Newell Brands Inc. (NWL) Earnings Call Transcript & Summary

All right. If everyone could take their seats, we'll get started. Just one quick housekeeping reminder as this is the last presentation of the day. Just a reminder to take all of your stuff with you at the end of the presentation as the room will be locked and cleaned. And if you leave stuff, I go home with it. So... Okay. So next stop, and to close out the day, I'd like to welcome Newell Brands back to the CAGNY stage. Newell has undergone a lot of strategic change over the past few years, focusing on core businesses and improving operational results and cash flow. Ravi Saligram, who joined Newell as President and CEO just 4 months ago, will be presenting his vision for the company during his first appearance here at CAGNY. He's joined by a familiar face, Chris Peterson, Newell's Chief Financial Officer and President of Business Operations. With that, I'll pass it over to Ravi.

Thank you, [ Andrew ]. Good afternoon, everybody. Those words [Audio Gap] presentations were a bit prophetic. I asked Mark, the audio legend here, was there a significance in going last, and he said, "Well, we do save the best for the last." So let us see if that proves to be true. So I'm Ravi Saligram, CEO of Newell Brands, also sit on the Board of Church & Dwight, where I've been on that Board for 13 years. Last 4 months, exciting journey; 100-day listening tour, listening to customers, investors, employees. So clearly, know all the challenges we face. More importantly, we have a ton of opportunity ahead. I am very confident that with the team we are building, we're going to rebuild shareholder value for Newell Brands. So Nancy has a surgeon general's warning about forward-looking statements. Speaking of Nancy, happy birthday. So she's spending it with all of her friends. So some key messages that we want to get started with. Newell has a portfolio of iconic brands with leading market positions, a clear set of near-term priorities, but importantly, over the 4.5 months, the team and I have worked on a strategic road map for the future. Our turnaround plan, which Chris Peterson put in place, is on track and yielding good results, and we are making progress towards financial benchmarks. Chris shared with you some of the peer benchmarks, and he'll give you an update on that. Next slide. So companies change quite a bit. We've been selling things. And so I thought we should give you a quick snapshot. About $10 billion, give or take. 25 brands, and importantly, our brands penetrate 90% of U.S. households. Importantly, even the bathrooms here in this fancy hotel have Rubbermaid refuse bins. I've been taught, don't say garbage, say refuse. 15% of our sales are via e-commerce, and 1/3 of our sales are international. So here is some examples of some of our iconic brands, whether it's Graco and strollers, Calphalon pans, Oster, NUK, Mr. Coffee. Well-known brands; 25 brands accounting for 85% of our sales. And then, importantly, we are the leading brand, #1 or #2, in 46 categories, and these 46 categories account for 79% of our U.S. sales. And these are some examples that we've put up where we are #1, whether it's markers, highlighters, car seats, canning or containers, vacuum sealers and the like. So let's talk about our current portfolio. Some people are a tale of 2 cities, we're today a tale of 3 cities. First one, our strong businesses: Writing, Baby, Home Fragrance, Connected Home & Security, about 45% of our sales. Here, things are humming. Proven strategies, good execution, good innovation, and we are growing. The next set, let's call it, under repair. Food, which is Rubbermaid; storage, Sistema, et cetera. And then our Rubbermaid Commercial business. Those 2 businesses, about 1/4 of our sales. And there's a bit of a challenge here on Commercial because we have put it up for sale, but our teams have been very resilient and they're actually getting things going. We are refreshing the strategies, getting a good innovation pipeline going. I just came back from an innovation review. We're getting executional discipline. And most importantly, for these 2 businesses, we've brought in 2 Cracker Jack CEOs that I'll talk about later, they're really going to get these businesses going in the right direction. And then we have some challenges. Our 2 challenged businesses: Outdoor & Recreation and Appliances & Cookware. So take Appliances & Cookware. Even this is a tale of 2 cities. We've actually got some businesses within appliances that are growing. So like Mr. Coffee with some innovations they put out, it's actually doing well. Heating pans -- heating pads under Sunbeam, which is pain relief, is doing well. But things like blenders, slow cookers, where we've been out-innovated, are not doing well and they're a downward drag. Same with Outdoor & Recreation, some pressure from private brands. But also, we have sort of missed on some of the innovations. So that's about 1/3 of our business. So now let's go to our segments. If you look at our segments, it's sort of evenly balanced on sales, which is the left side. The operating income, though, is heavily biased towards our healthy businesses, which is a good thing. But think of the opportunity. If we only got right some of our troubled businesses that can really bode well. So now let's look at e-commerce. So my background has been -- I've done 2 transformations at OfficeMax and now at Ritchie Brothers. And so this is a subject near and dear to me, and we've done quite well. So 15% of our sales is through online. And you heard from some of the others today in CPG, even the giants are about 9%, 10%. So we're doing a pretty good job here. Now that's skewed, obviously, our Baby business, it's about 60% U.S. is on the Baby side. But there's tremendous opportunity in some of the other sides like Connected Home and Writing and Food. We can really -- if we just get to our own benchmark, there's a lot of opportunity. And we're going to do just that as we become a digital-first organization. But just think about that 15%. We're already $1.5 billion in online sales, which is a good thing. Now international. Having lived in 6 countries, worked in 50, so this is -- and have been president of international twice. This is a pretty interesting opportunity. 1/3 of our business is in international outside the U.S., varies by business. And the interesting thing is 10 drive countries account for 90% of our sales in international. So they are concentrated, and this is what we've got to do. But they've been very fragmented. We've got different offices for different people. They've not been very connected. So if we can only get the synergies and create some depth in these markets, I think that's a good opportunity. And there a couple of other encouraging things. EMEA is about 40% of our international business, over $1 billion. And the interesting thing. LatAm actually grew in 2019, not only overall, but in Appliances & Cookware. So did Japan and Asia Pacific, in Outdoor. So it shows that even in our troubled businesses in certain geographies, we have cracked the code. In Japan, and I was over there and met with the teams, for 2 decades they've grown the business on the back of Coleman, which is positioned as a premium brand, and they've been innovating and understanding the consumer. And in Latin America, on Oster, they've really done a great job getting it as a premium brand. So good opportunity here in international. But our immediate priority in 2020 is really fixing the U.S. This is more of a long-term opportunity, and we are not throwing ourselves headlong, but there are opportunities to improve profitability in places like the U.K. and so on. So this is going to be a good thing. And Chris will show you some numbers that last year, we declined in international, but in 2019, we turned it around and actually grew modest single digits. So next, where are we going to go from here? So if we think about a time frame, 2019, Chris came out with a turnaround plan and initiated it. I came on, looked at it and said, "That's very sensible. No need to change. Let's build on it." But 2020 is the year where our turnaround plan really takes off, takes hold and we build the foundations, and 2021 and onwards for the next several years after that is when we can start delivering on our potential. And how will we do that? We're going to be addressing 5 key issues: first, we're going to restore growth; second, reduce complexity; third, reduce overheads; fourth, optimize our organizational structure to drive better execution; and then create a winning culture. The complexity and the overheads will help us drive up operating margins. So let me talk about org structure a bit before I move on. Org structure with Newell Brands, historically, we've either operated on 2 different spectrums, either we are very centralized or very decentralized. So centralized, too much bureaucracy; decentralized, Commonwealth of Independent States. We never seem to get a dimmer switch and say, "Hey, there is actually a hybrid model in between." And I think it's very important with the diversity of products and brands and categories that we have that we do find a hybrid structure. And we're doing just that. And the focus is we're going to create business units, which we already have in place, that are going to have domain expertise, will be the front-leaning organizations to understand consumers and go after the customer and drive innovation and really become experts in those businesses. On the other hand, we're not going to act like 8 businesses, which are $1 billion-plus, and be a Commonwealth of Independent States. We need to leverage the efficiencies, the enterprise so that we can fuel these business units forward, and we're doing just that. So let's talk about 2019. So we initiated the plan, enhanced the digital strategy, completed our divestiture program, initiated complexity reduction and improved cash generation. Chris will give you details on each of these, and he has really got this off to a great start. So let's go to 2020. The vision here is, first and foremost, I'm a big believer that if you need to win, you've got to have a great team. It's all about people, all about great talent. Because once you get great talent, they will galvanize the organization to really go after driving shareholder value. We've got to turnaround the challenged businesses. And then we've got this issue called tail categories where we have 100 brands and just appliances alone has like 36 categories, and a lot of them have a downdraft because for 10 years, maybe more, we've not really paid attention to small categories. But we're in a business that needs news. So there, you need -- even if it's a minor innovation, whether it's a packaging refresh, you need to do something, otherwise that downward draft will go on and on and you can never get above it. And so we're going to be addressing this. We'll show some examples of that. Next, we are creating an initiative, a massive productivity project called FUEL. And I'll talk about that momentarily. Complexity. This is really about reducing SKUs. When we started out, we had some 100,000 SKUs. We have been reducing them. We need to go more and more and more. We just can't have SKUs like it's nobody's business. Chris has done a great job getting the teams on it. Working capital improvement and debt reduction. Now it's interesting, Chris and I are both cash flow junkies. We really review our cash flow. I was in Aramark under Joe Neubauer and said, "Hey, we learned. Cash is king." And this year, $1 billion in operating cash flow. I mean that is something else. And if my dear friend Matt Farrell was here. I'd say, Matt, you showed that, for us, you showed free cash flow conversion from 2018 of 25%, please use 2019 numbers, will you? Chris will show you 108%, folks. So I don't want you to remember that number. It's 108%. So we're on our way on that and reducing a lot of debt. Okay, 2021. Got to return to growth from that time on. Now this is not guidance for 2021. But this is sort of 3, 4 years. How are we going to do it? Return to growth; get some momentum in international; get a winning culture, where everyone really wants to go after the consumer, grow the company, profitable growth, innovation, customer collaboration and flawless execution becomes part of our DNA; market-leading cash flow productivity, over 100%; and deleveraging, important. I went and met investors, they say, "Saligram, Peterson, please get that debt down." We heard you. We want to get to 3x long term, and we're going to do it. So how are we going to win? Look, I started my career in advertising so I love mnemonic devices. So came up with these 5 Cs, the 5 Cs for the new Newell. First, a culture of winning. Got to bring in A players for domain expertise. Domain expertise. The reason I stressed it, it was sort of ignored in the past saying anyone can do anything. No, we can't. We really need, when Outdoor, bring a guy who really understands and has a passion for the outdoors. And this is a company which had a lot of silos, management and use. We can't have that. The key to success is teamwork and collaboration. Second, consumer first. We've got to dream every night, every day, it's all about the consumer, 360-degree journey of the consumer, spotting trends, being ahead of trends and really saying, hey, we worship the consumer. But just the consumer without customer collaboration doesn't work. You've got to get the customer to be your partner. We've got to be their partners. We've got to be recognized by them. At one point when in Rubbermaid in 1994, most admired company in America, spewing out innovation. But also, I just saw a letter that had come from Walmart from Sam Walton and stuff from Sam's got saying, "Hey, love what you're doing, Rubbermaid." We need to get back to that when top CEOs are writing and saying, "You're adding value to us." So whether that's on customer service, whether that's on OTIF, we've got to be really in with the customer, planning innovations, getting them to be true partners with us. Channel management. Threefold. One, we've got to say omnichannel. Everyone we've got to be thinking it's not just brick-and-mortar. It's also online, but the combination thereof how do we drive omnichannel so that we're ubiquitous. Second, we've got to make sure that our [ college ] brands, especially the premium ones, we've got to be very careful. Where do you put them? Don't put a very premium brand in a discount chain and then expect some premium channel to say, "Hey, you're a mass market thing." So we've got to be very careful about how we manage channels. And third, we've got a lot of distribution opportunities, and I'll come to that. The fifth C is about continuous improvement and innovation. Supply chain productivity, which I'll talk about in a second, and then on innovation, I've got 5 or 6 points I want to dwell on, which I'll come to in a second. So now let's move to how do we get to a consumer first approach. When I first joined here and talked to my colleagues and said, "Oh, my God. Look at all these disparate businesses. What is the connection? What's the tie that binds? How do we create a noble purpose for this organization?" And I found the answers really with our people below. Because many of them said, "Look, we sell affordable indulgences." Just think about it, a Graco stroller or a Baby Jogger, which is above the market price on an average price and people want to pay a premium. Why? Because it's either fashionable. The functional efficacy is better. So in that moment, we are providing a moment of happiness or enjoy, okay? We're not the cure for cancer. We are not having grandiose illusions about what we are. But at that moment, we are providing a moment of happiness, a moment of joy so we need to get the best quality. And really, our people need to feel coursing through their veins that we never disappoint and always fulfill promises. But that ethos has been lost a bit because the company has become very internally focused, because everyone is worrying about when will the next Q4? What is going to happen? Are we going to sell this business? Are we going to jettison some more people? What we need is get people to say, "Hey, externally focused," and this never disappoint, fulfilled promises. And for that, we need some enterprise capabilities. We've got to be nimble. We've got to be agile. We've got to be quick. We've got to be collaborative. So with that, how are we going to do it? To galvanize these people, brought in 4 senior executives. Steve Parsons, who is my CHRO at OfficeMax, great guy, great talent magnet. And then went on to Stage Stores and Z Capital, joined me 4 months ago, just a week after I did. And he's helping with all the talent. Kris Malkoski, 14 years at P&G, started her own company, and then she went -- ran Craftsman, et cetera; World Kitchen, track record of innovation; and then most recently at Arc. She will get on to the Food business, you just started last week. Already, she's having an impact. She'll be amazing. Mike McDermott, had a $70 billion business at Lowe's, was Chief Merchant and had all the marketing, was Chief Customer Officer. He'll be terrific because understands that whole building side of homebuilding, et cetera, but understands contractors. He was Head of Sales at GE Appliances and product innovation there. So he will be great for that B2B business for our Rubbermaid Commercial. And today, this morning, we just announced Jim Pisani, our CEO of our Outdoor business, a true outdoor enthusiast. He was in charge -- or he's in charge right now, Global Brand President for Timberland and has done a lot over the last 3 years to rejuvenate this at VF. And prior to this, he was President of Licensed Sports for VF, which he turned around and then cut his teeth as VP of Business Development at PepsiCo. So 4 great new hires joining the team that will help us. And then I would be remiss if I didn't talk about my partner in crime Chris Peterson. Chris has done a great job as CFO, did a nice job as Interim CEO. And with all his expertise, I said, "Chris, you've got to do more, buddy." So he is going to be our President of Business Operations. What does that mean? He's going to be our Chief Complexity Reduction Officer and try to reduce complexity everywhere and be our cash flow guru. So how will we reignite sales growth? Number one, innovation. So what do we need to do on innovation? Number one, we've got to, first, have an external focus, do a lot of social listening, go to Pinterest, go to Instagram, go to Facebook. See what consumers are saying, listen to them carefully, understand where the trends are, again, get ahead of it. Do store checks every night, which is what I do. That's what I did on Valentine's Day because my wife was away. I spent 3 hours in Bed Bath & Beyond. Learned so much. So that is so important. So at least, you'll be happy. My wife knows I was safe. So second, we've really got to do innovations that matter to consumers, not manufacture outsider -- outside in to say, "Oh, okay, we can add this widget or add this feature." No, meet a consumer need. And then we've got to play in our price points. You can't have Mr. Coffee, which is $19.99 to $29.99, say, okay, we'll do $129. You don't have permission to do that. You haven't earned the right. So play in your zone but come up with great value. So there's a lot of things we are doing on innovation to get this. And then we've got to get the collaboration between R&D, marketing, our design center, et cetera, at a new level. And then one thing that I find very missing in our company, and having come from technology backgrounds recently, we've just missed the Internet of Things. There is so much we can do on IoT and also combining technologies, whether it's for Dynamo, whether it's for our connected homes, et cetera. So innovation will be a big hallmark. I already talked about customer collaboration. U.S., we have a lot of distribution gaps in terms of grocery, dollar, and so we're going to create a specialty team to go after that on an enterprise-wide level. And we already talked about e-commerce, and we're going to continue to build our social marketing skills. And international, it's really drive countries and selected categories. Next. So let me now turn to some of the innovations, because the 4 businesses where things are going well, we've actually done a great job. Laurel Hurd, our Group President and her team have really identified something amazing. So we are the leader in writing. But in pens, which is a $1 billion category in the U.S. and outside the U.S., it's even bigger, that we've really not taken our leading brand Sharpie. Everyone knows Sharpie, even the President. So no political comment meant there. So Sharpie, they're coming after the pen and in 3 points, 3 colors. And this -- the performance of this is amazing. So you'll all get your Sharpies. Please don't leave those behind. I might steal them. So love this stuff. This is going to be just great. And it's not just Sharpie alone. This -- we are calling it the year of the pen. Paper Mate Write Bros., one of the original ballpoint entry point. We've completely reengineered it and we're relaunching it. That will be great. Paper Mate Profile. That's going to come out in ballpoint profile, profile gel, and then Sharpie comes in a roller as well. So great year of the pen, lot of high expectations. And then, FoodSaver. This a little mini one. Those of you, if you are coffee connoisseurs, try it with coffee beans. And there's a great way to vacuum seal this. Very little thing. It's, I think, $29.99. So very easy to use. Amazing thing about this is it can help grow the category because the traditional vacuum, seeing this, it's limited, right? So this is going to help grow the category. Very excited about this. Next is Graco Modes Nest. Great innovation from that team, understanding the bond between mother and child. Adjustable height so that you can get closer to the kid. And then for all of you romantics, unlike me who spent it at Bed Bath & Beyond on Friday on Valentine's Day. Those of you who were on the porch, you could have just bought WoodWick's outdoor candles. So this is a beautiful ceramic jar, just look at that. And then when you are done, you don't need to worry about being environmentally unfriendly. You can just make it into a planter. So that's -- and then here is across the whole portfolio. We have many little innovations, little news, whether it's a NUK bottle where you can check the temperature; a ball [ jar ] which is like a champagne flute; those tents where water won't leak in; or that Calphalon lid, which milk won't boil over; so -- and those beautiful refuse bins, et cetera; or that diffuser from Yankee Candle. So you can see, we are now working on bringing some news. So with that, let me talk about one last program, which we call FUEL. FUEL is really about fueling unleveraged, untapped efficiencies and leverage. This is really about productivity programs that we want to drive throughout the company and make this into a huge 5-year marathon initiative to get our gross margins up, whether it's product reengineering, whether it is about our program, which we call PEAK, which is like Lean Six Sigma. We've got transformational projects in our operations with cobots and robots, all sorts of great stuff that Dennis Senovich in Supply Chain and Steve Nik in Procurement, with Steve, with Chris are going to really drive forward. So let me end here by saying that we are on an exciting journey. I am confident that the new Newell will really get back on track. Today, you may just give us the Most Improved Award, but we are really very committed, my team and I, to get shareholder value up. We are going to build -- we are building a winning team. We're going to restart that growth engine, and we're going to be aggressively focused on cash, margin and debt reduction. With that, to my dear friend and cash flow guru, Chris Peterson. Thank you.

Thanks, Ravi, and good afternoon, everybody. It's great to be back at CAGNY and see so many familiar faces. As Ravi mentioned, about a year ago, we pivoted from transformation to turnaround and we've put in place a turnaround plan to organize our efforts. The turnaround plan is focused on 5 key strategies: the first is to focus or is to strengthen the company's portfolio of brands and categories in which we compete; second, we wanted to return the company to sustainable, profitable core sales growth; third, improve operating margins, focused on both gross margin and overhead reduction as the opportunity to do that; we wanted to dramatically improve the company's cash efficiency, focusing on working capital transformation; and build a winning team. I wanted to spend a few minutes talking about the progress we've made in 2019. And the momentum plans we have going forward as we move into 2020. So in December, we completed the sale of The U.S. Playing Card Company, which ended the 2-year divestiture program that the company had initiated a couple of years ago. Importantly, during 2019, we made the strategic decision to keep the commercial business, which includes Rubbermaid commercial products Mapa/Spontex and Quickie. And the reason we decided to keep those businesses is because keeping those businesses was accretive to sales. It was accretive to operating margin. It was accretive to earnings per share and it was accretive to cash flow. And those businesses are competitively advantaged businesses, which we'll talk a little bit about later. In total, the divestiture program generated over $6 billion in after-tax proceeds and allowed the company to significantly strengthen the balance sheet. During 2019, we made significant progress accelerating the company's rate of core sales growth. In 2018, 1 of the 8 businesses of the company grew core sales. In 2019, 4 of the company's businesses generated core sales growth. And when you look at the company in total, we accelerated the rate of core sales growth by 330 basis points during 2019 from minus 5.2% in '18 to minus 1.9% in 2019, and we're guiding to continue to accelerate the rate of progress as we go into 2020. We turned -- as Ravi mentioned, we turned the international business from a low single-digit rate of decline in 2018 to a 2.9% growth in 2019, and importantly, we drove growth in every geographic region of the world. We also are building from a strength in e-commerce, but we pivoted and made significant transformation in our e-commerce and digital marketing efforts. We initiated a complete redesign of our digital technology platform, which is well underway. We rationalized our brand and direct-to-consumer websites. In the U.S. alone, a year ago, we had 290 websites, which is insanity. We rationalized and are down to 42 today. And the way we went through that exercise, which we looked at websites, whether they be direct-to-consumer sites or marketing sites that offer a unique consumer proposition. And those were the ones we prioritized. We began to get focused on social and influencer marketing capability, quadrupling our investment in that area. We've made good progress, although there's still more work to do here. And we enhanced omnichannel marketing. What was the result? In 2019, we grew the company's e-commerce business double digits compared to a low single-digit rate of growth in 2018. So almost a 10-point acceleration in the rate of growth in the company's e-commerce business in '19. And we expect that trend to continue going forward. Last year, on this stage, I shared that I thought looking at the benchmarks, we had a 200 to 300 basis point opportunity in gross margin going forward over the medium to long term. And I shared a set of actions that we were focused on putting in place, including pricing and mix management, driving gross productivity savings, plant and distribution center network optimization, SKU complexity reduction, forecast accuracy improvement and driving accretive margin through our new innovations. Although in 2019 we took a slight step backward because of the foreign exchange, tariff and commodities impact, we made significant progress on a number of these initiatives and I'm very confident that we're going to make progress going forward at closing this gap. What gives me the confidence? If you look at our productivity funnel that as we stand here today for 2020 compared to where we were a year ago for 2019, our productivity funnel for gross margin productivity projects is up 50% in dollar terms versus where we were a year ago. SKU complexity reduction is a big opportunity for the company. Last year, I said that we had 90,000 SKUs at the end of 2018. And I think I reported that we had 90,000 SKUs, and it took us actually a couple of months to figure out how many we had because nobody had ever counted it before. The decision to keep the commercial business reset that base to 102,000 at the end of '18. But importantly, look what we were able to accomplish in 2019. We reduced the company's SKU count by 28,000 SKUs in 2019 or 27%. And if you look at our active SKUs, the reduction was even higher at a 33% reduction. Importantly, we were able to do this without impacting the rate of core sales growth of the company. We accelerated core sales growth at the same time we reduced SKUs. And that's because the way we're going about SKU count reduction is by pursuing low-risk opportunities like multilingual packaging, rationalization of variety packs, customer-specific packs and a focus on reducing excess and obsolete inventory. We expect to get to less than 50,000 SKUs by the end of 2021. This is a year later than what I shared last year because we're getting a little bit later start on the commercial business since we just made the decision to keep that business a few quarters ago. We're also focused on improving forecast accuracy at the SKU level. Forecast accuracy at the SKU level is important because it allows you to take inventory levels down and improve customer service. When we started this journey, we were at 36%, which is not very good, in 2018. We invested in a team of people and started to invest behind machine learning, started to invest behind artificial intelligence and started to invest in new technology and dedicated teams and a reinvigorated focus on what we call the S&OP process. In 2019, we improved our forecast accuracy by 610 basis points, which is a very good start on our way to a goal of 60%, which we expect to achieve over the next several years. We also talked last year about overhead cost. I shared that I thought last year we had a 400 to 500 basis point opportunity in terms of overhead cost reduction. And the good news is we've made big progress in 2019. We reduced our overhead cost by $185 million and we reduced our overhead as a percent of sales by over 200 basis points in 2019. We still have significant opportunity ahead of us in this area. And to go after it, we're focused on IT systems rationalization, broader rollout of global business services, driving savings through procurement, real estate and legal entity consolidation. As an example, in 2019, we made significant progress on the IT systems and infrastructure consolidation. We completed 4 SAP implementations. We consolidated 16 data centers into a single private cloud. We consolidated 24 help desks into a single platform, and we rationalized more than 2,700 IT business apps, if you will, bringing our number at the end of 2019, down to about 1,000. So it was a significant reduction in applications across the enterprise. On our real estate footprint, we were able to reduce office space or close office space in 21 locations around the world, and we have a plan to continue that journey going forward. We also moved the company's headquarters from Hoboken back to Atlanta to reunite the executive team with the corporate employees who work and live in Atlanta. Operating margin, we made big improvement during the year. Last year, when I stood here, I reported that the operating margin of the company was 9.1%. And in the quarter, we just reported last week, the operating margin is 10.8%. We grew the operating margin by 170 basis points. At the same time as making progress on the top line. That was a function of 2 things. The decision to keep the commercial business, which is the strategically advantaged business from a competitive standpoint, resulted in a mix benefit of 120 basis points, and the work that we did on gross margin improvement and overhead reduction resulted in a like-for-like operating margin improvement of 50 basis points. Cash was the stellar performance in 2019. We generated over $1 billion in operating cash flow, which was a 50%-plus improvement versus the prior year. We more than doubled free cash flow productivity. Newell delivered free cash flow productivity above 100% for the first time in recent history. And if you look today at the company's free cash flow generation capability, our free cash flow yield as a company is close to 10%, which I think it puts us among the highest in the industry. How did we do it? We got focused on working capital reduction. I mentioned last year that we had done a benchmarking study and I think I reported our cash conversion cycle was 115 days. And at last year on the stage, I said I think that puts us as the worst of any company I could find. And I said the benchmark, looking at a mix of our competitive set was 70 days, and I said we were going to make progress. And we did. How did we do it? We got focused on improving our days payables. We put a concerted effort at renegotiating payment terms with our strategic suppliers. We made aggressive -- took aggressive action against tail suppliers. The work we did on SKU count reduction, forecast accuracy improvement and reducing excess and obsolete inventory made a big difference in terms of our days of inventory on hand and we were able to make progress on accounts receivable through process improvements and resolving deductions faster. The net result is we ended 2019 with a 17-day improvement in our cash conversion cycle. And importantly, we see significant opportunities still ahead of us on this metric as we go forward. We used the strong cash flow that we generated, coupled with the divestiture proceeds, to significantly strengthen the company's balance sheet. So we ended the year having reduced net debt by over $1 billion, by about $1.1 billion, and having a net debt to continuing operations EBITDA leverage ratio of 4.0x, which is a meaningful improvement versus the prior year. Going forward, we've set a target of continuing to drive cash flow and getting the net debt-to-EBITDA leverage ratio down to 3.0x over the next several years based on the cash opportunity we see ahead of us. Based on the -- where we are today, we are setting a set of long-term aspirational targets that we are shooting for. And we wanted to share those with you today. These are not annual targets. Instead, these are targets that we're looking to get to on average over the medium to long term. And as we look at these targets, we're making -- we've made significant progress toward these goals in 2019 and we're guiding to make additional progress in 2020. The goals that we've set for ourselves is to return the company to low single-digit core sales growth, Which represents core sales growth that's slightly ahead of our market growth rate when you look at the categories we're in, in a geographically weighted basis. We expect to generate operating margin improvement of 50 basis points per year on average, given the opportunity we have on gross margin productivity and on overhead reduction still ahead of us. And based on the results that we've had on cash and the visibility that we have going forward, we've set an objective of delivering free cash flow productivity above 100% every year for the next several years and returning the company to a net debt-to-EBITDA leverage ratio of 3x. As I mentioned, these are not our goals for 2020, but we do in 2020 expect to make another year of sequential progress toward these goals as we did in 2019. So I'll close on this slide, which is how I think about Newell today. Newell is a company that has strong brands with leading positions in growing categories. We've made very strong progress on the turnaround that we put in place, which is clearly yielding results, and we expect sequential progress in 2020. We've got a clear road map established to restore growth potential of the company. As Ravi mentioned, we've formalized project FUEL to drive additional productivity savings, which should enable us to both reinvest in the business and growing the top line and drive margin improvement at the same time. We continue to have a dramatic working capital improvement opportunity ahead of us. We've made good progress in 2019, but the opportunity, I think, is as much ahead of us is what we've generated in 2019. And we expect to deploy excess cash to strengthening the balance sheet going forward. So with that, we'll open for questions.

[ Catherine ]?

Bill. Oh, sorry. Go ahead. We'll get to you, Bill, after this.

So very intrigued with the turnaround. The -- you mentioned you added 4 members to your leadership team. Do you think -- you also, at a Board level, think that you can lead, not lag? That's my first question. My second question is on financial discipline, and this predates you. Because so much shareholder value was destroyed through M&A, are you willing to put a line in the sand today and say it makes no sense for Newell to do acquisitions for X years? Or can you give us your thoughts around financial discipline around that? Those are my 2 questions.

Okay. And on the first question, before you take the mic away. I just wanted a clarification. You want to understand about the Board composition or -- sorry.

Yes. So oftentimes, when there's been significant disappointment in an investment, a stock, there's management change but there's also change at a Board level.

Got it. Okay. Yeah. Look, I think we have a pretty new Board. And the Board has come together in the last year. With the exception of potential retirements, there's -- we have a good Board with different skill sets. They're all very committed to the turnaround and they're committed to bringing in the right new management. And so I'm very happy with the Board. I think they're going to be supportive and good challenges and hold us accountable. So I don't think that -- in fact, they're the ones giving us permission to move forward. On your second question, and then I'll also have Chris add to it, here's my view. Any sort of transformational acquisition, and you always have to be leary when people say transformational acquisition, is, to me, at this stage, out of the question because we really need to consolidate what we have. And we've got plenty of brands, we've got plenty of room. That doesn't mean that tuck-ins or bolt-ons in certain categories where we're very, very strong, so say, 2, 3 years from now in a certain geography something comes up in a particular category that enhances our leadership and our global leadership and it's a small acquisition, we would contemplate that. But anything which is major and definitely anything that was like the one done recently, in my opinion and under my leadership, I don't anticipate that.

Bill.