United Natural Foods, Inc. (UNFI) announced it has signed an asset purchase agreement with L&R Distributors, Inc., a national distributor of non-food products and general merchandise, to divest the company's non-foods and general merchandise lines of business. This strategic transaction will allow UNFI to concentrate on its core business of the distribution of natural, organic, and specialty foods and products. UNFI entered the non-foods and general merchandise businesses, which includes cosmetics, seasonal products, conventional health and beauty products and hard goods, as part of its acquisition of Millbrook Distribution Services, Inc. in November 2007. Terms of the transaction were not disclosed.
Following the closing of the sale of its non-foods and general merchandise lines of business to L&R Distributors, UNFI will cease operations at its Harrison, Ark. facility. This facility and the related assets will be considered held-for-sale, once the sale to L&R Distributors is consummated, which, subject to the satisfaction of customary closing conditions, is expected to occur in UNFI's first quarter of fiscal 2012, ended Oct. 29, 2011. All specialty food products from the Harrison, Ark. facility will be transferred into the company's other distribution centers across the United States. In addition, the company will be working closely with L&R Distributors and current non-foods and general merchandise customers to ensure a smooth transition of service.
As a result of this transaction and the closure of the Harrison, Ark. facility, the company expects to incur associated restructuring and impairment charges of approximately $11.0 million to $12.5 million during the fourth quarter of fiscal 2011 and first quarter of fiscal 2012. These costs will consist of a non-cash impairment charge for the Harrison, Ark. building and equipment, and cash charges primarily associated with associate severance and related benefit costs, and other non-recurring charges to fully transition the specialty food line of business into the company's other facilities. Approximately $8.4 million to $9.6 million of these costs are expected to be incurred in the fourth quarter of fiscal 2011, with the exact amount dependent upon the timing of the completion of the transfer of the company's specialty foods inventory from its Harrison, Ark. facility. The balance of the charges will be incurred in the first quarter of fiscal 2012. The company expects this divestiture and related closure of the Harrison, Ark. facility will be accretive to net income, excluding the restructuring and impairment charges noted above, by approximately $1.5 to $2.0 million annually.
Steven Spinner, president and chief executive officer of UNFI, commented in prepared statement, "After thorough analysis, we came to the conclusion that general merchandise and non-food products are not strategic to our business. By selling these non-core product lines and partnering with L&R Distributors to ensure a smooth transition for these customers, we will be positioned to completely focus our efforts on growing and expanding our natural, organic and specialty lines of business, while continuing to provide the highest level of service to our customers."
As a result of these actions, the company is revising its earnings per share guidance for fiscal 2011 to a range of $1.55 to $1.59 per diluted share. The company's revised earnings per share guidance reflects the impact of the sale of its non-foods and general merchandise product lines to L&R Distributors, and the associated restructuring and impairment charges of approximately $8.4 million to $9.6 million expected to be incurred in the fourth quarter of fiscal 2011. The remaining restructuring charges are expected to be incurred in the first quarter of fiscal 2012. The company had previously updated its fiscal 2011 earnings per share guidance to a range of $1.67 to $1.69 per diluted share in a press release issued on Jun. 2, 2011.
