Prestige Consumer Healthcare Inc

NYSE:PBH

Earnings Call Transcript 2019-Q4

[Operator]

Good day, ladies and gentlemen, and welcome to the Prestige Consumer Healthcare Fourth Quarter Fiscal 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

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

[Philip Terpolilli, executive]

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, CFO. On today's call, will cover the highlights and review the results of our fiscal 2019 fourth quarter and full year, discuss our fiscal '20 outlook and then take questions from analysts. We have a 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 this presentation today includes non-GAAP financial measures. Reconciliation 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 on our most recent SEC filings and the most recent company 10-K.

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

[Ron Lombardi, executive]

Thank you, 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 aisle. 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 untracked channels and strength in 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 and destocking pressure.

Our net sales were approximately $976 million, up slightly versus [indiscernible] year on an organic basis. Sales were positively impacted by strong consumption of approximately 2% driven by strength in women's health, 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 at shelf in the oral care category. The redesign BC & Goody's packaging, which we've discussed throughout the year, has made continual progress and is now largely rolled out across channels. I'm pleased to report initial sell-through trends remained solid with positive consumer feedback aligned with our expectations.

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 a strategic Household Cleaning divestiture enabled to pay down of $200 million of debt and the opportunistic repurchase of $50 million of stock in fiscal '19.

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 3-pillar strategy. We have confidence in our 3-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've 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 were pleased with our actions during the year. Our healthy level of free cash flow provides us with a flexibility to take opportunistic actions round 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 5x at the end of fiscal '19, 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 the 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 #1 market share brands representing approximately 2/3 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 6 distinctive examples that execute the strategy and launch 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, Summer Eve's 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 #1 OTC dental guard and act as an alternative to professionals' dental fitting. These are just 2 of many examples of us executing on innovation and increasing our connection with consumers. For a more in-depth example of our 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 underinvested, but leading brand. 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 in new users. Our first step was revitalizing tired packaging. We leveraged our creative team to improve messaging as well as design. We also used consumer feedback to expand the product reach by offering a version for kids as well as launching a less drowsy and nondrowsy product version to help alleviate consumer concerns around drowsiness.

Most recently, we've addressed the distinctive nausea market with the interested brand under the label Dramamine and for 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 a 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 traditional TV media to digital ad spend as well ongoing new product development and expand 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 #1 brand 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 that enable leveraging brand here for competitive share swaps to grow kind of crowded categories, brands, retailers and most importantly, consumers.

So in summary, we have leading brands that get the focus on growing categories and are 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 consumption 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, executive]

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 [indiscernible]. Adjusted EBITDA decreased slightly in Q4 versus the prior year due primarily to the household divestiture. Adjusted EPS increased approximately 16% in Q4 versus the prior year as 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.

In 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 & 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 & 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% of revenue with a 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 modest deleveraging 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 D&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 noncash goodwill and intangible impairments.

Regarding the noncash impairments. In fiscal '19, we reported a net charge of $171.2 million primarily related to the companies; Fleet, DenTek and Efferdent's branding. The charge resulted from our annual valuation assessment, which was affected by an increase discount rate applied to future cash flows versus prior years as well as how the individual brand performed versus the original projections used at the time of acquisition.

As a 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's brand has meaningfully exceeded its carrying value. 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 5x.

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 4.5x 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 3-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 purchases. 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 3 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 3.3x, just below our long-term target range of 3.5 to 5x.

Second, we expect to continue to evaluate opportunistic share purchases. This morning, we announced a $50 million share repurchase authorization for fiscal '20, which, if fully utilized, would represent approximately 1/4 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 6-plus years. Ultimately, M&A is weighted against these other priorities when evaluating its return potential. Over the long term, we continue to expect disciplined 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, executive]

Thanks, Chris. Let's wrap up with some closing remark and our outlook for fiscal ' 20 on Slide 20.

For net sales, we anticipate fiscal '20 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 experienced 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 1/4 of Household Cleaning sales and EPS, which were approximately $20 million and $0.04, respectively, in fiscal 2019.

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 or 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 margins 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 through brand heritage, product innovation and channel development, and we will continue in these efforts to drive our market share and overall category growth.

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

[Operator]

[Operator Instructions] Our first question comes from Joe Altobello with Raymond James.

[Adam Kozek, analyst]

This is actually Adam on for Joe. I had a couple 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 on your plans for turning that around or maybe a bit more color will be helpful?

[Christine Sacco, executive]

Adam, this is Chris. So regarding the top line, results came in, in line with our expectations. We've been talking about retailer inventory destocking for some time. And obviously, it's relative to our North American OTC business. On the growth margin, again, coming in, in line 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 & Goody's packaging, which is obviously in North America.

[Adam Kozek, analyst]

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

[Christine Sacco, executive]

Yes, 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, a nonfactor going forward.

[Operator]

Our next question comes from Jon Andersen with William Blair.

[Jon Andersen, analyst]

I want to take another just a quick stab at the earlier question on the margins in OTC being down -- gross margin being down in the quarter. Is that a mix issue? Is it -- is there any kind of pricing pressure you're experiencing? Or is it really just kind of a stranded overhead kind of issue 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 a gross margin impact?

[Christine Sacco, executive]

Yes, Jon, so a couple of things that are impacting us as a result of household. First is some of the gross-to-net cost that we talked about that were previously allocated to household 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 household used to be on the truck and riding the -- the OTC products were riding on that truck in a consolidated manner. And so when we divest household, we lose that synergy, if you will. So those are the real -- those are the factors contributing to the margin. So again, it was in line with our expectations and our margin came in at about 57% for the year, which is what we were guiding to.

[Ron Lombardi, executive]

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

[Jon Andersen, analyst]

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

[Ron Lombardi, executive]

Yes, it is consistent across the portfolio. Then again, one of the benefits of our portfolio and the needs-based nature of our products and our leadership #1 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 years, 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 efforts.

[Jon Andersen, analyst]

Okay. And in terms of consumption, I think you've 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% 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, executive]

Yes. So really that disconnect between those generic IRI and Nielsen reports that are out there continue. 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 at 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, Jon, they continue just to be incomplete and inaccurate.

[Jon Andersen, 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? Has that moderated a bit? Has that continued at a very aggressive pace, just trying to get a sense for whether there is any kind of light at the end of the tunnel on that?

[Ron Lombardi, executive]

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 benefits. 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 inventories, whether it's closed stores 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 of $15 an hour minimum wage or finding resources to invest in their online or pick-up-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 in their bottom line over time. So as we gave our outlook for fiscal '20, we thought it'd 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.

[Jon Andersen, analyst]

Okay, that's helpful. One more -- I'll ask 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 of the reactions in the new packaging from consumers, can you talk a little bit about that? Has it been universally received positively? Have there been -- has there been some pushback with respect to the packaging? And maybe most important, what has the sell-through been like, because that's the ultimate measure, I guess, of the success?

[Ron Lombardi, executive]

Yes. So first of all, the new packaging has been widely accepted by the users as expected. We did a lot of work in designing the product and talking with consumers to make sure it was going to be the right proposition. Anytime you make a change to something that's been out there for more than 100 years, you're going to get compassionate 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.

[Jon Andersen, analyst]

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

[Ron Lombardi, executive]

Yes, we're back in line with the long-term trends that we've realized for the brand.

[Operator]

Our next question comes from Steph Wissink with Jefferies.

[Stephanie Schiller Wissink, analyst]

Chris, I just wanted to unpack the revenue recognition a little bit more deeply. I think in your 10-Q, you'd disclosed that it was about an $8.5 million hit to the year-to-date numbers. Is that the 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, executive]

Yes, Steph, let me just go back because they are 2 separate issues when we talk about revenue recognition. When we talk about the benefits we received in this quarter, which was essentially flat for the year, right? Remember, first half was a hit, second half was the 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 and calculate revenue recognition as if we were still under the old policy. So it's an apples-and-orange compare, if you will. And I'd like to remind folks because there's a lot of variability there. We, quite frankly, don't look at it, we're not managing the business that away. I'd like to remind people that we change accounting policy under the literature. Our customers don't just all of a sudden place 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 there are 2 very different things. And the number that appears in the footnote is not what we're referring to when we talk about revenue recognition comparisons. The number that we're talking about that actually influence, that was a very slight help to Q4 and a negligible number to the full year.

[Stephanie Schiller Wissink, analyst]

Okay. So maybe ask it different way, the organic growth measure, do you want to give us a sense of what that was adjusted for the revenue recognition benefits, trying to reconcile 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 expectation for such a deceleration?

[Christine Sacco, executive]

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

[Stephanie Schiller Wissink, analyst]

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

[Ron Lombardi, executive]

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

[Stephanie Schiller Wissink, analyst]

Okay. And then final question just on the impairments. We're getting a lot of questions this morning on the size of the impairment that you took. And I appreciate, Chris, that you talked about you don't get any benefit from brands that enhanced or increased in value. How should we think about looking back over the last 5 to 10 years of acquisitions and the value you've paid? And how that influences how you think about future acquisitions strategy in terms of valuations?

[Ron Lombardi, executive]

So Steph, if you look back, and Chris addressed this in her 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 Summer's Eve and Phazyme and Boudreaux's and Efferdent, which was way back in the Blackstone -- Blacksmith acquisition, excuse me, that had a number of other brands. When you allocate the purchase price at the time of acquisition, you base it on what you think is going to happen for those brands over time. It's your best guess. 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 hits 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 are killing it, right? They're performing much better than what we thought they would. Even just a couple of years ago, we got meaningful push in there that gets ignored, but we had to recognize the Fleet impairment. Same thing for Efferdent going way back to the other brands that were there. We also had an impairment on Ecotrin, which wasn't called out today that was part of GSK. The portfolio we acquired from GSK, yet we ignored this huge cushion above fair value or the allocated value for BC & 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. Now 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 on our strategy, but there are some examples of things that drive it. And the last comment 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. We feel good about the overall position of our total portfolio. And I think that's the important note today on this topic.

[Operator]

Our next question comes from Linda Bolton-Weiser with D.A. Davidson.

[Linda Bolton-Weiser, analyst]

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, executive]

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

[Linda Bolton-Weiser, 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 sometime. Are you finding that -- can you give us a few examples of some of the trends you're seeing in private label versus your own shares?

[Ron Lombardi, executive]

Sure. Linda, we continue to take share versus private label and outgrow private label in the categories that we compete in. So that trend continues and has been in place for a very, very long time. Sometimes, there's a bit of confusion where there's other large private-label players who are claiming that private label is taking share. And the difference is that private label is gaining share in big categories that we don't compete in, whether it's an 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. We're focused on those niche categories where the brand heritage and innovation and new products that we bring are the differentiator between us and 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, 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 the Paragon announced an acquisition, I think, this morning over of an oral care business, look like a large deal, very large deal, perhaps. So 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, executive]

No, we really look at it on a subcategory basis. And today, Paragon announced the pending acquisition of 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 it's flossers or interdental brushes or bruxism devices or temporary fillings or tooth pain medication. And our brand has a number of leading -- DenTek has a number of leading positions within those subcategories. So if you're thinking about flossing, you're not worried about tooth pain or interdental dental brushes or bruxism, teeth grinding. So that's really how we think the consumer manages in that space, Linda.

[Linda Bolton-Weiser, 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 has that increased in FY '19 versus FY '18? And then what kind of growth rate are you seeing in your e-commerce business?

[Ron Lombardi, executive]

Yes. So our e-commerce business grew 70% in fiscal '19, and now is about 4% of our total revenue. So it's meaningfully additive to our performance. Our strategy has been fairly simple, which is be there so that when the consumer shows up at in increasing numbers, their trusted brands are there and available for them. And in a lot of ways, we were kind of head 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 at 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.

[Operator]

[Operator Instructions] Our next question comes from Frank Camma with Sidoti.

[Frank Camma, analyst]

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

[Ron Lombardi, executive]

Yes, Frank, we just wanted to give kind of 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 to...

[Frank Camma, 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 of brands. So I know, I appreciate that. I actually appreciate that. The other one is just sort of a comment really if you want to address it but you obviously haven't changed your capital allocation policy, so it's not a surprise, but it is a little surprising that you even talk about share repurchases, given -- I mean, you're still highly levered. And $50 million, it seems, while it's not going to drive you that down at times, it is a nice reduction in your debt and interest savings longer term. So why not just use that money to continue to pay down debt, get to a level where I would say, my guess is the market would probably give you an expanded equity multiple despite the fact that you'd have more shares outstanding. I don't know if you can address that.

[Ron Lombardi, executive]

Sure. One of the benefits that we have from our industry-leading free cash flow at over $200 million in fiscal '19 and expect the similar level in '20 is that we can do a number of things end. 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 derail or meaningfully move out our deleveraging. A matter of fact, in fiscal '19, you could think about the household divestiture, our capital allocation swap. We took $50-plus million in net proceeds from a meaningfully declining poor positioned business and returned it to our shareholders. So that's the way we think about it is that we have got $200 million to balance the right usage of, and we think returning $50 million to the shareholders and using $150 million to continue to pay down debt is the right balance.

[Operator]

Our next question comes from Carla Casella with JPMorgan.

[Carla Casella, analyst]

Actually, my all questions were just answered. I was going to ask about the potential to refinance the credit -- I'm sorry, the bonds.

[Christine Sacco, executive]

Carla, this is Chris. So obviously, we're always looking for opportunistic -- opportunities around our capital structure. As in, I think, last March, we refinanced, put some more fixed debt into our high-yield notes and were able to refi the term loan 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 ends on one of notes this December. So we'll continue to evaluate the entire capital structure as we go forward.

[Operator]

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, executive]

Thank you, operator. In closing, we feel good about the long-term trends of the business and our ability to execute our 3-pillar 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 this 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.