UNFI Sells Non-Food Business to L&R Distributors

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PROVIDENCE, R.I.–United Natural Foods Inc. (UNFI) is selling its non-foods and general merchandise line of business to L&R Distributors Inc. in order to allow UNFI to concentrate on its core business of distributing natural, organic, and specialty foods and products. UNFI said will be working closely with L&R Distributors and current non-foods and general merchandise customers to ensure a smooth transition of service.  Terms of the transaction were not disclosed.

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. The sale is subject to the satisfaction of customary closing conditions, and is expected to occur in UNFI’s first quarter of fiscal 2012, ended October 29, 2011.

Following the closing of the sale, UNFI will cease operations at its Harrison, AR, facility. This facility and the related assets will be considered held-for-sale once the sale to L&R Distributors is consummated. All specialty food products from the Harrison facility will be transferred into the UNFI’s other distribution centers across the United States.

As a result of this transaction and the closure of the Harrison facility, the UNFI 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 building and equipment, 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 UNFI’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 UNFI’s specialty foods inventory from its Harrison facility. The balance of the charges will be incurred in the first quarter of fiscal 2012. UNFI expects this divestiture and related closure of the Harrison facility will be accretive to net income, excluding the restructuring and impairment charges noted above, by approximately $1.5 to $2.0 million annually.

 As a result of these actions, UNFI is revising its earnings per share guidance for fiscal 2011 to a range of $1.55 to $1.59 per diluted share. UNFI’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. UNFI 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 June 2, 2011.

According to financial results for the first quarter of 2011 (1Q11), ended Oct. 30, 2010, UNFI’s net income for the quarter rose 12 percent compared to 1Q10, hitting $17.4 million or $0.39 per diluted share. Net sales for 1Q11 were up even more, rising 19 percent, or $168.2 million, to $1.053 billion; it is the first time UNFI has achieved more than $1 billion in net sales during a quarter.

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