make this positioning, you got to spend the dough. We've had the money for a very long period of time, and that's where it's gone, and we'll make it back very shortly.
Okay. A question or 2 about the products, but one last thing about expenses. So within the quarter, are we talking an order of magnitude, is it $250,000? Is it $1 million? Is it $2 million? How much extra expenses do you ballpark that's it's run into this quarter?
At least $1.5 million. How's that for a number? Basically soft costs. As we saw, it's the direct cost of people visiting and -- et cetera.
Got you. You've picked up -- with the Kraus distribution, you've picked up, as you say, 15,000 new customers. What's the game plan and how far have you gone forward in taking your other products, whether they be adhesives, tools, wood flooring and integrating them within Naturally Aged Floorings and Kraus at this point? And what is the long-term game plan that you think you can achieve in that integration?
We have -- first, I'll give you a little background. We have a great distribution business under the ROBERTS brand, if you will, and it's significant. They distribute and buy tools and they buy glue, et cetera. Dealers generally don't buy that. So what we've done with Kraus -- and remember, we've only owned Kraus for 3 months. Jamie has designed a very short line for them. We have 8 SKUs in adhesives and some basic tack strip business. The same thing happens with NAF. We're going to partner up with our distributor customers to start supplying exclusively a lot of the parts and pieces that the dealer won't have. So that's, for us, is a great opportunity and a challenge for us. And at the same time, remember, on top of this, if you look at the press release regarding Congoleum, we're exclusive in many areas with them on a new product called Cleo, which they're going to show at the Surfaces show. It's a beautiful new type of floor. And we've taken over the distribution last week of the Congoleum products, primarily in the West and more into Canada. So on top of all this will be a footprint of -- I don't want to quantify the numbers without permission from Congoleum, but they're very significant numbers, perhaps over $20 million plus, plus, plus. So we're [ looking ] good.
We will now take our next question from [ Gary Winston ], who's a private investor.
Got a question about the rollout of this new product out of Harris Wood. What are your expectations for that product? And what is your utilization of the factory at this point?
I'm going to give you basics. And then if there are more questions, we'll put Jamie on the phone, who's handling this. On the basics of this, we were unable to produce sawn face wood. We were unable to make it long and to make it wide. At the same time all of this is happening, tariffs went into effect on the engineered wood from China, and a lot of the Chinese factories are scrambling to make the stuff in Vietnam, Indonesia, et cetera, but behind the curve. We're just about ready now with our investment to make this. The expectation is great. I don't want to quantify the number until after the Surfaces show and we see the feedback from the customers, but we're enthusiastic that this could be a significant portion of our future income. We're guessing -- here, we're celebrating, we haven't sold the first piece yet because it's not being produced for another few weeks. But we're enthusiastic that this is going to utilize the factory to more than 100%, which is just a wonderful thing. We're looking forward to selling a lot of it. We've gotten feedback from our own companies, from Kraus, from Naturally Aged Flooring and from some of the other customers and the folks that work here, that this is one of the most devilishly beautiful flooring types that will be introduced very shortly. And the actual introduction will be January 24 in Surfaces.
So this is our new style that we've developed that's not currently in the market? Is it a -- for lack of a better analogy, is it a new fashion trend in flooring? Or what makes it unique?
I'm going to put Jamie on, she'll lie -- I mean, sort of tell you, sorry.
All right. It's not a new fashion design. What it is, it's a leading fashion design in the industry today. The fashion has gone to a wider plank, a longer plank. We were unable to take that up until now. And honestly, we are the only one in the United States that can actually make it today. Everything else is imported from China. So that's what's exciting about it. And especially with the tariffs coming down, the excitement from our customers is not yet coming but we are very excited to make -- actually, to see the feedback that we get.
So what type of modifications did we need to make to the factory in order to produce it?
$1 million or so, maybe a little bit more with some stock costs. We had to get -- we had some of the machinery, but the cutters had to be changed, the profilers had to be changed, the standards had to be changed, the type of veneer had to be changed, the presses had to be modified, et cetera. It took us -- we've been doing this probably for 6 months or so, and we're just about ready now. It was an upfront cost, but we decided it was necessary for us to be in the business to be first.
Where did the -- you said that tariffs jumped to 10%. What were we paying before, for the tariffs?
The tariffs were de minimis before this. Now, the industry, [ phomnicom ] was put on a 10% tariff and some anti-duty dumping which, fortunately, we don't believe we're affected by. Most people would be. The antidumping tariff was as high as 200% on a lot of the folks. There'll be a lot of crying people very shortly. What we have done is spent the money. And in tariffs that are proposed now on March 1 on engineered flooring, if they do go into effect, and we really don't know, and this is a tremendous amount of uncertainty making us and other businesses crazy, we'll go to 25%. If that happens and we produce the stuff domestically, I think you'll know what the end result will be. So we bought a ton of inventory, as I mentioned previously, that if the tariffs go into effect, you'll say, "Boy, what a smart management team this is." If they don't go into effect, we're going to be overinventoried. But in any case, the 10% may stay, may go away, but it probably will stay. And we're the only ones really, as Jamie said, producing this type of stuff domestically.
And you're sourcing the wood itself domestically and you bought a lot of that -- raw materials?
The raw materials are domestic. Our regular imports of engineered product, carpet squares, LTV -- all that was affected in the United States by the 10% tariff. Wood, particularly, and I've been mentioning, is 10%. And the other products along with wood may go to 25% March 1, no one knows. But in any case, we're going to be in great shape on the wood side if they do go up. If they don't go up, we're still in good shape, as we have new product with that.
You mentioned you got an obligation from the Indiana location through April. How large is that monthly?
Probably, we have the rent -- we have a couple of people there. We're cleaning the thing up. So it's not significant, but probably around $60,000, $70,000 a month, including the rent.
Okay. And then you said that you're running tabs on the cartridges. What are those? That's quality-controlled testing?
So it's a formula that we're making in-house. We think it's just terrific. We purchased last year over 2 million of these on the outside from another vendor. We're going to be the manufacturer of it, number one, so there should be cost savings. Number two, it gives us the opportunity to enter a new type of business and put other things in the cartridges besides our #1 bestseller. So it's a very significant part.
On the balance sheet, the debt associated with the acquisitions is broken out between line of credit and note payable. I think the note payable is about $10 million. Who's that to?
I don't believe that was the correct thing, the note payable.
Yes. The note -- I mean, the note payable goes back to a prior acquisition years ago. It goes back to when we bought Homelux.
Okay. So I was just looking at the [ comparable ]. It looked kind of different.
We'll now take our next question from Jamie Wilen from Wilen Management.
So going back to the inventory buildup, did we purchase the materials before the 10% tariff?
We purchased some of it before 10%. We purchased some of it after the 10%. In many cases, we were exempt. We bought some stuff from Cambodia and Vietnam. But Canada is unaffected by the tariff, only the United States portion of it, which is about half of Kraus' business. That was affected to a portion -- a portion, 10%. Most importantly is this, Mr. Trump has threatened a 25% tariff. As you know, we don't know the answer to that. It's March 1 supposed to go into effect against Chinese imports. We have plenty of inventory to protect us against that for a period of time while we pass prices through. If the tariff doesn't go into effect, then you might say we'd be overinventoried. It will take us another 90 days, 120 days to sell it off.
Where would your normalized inventories have been? How much extra inventory do you have right now?
Well, extra would be -- if you are an accountant, you'd say anything that's more than 3 weeks old, he wants to write off or get rid of. So we're in the business of selling. But as a normal practice and the normal selling cycle, we probably have an extra $5 million that we'd rather turn into cash. But that's about the number right now.
Okay. Within the Arizona property, making $2 million -- 2 million cartridges a year for yourself that you've been buying, how much do you expect to save per cartridge?
We haven't run it yet. Not trying to really be -- I'm not trying to be -- not give you the right answer. But there would be savings on it of freight, people, you name it, et cetera, cash flow immediately, and it's a product that we make. So we're going to quantify it when we first make -- the test runs are running now. We'll see how fast the machines run, et cetera, then we'll know. We think we can make up to 25,000 cartridges a day with the current machinery. So we're going to know very shortly if we save $0.25 a cartridge, you can figure the number out. But this puts us in a business, construction adhesives. Besides the coat base adhesive which is being made currently, there's a lot of things that can go into the cartridges, and we're looking at those for the future.
Excellent. Okay. And back to Kraus for a second. Could you go through the whole dynamics of what Kraus currently is revenue wise? What the gross margins are relative to the rest of our business, operating margins? I realize it was a carve-out, but how profitable do you think it could be? And what exactly we paid for it and what we received as far as inventory, physical plant, et cetera?
Okay. As you know, we didn't disclose the exact number, so I'll give you an approximate number. Approximately $25 million is the cost for the assets, that's what we purchased. Separately from the assets, which are inventory and receivables, we purchased a building from them. We bought a 90,000-foot building in Calhoun, Georgia, which I had mentioned we moved from Dalton to Calhoun in that building. So our purchases were primarily for inventory, receivables. We wound up with a first class computer system. We wound up with great people. We wound up with the administration. We wound up with 10,000 customers. All of that came along with this. Typically, on the carve-out, I don't want to give numbers out exactly because our competitors are on this conference call, but the sales in Canadian dollars we had estimated approximately $130-some-odd million. And the bottom line, we projected several different numbers: the full integration, the partial integration, et cetera. And we looked at those numbers, the numbers are all over the board right now. And they are because we haven't really decided on how deeply we'll make the integration or where we'll put a lot of the headquarters and the -- our -- the heads of our sales and computer functions because it's 90 days. But I can tell you, it's profitable and -- it will be profitable, I'm sorry. The first 90 days have been dicey for us while we go through this. But the projections, which we paid a lot from outside people, we've had Grant Thornton, Mark and a whole world of people looking at it, our -- an EBITDA return of between, I don't know, between $5 million and $10 million -- initial estimate.
Okay. And lastly, you talked about selling off some businesses that are not related to flooring. We, obviously, have several which we've purchased many moons ago. Can you talk about which ones you possibly would be looking at selling? And what types of dollar figures would you be thinking we could, in aggregate, receive?
Well, we spoke about this briefly. The difficulty we have is we have a confidentiality agreement in place with the buyer. And it's very, very difficult to say this because we're just about done. We're, oh, about 3 weeks away from closing. So you put me at a disadvantage. I want to tell you, but I'm not allowed to tell you. I can tell you it's not a part of our core business, and the numbers would be significant. The numbers could be $10 million or more to the company.
Okay. Okay. And then as we move forward, you would expect the extra expenses and the inefficiencies of combining the companies. When would that start to begin to ease away so we could see what we really have underneath?
I believe in the -- this upcoming quarter, in December, January and February, a lot of the one-timers have disappeared. December was a crappy month for everybody, including us, so while sales were good. There are a few things that we have left to do for Kraus that deal with the integration and computer issues. On the Arizona property, we're just about complete right now. We're looking at just a few further enhancements, buying some more racks, some better software, et cetera, to help us manage the company and a few other people. The major stuff is really done, but they'll be continuing insect bites as we go forward, as we continue to learn. We want to make increased investments on the marketing side of our business, which include B2B, e-commerce. Think of this, if you have -- I understand that Kraus has about 8,000 or 9,000 dealers, Naturally Aged Flooring has 5,000 or 6,000 dealers to [ take a bargain ], wouldn't you like to see at each dealer just a little rack that says Distributed by Kraus, a Q.E.P. Company, or a sign on the door or have them get something on the B2B side where they can look at all of our Internet sites and find out everything that's available for them? That's where the investment is going to be. It's very forward-looking, and we're going to invest in that area. Also, with our major customer, our home-centric customer, they're going to get an opportunity to look at some of these dynamite new products that are coming out. Now remember, we're going to be one of the few domestic suppliers of the engineered wood that will be tariff-free. And that could be as much as 25%, but who knows as we go forward. In any case, we have a great partnership on top of all of that with Congoleum, that's been around for quite some time. They're a very good company with a very good name. And in fact, in Las Vegas, they'll be right across the -- 10 feet from us; they'll be in the booth across from us. We're going to have a large footprint, a 50-foot booth for Kraus and NAF and then a smaller booth for the Harris Wood. Harris is a great trade name. It's been around since the 1890s, and we intend to use the tradenames now for a great deal of our marketing efforts. But you can see the way we're going. We're moving heavily towards the Internet, spending money on that, which is the right thing to do. The efficiencies are the operational side of life, which we're doing. We recognize that we picked up solid gold. I don't know if we paid $100 each for each of the customers, we got to 15,000 customers, you'd understand it. We pay our bills right on time. People love us. People are falling down to do business with us. We have a lot of cash coming back as we go forward. We have some escrow money from the company that we purchased in Canada. We have some money coming back from other things that were locked up. We even have some money coming back from the IRS. So I feel very, very confident as we go forward. We have 1 or 2 stumbling blocks that every company has, but I don't think that that's going to hurt us as we go forward. We just have to be careful we don't make any fatal mistakes.
Got you. So Lew, it sounds like, [ we deem ], the next fiscal year on March 1, that should be relatively clean and we'll be able to really see the true earnings power of the company that has now been put together.
You're correct. You're correct. That's the number we're working for. Remember, I'm with you guys. I'm a shareholder, too. I absolutely want this to happen the right way. So we'll see.
We'll now take our next question from [ Gary Winston ], a private investor.
So this is a very interesting conference call because for the last 15 years, it's been grow, grow, grow when we could organically. When we couldn't, all these acquisitions that ended up being made. But on this conference call, what I hear you're really saying is we're investing in ourselves. We're investing in rationalizing our warehouses and our product and our efficiency. Do you think that your plate is pretty full doing all that? Or is there still, in the back of your mind, another acquisition or 2 down the road?
I think the acquisitions -- that's a very good question. The large acquisitions probably it's not possible for us to absorb right now because when you increase sales by $150 million and you're doing $300 million and change now, it's significant with the number of transactions that go on. We're operating on several different computer systems. So what we've decided to do is this: the major acquisitions are off the table right now until we absorb these. Secondly, we're waiting to see the results. We spent several hundred thousand euros in Europe opening our German subsidiary and -- instead of an acquisition, that was an organic growth issue for us, and we're starting to get now some traction on that, selling one of the good German home centers to begin with. We're looking at England at a defensive strategy with Brexit. You saw the news. The news was made this morning, what happened yesterday. And 1 of 2 things can happen with Brexit: either the pound can go to parity or if it's successful, the pound will go up to $1.50 against this. And England is a very large piece of our business. So we're confident in England. We do roughly ballpark figure $60 million there. And they sent us a lot of money. They sent us almost $1 million back this year. And it's a very well-run operation, even though the Managing Director is on the line and he's not getting a raise this year, but -- sorry about that, Paul. But what we're looking at is the possibility of a very, very small acquisition there, someone that makes parts and pieces, but nothing significant. In the United States, we have the opportunity to look at other things, but I think we'll pay attention to what we're doing right now and get this straight as we make this transition. And remember, we're going from a very mature business that we've been in for 35 years, the parts and pieces, to a much larger playing field. And we're going to be a couple hundred million dollars in that playing field now, so we want to get this right.
Well, keep up the good -- you did. Keep up the good work.
Thank you very much. I appreciate it. It wasn't me. It was the whole team.
I know, I know, but it's been a big run this past year. I understand all the issues of trying to integrate everything and the onetime expenses. I'll be looking forward to next year. What do you estimate your revenue will be in the next fiscal year?
Well, I'm an optimist. The accounting people are pessimists. Leonard says a lot depends on if I get up right in the morning and [ Enis ] is very conservative. Jamie thinks it will be multimillion dollars. So it's all over the place. With Congoleum, who we really hope to do well with, my guess is about $0.5 billion. If we get unlucky, it will be about $480 million. This is a forward-looking statement, so I don't know. If we do the right things in life and there's no tariffs and et cetera, and the wood takes off, it will be about $520 million. These are very, very large numbers, and I don't see why it can't happen.
What's your headcount today?
1,218.
At this time, there appears to be no further questions. I would like to turn the conference back to you for any additional or closing remarks.
Okay. First, so let me thank all the folks who have been with us for a number of years: our directors, our officers and all the hard-working people who have been with the company. Nothing happens by itself. I would tell you, we gave out Christmas bonuses to most of the folks. Leonard and I did not get a Christmas bonus this year. We invested back in the company, which we felt was the right thing to do. We made sure that our associates and the people that work for the company, everybody got something and the company has a heart as it goes forward.
I can tell you that there's a lot of opportunities for us because at one point Kraus was an extremely larger company than they were, NAF is on a roll, our major home-centric customer is talking about phenomenal numbers and generally, this will be a year for B&B if we invest correctly. And I think those things are coming together. Spending money is not one of the things that we normally like to do with Q.E.P, but we've made the decision that we put the money back.
There'll be a little bit more money spent on infrastructure and people, but I think in the long run, that will pay off. But we're really looking forward to next year being probably one of the best years that we have, and the history book will say that we invested properly. Now no one knows what the economy will be next year. Residential sales are depressed a little bit more because of high -- but people are still remodeling. And if they need it, that's us.
I want to give you one sidelight. One of the businesses that Kraus is in is called carpet squares or carpet tile. That's a commercial product and they do about $30 million in that type of business. And they happen to be one of the leaders in that business, and that's something that is a hidden growth possibility for us to make that even larger as we put this into our other domestic sales mix that we have down here.
So our hands are filled with great opportunities all over. Everybody asking, can we have this, can we do this? We're going to get there, very shortly. But we have a lot a assets if you look to the balance sheet. We haven't punished the balance sheet that much. We spent the money that we felt was prudent. We didn't spend any other money besides that. So my money is your money. It's the same money together. We want to be prudent with how we do it.
So again, I want to thank all the people all over the world that work with us and to thank our suppliers, and of course, all our associates and officers, et cetera. And we look forward to the next conference call in June, I believe, reporting the first quarter. And we'll all have smiles on our faces. Either that or we'll be laughing. But let me thank everybody again. As there are no more questions, we'll say God bless America and we'll see you in June.
This concludes today's call. Thank you for your participation. You may now disconnect.