UNC Resources of Falls Church announced yesterday that it will write off a $25 million investment in a uranium extracting subsidiary and is temporarily suspending the payment of cash dividends.
The action was taken because the subsidiary, UNC Recovery Corp., has not been in operation since January -- a shutdown that has resulted in a $50 million lawsuit by UNC against W. R. Grace & Co., a producer of phosporic acid from which the uranium was removed.
The suit, which is still in litigation, charges Grace with failing to meet contract requirements and imposing arbitrary conditions which prevented UNC's continued operation.
Operations at the company's plants, which are adjacent to the Grace phosphate fertilizer complex in Mulberry, Fla., may be resumed if the situation is resolved. However, if the legal problems with Grace cannot be settled, UNC Resources President Keith A. Cunningham said yesterday "we plan to account for it as a discontinued operation in our year-end (March 31) financial reports."
Because of the discontinued operations, Cunningham said UNC Recovery would show a loss for the year of $6 million. But the parent company will still show a small profit for the fiscal year, he added. UNC owns United Nuckar Corp., the largest U.S. independent producer of uranium.
According to Cunningham, the book value of the subsidiary is being reduced to the estimated salvage value of its assets, separate from any awards from the litigation. Grace officials were not available to comment on the UNC situation last night.
In addition, the $25 million does not include the potential recovery of a portion of the subsidiary's former book value by the sale of some or all of its assets and facilities.
The decision to suspend dividend payments was based on the need to conserve cash, UNC said. "The directors determined that continuation of cash dividends at this time would not be prudent," Cunningham stated. The company had been paying dividends of 12-1/2 cents a share for the past three quarters and the next payout was scheduled for April.