Dean P. Siegal - Director of Investor Relations & Communications Ronald M. Lombardi - President and Chief Executive Officer David S. Marberger - Chief Financial Officer.

Frank Camma - Sidoti & Co. LLC Stephanie Schiller Wissink - Piper Jaffray & Co. (Broker) Linda B. Weiser - B. Riley & Co. LLC Krisztina Katai - Raymond James & Associates, Inc. Kevin L. Ziets - Citigroup Global Markets, Inc. (Broker) Carla M. Casella - JPMorgan Securities LLC.

Good day, ladies and gentlemen, and welcome to the Prestige Brands Holdings Fourth Quarter and Year End Fiscal 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, this conference is being recorded.

I would now like to hand the conference over to Dean Siegal, Director, Investor Relations. Please go ahead..

Good morning and welcome. As a reminder, there's a slide presentation which accompanies this call. It can be accessed by visiting prestigebrands.com, clicking on the investor link and then on today's webcast and presentation.

I am required to remind you that during this call, management may make forward-looking statements regarding their beliefs and expectations as to the company's future business prospects and results.

All forward-looking statements involve risks and uncertainties, which, in many cases, are beyond the control of the company and may cause actual results to differ materially from management's expectations. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this conference call.

A complete Safe Harbor disclosure appears on page two of the presentation accompanying this call. Additional information concerning the factors that might cause actual results to differ from management's expectations is contained in the company's annual and quarterly reports, which it files with the U.S. Securities and Exchange Commission.

As a reminder, some of the information contained in this presentation includes adjusted projections, which exclude acquisition-related and other items. A reconciliation between adjusted results and reported results is included in today's earnings release. Now, I would like to introduce Ron Lombardi, CEO and Dave Marberger, CFO..

Thanks, Dean, and good morning, everyone. Today, we will cover our performance highlights for the fourth quarter and the full year, review our fiscal 2016 results against our strategy. Dave will go over the financial results, and we'll wrap things up with our outlook for fiscal 2017.

But before we begin on page five of the presentation, I thought I would start with a few comments on our performance for fiscal 2016, which was successful on many fronts including both financially and strategically.

About six years ago, the company embarked down a path to focus our efforts on our core OTC brands and enhancing our portfolio through organic growth, as well as strategic and disciplined M&A. These efforts are behind the success we realized in fiscal 2016 with record revenues, adjusted EPS, cash flow, as well as the DenTek acquisition.

All of these factors have the business positioned for continued success in fiscal 2017 and beyond. With that, let's turn to page five. Our fourth quarter is highlighted by exceptional results across a number of fronts.

We continued to demonstrate portfolio growth, and realized strong sales gains during the quarter with reported revenue of approximately $208 million and organic sales growth of 5%, excluding the impact of FX. Driving this strong sales growth was consumption gains in our core OTC brands of 8%.

Our top line continues to benefit from our long-term brand building initiatives that include new products, a strategic focus on our Invest for Growth business, and a long-term investment focus.

Top line growth helped to drive strong performance on our bottom line with adjusted EPS of $0.52 for the quarter, which was an increase of 11% over the prior year and included breakeven results for DenTek.

We also realized nearly $49 million of adjusted free cash flow in the quarter, which continues to drive rapid de-levering after the DenTek acquisition and a leverage ratio of approximately 5.0 times at the end of the quarter.

Finally, we closed on the DenTek acquisition a little over 90 days ago and are on track to largely complete the integration of the business by the end of June. As we complete this phase of the integration, we will continue to focus on expanding and executing our marketing plans for this brand.

Turning to page six, we have a few highlights on the full year. As I mentioned at the start of the call, our full year results were records for revenues at $806 million, adjusted EPS of $2.17, and adjusted cash flow over $183 million for the year.

All of these results represent a top-line CAGR of approximately 20% over the last six years since fiscal 2010 and continue to validate our three-pronged strategy that focuses on driving core OTC and international growth, our industry-leading cash flow and financial profile, and a strategic and disciplined approach to M&A.

Turning to Slide 8, we will go into more detail on our fiscal 2016 performance. Fiscal 2016's results are a great example of how we are successfully executing against our strategy and how it impacts all aspects of our performance.

This includes a focus on our core OTC brands that is driving consumption and share growth along with improvements in our portfolio, which are setting us up for long-term growth. Our brand-building approach and marketing tool kit includes new products as a successful driver of sales and I'll touch on this in more detail in the next few pages.

Our fiscal 2016 results also show how our industry leading free cash flow enables us to invest in A&P and creates M&A capacity that underpins our proven, strategic and disciplined approach to M&A, as was demonstrated with this year's acquisition of DenTek.

With all of these components working together, we believe we are well positioned for fiscal 2017 and beyond. Turning to Slide 9, we have our consumption trends for the last few years. Slide 9 has consumption trends on the top and sales trends on the bottom of the page for our core OTC brands over the last five years.

With the exception of fiscal 2014, which was impacted by retail and inventory reductions and other factors, our consumption has largely outpaced the categories we compete in and driven strong sales results.

We believe this is due to continued investment in our marketing initiatives, as well as our focus on ensuring we are properly communicating with consumers about our brands and their benefits.

Fiscal 2016 performance was particularly strong in our largest brands, including Monistat, under our first full year of ownership, Clear Eyes and BC and Goody's.

Our results for fiscal 2016 and Q4 were our strongest over the last five years and above what we might realize over the long-term, but we continue to expect that our core OTC brands will continue to outgrow the categories they compete in.

This focus on driving core OTC growth is an important part of our strategy and turning to page 10, we will show how this, along with our international business, is driving organic growth. Over the last six years, we have been on a journey to evolve our portfolio from 50% growth brands and 50% Manage for Cash to our stated objective of 85%/15%.

With the recent DenTek acquisition, we have evolved to an 80%/20% mix positioning the company for long-term organic growth. For fiscal 2016, our Investor Growth portfolio of the business grew a solid 5.8% due to the performance in our largest brand in our international business, anchored around the Care portfolio in Australia.

Our Manage for Cash business also performed well with a decline of approximately 3.5%. Fiscal 2016 benefited from household growth of approximately 1% during the year. Over the long-term, we would expect this portion of our business to decline as much as 5% or even more due to the continued decline in the household category and other factors.

The combination of these two portions of our business resulted in solid organic growth of 2.8% for the year. Turning to page 11, we have an overview of our new product development. One of the key components behind our consumption trends is new product development, and Slide 11 shows results of our efforts this past year.

We have a dedicated team devoted solely to new product development. This team is composed of people with backgrounds in marketing, chemistry, new product development, regulatory affairs and consumer insight research. Our goal is to launch three to five meaningful new products each year.

When we speak of innovation, we are looking to create meaningful line extensions of existing core brands that match each brands' unique positioning in the marketplace, and at the same time make a difference in the lives of our consumers.

In fiscal 2016, we launched unique new products in Dramamine, Nix, Compound W, Little Remedies, Goody's and Fiber Choice. Moving onto page 12, we have more of these products in our NPD approach.

We have a broad portfolio of brands, which enables us to use a wide variety of marketing approaches for each brand and we take this approach with our new product development as well. For fiscal 2016, new products are great example of how each brand has taken a different approach to meeting consumer needs.

When our consumer insight work identifies an unmet need, we go to work to fill that need by focusing at each brand and its unique positioning. Shown here are several of the many strategic avenues to new product development we consider in product creation along with example of each brand innovation in fiscal 2016.

For example, efficacy was an added benefit for Dramamine with a new clinically proven non-drowsy formula with natural ginger to treat motion sickness. For Compound W, new technology created a product which more effectively targeted warts. The new Nix product offers a differentiated benefit by treating a newly emergent problem of super lice.

For Fiber Choice, it's a unique new delivery form for fiber in liquid flavor drops, while new flavors such as mixed berry blast are stimulating sales of Goody's headache powders and expanding the franchise. Finally, an expanded offering for Little Remedies now includes a colic treatment and adds a new SKU to the line to complement our gas drops.

Moving on to slide 13, we have our cash flow and leverage trends. Our adjusted free cash flow has grown significantly over the last six years reaching a record level of a $183 million in fiscal 2016.

This cash flow enables us to invest in our brands in order to drive top-line growth, as well as rapidly de-levering after an acquisition and building M&A capacity for the next opportunity. At the bottom of the page, you can see our history of increasing leverage to support acquisition and then rapidly de-levering ahead of the next opportunity.

Turning to page 14, you can see the pacing and history of the acquisitions. Over the last six years, we have completed seven acquisitions that have extended the platforms we have. We built out a business in Australia and more importantly evolved the portfolio to support long-term organic growth.

As we just saw with our consumption trends, and the change in the portfolio profile, our strategy of using M&A as a brand building tool has worked. Let's turn to page 15 and I'll wrap up this section before turning the call over to Dave. The ultimate report card on a strategy is the impact on financial results.

Not only have we built the portfolio to sustain long-term organic growth, but we have also delivered meaningful financial results. Our six-year CAGR for the all of the financial metrics on page 15 is about 20% or more and we have essentially tripled the size of our business. All of this, we believe, has us well positioned for fiscal 2017.

And with that, let me turn the call over to Dave, who will review the financial section..

Thank you, Ron and good morning, everyone. Turning to slide 17, as Ron described, we are very pleased with our fourth quarter results driven by organic growth of 5% excluding FX and total revenue growth of 9.4%. This sales performance resulted in an adjusted EPS of $0.52, an increase of 11% for the fourth quarter.

We generated about $49 million in free cash flow for Q4 and over $183 million in free cash flow for the full fiscal year 2016, an increase of 12% or $20 million versus fiscal year 2015. Free cash flow approximated 23% of net sales for fiscal year 2016, which is industry-leading performance.

Turning to slide 18, we have our consolidated fourth quarter and full year results. As a reminder, today's information includes adjusted results that are reconciled in our earnings release. Our net revenues increased 9.4% in Q4 and about 13% for the full year 2016 with full year sales coming in at approximately $806 million.

These results were driven by continued strong consumption trends in our core OTC and International business as Ron mentioned, and include incremental revenue from DenTek which was acquired in the fourth quarter. The fiscal year 2016 results include about $2.5 million of negative FX in the fourth quarter and about $14 million on a year-to-date basis.

Gross margin came in at 57.6% for the fourth quarter, and 58.1% for the full year, in line with our outlook for fiscal year 2016. We expect our fiscal year 2017 gross margins to be in line or slightly above our fourth quarter 2016 gross margin.

DenTek's gross margin levels are slightly below the Prestige averages, but EBITDA margins for DenTek are in line with the company averages on a fully integrated and synergized basis.

In terms of A&P for fiscal year 2016, we came in just under 13% of total revenue for Q4, and just about 14% for the full fiscal year with $11 million in additional A&P spending year-on-year, an increase of over 11%. For fiscal year 2017, we expect our A&P spending to increase in line with our overall total revenue growth.

Our adjusted G&A spending came in about 9% of total revenues for Q4 and 8.5% for the full fiscal year. G&A for fiscal year 2017 should increase as we continue to invest in infrastructure to support the growing Prestige business, resulting in adjusted G&A as a percentage of total revenues approximating 8.5%.

Finally, our adjusted EPS grew about 11% for Q4 and 17% for the full year, growing faster than revenues in both periods as a result of gross margin gains. Related to fiscal year 2017, we estimate our depreciation and amortization expense to increase to approximately $28 million due to the DenTek acquisition.

We also expect our fiscal year 2017 interest expense to increase to approximately $90 million due to net debt starting at a higher level in fiscal year 2017 compared to a year ago. We estimate our effective tax rate to approximate 36% for fiscal year 2017. Turning to slide 19, we have the details for our cash flow for the fourth quarter and full year.

As I mentioned, we delivered over $183 million of free cash flow in fiscal year 2016 and we finished with net debt of approximately $1.6 billion and a leverage ratio of 5.0 times.

This strong free cash flow in fiscal year 2016 allowed us to finance the DenTek acquisition of $225 million while reducing the leverage ratio from 5.2 times at the end of fiscal year 2015.

Our strong cash flow continues to be generated from our industry leading and consistent EBITDA levels, low fixed asset spending due to our asset-light model, and meaningful deferred tax benefits.

For fiscal year 2017, adjusted free cash flow is expected to be $185 million or more, which would reduce the leverage ratio to approximately 4.3 times by the end of fiscal year 2017. This leverage reduction is expected to create increased M&A capacity and will continue to support our M&A objectives going forward. Thank you.

I will now pass it back to Ron..

Thanks, Dave. Turning to page 21, we have our plans for fiscal year 2017 and our outlook. Our three-pronged strategy continues in fiscal 2017. We will continue to focus on brand building and look to grow our diverse portfolio in a variety of ways.

This has been at the center of our strategy for the last six years and it will continue to be going forward. We will continue to expand our digital marketing efforts, brand-by-brand as appropriate, and continue to focus on developing new products and innovation.

Our marketing to healthcare professionals will be an important part of our efforts going forward as well. We will focus on strengthening distribution in existing channels, including c-store and dollar stores and at the same time pay close attention to emerging e-commerce opportunities.

The DenTek integration is on schedule and we anticipate it will be fully integrated by the end of the first quarter of fiscal 2017 and our focus will continue on marketing, advertising and new product development plans for fiscal 2017 and the future.

As has been our practice, we expect to rapidly delever with our industry leading free cash flow as we build meaningful M&A capacity. Consistent with our strategy, we remain committed to being aggressive and disciplined in acquisition with a focus on M&A as a brand building tool. Turning to page 22, we have our outlook for the new fiscal year.

We head into fiscal 2017 with strong momentum in our largest brand and our international business and we anticipate our core OTC brands will continue to grow faster than the categories in which they compete. We also anticipate headwinds at retail from industry consolidations as well as an impact on our top line from foreign currency exchange rates.

Our specific revenue outlook for fiscal 2017 has revenue growth of plus 6% to plus 8%, which includes $11 million of impact from FX and from the discontinuation of some private label business that we were providing a retailer at breakeven.

We expect first half revenue growth of plus 6.5% to plus 8.5% with the second half growing at plus 5.5% to plus 7.5%. Organic growth should be in the range of 1.5% to 2.5% for the year. Adjusted EPS for the full year is expected to increase between 6% to 9% or $2.30 per share to $2.36 per share.

And finally, as Dave mentioned earlier, our adjusted free cash flow is expected to be $185 million or more for the year. And now, I'll turn the call back over to the operator for questions..

Thank you. Our first question comes from the line of Jason Gere from KeyBanc Capital Markets..

Hey everyone. This is actually Drew (22:15) on for Jason.

Just wondering, first of all, if you've got any highlights to call out from the core OTC portfolio, anything that's been performing well, or any areas that have been underperforming that you'd like to see improve?.

Good morning, Drew (22:29). As I mentioned in my remarks, our largest brand continue to do very well, and they have been really all of fiscal 2016. This includes Monistat, which we owned for the full year.

We closed on the Insight transaction back in September of 2014, as well as Clear Eyes, BC, and Goody's, and Dramamine have performed exceptionally well, with all of those brands not only outgrowing the categories they are in, but taking share..

Great.

And then if we could turn to free cash for a minute, can you talk about some of the puts and takes to this year's guidance? Why are you assuming flat this year after beating last year and growing nicely? And then with the priority on deleverage, where do you want to get to before you're ready to look at acquisitions again?.

Okay. So let me take the first part of that, Drew (23:26), this is Dave. So if you look at our guidance for our outlook for 2017 for cash flow, you have to peel it a back a little bit. So if you look at fiscal year 2016, we came in at $183 million, we had about $2 million of cash flow related to DenTek.

So if you take that out and then you look at the outlook for next year, we have about a $4.5 million increase in CapEx related to DenTek that's factored into next year as well. So if you factor in those two items, the increase is close to 5%, and we do guide $185 million or more. So that's how you would reconcile that..

Very, very helpful. Thank you. And one more, if I may, if we could go to DenTek for a second.

Is $60 million still a fair way to think about that business? Just wondering if you have any updated thoughts given that the 4Q contribution probably came in above what most people were expecting?.

Yeah. So, for next year's sales outlook, Drew (24:29), we're anticipating $60 million or so from the DenTek business, so that amount continues to be consistent..

Great. Thank you. And that's it from me. I'll pass it on..

Thank you. And our next question comes from the line of Frank Camma from Sidoti..

Good morning, guys..

Hey, good morning, Frank..

Good morning, Frank..

Hey, I know it's small, but like the household cleaning continues kind of really outperforming, but there's really no category reason driving that. Can you talk about that a little bit? I mean, you discussed how forward do you expect it to climb, but just wonder if you could comment on what's sort of keeping it going in the short term here at least..

Sure. Really the last couple of years, the Household business has performed well for us with slight gains in sales year-over-year, and it's really attributable to execution at retail, primarily at the dollar channel where we're running programs in that channel.

And again, as you just mentioned, the long-term trends for the category that'll continue to decline as consumers' household cleaning changes. People aren't mopping floors and mopping off branded counters like they used to. So we anticipate over time that we're going to eventually fall back in line with the category trends, which are declining..

Okay.

Specific question on Monistat brand, obviously, you called that out as a strong brand for the quarter, but could you talk a little bit or update us more on sort of the professional detailing efforts you're doing there or the doctor detailing efforts you're doing there? And how that's going?.

Sure. When we've talked about the doctor detailing program in the past, we've always talked about it as a long-term initiative, and it continues to be that.

Over the last year, we've kicked off the program and got it going, and we've got a detailing force out visiting OB/GYN and other doctors, getting them back up to feed on the benefits of Monistat for their patients, so that'll continue going forward..

Okay. And Dave, you touched on the adjustment to the cash flow. I think it was helpful explaining how the guidance is $185 million.

But I would like to specifically touch on so the benefit you get from the deferred income taxes in your model, especially since you have the rate – the rate is incrementally going up a little bit, right? So it looks like in the quarter, the March quarter, you benefited a little bit more on an absolute basis.

Just wondering if you could just talk about that and how maybe the DenTek acquisition, does that at all change the rate we should model going forward from deferred income taxes..

Yeah. So let me address that in a couple of ways, Frank. Yeah, so for the full year, we continue to benefit from our cash tax rate being lower than our effective tax rate driven by the acquisitions we've made and the tax basis and deductions we get from that. That will continue going forward.

As we acquire businesses that is part of a benefit, that benefit can vary depending on whether you're buying assets or whether you're buying stock, but generally speaking that benefit will continue into the future and is factored into 2017's outlook for cash flow..

Okay.

But is the cash rate still roughly the same as it has been in the past? Is that kind of how we should model it?.

Yes, that's correct. You can see it in the cash flow statement and that would be consistent..

Okay, great. That's all I have for now. Thanks..

Thanks, Frank..

Thanks, Frank..

Thank you. And our next question comes from the line of Stephanie Wissink from Piper Jaffray..

Thank you. Good morning, everyone. We have a couple of questions. I think, Dave, you mentioned that G&A this year is slightly higher by about 50 basis points.

I'm curious if that's due to investments that you've deferred or just some opportunities that you see near term in the market to bump up the overall investment profile in the G&A line?.

So, Steph, the increase in capital spending for next year is largely around the DenTek business. We've had to make some changes in our warehouse to accommodate that additional activity and then some ongoing tools and dies and that kind of thing for the DenTek business..

Ron, how about on the P&L? I think, Dave, you mentioned kind of 8.5% of sales for G&A. Is that....

Yeah..

...it seems like a little bit of a step up..

Yeah. Okay. So, Steph, that's – as we acquired the businesses, we obviously drive synergy, but we're growing the overall business. So the infrastructure support that we have here to support all of the businesses, we want to make sure that we're investing as the business grows.

So it's a balance between getting leverage, cutting costs, but adding resources where needed to support the bigger businesses that we have..

Okay. That's helpful. And then, I think as you talked about the outlook for the year kind of a first half, second half split, first half being a little bit stronger.

Is that really due to comparability or product launch timing? Maybe just help us understand that 100 basis point swing between first half and second half?.

It's largely attributable to the timing of the DenTek acquisition. So, we owned it two months in fiscal 2016. So, that's the big difference..

Okay. And then just lastly, I think, Ron, you mentioned emerging e-commerce opportunities. I'm wondering if you could just help us appreciate how big e-commerce is today.

I can imagine it's probably quite small, but how you're thinking about opportunities in that channel partnering with your retail distributors, and some of the new brands that you're integrating and how those might actually benefit from more diversity and channel opportunity? Thanks..

Yeah. E-commerce is really still a small part of our business right now. And our focus is, first of all, to make sure we're available every place that the consumers may show up to buy the product. That's the first part of it.

Going forward, we think products like DenTek might naturally fit well with e-commerce and shoppers may look to that channel for the product. So, DenTek is a bit of a first step in that direction for us. But we think it will evolve for our channel slowly over time..

All right. Thanks, guys. Best of luck..

Sure. Thanks..

Thank you..

Thank you. And our next question comes from the line of Linda Bolton from B. Riley..

Hi. I was just curious, in terms of the organic growth guidance for FY 2017, the 1.5% to 2% growth, that's a little bit lower than what you achieved this year. Is that a reflection more of expected, maybe tightening of inventory levels at retail, or is that a result of expectation of slowdown of your actual POS growth? Thanks..

Yeah. The first impact on that when you compare it to this year's 2.8% to our outlook next year, is that our household business grew about 1% this year. We expect it to be flat to maybe slightly down next year, so that has an impact of about a half a point on total company organic growth.

And then as I mentioned in my comments, we expect a continuing headwind from retailer consolidation in fiscal 2017. So we baked some of that into the organic growth outlook as well, Linda..

Okay.

And then, just on the cash flow guidance, I know that you give the guidance in terms of adjusted free cash flow, but are there expected to be many cash related adjustments in FY 2017 affecting that number, or is that pretty close to the adjusted number you gave?.

Linda, if you look on the outlook schedule in the earnings release, you'll see the reconciliation and we put in an estimate of $3 million of cash cost related to it..

Okay, great. And then in terms of the slight gross margin decline in the quarter, I think year-over-year it was down slightly.

You may have talked about it, but what were the reasons for that and did that involve any type of higher promotional activity?.

Yeah, Linda, the primary driver is DenTek as I mentioned in my comments. The DenTek gross margin is below the Prestige average, although the EBITDA margins for DenTek are in line once we're fully integrated and synergized.

So, it's an opportunity for us as we look at DenTek going forward to once we get it integrated and leverage our synergies to move that more towards our average. But in the fourth quarter, it was impacted by DenTek..

Okay. And then, just in terms of your International business, I believe if the numbers bear it out that you had really good growth there I think in FY 2016.

Can you just maybe review again what went so well there and is that something that's going to slow down too a little bit in FY 2017 or do you expect there to be still lots of opportunity to drive very good growth there?.

Yeah. We continue to feel good about the International business, right. It's largely anchored around the Care business in Australia, which grew 10% or so in fiscal 2016 excluding the impact of FX. And it's largely driven off of the same formula that we're applying in North America, which is brand building, consumer insights and new products.

So our three big brands there Hydralyte, Fess and Murine continue to grow very well, as well as our business in the UK, now it's relatively small, but we've had some new products and expanded SKU offering at retail that's growing there and we expect those strong trends to continue into fiscal 2017 as well, Linda..

Great. Thank you very much..

Thank you..

Thank you..

Thank you. And our next question comes from the line of Joe Altobello from Raymond James..

Good morning. This is Krisztina on for Joe. I was just wondering if you could talk about what the biggest growth opportunities are for DenTek next year..

Really, Krisztina, for fiscal 2017, DenTek will first start by focusing on completing the integration, that's the first order of business at hand. Second is continuing to build out our marketing AMP and new product plans and executing against them in fiscal 2017.

So it's really getting control of the business and moving it forward under our traditional brand building approach. So that's what we're focused on for 2017 as well as setting the stage for long-term growth as well..

Okay.

And how much is it under distributed at this point?.

We feel we have distribution opportunities in club and dollar are probably the biggest opportunities at hand..

Okay.

And then just to transition a little, can you talk about your expectations for AMP next year?.

Yeah, Krisztina, as we mentioned in the comments, we expect it to grow consistent with the top-line growth of the AMP..

Okay. Great. Thank you so much..

Thank you..

Thank you. Our next question comes from the line of Kevin Ziets from Citi..

Hey, good morning. Thanks for taking my questions. First was just a follow-up on the advertising question. I guess moving into a heavier election cycle, I'm wondering if the staging of your advertising or maybe the forms of your advertising will be altered as forms get more expensive..

Kevin, we're not anticipating having to make any shifts in our advertising approaches in the fall. TV, although it plays a role in many of brands' marketing initiatives, it's not a big initiative for us with any one brand, so we don't anticipate being impacted by what goes on in the fall..

Okay, great. The one thing I didn't – I am not sure if I caught this 4Q core consumption number.

Is that sequentially on trend or up?.

It was up. We were about 5%, 5.5% in the third quarter. We had a particularly strong quarter for consumption in the fourth quarter..

Okay, great.

And then in terms of the e-commerce opportunity you mentioned, is that something you think you would – think you would do directly or do you think you would use – try to do more through your retail and, I guess, e-commerce pure play partners?.

Yeah. It would be a number of different approaches including partnering with the retailers as well..

Okay, great. And then I guess lastly just on acquisitions. I know you tend to be strategic and opportunistic but just wanted to think generally in terms of categories, would you entertain adjacent categories of I am thinking like maybe areas like vitamins and supplements and sports nutrition and things like that.

Are you likely to stay very close to the OTC core that you've had? And then just secondly, if you could comment on just how robust the pipeline of opportunities are right now that you're seeing versus historically?.

So, our M&A criteria has been consistent, we expect to continue to use it where we focus on brands that have strong connections and heritage with consumers, we look for brands that compete in categories or spaces that we can win in.

We look for brands with new product development and innovation opportunities and brands that will respond to increases in A&P. So, that's where we begin with, we don't necessarily target categories for M&A opportunities.

We really look for those attributes first and those attributes can be applicable to the VMS space, sports/nutrition and other categories that are close in to the OTC space. So, we would be open to adjacent categories but we still start with looking for brands that meet that criteria I just described..

Sure..

And then in terms of the ongoing opportunities we expect that the opportunities that will be consistent with the long-term trends that we've been seeing over the years. So, big pharma, we would anticipate will continue to sell, private equity has investments in this space and they come and go into the space and there is private sellers.

We've done deals with all of these types of sellers and we expect those opportunities to continue..

Okay. Thanks, Ron. That's great color..

Thank you, Kevin..

Thank you. And our next question comes from the line of Carla Casella from JPMorgan..

Hi. My question is related to – you talked about retailer consolidation.

Where would you say we're in that process in terms of just the magnitude of the impact you see today versus as we go forward in into 2017, is it getting better or worse?.

Yeah. I think so for fiscal 2016, we began to see some of the impact from the consolidation in dollar. We expect that to continue through fiscal 2017, and then the consolidation in the drug is, I believe, expected to happen late in the calendar year. So that will be a second half fiscal 2017.

So, as I mentioned during my remarks, it's a headwind that's been happening in fiscal 2016 and we expect it to continue into 2017 based on that..

Okay, great.

And then, on that the drug side, do you have better placement, would you say in Walgreens versus Rite Aid?.

We're pretty consistent across both banners and fairly strong in both. So, we don't see an opportunity or exposure in terms of SKU offering as a result of that..

Okay, great. Thank you..

Sure. Thanks, Carla..

Thank you. And that concludes our question-and-answer session for today. I'd like to turn the conference back over to Mr. Lombardi for any closing comments..

Okay. Thank you. And thanks everyone for joining us on today's call. Thank you..

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. Everyone. have a good day..