Jim PetersEVP and Chief Financial Officer
In 2020, we were impacted by a global pandemic that brought with it economic challenges and new ways of working. At the outset of the pandemic, we outlined and successfully executed our COVID-19 response strategy which was focused on:
- Sustaining strong operating margins
- Protecting our liquidity position
- Winning in the post-COVID economic recovery
This strategy guided our decisions throughout the year, ensuring we stayed focused on meeting the needs of our employees, our business and our consumers. The strong execution of our global teams resulted in record financial results, a strengthened balance sheet position and the return of strong levels of cash to our shareholders through share repurchases and a dividend increase for the eighth consecutive year.
As part of our COVID-19 response strategy to sustain strong margins, we implemented and delivered on a $500 million cost takeout program, aggressively targeting both discretionary and structural costs. Additionally, we optimized our go-to-market strategy to operate within a supply constrained environment and delivered strong price/mix for the year. As a result of these actions and strong global demand, we delivered record ongoing EPS(b)of $18.55, record ongoing EBIT margin(b)of 9.1%, and record free cash flow(b)of $1.25 billion in 2020. Further, our regional performance in North America and Latin America was exceptional with both regions delivering approximately 300 basis points of margin improvement. In EMEA, we successfully executed our turnaround strategy resulting in positive EBIT for the year.
Lastly, we remained committed to our capital allocation strategy, yet agile in our approach as the pandemic unfolded. We quickly prioritized and ensured we had robust liquidity measures in place, while remaining committed to reducing our debt leverage by year end and returning cash to shareholders through share repurchases and dividends.
Funding the Business
We invested over $850 million in capital expenditures and R&D to maintain our best cost position in the industry, and support our proven track record of providing innovative products and services to our consumers.
In 2020, we launched our connected laundry line with consumer-relevant technology, enabling more control and ease when interacting with our appliances. We also launched our global dishwasher platform, with the largest third rack dishwasher, enabling families to spend more time together and less time cleaning up. Not only does this global platform benefit our consumers, but it also drives out cost and complexity in our organization.
Additionally, we increased investments in the digitization of our manufacturing and supply chain network, helping to drive sustained cost advantages and strong progress toward a best-in-class home delivery network. These investments advance our structural position, while ensuring we continue to improve the lives of our consumers both today and in the future.
Our multi-year focus on strengthening our balance sheet and liquidity position paid strong dividends this year. We leveraged our strong cash balance and existing credit facilities to ensure we were able to support our ongoing business and working capital needs. Further, we benefited from an optimized debt ladder with no bond maturities until the second quarter of 2021 and with ample buffer in our financial covenants. Lastly, because of our strong financial position, we were able to make significant progress toward our debt leverage goal of approximately 2.0x, repaying $1.7 billion of our outstanding short-term debt, and finishing the year at 2.3x(c).
Returning Cash to Shareholders
While the environment around us was constantly changing, our commitment to delivering strong returns for our shareholders did not. We raised our dividend for the eighth consecutive year and repurchased $121 million of common stock, returning over $425 million to shareholders in 2020. These actions reflect the confidence we have in our business in both the short- and long-term.
In closing, despite the impact of COVID-19, we made sustainable progress toward our long-term financial targets in 2020. We once again demonstrated the resiliency and agility of our business model, delivering record results in the midst of a global pandemic, including a 2021 outlook which represents a fourth consecutive year of record ongoing EPS. We remain committed to continuing to serve our consumers, our employees, and our shareholders by investing in World Class Manufacturing, innovation and progressing on our digital transformation journey. The progress made in 2020, along with strong, structural actions taken in years prior, provides us with confidence that we will continue to deliver strong shareholder value in 2021 while earning trust and creating demand for our products and brands across the globe.
(b) Please see "Non-GAAP Financial Measures" on pages 37-41 of our Form 10-K for a reconciliation of this Non-GAAP measure to the equivalent GAAP measure.
(c) Please see Financial Highlights for the applicable non-GAAP to GAAP reconciliations.