Good morning, and welcome to Newell Brands' Fourth Quarter and Full Year 2020 Earnings Conference Call. As a reminder, today's conference is being recorded. A live webcast of this call is available at ir.newellbrands.com. I will now turn the call over to Sofya Tsinis, VP of Investor Relations. Ms. Tsinis, you may begin.

Thank you. Good morning, everyone. Welcome to Newell Brands' fourth quarter earnings call. On the call with me today are Ravi Saligram, our President and CEO; and Chris Peterson, our CFO and President, Business Operations. Before we begin, I'd like to inform you that during the course of today's call, we will be making forward-looking statements, which involve risks and uncertainties. Actual results and outcomes may differ materially. I refer you to the cautionary language and risk factors available in our earnings release and our Forms 10-K and 10-Q available on our Investor Relations website for a further discussion of the factors affecting forward-looking statements. We assume no obligation to update any forward-looking statements. Please also recognize that today's remarks will refer to certain non-GAAP financial measures, including those we refer to as normalized measures. We believe these non-GAAP measures are useful to investors, although they should not be considered superior to the measures presented in accordance with GAAP. Explanations of these non-GAAP measures and available reconciliations between GAAP and non-GAAP measures can be found in today's earnings release and tables as well as in other materials annual on the Investor Relations website. Thank you. And now I'll turn the call over to Ravi.

Thank you, Sofya. Good morning, everyone. Happy New Year and happy Lunar New Year, and welcome to our call. I sincerely hope that you and your loved ones are staying healthy and safe. While there's no doubt that 2020 was a very challenging year, I am immensely proud of the results our team delivered as we quickly adapted to the evolving environment. At the same time, we remain focused on ensuring the safety and well-being of our employees, carefully operating our plants and distribution facilities while maintaining our capacity and financial viability and business continuity. We closed the year on an exceptional note, with fourth quarter and full year results ahead of our expectations across the board. This is a testament to the incredible resilience, fortitude, and commitment of our employees who execute with excellence. In fact, in the first quarter, we pivoted to accelerate the turnaround plan and drove significantly stronger underlying performance in the business in the second half of the year across all key value drivers: top line, margins, earnings per share, and cash growth. We also achieved meaningful progress against our strategic priorities in 2020. First, we strengthened and diversified our team as we broadly worked with our leaders from the outside into our clients, commercial food, and outdoor and recreation businesses, as well as the driver functions. They hit the ground running as COVID certainly hit us, and did not allow for any downtime. They complement our strong existing leaders across the remaining 4 businesses. The leadership team and I are focused on building a winning culture centered on trust, transparency, and teamwork. Our diversity, inclusion, and belonging efforts are our top priority as we continue to gather our employees and unify everyone behind the common purpose of delighting consumers with our innovative brands that create moments of joy, build confidence, and provide peace of mind. Second, throughout the year, we improved customer relationships through enhanced collaboration, joint business planning efforts, and an increased emphasis on delivering excellent service for our customers. We are leveraging our omnichannel capabilities to advance joint business planning and believe there's an area of strength for you. We're also seizing opportunities to close our distribution gaps, particularly in the food, drug, and other channels. We're already making progress on that front across a number of businesses, such as Food, driving, and Home Fragrance. Third, we drove a 30 basis point improvement in normalized operating margin in 2020, which is incredible given the cost and business mix headwinds we had to overcome during the year. This was made possible by establishing a culture of productivity and aggressively attacking overhead costs and organizational complexity. In fact, the normalized operating margin expanded 120 basis points year-over-year in the second half, reversing the losses in the second quarter that were mostly driven by fixed cost deleveraging. And for the full year, EPS of $1.79, up nearly 12% from continuing operations, coupled with tight working capital management, resulted in stellar operating cash flow of more than $1.4 billion. Our business unit CFOs, led by our own $1 billion-man, Chris Peterson, did a phenomenal job. Lastly, one of the key objectives of our turnaround has been to return the company to sustainable core sales growth. While core sales for the year declined 1.1%, I'm delighted to say that in the second half of 2020, we turned the corner. Core sales grew 6% and increased across 7 out of 8 business units, with every geographic region growing. During 2020, we experienced healthy domestic consumption that's broad-based. The strength and resilience of our portfolio showed through as growth in Food, Commercial and Appliances, and Cookware business units offset Writing softness. The team successfully navigated demand surges and product and container availability issues, all while managing distribution center closures. We were highly focused on relevant generation grounded in consumer insights, and omnichannel execution is making a difference. During 2020, we grew and improved domestic market share across a number of businesses, including baby gear, food storage, vacuuming, fresh preserving, tents, and coolers, to name a few. Many of our top brands delivered incredible results in 2020, including Rubbermaid, FoodSaver, Oster, Mapa, Spontex, Breville, and others, all of which grew at a double-digit rate. Omnichannel is the way forward and a critical priority for us. Our e-commerce business has continued to be a substantial growth engine for the company. In 2020, e-commerce revenue growth accelerated to the high 30s, and penetration improved to about 22% of net sales on a local basis, close to double the rate from 2 years ago. While Baby remains, by far, the most highly penetrated business across digital platforms, we're seeing a meaningful shift towards online consumption across the portfolio. In fact, in 2020, 4 business units commanded digital penetration as a percent of net sales of more than 20%, including Baby, Home Fragrance, Outdoor & Recreation, and Appliances and Cookware, with Food chasing that number. All of our leaders took quick and decisive actions to swiftly adapt to the COVID-19 environment and emerging trends. These trends include preparing more food at home as regular people turn into home chefs, heightened interest in outdoor hobbies and personal well-being, and increased investment in sanitation. We anticipate that these trends will continue to evolve throughout 2021. We also believe that many of the habits formed during the pandemic will remain with us, and our portfolio is well-positioned to capitalize on these shifts. Let me briefly touch upon how each of our businesses performed in 2020, as I'm truly thrilled with the progress we've made. Let's start with Appliances & Cookware, where we delivered mid-single-digit core sales growth, driven by strength in the international markets. In the U.S., consumption increased during the fourth quarter and for the full year as more people have been cooking, baking, and spending time at home. In Latin America, despite COVID-related challenges, the team delivered outstanding results as they quickly pivoted towards the digital platform. Although I'm extremely proud of these results, I know we have more work to do to reposition the Appliance business for sustainable growth. During 2020, the Appliances category accelerated significantly, but in some instances, we did not keep up, especially in the U.S. This resulted in share losses, albeit lower in magnitude than in prior years. We're seeing good traction with recent innovations such as the Mr. Coffee iced coffee maker, Oster Texture Select Blenders, and Oster Diamond heating cooking parties, but we need to extend the learnings and leverage consumer insights across the entire brand portfolio. Back in 2020 and continuing into 2021, we're implementing the necessary strategic changes to successfully position appliances. We have a strong international Appliance franchise with good brand equity for Oster, Crockpot, and Sunbeam in Latin America and Australia and New Zealand, followed by Breville in Europe. Our challenge is to address the low gross margin category businesses in the U.S. that drag down the portfolio. Chris Robins, our CEO for that business, will undertake actions in 2021 to prune the portfolio. Within the Commercial Solutions segment, our commercial business had a phenomenal 2020, as core sales growth during each quarter culminated in high single-digit growth for the year. We saw particularly strong sales growth in washroom and glove and scouring products as well as outdoor and garage organization businesses—we've benefited from heightened consumer engagement across all home improvement categories. In response to strong demand for sanitization, we placed about 3.3 million soap and sanitizer dispensers globally and sold enough soap and sanitizers to clean over 30 billion pairs of hands. That's a lot of hands. We're not stopping there; we're introducing innovative stands and brackets that enable facility operators to position hand sanitizers virtually anywhere in the building, including on walls, tabletop, or any general open space. The breadth of the commercial business portfolio, which includes both consumer and commercial offerings, as well as diverse coverage of verticals and enhanced partnerships with retail partners, position the business for long-term success. Moving on to our Connected Home & Security business. While core sales were down in 2020 due to supply constraints caused by pandemic-related plant shutdowns, the business performed well in the second half of the year, with top line accelerating in the fourth quarter. Within the Home Solutions segment, our Food business has certainly lived up to its rocket-ship status, growing to mid-20% core sales growth in 2020, propelled by strong consumption throughout the year as well as market share gains. In the U.S., our leading brands, Rubbermaid, FoodSaver, and Ball, took share across food storage, food preservation, and canning verticals, benefiting from improved commercialization of product, stronger consumer social engagement and programming, as well as recent innovations such as the latest vacuum sealing device, FoodSaver VS3000 multi-use preservation system, and Rubbermaid Brilliance Glass. The launch of Brilliance Glass has started strong; overall, Rubbermaid Brilliance sales have almost doubled in 2020. It was a stellar year for FoodSaver, which is the fastest-growing brand across all of Newell Brands, and it broke through as a top 10 brand for us. Strong appliance sales in 2020 should translate into increased consumer purchases in 2021. In Food, we're continuing to chase prolonged demand as we work hard to address supply constraints in certain product lines. Regarding Home Fragrance, we experienced strong consumption growth during 2020, driven by a surge in demand in the back half of the year. As a result, core sales increased in both North America and EMEA in the second half of the year and in the seasonally critical fourth quarter period. Full year top line sales performance was partially hindered by the temporary closure of Yankee Candle retail stores and other specialty chains for several months early in the year, along with supply chain disruption experienced in the second quarter. I'm extremely proud of the team's resilience and creativity in addressing supply shortages as they worked around the clock and even engaged corporate teams in manufacturing and packing operations. They went all out on production in an attempt to keep up with robust consumer demand, which remained strong in January. In terms of the scented candle category, demand for products that help create tranquility in consumer homes remained robust. We maintained market share despite supply constraints. Looking ahead to 2021, we have exciting innovations planned, including the Yankee Candle Signature Collection, the largest update to the Yankee line in years, launching this month. It promises to provide our best burning experience to date. We're continuing to reposition the Home Fragrance business for the long term. During 2020, we exited the fundraising business and 77 retail stores, with additional store closures anticipated in 2021. At the same time, we are building great momentum in our direct-to-consumer business, which grew strong double digits in 2020, offsetting sharp declines in retail, expanding distribution into grocery and truck channels, and diversifying the product portfolio into auto diffusers, etc. In the Learning & Development segment, cross-sell for our Baby business grew modestly during 2020. The rebound from Q3 persisted into Q4, driven by healthy consumption recovering from the depressed levels in March and April, when lockdowns were fully enforced. For the year, domestic demand improved across baby gear and infant care businesses, particularly in car seats, high chairs, swings, and bottles. We have seen continued strong domestic consumption trends in January. As mobility improved post-lockdowns, the demand for toddler products has rebounded remarkably. It's exciting to note that we solidified our leading position in this important category in 2020, gaining over 250 basis points of market share. We're thrilled by the strong performance of our Graco brand, which picked up 130 basis points of share in 2020, backed by innovation. More exciting launches are planned for 2021, including the Graco Slim Fit 3-in-1 car seat, our slimmest design capable of fitting 3 car seats across a backseat without compromising on safety features. Now, as anticipated, 2020 was a tough year for our Writing business, as the category struggled overall, particularly in the commercial channel. Core sales pressure continued into the fourth quarter, albeit at lower levels compared to earlier in the pandemic when demand normalized in the U.S. We did see continued consumption growth in the U.S., which began in September as the back-to-school season was extended. For the full year, we saw some bright spots, including fine art businesses, which all grew POS despite the disruptions. Although category headwinds were significant both in the U.S. and internationally, we've made progress on the market share front in our core Writing category, positioning us to emerge from the pandemic on a stronger footing. 2020 was a notable year for our Writing business, with innovation yielding outstanding market share gains of about 750 basis points in gel pens and 260 basis points across the entire pen category. We're optimistic about our momentum in the pens category and have launched expansions to our Sharpie S-Gel platform with Sharpie S-Gel fashion designs and color expansions. We also achieved strong share performance in our other writing instruments. While category challenges persist, consumption has remained positive thus far in 2021. We exited 2020 with the lowest retailer inventory position across office superstores in several years. This should better position us with retailers for a rebound post-pandemic as schools and offices return to more normal operations. While uncertainty remains around the timing of the return to normalcy in schools and offices, we're anticipating a more normal back-to-school season in 2021. Core sales and consumption in our Outdoor & Recreation business were under pressure during 2020, primarily due to softness in our technical apparel and beverages businesses as a result of decreased on-the-go activities. We delivered moderate performance in the Outdoor business in the latter half of the year, particularly in outdoor equipment categories like scooters, tents, and more. We also saw a number of favorable developments in market share in core categories like coolers and tents, where we gained about 90 and 190 basis points of share, respectively. I'm especially excited to share that Coleman, one of Newell's largest brands, returned to growth during 2020—what a way to celebrate the brand's 120th anniversary. Coleman launched several successful products in 2020, including the Coleman Skydome, and we'll continue with additional consumer-centric and purposeful innovations in the 2021 season. To highlight just a few: we're expanding the assortment on the 2020 Coleman Skydome Tent to larger dome tents in varied styles and colors and introducing a Coleman reunion collection of coolers, which will include new battery-powered options in three attractive, trend-focused colors that enhance and refresh the Coleman style. While I am encouraged by the progress we have made in the outdoor equipment business, we still have work to do on technical apparel, led primarily by the Marmot brand, and beverages with Contigo. We have brought in capable leaders to drive improvement in these segments and expect a stronger performance in 2021. Newell is now 2 years into the turnaround with notable progress across the organization. Looking ahead to 2021 and beyond, we intend to build on this improving momentum. We will continue to position Newell brands for sustainable and profitable growth with our strategic priorities focused on the following five areas. First, galvanize our employees behind our processes to create a consumer-obsessed, customer-focused organization that's digitally savvy and willing to experiment and learn while upholding values. Second, sustain top line growth by focusing on the end-to-end consumer journey, strengthening omnichannel capabilities while accelerating online penetration, and scaling and modernizing our top brands. We also aim to improve supply availability to enhance customer service levels with a strong focus on forecast accuracy. Third, become an innovation engine by sharpening our focus on consumer insights and trends, implementing an enterprise-wide innovation operating model, building cross-business unit platforms, and better leveraging our R&D resources. Fourth, accelerate international growth and improve profitability by addressing fragmentation and high overheads, prioritizing mature countries, evolving autonomous geographic units into a unified Newell approach to build scale and transitioning to a distributor model in non-priority countries. Finally, we aim to make progress on our financial agenda by expanding margins through productivity management of overhead cost and complexity reduction, as well as strengthening Newell Brands' cash conversion cycle and balance sheet. Although 2020 was undeniably one of the most trying and volatile periods in recent history, I am extremely proud of our persistent resilience, ability to adapt, pivot, and execute with speed in our turnaround journey. This has enabled us to gain significant traction on our strategy and strengthen the underlying fundamentals, positioning the company to come out even stronger post-pandemic. I am excited about Newell's prospects and believe our better days lie ahead. Onwards and upwards. And now I turn the call over to our $1 billion-man, Chris Peterson.

Thanks, Ravi, and good morning, everyone. The team delivered an outstanding finish to the year with Q4 results ahead of our expectations across every key metric, including top line, operating margin, EPS, and operating cash flow. In fact, our 2020 results exceeded or were in line with the initial guidance we laid out a year ago despite the significant disruption from the pandemic. We are now 2 years into the turnaround and have come a long way in strengthening the financial performance and operational effectiveness of the company. Last year, we made excellent progress on each area of the turnaround plan and gained significant momentum in the second half of 2020. Before getting into the financial results and outlook, I want to spend a few minutes on operational highlights. We made significant progress simplifying the organization. For example, on SKU count, we exceeded our target a year early and exited 2020 with 47,000 SKUs as compared to our goal of 50,000 by the end of '21. We have eliminated 54% of our SKUs over the past 2 years, with a 37% reduction in 2020 alone. Effectively, we have doubled our revenue per SKU over the past 2 years. We've also meaningfully strengthened the quality of our inventory, cutting our excess and obsolete inventory by more than half since 2018. We are not stopping here; we'll continue to simplify the SKU portfolio across each of our businesses. Over the past 2 years, we've also significantly simplified our IT architecture, rationalizing nearly 90% of IT applications, ending 2020 with less than 800 apps; successfully completing eight ERP migrations, including the October 1 move of Coleman North America to SAP, which went smoothly. We expect to have 95% of our business on two ERP systems over the next two years. We also fully redesigned our digital technology platform, rationalizing the number of sites in North America from about 290 to 40. We have already migrated 35 of these 40 sites to the new platform, with another three conversions expected to be completed by the end of February. This is a remarkable achievement within an 18-month period. The new platform delivers a much higher quality, more engaging, and impactful consumer experience, allowing us to introduce exciting omnichannel features along the way. We expect to complete the conversion of the remaining U.S. sites by summer and later this year, plan to extend this initiative to our international markets. As I mentioned on our prior call, during 2020, we also implemented new technology to consolidate and better control the company's indirect overhead spending, which we expect to drive significant savings going forward. These are just a few examples of where we are eliminating complexity from the organization, but the efforts extend well beyond what I mentioned, impacting areas including supply chain optimization, legal entity structures, cost centers, profit centers, financial systems, and real estate, among others. We are driving overhead efficiencies through complexity reduction, along with benefits from restructuring savings that we started to realize in the back half of the year. We lowered our overhead as a percent of sales by another 100 basis points in 2020. Importantly, looking forward, we see ample opportunity to continue simplifying our operations and optimizing our supply chain. Beyond efficiency, simplification allows us to become a preferred partner with our retail customers. As we continue to optimize our cost structure, we are increasingly leaning into our productivity initiative called FUEL, a significant enabler of our margin ambitions. In 2020, we drove a stellar outcome on FUEL, reducing our cost of goods sold basis by about 4% year-over-year, with gross savings increasing about 35%. This was not only the best annual result Newell Brands has delivered since we started tracking this measure, but also among the best-in-class in the industry. We are systematizing these productivity efforts across the organization and have a robust pipeline of projects for 2021 and the coming years, which should help drive gross margin improvement going forward. Now let's turn to quarterly results. During the fourth quarter, Newell's net sales increased 2.5% year-over-year to $2.7 billion, as core sales growth of 4.9% was partially offset by headwinds from foreign exchange, as well as business and retail store exits. For the second consecutive quarter, we saw broad-based top line momentum, with core sales growth across all four geographic regions and six business units. Normalized operating margin improved 10 basis points year-over-year to 11.4%, which was ahead of our expectations. Overhead cost reduction and productivity savings helped to offset higher advertising and marketing expenses, as well as pressure from business unit mix, COVID-related costs, and inflation. We reduced our net interest expense by $1 million year-over-year to $69 million due to debt repayment during the year. We recorded a normalized tax benefit of $6 million as compared to a normalized tax expense of $51 million in the year-ago period, reflecting discrete tax benefits in the current quarter. We grew Q4 normalized diluted earnings per share by 33% year-over-year to $0.56 a share. Stronger-than-anticipated top line results, combined with disciplined expense management and strong productivity, enabled us to outperform versus our expectations. Moving on to our segments. Core sales for Appliance & Cookware increased 4.2%, driven by international markets. Consumption trends continued to reflect increased frequency in at-home cooking. I'd like to point out that effective January 1, 2021, the CEO of the Food business has taken over responsibilities for the Calphalon Cookware business. As a result of this change, the Appliance & Cookware segment will be renamed Home Appliances in 2021. Core sales growth for the Commercial Solutions segment accelerated sequentially to 13.8%, with increases across both the Commercial and the Connected Home & Security businesses. Consumption trends also improved sequentially across both businesses. Within Commercial, we saw strong demand for many consumer-facing businesses, as well as in washroom and hand protection. Core sales for the Home Solutions segment increased 12.4%, propelled by growth from both Food and Home Fragrance business units. Food was once again the strongest performer within the portfolio, continuing its double-digit growth streak, as consumption remains strong. In a seasonally important quarter, core sales increased in the Home Fragrance business, reflecting strength in e-commerce, EMEA, and the wholesale channel. As anticipated, core sales in the Outdoor & Rec segment were under pressure, declining 7.4%. Fourth quarter results were negatively impacted by the timing shift of sales in Coleman North America into Q3, ahead of the October 1 conversion to SAP. Looking past the timing shift, focusing on the second half of 2020, core sales growth year-over-year improved as outdoor equipment consumption trends offset softness in beverage and technical apparel. Core sales for the Learning & Development segment contracted 2.2%, which was a meaningful improvement from the prior three quarters. While core sales for Writing faced challenges due to COVID-19's impact on school and office closures, we were encouraged to see positive consumption trends continuing in the U.S. Top line momentum for Baby accelerated in the fourth quarter, reflecting strong consumer demand. Our efforts to tighten working capital delivered outstanding results, making cash flow one of the major highlights in 2020. We generated over $1.4 billion of operating cash flow during the year, which represents a $388 million improvement from 2019. Last year at CAGNY, we set an ambitious target of delivering free cash flow productivity in excess of 100%, and this was our second consecutive year of meeting that goal. In fact, in 2020, Newell's free cash flow productivity was 154%, a remarkable achievement by all accounts. We shortened the cash conversion cycle by about 26 days to 72 days, which is very close to our benchmark target of 70 days. Accounts payable was the most significant driver of the improvement in the cash conversion cycle as we experienced favorable payment terms that we had renegotiated with our suppliers. We ramped up our supply chain to build inventory to support demand, creating a timing benefit in payables that we expect to partially reverse in 2021. We are in a much stronger balance sheet position today than we have been in a very long time. We ended the year with a net debt-to-normalized EBITDA leverage ratio of 3.5x, down from 4.0x at the end of 2019, and we are closing in on our target of 3.0x. During the fourth quarter, we completed a $300 million debt tender. For the year, we reduced our net debt by $748 million, exiting 2020 with $4.6 billion. We ended the year in a very strong short-term liquidity position, exceeding $2.5 billion, including nearly $1 billion of cash on the balance sheet. Turning to 2021, I want to start by providing some context for our plan. We are encouraged by the momentum we've seen in our business in the second half of 2020. The first quarter of 2021 is off to a very strong start from both a consumption and shipment perspective. At the same time, we are balancing this optimism against the macro environment, which remains dynamic due to the ongoing pandemic. We are taking a prudent planning approach to 2021, capitalizing on growth opportunities while continuing to drive cost and cash discipline. While we expect many of the recent consumer habits to persist, we are assuming a normalization of category trends throughout the year. Given that comparisons are tougher in the back half of 2021, we expect a stronger first half compared to the second half. Additionally, we are seeing inflation trends pick up, primarily due to resins, transportation costs, wage rates, and sourced finished goods pricing. We plan to grow gross margins despite this cost pressure through pricing and productivity actions. Specifically, in 2021, we expect to deliver on our evergreen financial targets for core sales growth, operating margin expansion, and free cash flow productivity. For the full year of 2021, we are guiding for net sales of $9.5 billion to $9.7 billion, with core sales growing at a low single-digit rate and favorable foreign exchange more than offsetting the headwind from the continued rationalization of the Yankee Candle retail store footprint and other minor business exits. We're planning for normalized operating margin improvement of 30 to 60 basis points year-over-year to 11.4% to 11.7%. We expect productivity and overhead savings will more than offset the impact of inflation, as well as the incremental investment behind higher advertising and marketing spend. We are assuming a normalized effective tax rate in the high teens, significantly above the 2020 level, due to a lower benefit from discrete tax items. This outlook does not contemplate any potential changes in the U.S. corporate tax rate under the new administration. We expect this to result in normalized earnings per share of $1.55 to $1.65, with a modest uptick in the number of shares compared to 2020 levels. The year-over-year step-up in the tax rate represents more than $0.30 headwind to earnings per share in 2021. On a tax rate equivalent basis, we're projecting strong growth in earnings per share this year. For 2021, we expect to generate operating cash flow of approximately $1 billion. Our outlook implies that we will continue to reduce our cash conversion cycle, despite a lower year-over-year benefit from working capital. For Q1, we are guiding for net sales of $2.04 billion to $2.08 billion, or 8% to 10% year-over-year growth, with core sales increasing in the high single-digit range compared to Q1 2020. Favorable currency is expected to more than offset the impact from the Yankee Candle store closures and minor business exits. Our first quarter guidance assumes normalized operating margin improvement of 90 to 130 basis points year-over-year to 6.9% to 7.3%, reflecting benefits from productivity efforts and overhead savings that are partially masked by higher advertising and marketing investments, as well as heightened commodity and transportation costs. We are projecting a normalized effective tax rate in the mid-20s for the first quarter, reflecting a discrete tax headwind in that quarter. We expect normalized earnings per share in the range of $0.12 to $0.14, which represents strong double-digit growth compared to $0.09 in the year-ago period. Over the past 2 years, we have made tremendous progress on our turnaround. We are emerging from 2020 in a much stronger position than we were when we started, despite the ongoing disruption from the pandemic. We continue to see significant opportunities for value creation and will remain vigilant in executing our goal of driving consistent and sustainable core sales growth, operating margin expansion, and an improved cash conversion cycle. Operator, let's now open up the Q&A session.

Thank you. We will now take our first question from Bill Chappell from Truist Securities.

I understand that forecasting this year is more of an art than a science. Could you guide us through a few aspects? Firstly, considering we are a year ahead of expectations, how does the SKU count reduction impact expected revenue in relation to the Yankee store closures? I know it may not significantly affect the first quarter, but what about the latter half of the year? Secondly, I cannot recall the details from last year regarding the plant closures due to COVID that caused shortages and out-of-stock issues. Do you have any insights on what we might be able to recover as we approach the first and second quarters of this year? Sorry for the many questions.

Yes. No problem. Let me try to address those. We are very excited about the SKU count progress that we've made. As I said in the prepared remarks, we've gotten to our goal a year early. One of the things we've done is put in place a systemic process that we call a Magic Quadrant analysis that looks at revenue per SKU and gross margin per SKU. As we've gotten into that and systematized the process, we see opportunities to further reduce SKU counts going forward. We don't believe this will pose a revenue headwind; in fact, we think this will positively impact both revenue and costs by improving our customer service levels. We're in the process of setting new targets and will share more, probably, at CAGNY next week regarding these out-front targets, but we're very encouraged by the results so far. Also, we expect to see profitability benefits from the Yankee Candle store closures, but the impact on overall revenue should be minor as we are growing very fast in that business, particularly on the e-commerce side, retail business, and the international markets. So we believe we will see a profitability benefit as we shift from retail to more online and wholesale sales in that segment. Regarding the plant closures, you're right; in the second quarter last year, we had about 20 out of our roughly 135 manufacturing facilities and distribution centers closed via government mandate. As we sit here today, all of our facilities are open, largely operating at full capacity, and we have caught up across the majority of our product categories. That being said, we still have some product categories that are supply-constrained, mainly those with outsized consumer demand, but we are working hard to increase capacity in those areas.

Well, that's great. And one just follow-up on Writing, and you're talking about kind of tougher comparisons for the overall business in the second half. I've got to think Writing is set up for a gangbusters. You had third and fourth quarter, assuming schools are back open, offices are back open. Are you preparing for that? Or how should we be looking or thinking about that as we move to the third quarter, fourth quarter?

Yes. Bill, let me tackle that. The first piece of good news is the resilience of the portfolio: when you look at 2020 with all the headwinds we faced in Writing, and we managed to contain the decline for the full year to a negative one — that’s a testament to how we're beginning to achieve resilience with other brands. So that may be comforting for the long term. Writing is a well-managed business for us, but the macro circumstances have impacted it. For 2021, we expect schools to reopen, and we have taken that into consideration. We’re preparing for it, aiming for a more normal back-to-school season. We still see the big unknown being the commercial business, as some offices may remain closed for an extended period, which could soften that segment, but overall, do we expect the Writing business to grow in 2021 versus 2020? Absolutely. How much? I think the second half will be the question mark. Also, I should mention, the share gains we’ve achieved in Writing are impressive. The strength of the Sharpie brand is extending beyond just markers, and the innovations we've rolled out, are expected to continue to perform well. We’re optimistic about the future of this business, while other segments are picking up as well.

I was hoping to talk a little bit more about the margins, particularly gross margin. You mentioned the commodity pressure, of course, and some pricing. So perhaps could you give a little bit more detail in terms of where you think you could potentially price? And then just sort of merging all the different things—the puts and takes from margin, recognizing pressure, potential offset from pricing, and maybe a little bit less leverage, but hopefully an improved sales mix versus last year. So just think me through all these different pieces. If you could just give us a little bit more color on that in terms of the puts and takes.

Chris, why don't you take that?

Sure. So when considering our margin guidance, specifically relating to operating margins, the gross margin impact for 2021 will have two primary headwinds. The first is inflation, which, as I mentioned in the prepared remarks, comes from costs related to resin, wage rates, and sourced finished goods impacted mostly by the strengthening of the Chinese currency and transportation costs. We've seen this inflation pressure amounting to nearly a 200 basis point headwind for the company next year, which is a significant shift from prior years. We're also planning to increase our advertising and marketing costs as a percent of sales for 2021, due to a robust innovation pipeline that has strengthened with new leadership that has come on board. These form the two main headwinds. However, we are guiding for operating margin growth because benefits will more than offset these headwinds. The biggest benefit comes from the productivity associated with our FUEL savings program. We'll utilize that productivity drive to largely offset the inflation pressure we’re experiencing. We're planning to take selective pricing; however, we won't take pricing to fully combat inflation. Instead, we will selectively raise prices in categories that have seen the biggest inflationary impact. Additionally, we project some benefit from the mix of business units. With expected strong growth in our Writing business in 2021, we anticipate it bringing improvements. Lastly, we'll continue to focus on overhead cost reductions through our simplification initiatives. That summarizes the various puts and takes affecting our margins this year.

Can I ask you one about how you're thinking about channel exposure for the business going forward? Evidently, e-commerce has been growing pretty substantially. So as you expand online, can you talk about the margin implications of that? And which segments do you think you have more opportunity in terms of distribution expansion?

Yes. I think e-commerce is here to stay. It will continue to grow, and this will provide us advantage given our strengths; as I mentioned, 22% global net sales penetration; and our e-com growth is in the high 30s. The e-commerce business is also quite profitable, so I don't see that as a concern, and we'll keep growing in that space. Secondly, in terms of channels, the significant thrust for us is the grocery business, dollar stores, and drug stores. We're already making good progress there, particularly with our Food business performing well across grocery. We're putting together a focused sales team to actually maximize these opportunities. Additionally, we want to maintain our strong relationships with mass merchants, who remain our largest customers. Thus, our strategic push will continue in those areas.

Congratulations here on the recent momentum. It's great to see. First question, perhaps for Chris on the margin opportunity, and I have one for Ravi on the geographic opportunity. So first, on the margin opportunity. Chris, as you're well aware, the 600 to 800 basis point opportunity regarding combined gross margin and overheads is unique and substantial within the consumer space. The long-term guidance calls for 50 basis points of improvement each year, but this year you're guiding for 30 to 60 basis points. The question is, what's the organization's ability to lean in and accelerate the pace of that margin enhancement and unlock that value for shareholders while balancing investment needs against the inevitable cost inflation you'll encounter in any given year?

Yes, if you look at our underlying trends overall, we’re actively working on driving sustainable margin improvement with both gross and overhead margins. We're experiencing some inflationary headwinds to our guidance, hence the range we provided for this year's operating margin improvement. Yet, we’re committed to our evergreen model that tracks 50 basis points of improvement. Thus, we are excited that our guidance this year aligns with our long-term expectation. The capabilities within our organization enable us to pursue above the yearly goal when needed. We will guide based on existing circumstances each year, but I’m feeling positive about our capacity to maintain and release margin improvements effectively moving forward.

Yes. I have a follow-up on international business. Ravi, just very quickly on the opportunity outside the U.S. It's roughly 30% of your mix now. Could you spend a moment on your international strategy? How critical it is to growth beyond the U.S.? Where do you see the greatest potential? And how should we think about the overall portfolio growth rates for your businesses outside the U.S.?

Yes, I appreciate the question, Kevin. I've led international efforts multiple times before, so this is very critical to me. Our first priority was to get the U.S. business stabilized, which we’re now doing. Hence, in 2021 and beyond, we’ll be shifting more focus to international growth. Our aim is to fortify the most promising 10 countries while streamlining operations in fragmented markets to cut overhead costs from identifiable synergies. Current trends show that the international unit has been growing at a better rate than the U.S. For instance, we realized strong double-digit growth in appliances within Latin America. Moving forward, we will get strategic in identifying and penetrating international opportunities responsibly.

Two questions, please. First is just in the very short term; we've read some reports about the port of Los Angeles having backlog issues. And Chris, I was wondering if you have any issues given that you import some goods from China? Do you have any bottlenecks there? And then second, regarding margins but looking at it differently. My take is that the biggest hindrance to your overall margin is how low your margins have been in appliances and cookware specifically. I know there's been a lot of lumpiness quarter-to-quarter, but with new management there, what do you think it will take until that specific segment can consistently deliver double-digit EBIT margins?

So regarding the port of Los Angeles, I'm happy to note that we do import a significant amount through there, primarily from Asia, and we’ve faced backlogs and supply disruptions earlier. While we are getting products through, and we've also expanded shipping through other ports on both the East Coast and other West Coast options. We've observed a significant increase in container prices due to heightened demand. Since we are a large-scale importer, we have negotiated advantageous contractual commitments, giving us a competitive edge in the marketplace. This input won’t be a major obstacle for us in the first quarter or year, though we recognize that we are navigating daily realities regarding the situation. Moving on to appliances, just as you noted, we recognize that we need to work on improving margins. We have plans in place aimed at elevating that structure, with a core focus on gross margins. This ties heavily into driving innovations that can yield high-margin products. The gross margins for our brands outside the U.S. actually present much better figures. We need to ensure we phase out any underperforming goods and clearly assess our category margins. We're approaching this with a tough, results-oriented mindset as we ensure higher margins in this segment.

So yes, we are aware of that concern around appliances and cookware. But I agree with Chris that we have potential, and will effectively determine the best strategy as we aim to elevate margins to a much higher degree moving forward.

Just a question on the guidance. Given the momentum you witnessed in the second half, and I know you assumed some of those consumer trends that we saw last year, have started normalizing, and there’s a lot of uncertainty. But why would sales in 2021 be below 2019? Other than Writing on the commercial side, what businesses might be lagging from 2 years ago?

Can you repeat that? We couldn't hear you very well. Sorry about that, Joe.

Yes. Outside of Writing on the commercial side, what businesses might be lagging from 2019?

I don't think we’re implying that. Rather, let me clarify the top line guidance and provide some additional context. The company returned to positive core sales growth in Q3 last year. We’re reporting positive results in Q4 and guiding for high single-digit core sales growth in Q1, as well as low-single-digit core sales growth for the year. If you examine the 2-year stack growth rates, we turned positive on a 2-year basis starting in Q3 last year. By Q4 we maintained that, and we’re guiding positive for all of 2021. While Writing has indeed been the most affected sector due to school and office closures, as mentioned earlier, 2020 ended with us in a much stronger retail inventory position. We expect writing to grow starting from Q1 based on this position.

Just to add to that, the first half looks promising due to better visibility. We've indicated positive expectations for Q1. Following a robust second half last year, we factor our projections on Food business growth from 25% last year. There will be challenges in terms of lapping those results, influencing stacked growth this year. But overall, we’re confident in our projections, and we expect consistent growth for the company.

Yes. As I mentioned, we remain confident about our trajectory. As you noted in your question, there will be challenges to manage, but we are very optimistic about our growth potential. We're indeed looking at the working capital drivers outlined on Slide 15 in a forward perspective. We aim to work on our plans to optimize our cash conversion cycle further. The progress we've made thus far has been remarkable. I'll expand on this next week during our CAGNY strategy discussions.

I was hoping we could talk a little bit about Baby. You called out very strong performance in the fourth quarter. I was just thinking forward some of the headline risks or realities about the birth rate. I know that over time, innovation outstretches birth rate dynamics, but I was just curious what you were seeing regarding how you're projecting the category, how you're thinking about innovation in the pipeline, and what may be developing from a competitive landscape standpoint?

Yes, Lauren, so while the U.S. birth rate is crucial, we also have the impact of continuous immigration in play. Growth rates in specific segments may still be rising because of how different demographic trends pull through. The business is global for us, and potential exists elsewhere. Our innovation in the care business, driven by our NUK brand, is a promising initiative. There are also exciting developments in the baby gear category we want to capitalize on. Speaking to innovation, we're focusing on product enhancements for items like temperature-controlled bottles, which have gained traction, especially in both U.S. and Germany. We still have more opportunities within our Graco brand. Moreover, we're excited for upcoming launches such as the Graco Slim Fit 3-in-1 car seat, along with continuous assessments on innovative product offerings.

I appreciate it. If I might squeeze in two, that would be great but they’re both straightforward. First one is just getting continuity on expected store closures that you called out versus some channels reopening and how you see your own efforts to expand points of distribution online and driving elsewhere. Can you speak to how you're expecting actual end-market consumption to trend across your portfolio versus the low single-digit core sales guidance you issued today? I just want to get clarity on that.

Yes, I’ll respond to that, Steve. As we look at our different categories, we think, particularly during the first half where we have clearer visibility, there is continued growth. The trends that began during the pandemic, notably with home cooking as people started focusing more on meal prep in their kitchens, have transitioned to a more established routine. This trend provides a positive outlook on their growth potential across many categories we compete in. However, we recognize the risk associated with store closures, especially with the Yankee store closures that we’ve anticipated this. Our direct-to-consumer business is absorbing those losses effectively, and we’re also strengthening our online channels which bodes well overall.

Yes, that's accurate regarding our guidance; we expect actual consumption to track reasonably aligned with core sales, especially as we analyze the ongoing transitions within the market. We certainly see opportunities on those working capital drivers you mentioned on Slide 15. Given how we’ve executed, we remain optimistic on expanding those metrics as we move forward. I’ll also cover this further at CAGNY next week.

This concludes our questions-and-answer session. I will now turn the call back to Mr. Saligram for closing remarks.

Thank you very much. We feel very good as we go into 2021. I apologize to those who couldn't get their questions in; we ran out of time a bit. Thank you, and onwards and upwards.

Thank you. A replay of today's call will be made available later today on our website, ir.newellbrands.com. This concludes our conference. You may now disconnect.