Richard G. WolfordChairman of the Board,
Chief Executive Officer
Our mission at Del Monte Foods is to become a premier consumer packaged food company with all the capabilities it requires: powerful brands, great products, and an ongoing stream of product innovations that resonate with consumers; strong marketing and sales relationships with retail customers; and an efficient and effective infrastructure to get products from the field and into the shopping carts of consumers. Critically, core to our mission is to drive increased stockholder value.
In 2008, we delivered strong progress against many of these goals. Importantly, from both marketing and operational perspectives, the progress realized during the year is key for future growth. From the financial perspective, we grew revenues substantially during fiscal 2008, generating more than $3.7 billion for the year, up 9.4% over fiscal 2007. However, during this past year, we also faced significant challenges as our input cost environment continued to increase at an accelerated rate. This cost environment created pressure on our margins despite the fact that we took aggressive actions on the pricing and productivity fronts to help mitigate the effects of dramatically rising prices for raw products, commodities and energy. Net income for the year totaled $133.1 million, or $0.66 per share. Turning to cash flow, fiscal 2008 reflected another year of strong performance. Del Monte Foods generated in excess of $200 million in cash flow (cash from operations less cash from investing) in fiscal 2008, improving our financial flexibility.
We put that cash to work in three ways: paying down debt, buying back $50 million of shares, and paying quarterly dividends to stockholders.
Leveraging Our Platform
I am particularly proud of our revenue performance in fiscal 2008. We continued to introduce innovative new products; in fact, dollar sales attributable to new products set record levels in 2008. Significantly, we were also able to increase overall sales volumes throughout the portfolio by effective execution of both marketing and promotional programs. Finally, our topline also reflected aggressive pricing actions that we took to combat the cost pressures mentioned above. I believe our revenue performance in 2008 suggests we are winning in the marketplace. It also reflects three underlying strengths ofDel Monte Foods: Brand Strength: We continue to believe that the strength of our Company is directly connected to the strength of our brands, and we have some of the best known and most trusted brands in the consumer packaged food industry. Brand strength supports the innovation process, giving new products instant credibility. As well, in 2008, the effective leveraging of the power of our brands was a key driver, enabling us to grow overall volume, increase market share, and execute successful pricing actions. Brand-based Innovation: We take a lot of pride in our ability to create innovative new products. At Del Monte Foods, innovation begins with product platforms that address key consumer needs. Supported by the strength of our brands and our relationships with retailers, these platforms enable us to create and launch new products that add value to consumers in terms of health, convenience, and portability.
A good example of successful innovation is our line of Del Monte Fruit Naturals packaged produce. These individual servings of ready-to-eat fruit are picked at the peak of ripeness, packaged in convenient plastic cups, and sold in the produce section of the supermarket; they represent a great growth platform for Del Monte Foods. In 2008, we introduced three new flavors: Hawaiian Medley, Apples & Oranges, and No Sugar Added Peaches. Innovation is also fundamental to success in our growing pet foods and snacks business. Recent innovations include 9Lives Daily Essentials, a dry cat food made from real meat and fish and loaded with important nutrients, and Nature’s Recipe Farm Stand Selects, a premium dry dog food made with real fruit, vegetables, turkey, and hearty grains. Execution: A commitment to execution is fundamental to Del Monte Foods’ foundation, and I believe we executed well in many aspects of our business in fiscal 2008. In particular, our sales and marketing team played a critical role in helping to grow revenues and to execute pricing in a difficult economic environment. Our ability to execute also played a key role as we worked to mitigate margin pressures by addressing our cost structure. In fiscal 2008, our productivity and transformation initiatives were successful in taking approximately $85 million in costs out of our system. These savings included results from the implementation of a number of Lean Manufacturing initiatives, including projects that improve yields and efficiencies in our factories and extend our fresh processing season. We also continued to improve our logistical capabilities. To cite just one example: since the start of our transformation plan, we have cumulatively reduced the aggregate length