Mick Beekhuizen
Executive Vice President and Chief Financial Officer at Campbell Soup
Thanks, Mark. Good morning, everyone.
Turning to Slide 19 for the fourth quarter organic net sales, which excludes the impact from the additional week and the impact of the sale of the Plum baby food and snacks business declined 4% as we cycled both the elevated demand in food purchases for at-home consumption, and a partial retailer inventory recovery in the prior year. Compared to the fourth quarter of fiscal 2019, which we view to be more meaningful given the COVID-19 impact to prior year, organic net sales increased 4% on a two-year CAGR. Adjusted EBIT decreased 13% compared to prior year, to $267 million driven by lower sales volume, including the impact of the additional week in the prior year quarter and a lower adjusted gross margin, partially offset by lower adjusted marketing and selling expenses and lower adjusted administrative expenses.
Our adjusted EBIT margin was 14.3% compared to 14.6% in the prior year. Adjusted EPS from continuing operations decreased $0.08 or 13% versus prior year to $0.55 per share, partially driven by the estimated $0.04 contribution from the additional week in fiscal 2020. For the full-year organic net sales, which excludes the impact from the additional week, divestitures hence the impact of currency were comparable to the prior year and grew 3% compared to fiscal 2019 on a two-year CAGR basis. Compared to prior year, Meals & Beverages organic net sales decreased 1% driven by declines in foodservice, partially offset by growth in V8 beverages.
In Snacks, organic net sales were flat, as gains in our salty snacks portfolio including Late July snacks and Snack Factory Pretzel Crisps and in Goldfish crackers were offset by declines in Lance sandwich crackers and in partner brands within the Snyder's-Lance portfolio. Full-year adjusted EBIT decreased 3% versus the prior year to $1.4 billion. The decline reflected lower adjusted gross margin and lower sales volume, including the impact of prior year's additional week, partially offset by lower adjusted marketing and selling expenses and higher adjusted other income.
Our marketing and selling expenses represented 9.6% of net sales compared to 10.9% last year. Full year 2021 adjusted EBIT margin was 16.6% compared to 16.7% in the prior year. Full year adjusted EPS from continuing operation increased 1% to $2.98 per share. On the next slide, I'll break down our net sales performance for the fourth quarter. Organic net sales decreased 4% during the quarter lapping an increase of 12% in the prior year quarter when the demand for at-home consumption remained elevated and retailers partially recovered on the inventory. The organic net sales decline was driven by a 5 points headwind due to volume declines, partially offset by favorable price and sales allowances and lower promotional spending, which each drove a 1 point gain in the quarter.
The impact of one last week in the quarter subtracted 7 points and the recent sale of Plum subtracted 1 point. All in, our reported net sales declined to 11% from the prior year stronger than anticipated as in-market demand remained elevated. Turning to Slide 22, our fourth quarter adjusted gross margin decreased by 420 basis points from 35.6% last year to 31.4% this year, which was generally consistent with our expectations. Mix and operating leverage had a negative impact of approximately 70 basis points and 40 basis points respectively on gross margin, as we continue to transition from last year's elevated demand. Net pricing drove a 100 basis point improvement due to lower levels of promotional spending in the quarter as well as favorable price and sales allowances, which do not yet reflect the price increases effective first quarter of fiscal 2022.
Inflation and other factors had a negative impact of 640 basis points with slightly more than half of the decline driven by cost inflation as overall input prices on a rate basis increased by approximately 5%. The remaining impact was driven by higher other supply chain costs largely due to last year's manufacturing cost efficiencies related to a higher production levels to service the elevated demand, as well as lower mark-to-market gains on outstanding commodity hedges, partially offset by lower COVID-19 related costs. Our ongoing supply chain productivity program contributed 150 basis points to gross margin, partially offsetting these inflationary headwinds. Our cost savings program, which is incremental to our ongoing supply chain productivity program added 80 basis points to our gross margin.
Moving on to other operating items, adjusted marketing and selling expenses decreased $91 million or 34% in the quarter on a year-over-year basis. This decrease was driven by lower advertising and consumer promotion expense, lower selling expenses and lower marketing overhead costs. A&C declined 52% reflecting our elevated pandemic driven level of investment in the prior year to attract and retain new households. However A&C was comparable to the fourth quarter of fiscal 2019. Overall, our adjusted marketing and selling expenses represented 9.3% of net sales during the quarter, a 330 basis point decrease compared to last year.
Adjusted administrative expenses decreased $30 million or 18% with approximately one-half of the decrease, driven by the estimated impact of the additional week in the prior year quarter. The balance of the decrease reflected lower general administrative costs, higher charitable contributions in the prior year and benefits associated with our cost savings initiatives, partially offset by higher IT costs. Adjusted administrative expenses represented 7.4% of net sales during the quarter, a 60 basis point decrease compared to last year.
Moving to the next slide, we have continued to successfully deliver against our multi-year enterprise cost savings initiatives. This quarter, we achieved $25 million in incremental year-over-year savings, which came in ahead of our expectations, resulting in full-year savings of $80 million, with the majority of the savings from the Snyder's-Lance integration. We remain on track to deliver our cumulative savings target of $850 million by the end of fiscal 2022. On slide 25, we are providing a total company adjusted EBIT bridge to summarize the key drivers of performance this quarter. As previously mentioned, adjusted EBIT declined by 13% as the net sales decline, including the impact of the additional week in the prior year quarter and the 420 basis point gross margin contraction resulted in a $84 million and $77 million EBIT headwind respectively. Partially offsetting this was lower adjusted marketing and selling expenses, contributing 330 basis points to adjusted EBIT margin and lower adjusted administrative and R&D expenses contributing 50 basis points.
The estimated impact to EBIT from the additional week in fiscal 2020 was $22 million. Overall, our adjusted EBIT margin decreased year-over-year by only 30 basis points to 14.3%. The following chart breaks down our adjusted EPS change between our operating performance and below the line items, a $0.10 impact of lower adjusted EBIT and a $0.01 impact of higher adjusted taxes, partially offset by a $0.03 favorable impact from lower interest expense resulted in better than expected adjusted EPS of $0.55, down $0.08 from $0.63 per share in the prior year, of which an estimated $0.04 was driven by the additional week in fiscal 2020.
In Meals & Beverages, declines across US retail products, including US Soup, Prego pasta sauces and Pace Mexican sauces led to a 9% decrease in fourth quarter organic net sales compared to the prior year. The decline was driven by volume decreases in US retail due to last year's partial retail inventory recovery and increased demand of food purchases for at-home consumption in the prior year quarter. However for the comparable period in fiscal 2019, organic net sales increased 10%. In the fourth quarter of fiscal 2021, sales of US Soups decreased 21%, 7 points of which were driven by the additional week in the prior year, while at the same time cycling a 52% increase in the prior year quarter.
Operating earnings for Meals & Beverages decreased 30% to $129 million. The decrease was primarily due to sales volume declines including the additional week and a lower gross margin, partially offset by lower marketing and selling expenses as well as lower administrative expenses. The lower gross margin resulted from higher other supply chain costs net of lower COVID-19 related costs, higher cost inflation, including higher freight costs and ingredients and packaging inflation, and unfavorable product mix, partially offset by the benefits of supply chain productivity improvements.
Overall within our Meals & Beverages division, fourth quarter operating margin decreased year-over-year by 290 basis points to 15.2%. Within Snacks, organic net sales increased 1% to $1 billion, driven by volume gains in Goldfish crackers and our salty snacks portfolio including Snack Factory Pretzel Crisps, Snyder's of Hanover pretzels, and Cape Cod potato chips, partially offset by declines in partner brands and fresh bakery, favorable price and sales allowances and lower promotional spending also contributed to sales growth. Compared to the fourth quarter of fiscal 2019, Snacks organic net sales grew 7%.
Operating earnings for Snacks increased 7% for the quarter, driven by lower marketing and selling expenses, partially offset by sales volume declines, including the impact of the additional week and a lower gross margin. The lower gross margin resulted from higher cost inflation and other supply chain costs net of lower COVID-19 related costs, partially offset by the benefit of cost savings initiatives, supply chain productivity improvement, favorable price and sales allowances and lower promotional spending. Overall within our Snacks division, fourth quarter operating margin increased year-over-year by 170 basis points to 14.2%.
I'll now turn to cash flow and liquidity. Fiscal 2021 cash flow from operations decreased from $1.4 billion in the prior year to $1 billion primarily due to changes in working capital, mostly from a significant increase in accounts payable in the prior year and lower accrued liabilities in the current year. Our year-to-date cash for investing activities was reflective of the cash outlay for capital expenditures of $275 million, which was slightly lower than the prior year driven by discontinued operations and the net proceeds from the sale of Plum. Our year-to-date cash outflows for financing activities were $1.7 billion, reflecting cash outlays due to dividends paid of $439 million as we continue to focus on delivering meaningful return of cash to our shareholders.
Additionally, we reduced our debt by $1.2 billion. We ended the year with cash and cash equivalents of $69 million. In June, the Board authorized a $250 million anti-dilutive share repurchase program to offset the impact of dilution from shares issued under our stock compensation programs. As you saw in today's press release, we re-instituted our strategic share repurchase program with a $500 million program replacing the suspended $1.5 billion program, which has been canceled. The Company expects to fund the repurchase out of its existing cash flow generation.
Turning to slide 30, as covered in our press release, we are providing guidance for full year fiscal 2022. We expect to continue to uncertainty around the duration and effects of the pandemic on industry wide supply chain networks, resulting in accelerating inflationary pressures and a constrained labor market. We expect to partially mitigate these headwinds with well-executed pricing and planned productivity initiatives, as well as our cost savings program. First half margins, particularly in the first quarter will continue to be impacted by transitional headwind cycling prior year's elevated sales and scale efficiencies with comparisons easing in the second half of the fiscal year.
We expect organic net sales to be minus 1% to plus 1%, adjusted EBIT of minus 8% to minus 5%, and adjusted EPS of minus 8% to minus 4% versus the fiscal 2021 results. Fiscal 2021 results include a $0.12 benefit from mark-to-market gains on outstanding commodity hedges and an approximate $0.02 adjusted EPS contribution from Plum. For additional context on mark-to-market, please refer to today's Form 8-K. Importantly, when considering these items, the upper end of our fiscal 2022 adjusted EPS range is in line with fiscal 2021 performance.
As you see on Slide 31, we expect core inflation for the year to be high single digits with a more pronounced impact in the second half of fiscal 2022, which we plan to address with price increases in trade optimization, supply chain productivity improvements and cost savings initiatives, and a continued focus on discretionary spending across the organization. Moving to additional assumptions, we expect ongoing supply chain productivity gains of approximately 2% to 3% for the year excluding the benefit of our cost savings program. As previously mentioned, we expect to continue to progress on our cost savings program and expect to deliver an incremental $45 million in fiscal 2022, keeping us on track to deliver $850 million by the end of the fiscal year.
Additionally, we expect net interest expense of $190 million to $195 million and an adjusted effective tax rate of approximately 24%, which is largely in line with fiscal 2021. While cognizant of our current operating environment, we expect to continue to invest in the business, targeting capital expenditures of approximately $330 million, which includes carryover projects from fiscal 2021. Additionally, we expect the net of adjusted administrative expenses and adjusted other income to increase as a percentage of net sales, reflecting the planned information technology investments and related costs and the cycling of lower administrative items in the prior year.
All in, we expect year-over-year operating margin improvement in the second half of the year. Overall, as Mark said, we had a positive finish to the year. We are truly grateful to our teams and for their continued dedication and commitment as we head into fiscal 2022. And with that let me turn it over to Mark.
