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

Good afternoon and good evening everyone. I'm Steve Powers, Deutsche Bank's lead U.S. consumer packaged goods analyst. And today, I'm thrilled to welcome Newell Brands back to the conference, a company that has been undergoing a lot of exciting change over the past year, embarking on a far more simplified and cash-focused strategy under new leadership. And joining us from that management team, to talk about that strategy, are CEO, Ravi Saligram; and CFO, Chris Peterson. Welcome to the conference, guys. Next year, we are excited to get you actually to Paris, but thanks for being here nonetheless. As we've been doing all day today, we're going to run this session entirely as Q&A. If you're listening into the session via the conference portal, please feel free to submit questions of your own at the bottom left-hand side of your screen. And I'll do my best to work them in as we go. But with that, welcome again, guys. And let me just open it up with a very general question on the current state of play.

Ravi, maybe just ground us on where you were exiting the first quarter. You unveiled a lot of very important information at CAGNY, just as the world changed on all of us. So maybe just any -- just ground us in what -- where you were when this all began, and to the extent you're able, any updates that have transpired since?

Steve, thank you for having us. And yes, we would all have preferred to have been in Paris, but glad we're still able to connect. So let me make my comments based on our latest standings from the first quarter earnings call, where we had signaled that we have a very challenging quarter in Q2. And we feel that as we have progressed now through April and May, that things are better than what we had thought and improving. Still not too bright, and we think though that the better performance than we had expected or signaled bodes well for an improved recovery in the second half. And I will frame that in 3 ways. Based on the call, we talked about 3 components that affected our performance: consumer demand; our supply; and then distribution and customers. So let me start with the consumer things. The good news is that POS, as a whole for Newell, has been up 6 weeks in a row, 6 consecutive weeks. Our POS has been up and meaningful. So that's a positive. Our online penetration is doing extremely well. I think, on the call, we had said that on a POS basis, we have -- on end of Q1, we were at about 30%. But year-to-date, we're 36%, almost up 1,000 bps versus prior year. And then if you dissect April and May, it's even higher. So that's the online penetration and online growth, whether it's on retail.coms or on Amazon, is all positive and double digits and a source of strength. So that is something we're very happy about. For us, our businesses are up on POS over the last 4 to 6 weeks. Food, which has been a rocket ship, our commercial business. So those 2 have really done very well. And the pleasant surprise for us has been Appliances & Cookware that, for now, 8 weeks in a row has been -- the POS has been up, and Baby bouncing up. So that's sort of the positive side of the ledger. The businesses that are truly struggling right now still are O&R, though it had its first week of POS growth last week, and then Writing, which even though it's an extremely well-led and well-managed business, the external forces of staying at home, schools and colleges being shut down, that has been a challenge. However, because of the year of the pen and the launch of Sharpie S-Gel, our market share in the pen category has actually gone up rather well, I must say. So that bodes well. So I think the Connected Homes, that has been a challenge of supply, with the Juárez plant having been closed. So that has been a tough one for us. And Yankee Candle, our Home Fragrance, where we are actually in distribution, we continuously see dramatic POS growth, but it's been affected by closures of specialty stores and our own retail business. So that gives you the consumer demand picture. The next one is on supply. Supply, we were struggling with like the EFL plant for Yankee, had been closed as has been the DC. We've just opened it back up. And Juárez is opening up for our Connected Home business. Mexicali, where we were having some issues there with the plant closure, that's opened up. So pretty much now 100% of our plants are up and running, but they still need to ramp up and we have got to build capacity. So that's the second point. The last point is distribution. Clearly still, along the specialty stores, are still -- they're just in the process of opening up. And we are now doing store pickups for Home Fragrance for the Yankee Candle stores. That has been a limiting factor. And then, of course, internationally, that in Latin America in particular, they have been in lockdown as we saw. So that's sort of the ledger on the whole, better than what we thought. POS is growing very fast, but sales and shipments still not at the level of POS, a lot of catching up to do, but getting better. So that's sort of the big report. And I would lastly say one other thing. Good news on -- we have -- the leadership team has really come along well. This morning, we announced internally that we have made a leadership change in the Appliances & Cookware business. I'm delighted to announce that Christine Robins, Chris Robins, has -- will join us next week as the CEO of the Appliances business, a 3-time turnaround CEO, ran Char-Broil most recently and drove growth there, was -- launched the wearables category, which was bought by Jawbone, was CEO of Philips Sonicare. So -- and 22 years at SC Johnson. So great consumer-focused turnaround person, driver of innovation. And I think she will bring what that business needs, which is innovation. So the BU CEO changes are more or less completed. So we've got a leadership team raring to go.

Okay. Well, that was -- you give me a lot to work with in terms of where to go from here. I guess maybe we'll start, right, where you finished off on the leadership changes because this is the sort of the culmination of a lot of key hires that you've brought onboard and integrated over the last, say, call it, 6 months, which is quite a time to be changing leaders and refreshing the executive suite. So can you talk a bit about how that has gone and whether that has created an additional challenge as you moved through the last few months? Or has that, in some ways, been a positive that everyone's coming at things with fresh thinking and new energy?

Without any sense of hyperbole or exaggeration, on that point, that's -- it has gone wildly better than my expectations. We have truly topnotch executives, people-centric leaders, very consumer-focused and have had big jobs and are very experienced with good domain expertise. And the most important thing is there are no turf loss, we are all aligned and unified. And that has had -- and the caring that this team has shown for our people, during COVID in particular, has certainly unified the company. Our cultural issues which were many in the past, innate bonds, we do not look at our culture any longer as a problem or liability. In fact, I would now say it's a tailwind. We have galvanized the organization. The productivity and how our people have worked through this time, even sheltered at home, is extraordinary, the collaboration and the spirit, so I'm very pleased with that. The second thing about this team is that they don't have any sacred cows and they are -- their focus is consumer, customer and blending and driving results and growing the business, the brands and the people. So I'm very pleased, and with Chris joining in, these are all people who are going to be innovators, which long term, serves us well. So I would say that -- one might say, wow, you're making all these changes, is that a distraction. I would say, no, that's an attraction because -- and our people have taken up to our leaders, and we're coming together very well. And we're, in fact, accelerating our initiatives. So whether it is the journey of reducing complexity and with -- whether it's SKU reduction or the Project FUEL we talked about, capitalizing our brand equity to drive top line, driving the e-commerce initiatives, all of those are well underway. And we're all here, and it's interesting, Kris Malkoski, who joined us just 4 months ago, I think. And at 2 months, I think she was 6 weeks, sort of meeting with people and then she had to shelter from home. But the extraordinary job she has done or Mike McDermott has done, or Mike Hayes, my Chief Customer Officer has done, inducting themselves into the organization, making connections to people, is just fantastic. Kris and I went, Kris Malkoski and I went and toured 3 of our -- 2 factories and a DC yesterday, and the warmth with which people greeted us was just very moving. So I think we're -- the leadership team is going to be one of our most significant advantages going forward.

That's great to hear. As you framed these early, maybe success is too strong a word, but I think they are successes relative to when we last heard an update. You think about the -- where we go into the back half and beyond. It seems, listening to you, that the distribution points that you mentioned is a key, kind of a wildcard factor. How are you thinking about the pacing of retail outlets opening up in the U.S., first; Latin America, the trajectory of that market, second? And then, I guess, all of that's in the context of how you're thinking about the prospects for economic fallout from what we're going through now, depth and duration of any kind of recessionary overlays on just reopening. Just how are you thinking about all of that in the context of distribution opening up?

Yes. I'll do a piece of that, and I'll see if Chris wants to add anything to that. So the first piece is, clearly, the specialty stores, which are important for us, especially in like our Home Fragrance business or in our office products or writing business, those are clearly are very important and does have an impact. We're beginning to see them opening up. And so we hope that as summer progresses, that will improve. At the same time, we're doing 3 things. With our big customers in terms of the mainstream mass merchants, we're continuing to see great POS increases. We're working hard to improve our fill rates for them and working on joint business plans. So that is going to be a positive for us. The second is Mike Hayes, with the sales leaders, is really pushing on an initiative to get into new distribution, such as the dollar stores, the grocery stores, et cetera, improving and increasing our distribution there. So that should help us a bit. So -- and third, we're continuing to drive online. And Home Fragrance, for instance, also is looking on direct-to-consumer, and we're making the improvements on both the shipping times and the cost structure there. And we're doing that in Latin America as well. So that in places like Chile, Peru, Brazil, et cetera, our direct-to-consumer business has really helped during the time of store closures. So taking advantage of our online capabilities. But clearly, those ramping up will be important, and we'll have to see. But it's beginning to open up and we're encouraged. Chris, anything you want to add there?

Yes. Well, I guess what I would add is maybe on the economic fallout and the recession point of the question. When we started on the pandemic, we prioritized 3 things: the health and safety of our employees; the -- keeping our manufacturing and distribution centers open; and then -- and strengthening the liquidity of the company. And I think we've done a very strong job against all 3 of those. About 1.5 months ago, as we felt like we had really gotten ahead of those things, we really pivoted from a management focus, to accelerating our turnaround plan and trying to drive the turnaround plan faster than what we were previously planning as a result of our view that we were likely headed into a recessionary environment. And so Ravi mentioned a number of these, but we believe we're going to be able to drive SKU count reduction faster than what we previously were planning. We're focused on driving our gross margin productivity through the FUEL program even faster. We're taking an aggressive look at -- from a zero-based standpoint of our overhead cost, and we think we're going to make more progress on overhead reduction than what we were previously planning. And we're focused on working capital transformation. And we think all of those things that we are now focused on driving with speed are going to position us well for the economic environment that we anticipate seeing over the next year to 2. The only other point I would mention is we did also go back and look at what happened during the last recession in 2008. And the good news is, generally, in most of the businesses that we have, we gained market share during that time period because many of our brands are price-positioned at the opening price point or the middle price point of the categories in which we compete, and we tend to have market-leading share positions. And so we believe that we're well positioned to handle a recessionary environment. And we are taking aggressive action to accelerate the turnaround plan, to strengthen our ability to thrive in the environment that could present itself to us over the next year or 2.

As I listen to you, it sounds -- I guess the follow-up question I have is you framed that acceleration of complexity reduction with just structural improvements and productivity improvements as a reaction and almost a defensive mechanism. But as I think about it, what you've done is you've accelerated a lot of the levers, it sounds like, that you were going to need to, using your words from before all this, kind of deliver the potential in 2021-plus. So is that a fair way to think about it, that these changes can prove structural, and that when and if -- or if and when the economy turns out better or turns around, you will be in that much better position to realize the benefits of acceleration?

Yes. Let me just give a quick view on that. When the management team, when we faced COVID, clearly, our priority was to keep our people safe and so on, which we have done a tremendous job of. But all the things that we have laid out on the turnaround plan made complete sense, and our view was we've just got to do it faster. And for instance, as many are faced with supply challenges, our first thing was let's focus on A and B SKUs. And when you focus on A and B SKUs, that also is a test for the organization. So we have more coming in that share, but why do we need all these other SKUs? So Chris and I, in this firmly believe, the root of many of our evils as Newell has been this SKU proliferation. If we can only get that down because that touches so many things in the company, that if we can just really be aggressive about it, then we can make a lot of dividends. And this team that we have completely gets it. So we're moving along that at a great pace and energy. And so when you come out of it, because now what we're thinking about is 2020 is a foundational year for '21 and beyond, because I think we're justified that given most, we'll be stronger, and hopefully, we'll get there faster as we face the future.

Chris, did you have something to add to that? I heard you start to answer at the open...

No. I think Ravi said it very well. The only thing I would add is that I think the actions that we're taking as part of accelerating the turnaround plan are -- I would characterize as structural and benefiting the company for the long term, not just short term and onetime in nature. So when Ravi talks about SKU count reduction and the work that we're doing there, that helps us in the short term, but it really helps us in the long term. And so we've pivoted our focus, even though we're in the middle of the pandemic, to doing things that we believe are going to strengthen the company's portfolio for the mid- and long term. And we're doing it at pace.

Great. I do want to go back to some of the consumer demand trends you talked about. But I just wanted to pause and just ask again about Latin America just because it's been a very consistent topic thus far at the conference. Investors very much trying to get underneath what is and what isn't happening in Latin America and where we're going to go from here. How are you thinking about that market, which has been a market for you -- that's been a growth market for you over the medium to long term? It sounds like it's more tough, more difficult right now. What's the kind of the 2020 outlook? And then does it -- is anything you're seeing now change the role that Latin America is positioned to play in your portfolio '21 and beyond?

Chris, do you want me to start and then you can add things?

Yes.

Okay. So our biggest business in Latin America, Steve, is Appliances & Cookware, followed by Writing and other businesses. And the Appliances business, that has been historically very strong. And under Franz, our leader for Latin America, he's done an exceptional job of growing that business, doubled it over the last decade. And so -- and we have a very strong brand there with Oster. And so they pivoted, when the shutdowns occurred, to get to a direct-to-consumer. So initially though, they struggled in the first quarter, and now as they have pivoted, they're -- even their full year, they look at it and they feel things will get better. It will not be, I think, given it started there late and it's got hurt, it's going to be still challenged. But I think they are making the best of the situation. And because of our excellent brand strength, they're finding ways. And now I think some of the food stores are opening up there, and they're finding ways of getting Oster through that. So they're trying to maximize the channels to get to the consumer, the brand strength, and the fact that we have a strong management team in the Appliances business in Latin America bodes well for us.

Great. Chris, anything before I move on?

No, I think that's well said.

Okay. Great. Now so the momentum that you outlined, the recent momentum you outlined, in a lot of ways, is not 180 degrees removed from, but a very different composition than how you framed momentum in your business exiting '19. It sounds like Outdoor and Writing -- sorry, Outdoor & Recreation is still a bit of a drag as it was and Baby still on the positive side of the ledger as it was, but Writing and Appliances & Cookware have reversed roles. How much of that is just, in both directions, is just a function of the moment versus is something that you can build on in Appliances & Cookware and might be more concerned about in Writing?

So let me take the 3. Outdoor & Recreation remains a troubled business. And COVID only exacerbated it because people were not going out. And then our Beverage business, which is Contigo, et cetera, got challenged because people are not on the go. And so we have a new CEO, Jim Pisani who has started, he's tackling the fundamentals, 2020 will be a rebuild year, getting the foundations, identifying the problems and making sure we have the right structure, the right team going forward. So that remains a challenge. As far as Appliances & Cookware is concerned, 2 things. First, delighted with, especially in the U.S., the very strong POS growth, which says, hey, we actually have good brands. And some of the innovations, even though they were not major needle movers, they were at the right price points in coffee and stuff, that when we get that right -- we've had a toaster that has been sold out on Walmart, so when you do it right, you can actually get some good results. So I think the key is to build on this momentum. I don't want to give a false impression to say, hey, everything is hunky-dory with Appliances now because it is not. The fundamentals of breakthrough innovation still need to be driven, which is why we have brought Chris in. And so -- but I think we will build on this momentum and solve for the other problems that we have on Appliances. So the other thing we've done is we've taken a decision, at least in the strategy part, the marketing and innovation part for Calphalon, which is the Cookware side, we feel it is better aligned with the Food business. So that also reduces the complexity range of Appliances & Cookware, so that Chris can focus on the other segments, and Kris Malkoski can integrate to get Calphalon growing. So I think Appliances, that's the story there. As far as Writing is concerned, this is a tremendous business for us. And from my OfficeMax days, I know we've got fantastic brands. What we're seeing is temporary. And the good news is we've heard 2/3 of universities and colleges might be reopening in the fall. The offices may be slightly different. Schools, we don't have definitive numbers, but it's also looking positive. So I think, don't get me wrong, 2020 will be a challenging year for Writing. But on the whole, I think it's temporary. The fact that we gained good share in April on the Writing with the launch of the innovation like the Sharpie S-Gel is a great indicator for us. So -- and then we're working on now the kind of innovations for the future to say, okay, more people work at home, how do we need to pivot the business? There is a super team under Laurel Hurd in that business. We've got great marketing, great sales, great R&D. So I am very confident about our Writing business long term.

Great. And just following up on Writing. You had spoken, coming out of last quarter, the conversation with retailers, the early conversations, we're still planning for a reasonable back-to-school season. Have those conversations evolved at all? Or have they more or less stayed the same?

Yes. The orders, we're fulfilling orders and getting that through. We still have some of our own supply challenges as we -- with Mexicali and Tennessee and stuff. But the orders are there. We're fulfilling it. So, so far, so good. Chris, anything you want to add there?

No. I think that the retailers are planning for a back-to-school season. If you look at the Writing business, the K-12 schools are the biggest driver of the back-to-school season. The second biggest driver is the office environment. And the third biggest driver is university, so universities is, in terms of their importance of reopening. But as we talked with retailers, all retailers of significance are planning for a significant back-to-school season. We've received initial orders already. And as Ravi said, we've started shipping this month, those orders. The supply chain is back to 100% open, although we're not yet back to 100% capacity. We're getting close. And I think we'll see how the reorders go from the initial orders, but the initial orders appear to be planning for a pretty typical back-to-school season.

Great. Is there -- just mechanically, as those orders progressively build as you anticipate or as hoped for, if, for some reason, the actual consumption just doesn't come through, does that -- do you risk taking that product back post-season? Or how does that work? Or is that just kind of on the back end?

No. Typically, the way it works is that we get an initial set of orders to sort of set the aisle for back-to-school when the back-to-school order gets set or back to when the aisle gets set for the back-to-school season, and that is a pretty significant set of the orders. And then there's a series of replenishment orders that come after that. And so typically, the sell-in for the initial orders and the shipments happen in June or July. And it sometimes can create a little bit of turbulence between the second quarter and the third quarter, depending on whether you ship in June or July. And then the reorders typically come in August and September. And so I think that the initial orders that we're talking about are planning for a pretty typical back-to-school season. We believe we're going to be in position with the supply chain to be able to fulfill them fully. Some of them may be in July versus June. We're working through that. And then the real test will be when the reorders come in August and September, and that will be dependent on how many schools reopen and how people do, going back to the office, and whether there's a second wave of COVID, et cetera. But there's no return that we take back per se.

Got it. That's great. And I guess, Ravi, you framed Home Fragrance and Connected Home currently as a bit kind of spotty. But I guess what I heard underneath that was still your view that those businesses are solid with -- just strategically and innovation pipelines intact and good executing businesses. Is that fair, just an externality that you have to work through?

Yes. And let me touch on them separately. So on our Home Fragrance, we have a terrific team. Our head of that business, Lisa McCarthy is just super. She's currently doing a great leadership job. And they have a great R&D and marketing team that work very well with innovation. So -- and capital consumption is up significantly. People are burning -- when I say consumption, not POS, I'm talking about home -- that people are burning candles at twice the rate they were because it gives them peace of mind and it reduces anxiety, et cetera. Our biggest challenge has been distribution because our stores have been closed on -- our retail stores. A lot of the specialties were closed. And then we have our own challenges because of the distribution center and the plant workers. Despite all of that, where it's been going in, the big mass merchants, we're seeing fantastic growth. And our online growth has been fantastic, whether it's direct-to-consumer or for Amazon and the retail.coms. So I just think that's temporary. And as we come out, we'll do great. They're also looking -- we're looking at, longer term, how do we continue to move the business from a store retail basis to online and be aggressive on that conversion, whether it's ours or through others. So I feel pretty good about that business. As far as Connected Home, it was really -- it suffered a lot because of the Juárez closures. The demand -- it's a strong business, great innovation with UL 2 and 7, and a leading brand, exclusive in many retailers, it's just been a factor of supply. Now we're just chasing demand as we come out. And when we did see 1 week of POS pop up, so I'm not overly concerned as we can get -- and now Juárez has opened up, so I feel pretty good about that business as well.

All right. And don't fault me for saving the rocket ships for last. But I think it's called saving the best for last. The Food and Commercial businesses that are so strong right now, those are businesses that you had a good deal of hope for coming into this year. How much of what you're seeing now do you think is a reflection of the work that you did coming into this year versus the -- just the backdrop of COVID-19 and where we are? And a similar question to the Appliances & Cookware topic, can you build on this and your confidence level that this jump-start can be levered as you go forward?

So on the Food side, the team did a really nice job laying the foundation last year. They got incremental distribution in some of the mass merchants, which was very positive. And the DIRECTV that we run on FoodSaver was very strong. So that business foundationally was good, and you may remember, fourth quarter, we had a nice pop, where our shipments grew for the first time after 2 quarters. So then this team and under Kris Malkoski's leadership has just taken it into the next level. There's no question that the consumer trends coming off of COVID came with an immense tailwind. But just because you get the tailwind doesn't mean you're not -- that you're capitalized on it, but this team is. They are really pulling all the stops. Our bowl jars are just doing extremely well flying off, we can't keep pace. So we're chasing demand. The same on FoodSaver, is just a true rocket ship. And we've not even switched on the advertising in a big way for the year. And there, again, it's a matter of supply, so chasing demand. And then third, on Rubbermaid Food Storage, that is now really doing very well and brilliant. Yesterday, I was in the factory. They're cranking it out. So I think this is -- and Kris has been driving scale initiatives to drive brilliance, marketing programs to drive it through social media, et cetera, and the one where we've had a little challenge primarily because of supply from Sistema because of New Zealand's closure, and so we're playing catch-up on that. But the 3 categories, we're gaining share. And that business, we're improving margins. That's on a lot of credit to that leadership team for hitting the ball out of the park. Same on Commercial, except their challenges on supply has been greater. And they also have been hampered by the fact that the hospitality vertical has completely dried up with restaurant closures, et cetera, and that is at least 15% of their business. But the washroom category has been really taking off, where we have the stands with sanitizers. We have the soap business. And we're using this now as a pivot to really transform it for the future. I'm a big believer in B2B businesses. I think our Commercial business is just a tremendous business and the fact that Mapa now is a growth business. So thank God, we didn't sell this business, and thanks to Chris Peterson again for his foresight and now that team under Mike McDermott. Just -- I can't -- I think Rubbermaid as a brand is a gem and will now go back to its days, when, in 1994, it has become the most admired company on Fortune's list. So very, very -- I feel strong about these 2 businesses. It's not a fluke. We're going to build on that. And then the last one you asked about was Appliances. So we're seeing many categories in Appliances, whether it's blenders, whether it's appliances that we're seeing positive momentum in the U.S. Australia has picked up just a little bit now, so has Europe. So we just need to build on that. So it's definitely that COVID trends helped here as people are cooking more at home. But now -- and then we were at the right price points. Coffee is going up. Crock-Pot is going up. But we need bigger innovations, and that is going to be Kris' job. So the third business, I don't want to give as rosy a picture as the first 2. The first one, I'm very confident. On Appliances, we've got work to do. By the way, Calphalon is also, POS, going up, so good stuff.

The only thing I would add to that is, particularly on the Food and Commercial business, is that, last year, we did a lot of work to improve the margin profile of those businesses. And so we exited the year with gross margins on those businesses that was up hundreds of basis points versus the prior year on both businesses. And that was a function of getting the price promotion strategy, the channel segmentation strategy and the product strategy right. Both businesses made strong progress on SKU reduction last year. And so they entered this year with a very, very good base, which is why when we talked about those businesses prior to the coronavirus, we were pretty optimistic that they were going to turn this year. And I think they've done that, and the coronavirus has only accelerated it, as Ravi rightly pointed out. So -- but the margin profile is exciting as well.

Great. Just circling back to where we were talking about some of the distribution benefits or wins that you had been able to eke out of late, despite sort of the tumultuous backdrop, you mentioned closing some channel gaps, dollar, drug, et cetera, as well as the further acceleration of e-commerce. Both of those initiatives were on the -- on your short list coming into the year. How much of what you were -- what you have done was sort of just what was planned versus were you able to accelerate there, too?

Now I think, there, we have ways to go. Some of the -- we got the distribution, which were more incremental where we already were. So with some of the last tranches, we still were getting a little bit more on the Food side. But there's a ton of opportunity we feel for Newell as a whole across many of our businesses. In these distribution, the Food, the dollar stores, drug, et cetera. Likewise, I think there is a lot of retailer.coms that we need to penetrate more. So I think there's a tremendous opportunity. There are a lot of specialty retailer.coms out there that we need to focus on, and we will be. And so I look at that as a journey ahead, which can only help us with the top line.

Perfect. I guess this is probably a question for Chris. As I listen, we know that as you were -- as the business was progressing through the current backdrop, there was a lot of belt-tightening going on, both from an expense standpoint as well as capital expenditures and just cash in general. It sounds like you're starting to pivot to starting to look to be a little bit more front-footed. How do you frame where you are in that cycle of further belt-tightening versus being poised to start to reinvest against some of the burgeoning strength that we've been talking about? And then I've got a follow-up related to cash.

Okay. Yes. I think pivot is a fair characterization. I think that we have pivoted, and as I mentioned, maybe about a month or 1.5 month ago, to trying to be more front-footed at accelerating the turnaround plan versus the immediate need to deal with the pandemic for the first month or so that it was upon us. Specifically, what have we done? The first thing that many will have seen is that we strengthened dramatically the company's liquidity position. And so we did -- we completed a debt offering a few weeks ago at the end of May, where we raised $500 million of 5-year debt and basically used that money to dramatically strengthen the company's short-term liquidity position. And so as we sit here today, we have a $1.2 billion revolver that's undrawn. We have an ARR facility that is undrawn. And we are operating with a significant amount of cash that's higher than normal on our balance sheet. So we have over $2 billion of short-term liquidity when you look at our global cash position, plus our undrawn short facilities. And that's the highest amount of short-term liquidity that the company has had in at least several years. So we feel like we've positioned the company well so that we're not worried about liquidity in this environment or depending on how the environment heads. Relative to investment in the business, we have continued to invest in the business. So we did not want to stop investing in projects to set the business up for long-term success. So throughout the pandemic, from the start, we did not pull back on capital expenditures. And generally, what we're looking to do there is fund investments where we get a rate of return that is roughly double our cost of capital. And so we've been fully funding those and in fact, have tried to use this opportunity to go faster on some of those initiatives as we're working remotely. And then as you say, we are taking this as an opportunity to look at our overhead structure. And as Ravi mentioned, we're taking a zero-based approach to that. We've gone through a review with all of our corporate functions and with each of our business units on that. And we believe that there are actions we can take to get us closer to the long-term goal in terms of overhead as a percent of sales faster that are appropriate in this environment. And so I view it as we're kind of doing all of the above in a way that sets us up for the long term. And one of the things we've spent a lot of time talking about, as I mentioned, is we didn't want to do things that were a onetime help this year that then came back and didn't benefit the business next year. What we're trying to do are things that are a help this year and will be an even bigger help next year and the following year so that we set the company up for sustainable top and bottom line growth and sustainable cash generation.

Yes. That's great. And maybe -- and we're at the end of our time. But maybe I'll just -- one final question to build off of that. For you, it sounds like clearly still a lot of moving parts just in the near term, and then the recessionary backdrop doesn't help. But I guess my takeaway from this is you feel better not only about the -- in your comments there, Chris, that not only about the P&L prospects of the business, but just that path to a sustainable attractive normalized cash earnings power seems, if not -- maybe not necessarily closer in, but the least, it sounds like you have a little bit more confidence on that, like you said -- like your feedback on that takeaway. And then, Ravi, just for you, in closing, any thoughts on like just really critical success factors for you that investors should be cognizant of as we progress through the back half of the year?

Yes, I'll take the cash question and then turn it back to Ravi. On the cash side, I think we've continued -- we started 1.5 years ago when we put the turnaround plan in place with a focus on working capital transformation and getting the company's cash conversion cycle down closer to in line with the peer group. And we made very strong progress last year. Last year, we generated, in 2019, free cash flow as a percent of net income of 108%. And I think it was the first time the company had been over 100% in a lot of -- in a number of years. And we generated over $1 billion of operating cash flow. We have accelerated that progress this year. So in the first quarter, our cash conversion cycle was down 27 days, and we've taken the opportunity of the pandemic to say how can we go faster at doing -- at continuing the progress there. And so we're looking at putting processes in place to more aggressively take inventory out through SKU reduction and other measures, to more aggressively push payables through negotiated -- negotiations with our key suppliers so that we generate cash from our payables and we collect our receivables faster through process improvements. And those things continue to do well. At CAGNY, we had set a goal of sustainably delivering a free cash flow productivity number above 100%. And I think we did that in 2019. And I'm confident we are set up to do that going forward. So I feel very good about the progress that we're making and think that we even have a chance of doing an accelerated pace given the focus that we've put on it.

Right. So where I would conclude, Steve, in terms of sort of key success factors, overall, I would say now, given that we have the leadership team pretty much in place, the only one that's left is to replace the whole head of e-commerce, but all of the new positions are in place and the functions are in place. It's really all about execution. And the focus is on top line growth. And some of the key variables there are driving online and e-commerce, new distribution we talked about, scaling existing innovations through marketing and then breakthrough innovations for the future. And then the next one is really about reducing complexity and improving margins. So whether it's a sale reduction, reducing overhead as a percent of net sales, these are going to be the whole Project FUEL productivity improvement because the more we can do that, the more we can reinvest in A&P to build the brands. So that's the overall view, Steve.

Well, great. I think we're going to leave it there. Thank you both for a wide-ranging discussion. Thanks for your time. Thanks to Newell for attending the conference. And thanks to all of you for listening in. Stay safe, and take care.

Thank you.

Thank you so much. Bye-bye.