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Prestige Consumer Healthcare Inc (PBH) Q4 2019 Earnings Call Transcript

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Prestige Consumer Healthcare Inc (NYSE: PBH)
Q4 2019 Earnings Call
May. 9, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Prestige Consumer Healthcare Fourth Quarter Fiscal 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later there will be a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Phil Terpolilli, Director Investor Relations. Sir, you may begin.

Phil Terpolilli -- Director of Investor Relations

Thank you, Shannon and good morning to everyone on the phone. Joining me on the call today are Ron Lombardi, our Chairman, President and CEO; and Christine Sacco, our CFO. On today's call, we'll cover the highlights and review the results for our fiscal 2019 fourth quarter and full year. Discuss our fiscal '20 outlook and then take questions from analyst. We have the slide presentation which accompanies today's call that can be accessed by visiting prestigeconsumerhealthcare.com, clicking on the Investors link and then on today's webcast and presentation. Remember some of the information contained in the presentation today includes non-GAAP financial measures. Reconciliations between adjusted and reported financial measures are included in today's earnings release and slide presentation.

During today's call, management will make forward-looking statements around risks and uncertainties, which we detail in a complete safe harbor disclosure on Page 2 of the slide presentation accompanying the call. Additional information concerning risk factors and cautionary statements are available in our most recent SEC filings and the most recent company's 10-K.

I'l now hand it over to our CEO, Ron Lombardi, to walk through the highlights of our fourth quarter performance. Ron?

Ron Lombardi -- Chairman, President and Chief Executive Officer

Thanks, Phil, and good morning everyone. Let's begin on Page 5 of the slide presentation. We are pleased with our fourth quarter results which included solid revenue, profitability and cash flow trends. This performance was underpinned by our leading position in the OTC. Revenue grew 3.2% driven by healthy consumption trends and adjusted EPS grew over 16% versus the prior year. Consumption trends were healthy in Q4 and benefited from our fast growing untrack channels and strengthen a number of core brands which more than offset the impact of challenging incident levels particularly in cough, cold compared to last year.

Now let's turn to Slide 6 for more detail on our full year results. For fiscal 2019, we delivered solid profit performance and continued to win with consumers which in conjunction with our strategic capital allocation efforts helped to offset revenue challenges that were a result of a retailer environment that faced consolidation in destocking pressure.

Our net sales were approximately $976 million up slightly (Technical Difficulty) year on an organic basis. Sales were positively impacted by strong consumption of approximately 2% driven by strength women's health GI and Ear and Eye care categories. In addition, our (Technical Difficulty) GI and Ear and Eye care categories. In addition, our international segment grew over 5% after adjusting for FX. These positive drivers were partially offset by inventory reductions at certain drug retailers particularly in Q3, as well as changes that shelf in the oral care category. The redesigned BC and Goody's packaging which we've discussed throughout the year has made continued progress and is now largely rolled out across channels.

I'm pleased to report initial sell through trends remain solid with positive consumer feedback aligned with our expectation. Total company gross margin for the full year came in at 57% up approximately 130 basis points versus the prior year and were in line with our expectations. Chris will provide additional comments on gross margin later.

Adjusted free cash flow was over $202 million for the year. The strong cash flow along with the strategic household cleaning divestiture enabled the pay down of $200 million of debt and the opportunistic repurchase of $50 million of stock in fiscal 2019. In summary, we continue to feel good about the long term trends of our business in spite of the inventory destocking and consolidation headwinds faced during the year.

So let's turn to Slide 8 to review our fiscal '19 in the context of how our results performed against our simple yet effective three pillar strategy. We have confidence in our three pillar strategy which is comprised of growing our top line by winning with consumers, maintaining our strong financial profile and cash flow along with disciplined capital allocation approach to enhance shareholder value. In fiscal 2019, we delivered against each of these pillars. Our first pillar investing for growth continues to pay dividends. In fiscal '19, we continued our brand building efforts and launched a number of successful new products during the year. These helped us continue our long term history of driving market share and category growth for our brands. Our overall strategy is underpinned by our leading brands and brand building efforts so we were pleased with this performance, which included approximately 2% consumption growth for the year.

Second, cash generation, as I mentioned earlier, we generated $202 million of free cash flow which continues to benefit from our industry leading EBITDA margins, minimal capital spending and low cash tax rate. This cash generation is a key enabler to the third part of our strategy, capital allocation optionality. For capital allocation, we are pleased with our actions during the year. Our healthy level of free cash flow provides us with the flexibility to take opportunistic actions around capital allocation in addition to a consistent focus on debt reduction.

As mentioned earlier, we reduced our debt by over $200 million and we achieved a leverage ratio of five times at the end of fiscal 2019 on top of our $50 million stock buyback. Even in a challenging retail environment our strategy has us well positioned for future success.

Now let's turn to Slide 9. The strategy I just discussed is in place and succeeding due to our diverse brand portfolio and our leading market share positions as shown on the right hand side of the page. Having the starting point of a diverse and leading brand mix ultimately underpins our strong platform and ability to execute our long term strategy. Our portfolio diversification also enables us to use a wide variety of brand building approaches. With no one market share brands representing approximately two-thirds of our sales we are focused on the end goal of driving category growth through these brand building efforts which benefits us as well as our retail partners and consumers.

On slide 10, we have six distinctive examples that execute the strategy and launched during the year. We are extending brands by providing better consumer experiences, innovation and leveraging leading consumer names to expand into new channels and categories. For example some of these fresh cycle expands the brand into the same process with the end goal of increasing consumer awareness. Dentek meanwhile has multiple new products launching including a lightweight ultimate dental guard designed to solidify the brand's position as the number one OTC dental guard and act as an alternative to professional dental setting. These are just two of many examples of us executing on innovation and increasing our connection with consumers. For a more in-depth example of a leading brand executing on this playbook. Let's turn to Slide 11 and discuss Dramamine.

The Dramamine brand was acquired in 2011 and is a textbook example of how our brand building approach can reinvigorate long term growth into an under invested leading brands. The strategy for this brand is to utilize consumer insights and do smart meaningful brand building and innovation to break down barriers and increase usage while bringing end users. Our first step was revitalizing tired packaging. We leveraged our creative team to improve messaging as well as design. We also use consumer feedback to expand the product reach by offering a version for kids as well as launching a less drowsy and non-drowsy product version to help alleviate consumer concerns around drowsiness.

Most recently we've addressed the distinctive nauseam market with a trusted brand under the label Dramamine and Nausea. The results of these efforts is that Dramamine has grown more than double since the acquisition driving category growth and winning with both consumers and retailers.

Let's turn to Slide 12 and discuss the second brand example Hydralyte. Hydralyte, our largest brand in Australia is another great example of our long term success and a big driver to our international segment growth. Acquired in 2014, Hydralyte represents over 90% of the oral rehydration category in Australia. With this solid base, it continues to drive total category growth by utilizing our brand building strategy, growing sales in fiscal 2019 by over 10%. Here our brand building playbook success has involved extending usage occasions through targeted messaging. Shifting from to traditional TV media to digital ad spend as well as ongoing new product development and expanded distribution. Going forward, we see an ample runway for further growth of the brand through increased household penetration and growing awareness for the brand.

Now let's turn to Slide 13 for a review of our largest brand's performance in fiscal '19. During the year, the vast majority of our largest brands outpaced category growth which is a continuation of the trends we've seen over the long term. This success is a result of our brand building strategy and long term investments, having leading number one brands is important, but just as important is the fact that we lead by a wide margin in many of our categories 50% larger than the next category competitor. This allows us to concentrate our efforts on consumer insights with competitor. This allows us to concentrate our efforts on consumer insights that enable leveraging brand heritage competitive share swaps important to grow -- crowded category. Brands, retailers and most importantly, consumers.

So in summary, we have leading brands that get to focus on growing categories and our valuable traffic driver for our retailers. The brand portfolio is diverse allowing us to mitigate the impact of near-term brand fluctuations. This foundation enabled us to deliver solid company wide assumption growth in fiscal '19 and positions us to generate sustained growth over the long term.

With that, I'll now turn it over to Chris to discuss the financials.

Christine Sacco -- Chief Financial Officer

Thank you, Ron and good morning everyone. I'd like to walk through our fourth quarter results in greater detail as well as offer certain expectations as we look ahead to fiscal 20. As a reminder, the information in today's presentation includes adjusted results that are reconciled in our earnings release.

On Slide 15, you can see our high level fourth quarter and full year results. For the fourth quarter, this included revenue of $241 million up approximately 3% on an organic basis. As Ron touched on earlier this was driven by strong overall consumption as well as international (Technical Difficulty) Adjusted EBITDA decrease slightly in Q4 versus the prior year due primarily to the household divestiture. Adjusted EPS increased approximately 16% in Q4 versus the prior year. If we continue to deliver strong profitability and benefited from a favorable tax rate versus the prior year.

Now let's turn to Slide 16 where I'll discuss consolidated results in more detail. For the full year fiscal '19. Our net revenues decreased approximately 6% to $976 million, but were up slightly on an organic basis after excluding the effects of the household divestiture and foreign currency. Our top line was also impacted by retailer inventory reductions as well as the launch of BC and Goody's new packaging.

Moving down the P&L adjusted gross margin came in at 57% for the year up 130 basis points. We benefited primarily from the divestiture of the lower margin household cleaning segment for the full year. For fiscal 20, we expect gross margin to approximate 57.5 % essentially flat to our Q4 performance. As a reminder, we continue to experience certain transition costs associated with the BC and Goody's packaging rollout as well as costs previously allocated to the household cleaning business which remain following divestiture. Regarding A&P, we came in at 14.7% of revenue in fiscal '19. Looking ahead to fiscal 20, we again expect A&P spend to approximate 14.5% (Technical Difficulty) with the higher A&P spend in the first half as a percentage of full year revenue.

As expected our adjusted G&A spend was just under 9% of total revenues in fiscal '19. As a reminder G&A dollars are largely fixed and the result is modestly leveraging as a result of the divestiture of household as we move forward. For fiscal 20, we would anticipate G&A expense slightly above 9% and weighted more heavily to the first half due to certain expense timing. For depreciation and amortization our fiscal '19 was roughly flat excluding the household divestiture impact. For fiscal 20, we anticipate G&A expense not included in cost of goods sold to approximate $26 million.

Last we reported adjusted earnings per share of $2.78 for the full year up approximately 8% versus the prior year as a favorable tax rate more than offset the impact from the household divestiture we've discussed. As we move forward to fiscal 20, we anticipate an effective tax rate of 25.5% which is approximate to fiscal '19. We also anticipate interest expense of approximately $99 million as we continue to reduce debt.

Before we move on, I'd like to point out that these adjusted results primarily exclude the following factors. Adjustments related to tax reform, the divestiture of our household cleaning segment and non-cash goodwill and intangible impairments. Regarding the non-cash impairments, in fiscal '19 we reported a net charge of $171.2 million primarily related to the company's Fleet, DenTek, and Efferdent brand names.

The charge resulted from our annual valuation assessment which was affected by an increased discount rate applied to future cash flows versus prior years. As well as how the individual brands performed versus the original projections used at the time of acquisition. The reminder accounting rules do not write up the value of brands that have exceeded their fair value versus the time of acquisition. As an example, while we've written down the value of our fleet brand our Boudreaux brand has meaningfully exceeded its carrying value. It's important to remember that these adjustments have no impact on our long term outlook for the business or our performance expectations for the company as a whole.

Now let's turn to Slide 17, to discuss our cash flow. In Q4, we generated $47.5 million in free cash flow bringing the total adjusted free cash flow for the full year to $202.4 million down slightly due to the household divestiture. We continue to maintain industry leading free cash flow conversion of approximately 140% for fiscal '19. Our full year free cash flow equates to $3.89 per share well in excess of EPS. After reducing debt by $200 million during the fiscal year, our net debt at March 31 was $1.8 billion and equated to a net debt to EBITDA leverage ratio of five times. We continue to anticipate using free cash flow principally for debt reduction. As shown on the graph you can see our commitment to gradual deleveraging. Excluding other potential capital uses using free cash flow for debt reduction in fiscal 20 would bring us to an approximate 4.5 times leverage ratio.

Now let's turn to Slide 18, to discuss capital allocation in more detail. Our priorities remain consistent with what we've discussed in the past. Based on our three pillar strategy. Efficient and disciplined capital allocation is the critical third pillar of the strategy balancing the use of our cash generation against various priorities of investing in our brands, deleveraging and opportunistic share repurchases. This discipline provides a key opportunity as this chart illustrates. Simply assuming our free cash flow guidance for fiscal 20 continues at a constant rate. We would generate over $600 million over the next three years that could provide meaningful capital allocation optionality. For example a reduction of $600 million of debt to today's profile would bring us to a leverage ratio of 3.3 times just below our long term target range of 3.5 to 5 times. Second, we expect to continue to evaluate opportunistic share repurchases. This morning we announced a $50 million share repurchase authorization for fiscal 20 which is fully utilized would represent approximately one quarter of our cash flow delivering strong shareholder value without changing our other capital allocation priorities.

Third, M&A this has been a long term driver of value for our company building out our strong portfolio of brands over the last six plus years. Ultimately M&A is weighted against these other priorities when evaluating its return potential. Over the long term we continue to expect discipline M&A to remain an important part of our strategy to adding shareholder value and our cash generation and deleveraging allows for this optionality.

I'd like to now turn it back to Ron for discussion surrounding our outlook and some closing remarks.

Ron Lombardi -- Chairman, President and Chief Executive Officer

Thanks, Chris. Let's wrap up with some closing remarks and our outlook for fiscal 20 on Slide 20. For net sales we anticipate fiscal 20 is to be in the range of approximately $951 million to $961 million with organic revenue growth approximately flat. We anticipate consumption growth of approximately 2% for the full year. Our expectation that full year consumption growth will meaningfully exceed sales is driven most notably by the drug channel where we experience significant inventory reductions during fiscal '19 and expect to again in fiscal 20.

For profitability, we anticipate EPS to be in the range of $2.76 to $2.83 or approximately flat to up slightly year-over-year. Here the benefit of financial leverage is partially offset by the loss of one quarter of household cleaning sales in EPS which were approximately $20 million and $0.04 respectively in fiscal '19. In terms of timing, we would anticipate EPS to be weighted more heavily in the second half due to the timing of A&P and G&A spending during the first half of fiscal 20, similar to what we realized in fiscal '19. Regarding cash flow, we expect full year free cash flow of $200 million and more. In summary our long term strategy to drive shareholder value remains sound. We were able to gain market share and improve earnings in a challenging fiscal '19 retail environment due to the strength of our strategy driven by our diverse portfolio of leading brands. We successfully completed the divestiture of our household cleaning segment improved gross margin and had solid cash flow allowing us to reduce our debt by $200 million. Our company has a strong record of providing long term growth to brand heritage, product innovation and channel development and we will continuing these efforts to drive our market share and overall category growth.

I'll now turn it over to the operator for questions.

Questions and Answers:

Operator

Thank you. (Operator Instructions) Our first question comes from Joe Altobello with Raymond James. Your line is open.

Adam Tindle -- Raymond James -- Analyst

Hi guys is actually Adam on for Joe. I had a couple of quick questions I was curious if you expected North America organic sales to be down modestly this year with international up and perhaps if I can add one more. given North America OTC gross margin was down about 100 basis points in the quarter and 150 for the year. I was curious in your plans for turning that around or maybe a bit more color would be helpful? Thanks a lot guys.

Christine Sacco -- CFO

Good morning, Adam this is Chris. So regarding the top line results payment inline with our expectations we've been talking about retailer inventory destocking for sometime and obviously it's relative to our North American OTC business. On the gross margin again coming in inline with our expectations for the segment and the company reminder that we have some stranded household costs that remain with the business following the divestiture that impacted us and also in fiscal '19 we've experienced some transition costs related to the BC and Good's packaging which is obviously in North America.

Adam Tindle -- Raymond James -- Analyst

Got it. And if I could ask one more quick one we were also curious how much revenue recognition accounting added to the top line in the quarter?

Christine Sacco -- CFO

So for Q4 we benefited slightly in line with our expectations and then from a full year perspective it was essentially flat going forward into fiscal 20 that will be an apples-to-apples comparison on factor going forward.

Adam Tindle -- Raymond James -- Analyst

Great. Thanks so much.

Operator

Thank you. Our next question comes from John Anderson with William Blair. Your line is open.

John Anderson -- William Blair -- Analyst

Excuse me -- thanks. Thanks everybody and good morning.

Ron Lombardi -- Chairman, President and Chief Executive Officer

Hi, John. Good morning.

Christine Sacco -- Chief Financial Officer

Good morning, John.

John Anderson -- William Blair -- Analyst

I want to take another just a quick stab at it really your question on the margins in OTC being down -- gross margin being down in the quarter. Is that a mix issue, is there any kind of pricing pressure you experiencing. Or is it really just kind of a stranded overhead, kind of issue that, that lingers I guess because of the household divestiture. I would think the stranded overhead would be more of a G&A impact as opposed to gross margin impact?

Christine Sacco -- Chief Financial Officer

Yeah, John, so a couple of things that are impacting us as a result of households. First is some of the gross to net cost that we talked about that were previously allocated to households that remain with the business, so obviously that has an impact on margin. And then if you think of it from a distribution cost as an example right, you think about households used to be on the truck and riding the OTC products were riding on that truck in a consolidated manner and so we divest household we lose that synergy if you will. So those are the real, those are the factors contributing to the margin, but again in line with our expectations and our margin came in about 57% for the year which is what we were guiding to.

Ron Lombardi -- Chairman, President and Chief Executive Officer

John in terms of pricing we continue to see fairly consistent pricing out there so we're not necessarily being negatively impacted by that.

John Anderson -- William Blair -- Analyst

Okay. Fairly consistent. Can I interpret that is just across the portfolio in aggregate uniform pretty uniform pricing across the board. And also if you could just comment Ron maybe on promotion intensity, but frequency and depth any changes there in any of the channels.

Ron Lombardi -- Chairman, President and Chief Executive Officer

Yeah. It is consistent across the portfolio, then again you know one of the benefits of our portfolio and the needs based nature of our products and our leadership number one position in so many categories is we don't face those competitive pricing pressures that many other categories face and we've talked about this a number of times over the year, so we have that benefit in terms of promotion again if it's needs based promoting it doesn't cause people to buy the product either you need it or you don't. So we're not seeing any change in our promotional effort.

John Anderson -- William Blair -- Analyst

Okay. In terms of consumption, I think you just mentioned earlier your guidance assumes about 2% consumption growth for fiscal 2020. I think at least what we can see which is very incomplete, I understand that consumption growth rates have been sub 2% you know in recent months. Are you seeing the same thing and what's causing that and what do you see on the horizon to turn that to get back to kind of a 2% number as you look at fiscal 2020 as a whole.

Ron Lombardi -- Chairman, President and Chief Executive Officer

Yeah. So really that disconnect between those Generic IRI in Nielsen reports that are out there continue. You know as we mentioned in our prepared remarks today, we continue to benefit from fast growing untracked channels International for example grew 5% during the last quarter. Amazon has been very fast growing add nearly -- adding nearly a point of growth for our business over the last year that piece of business was up almost 70% for us. So we get our own customized reports that are complete and accurate. So we kind of don't worry about those other reports that are out there. So in general, John, they continue just to be incomplete and accurate.

John Anderson -- William Blair -- Analyst

So wish we could get your reports and not pay for the incomplete ones. The other question I guess is on the retail inventory reductions there was a big impact in the December quarter with I think one retailer really kind of pulling back late in the quarter. What did you see in the March quarter and what have you seen more recently, is that moderated a bit, has it continued at a very aggressive pace. Just trying to get a sense for whether there's any kind of light at the end of the tunnel on that.

Ron Lombardi -- Chairman, President and Chief Executive Officer

We didn't see any meaningful disconnect between selling and consumption more or less for the quarter for us. So we didn't see any concentrated destocking hits or benefit, so we didn't really see any recovery in the quarter ended March. But I think it's important to note that, for fiscal '20, we took a prudent approach if you stand back and think about each channel, we expect continued destocking impact in fiscal '20 in the drug channel, not only as they continue to struggle with declining year-over-year sales, but they're publicly making announcements about their plans to reduce inventory whether it's closed doors or closed distribution centers. If you look at the mass channel, they're looking to make sure that they meet their bottom line goals and objectives while finding ways to offset the investment needed either in higher wage rates a $15 an hour minimum wage or finding resources to invest in their online or pickup at store initiatives.

And then finally, the regional players are hanging on and looking for every opportunity to continue to take inventory and help their cash positions and their bottom line over time. So as we gave our outlook for fiscal '20, we thought it be prudent to not only reflect what we saw in '19, but also expect a little bit of an increased headwind given those factors I just described.

John Anderson -- William Blair -- Analyst

Okay. That's helpful. One more and maybe get back in the queue. I've had a couple of questions I haven't seen this myself, but around BC Goody's and some other reaction of the new packaging from consumers. Can you talk a little bit about that is has it been you know universally recedes positively have there been so has there been some pushback with respect to the packaging and maybe most important you know what has the sell through been like because you know that's the ultimate measure, I guess of the success.

Ron Lombardi -- Chairman, President and Chief Executive Officer

So, first of all the new packaging has been widely accepted by the users as expected, you know we did a lot of work in designing the product and talking with consumers to make sure it's going to be the right proposition. You know anytime you make a change to something that's been out there for more than 100 years you're going to get passionate consumers go online and make comments on it, but in general the adoption and acceptance of the new package has been largely in line with what we expected.

John Anderson -- William Blair -- Analyst

And are you seeing positive consumption trends for the brand as a whole right now?

Ron Lombardi -- Chairman, President and Chief Executive Officer

Yeah, we're back in line with the long term trends that we've realized for the brands.

John Anderson -- William Blair -- Analyst

Great. Thanks so much.

Ron Lombardi -- Chairman, President and Chief Executive Officer

Thank you, John.

Operator

Thank you. Our next question comes from Steph Wissink with Jefferies. Your line is open.

Steph Wissink -- Jefferies -- Analyst

Thanks. Good morning, everyone. Chris we just wanted to unpack the revenue recognition a little bit more deeply. I think in your 10-Q it get disclosed that was about an $8.5 million hit to the year to date numbers is that a scale of the reversal in the fourth quarter or the benefit, I know you mentioned slightly, but I'm wondering if you can quantify it for us.

Christine Sacco -- CFO

Yes, Steph, let me just go back because there are two separate issues when we talk about revenue recognition. When we talk about the benefit we received in this quarter which is essentially flat for the year, right remember the first half was a hit. Second half was a help. We benefited slightly in Q4 and again full year being essentially flat. That relates to the timing of when we recognize certain promotional activity within gross to net. That's real spend that's real accounting if you will and that impacts our numbers.

I think what you're referring to is a footnote that appears in our 10-Qs and will appear in our 10-K which is essentially a hypothetical calculation asking us to go back in and calculate revenue recognition as if we were still under the old policy. So, it's an apples and orange compare if you will. I'd like to remind folks because there's a lot of very availability there, we quite frankly don't look at it we're not managing the business that way. I'd like to remind people that we change accounting policy under the literature our customers don't just all of a sudden placing more orders or take more inventory. If you recall that number in the third quarter actually swung in the other direction and would have given us almost $14 million of more sales than we reported. So the number can vary but they're two very different things and the number that appears in that footnote is not what we're referring to when we talk about revenue recognition comparisons. The number that we're talking about that actually influenced us was a very slight help to Q4 in a negligible number to the full year.

Steph Wissink -- Jefferies -- Analyst

Okay. So maybe ask a different way the organic growth measure. Do you want to give us a sense of what that was adjusted for the revenue recognition benefit trying to reconcile you know relative to your guidance it would seem like a fairly meaningful deceleration. Again on a full year basis no change, but just trying to understand kind of coming out of the final quarter of the year why the expectations for such a deceleration?

Christine Sacco -- Chief Financial Officer

Sure. So for the fourth quarter the impact of the revenue record was less than a half of point to our organic growth.

Steph Wissink -- Jefferies -- Analyst

Okay. So that's very helpful. And then if I could just on the destocking, I think an historic framework you've kind of talked about it as a 50 to 100 basis point drag maybe a bit more at times, how should we think about it relative to the fiscal 20 guidance of consumption is growing to. Is there a destocking headwind that's about the same which kind of nets out to your great organic plan which tends to run a little bit behind consumption, but how we should think about the framework.

Christine Sacco -- CFO

Yes, that's exactly it. So in fiscal '19 our consumption was above 2% and organic sales were up -- couple of basis points essentially flat. We saw 2% disconnect and that's essentially what we're planning for 20, with that same level of activity.

Steph Wissink -- Jefferies -- Analyst

Okay. Thank you. And then final question just on the impairment we're getting a lot of questions this morning on the size of the impairment that you talk and I appreciate Chris that you talked about you know you don't get any benefit from brands that enhance or increase in value. How should we think about just looking back over the last five to 10 years of acquisitions and the value you've paid and how that influences how you think about future acquisition strategy in terms of valuation.

Ron Lombardi -- Chairman, President and Chief Executive Officer

So Steph, if you look back and Chris addressed this in our prepared remarks today is that when we buy a portfolio. So today we had impairments for Fleet which was in the -- a broad portfolio that included some of these things that based on in Boudreaux and Efferdent which was way back in the Blackstone blacksmith acquisition excuse me, that had a number of other brands. You know when you allocate the purchase price at the time of the acquisition you base it on what you think it's going to happen for those grow for those brands over time it's your best guest and inevitably some brands do better than you think when you estimate at the time of acquisition some do in line with what you think and some do below. The net of them ends up being generally in line or above what you thought, but the way the accounting works is you ignore the brands that do better, but you recognize the hit for the brands that might be below despite the fact that the entire portfolio you acquired may be better. So for example, Phazyme and Boudreaux accumulate right, they're performing much better than what we thought they would even just a couple of years ago we got meaningful cushion they are -- there that gets ignored, but we have to recognize the fleet, the fleet impairment same thing for Efferdent going way back to the other brands that were there.

We also had an impairment on Eco trends which wasn't called out today that was part of GSK, the portfolio we acquired from GSK yet we ignore this huge cushion above fair value the allocated value for BC and Goody's. Now DenTek is a little bit different in that what we found is that although we continue to feel very good about our long term ability to work with the retailers to provide leadership in that specialty PEG section it's going to take us a bit longer than we initially thought. And it's also going to be a bit more lumpy if you go back a couple of years ago DenTek grew about 10% because we had a big win at retail with changes at shelf. We saw this year some changes that went the other way kind of reversing it.

So we still feel good about the strategic position for that brand and our ability to execute our strategy. But there are some examples of things that drive that in the last comments on this topic Steph is that fundamentally when we step back you net all this together we still feel good about our long term outlook of 2% to 3% top line growth and mid single digit bottom line growth over the long term and feel good about the overall position of our total portfolio. And I think that's the important note today on this topic.

Steph Wissink -- Jefferies -- Analyst

Thank you. Very, very helpful.

Ron Lombardi -- Chairman, President and Chief Executive Officer

Sure.

Operator

Thank you. Our next question comes from Linda Bolton Weiser with D.A. Davidson. Your line is open.

Linda Bolton Weiser -- D.A. Davidson -- Analyst

Hi. Just a quick question for Chris. And in terms of the free cash flow guidance for FY 20, do you expect there to be a delta between the adjusted and the unadjusted free cash flow?

Christine Sacco -- Chief Financial Officer

No at this time we're not calling for any adjustments to our GAAP results for fiscal 20.

Linda Bolton Weiser -- D.A. Davidson -- Analyst

Okay. And then just in terms of sometimes you comment a little bit on private label share trends and how that's comparing to some of your products. Can you comment on that. And generally speaking, broadly speaking in a stronger economy private label tends to do less well sometimes. Are you finding that can you give a few examples of some of the trends you're seeing in private label versus your own shares?

Ron Lombardi -- Chairman, President and Chief Executive Officer

Sure. Linda, we can we continue to take share versus private label and outgrow private label in the categories that we compete in. So that trend continues and it has been in place for a very, very long time, you know sometimes there's a bit of a confusion where there is other large private label players who are claiming that private label is taking share and the difference is, is that private label is gaining share in big categories that we don't compete in whether it's in Rx-to-OTC Switch like in the allergy or heartburn, categories that we're not competing in or other big spaces like smoking cessation or tablet and analgesics. You know we're focused on those niche categories where the brand heritage innovation and new products that we bring are the differentiator between us than any other competitor whether it's a branded or private label that's the driver for us there. So we continue to do well in share versus private label.

Linda Bolton Weiser -- D.A. Davidson -- Analyst

And then I don't know if you saw just with regard to DenTek, I'm sort of wondering if perhaps you need more critical mass in the oral care category to be more successful there. I don't know if you saw that pair ago announced an acquisition I think this morning of an oral care business it look like a large deal valley, large deal perhaps or maybe you wouldn't have been able to look at it, but is that something you would look at in terms of oral care and trying to build up that category for you to be bigger.

Ron Lombardi -- Chairman, President and Chief Executive Officer

Now we really look at it on the subcategory basis and today Perego announced the pending acquisition of a competitor that's been in the space competing against DenTek forever. So this does not change the competitive dynamics for us. And again we look at that specialty oral care broken down into a bunch of subsections whether Flossers or dental brushes or bruxism devices or temporary fillings or tooth pain medication. And our brand has a number of leading dentist has a number of leading physicians within those subcategories. So if you're thinking about flossing you know you're not worried about tooth pain or in the -- dental brushes or bruxism and teeth grinding. So that's really how we think the consumer manages in that space, Linda.

Linda Bolton Weiser -- D.A. Davidson -- Analyst

Okay. And then just finally, I know it's relatively small percentage for you guys, but can you update us on your e-commerce percentage of sales and how is that increased in FY '19 versus FY '18? And then what kind of growth rate are you seeing on your e-commerce business? Thanks.

Ron Lombardi -- Chairman, President and Chief Executive Officer

So our e-commerce business grew 70% in fiscal '19 and now is about 4% of our total revenue. So it meaningfully additive to our performance you know our strategy has been fairly simple which is be there so that when the consumer shows up in increasing numbers, their trusted brands are there on available form and then a lot of ways we are kind of ahead of the curve where a number of years ago we started making the right level of investment to get good media out there online and have our products available not only at Amazon, but all of our brick and mortar partners, e-commerce initiatives as well. So it's something we're going to continue to focus and invest behind the right way.

Linda Bolton Weiser -- D.A. Davidson -- Analyst

Okay. Thanks very much.

Ron Lombardi -- Chairman, President and Chief Executive Officer

Thank you, Linda.

Operator

Thank you. Our next question comes from Frank Camma with Sidoti. Your line is open.

Frank Camma -- Sidoti & Company -- Analyst

Good morning, guys. Just a couple of quick ones. One is -- just couldn't help noticing that you don't really at least from the presentation, I don't see it talk about the core or the growth brands. Can you explain why like you changed some messaging around there, is it more to focus on the total portfolio at this point?

Ron Lombardi -- Chairman, President and Chief Executive Officer

Yeah, Frank, we just wanted to give kind of an annual scorecard today in terms of how our biggest brands were doing and it's something that we're looking to do going forward at the end of each year give a scorecard on our performance versus the categories and grade ourselves on our ability to outgrow the categories that we compete in which is an important way...

Frank Camma -- Sidoti & Company -- Analyst

I actually, to be honest with you, I actually prefer it that way. I mean it's really what drives your earnings right? not just your core growth brands. So, I know -- I actually appreciate that. The other one is just sort of you know a comment really and if you want to address it. But you obviously haven't changed your capital allocation policy so it's not surprise, but it is a little surprising that you even talk about the share repurchases given, I mean you still highly levered and $50 million it seems well it's -- it's not going to drag your debt down a ton, it is a nice reduction in your debt and interest savings longer term. So why not just use that money to continue to pay on DenTek at a level where I would say my guess is the market would probably give you a expanded equity multiple despite the fact that you'd have more shares outstanding, I don't know if you could address that?

Ron Lombardi -- Chairman, President and Chief Executive Officer

Sure. You know one of the benefits that we have from our industry leading free cash flow at over $200 million in fiscal '19 and expected similar level in 20, is that we can do a number of things and buying $50 million worth of stock back at value that we're seeing out there today we think is the right thing to do for our shareholders it's got a return of 12% or more and it was well received by the shareholders last year when we did it and it still leaves us with $150 million or more to continue to accelerate our deleveraging and paying down our debt Frank.

So it doesn't seem real or meaningfully move out our deleveraging net effect in fiscal '19 you could think about the household divestiture as a capital allocation swap we took 50 plus million dollars in net proceeds from a meaningfully declining position business and returned it to our shareholders. So that's the way we think about it is that, we've got $200 million to balance the right use the job and we think we're turning $50 million to the shareholders and using $150 million to continue to pay down debt is the right balance.

Frank Camma -- Sidoti & Company -- Analyst

Fair enough. Thanks.

Ron Lombardi -- Chairman, President and Chief Executive Officer

Thank you, Frank.

Operator

Thank you. Our next question comes from Carla Casella with JP Morgan. Your line is open.

Carla Casella -- J.P. Morgan -- Analyst

Actually my questions were just answered. I was going to ask about the potential to refinance the credit inside the bonds.

Ron Lombardi -- Chairman, President and Chief Executive Officer

(inaudible)

Christine Sacco -- Chief Financial Officer

Hi, Carla, this is Chirs, so obviously we're always looking for opportunistic -- opportunities around our capital structures as evidenced I think last March we refinanced put some more fixed debt into our high yield notes and we're able to refi the term loans to make it EPS neutral. So we look for those opportunities we'll take advantage of them when they're in the marketplace. I think you know we have a non call that, that ends on one of the notes this December. So we'll continue to evaluate the entire capital structure as we go forward.

Carla Casella -- J.P. Morgan -- Analyst

Great. Thank you.

Ron Lombardi -- Chairman, President and Chief Executive Officer

Thank you, Carla.

Operator

Thank you. And I'm showing no further questions at this time. I'd like to turn the call back over to Ron Lombardi for closing remarks.

Ron Lombardi -- Chairman, President and Chief Executive Officer

Thank you, operator. In closing we feel good about the long term trends of the business and our ability to execute our three pillars strategy of growing the top line through brand building maintaining a strong financial profile with consistent free cash flow and continuing our disciplined capital allocation approach to enhance shareholder value. We look forward to executing the strategy in fiscal 20 and speaking with all of you in the coming months. Thank you and have a great day.

Operator

Ladies and gentlemen, this concludes today's conference. Thanks for your participation. Have a wonderful day.

Duration: 49 minutes

Call participants:

Phil Terpolilli -- Director of Investor Relations

Ron Lombardi -- Chairman, President and Chief Executive Officer

Christine Sacco -- Chief Financial Officer

Christine Sacco -- CFO

Adam Tindle -- Raymond James -- Analyst

John Anderson -- William Blair -- Analyst

Steph Wissink -- Jefferies -- Analyst

Linda Bolton Weiser -- D.A. Davidson -- Analyst

Frank Camma -- Sidoti & Company -- Analyst

Carla Casella -- J.P. Morgan -- Analyst

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