<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

                                   FORM 10-Q

  [ x ]     Quarterly Report Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934

                                      or

  [   ]     Transition Report Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934


For the Quarter Ended March 31, 1997            Commission File Number 1-5371
                      --------------                                   ------


                             The Union Corporation
             ----------------------------------------------------
            (Exact name of Registrant as specified in its charter)


          Delaware                        25-0848970
   ------------------------   ---------------------------------------
   (State of incorporation)   (I.R.S. Employer Identification Number)


            145 Mason Street, Greenwich, CT               06830
         --------------------------------------          --------
       (Address of principal executive offices)        (Zip Code)


                                (203) 629-0505
               -------------------------------------------------
             (Registrant's telephone number, including area code)


       Indicate by check mark whether Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                     YES     X               NO 
                         ---------              -----------

    5,731,344    Common shares were outstanding as of          May 7, 1997
  -------------                                       ------------------------
<PAGE>
 
                    THE UNION CORPORATION AND SUBSIDIARIES

       Index to Condensed Consolidated Financial Statements and Exhibits
<TABLE>
<CAPTION>
 
Part I.       Financial Information:                             Page
                                                                 -----
<S>                      <C>                                     <C>
 
              Item 1.    Financial Statements
 
                         Condensed Consolidated Balance Sheets,
                         March 31, 1997 (Unaudited) and
                         June 30, 1996                               3
 
                         Condensed Consolidated Statements of
                         Operations (Unaudited), for the Nine
                         Months Ended March 31, 1997 and 1996        4
 
                         Condensed Consolidated Statements of
                         Operations (Unaudited), for the Three
                         Months Ended March 31, 1997 and 1996        5
 
                         Condensed Consolidated Statements of
                         Cash Flows (Unaudited), for the Nine
                         Months Ended March 31, 1997 and 1996        6
 
                         Condensed Consolidated Statement of
                         Shareholders' Equity (Unaudited), for
                         the Nine Months Ended March 31, 1997        7
 
                         Notes to Condensed Consolidated
                         Financial Statements (Unaudited)          8-9
 
           Item 2.       Management's Discussion and Analysis
                         of Financial Condition and Results
                         of Operations (Unaudited)               10-15
 
Part II.   Other Information (Unaudited):
 
           Item 1.       Legal Proceedings                       16-19
 
           Item 6.       Exhibits and Reports on Form 8-K           20
 
           Signatures                                               21
</TABLE>
<PAGE>
 
                    THE UNION CORPORATION AND SUBSIDIARIES
                     Condensed Consolidated Balance Sheets
                 March 31, 1997 (Unaudited) and June 30, 1996
                                (In thousands)


<TABLE>
<CAPTION>
 
                                                        March 31,  June 30,
                                                             1997      1996
                                                         --------  --------
   ASSETS
   ------
<S>                                                     <C>        <C>
 
Current assets:
 Cash                                                    $ 15,762  $ 18,634
 Short-term investments, at cost,
  which approximates market                                29,079    24,529
 Accounts receivable, trade, less allowance
  for doubtful accounts of $931 and $700                    9,990     9,135
 Prepaid expenses and other current assets                  4,259     5,860
                                                         --------  --------
  Total current assets                                     59,090    58,158
 
Property, buildings and equipment, net                      8,882     9,168
Cost of intangible assets from businesses acquired,
 less accumulated amortization of $10,169 and $9,080       48,351    49,248
Other assets and deferred charges                           3,360     3,526
Deferred income taxes                                       2,886     2,886
                                                         --------  --------
  Total assets                                           $122,569  $122,986
                                                         ========  ========
 
    LIABILITIES AND SHAREHOLDERS' EQUITY
    ------------------------------------
 
Current liabilities:
  Accounts payable                                        $  3,344   $  3,531
  Accrued expenses                                          20,458     22,065
  Income taxes payable                                       1,731      1,448
  Current portion of long-term debt                            279        277
                                                          --------   --------
    Total current liabilities                               25,812     27,321
 
Long-term debt                                              20,428     20,634
Other liabilities                                            8,295     12,038
                                                          --------   --------
    Total liabilities                                       54,535     59,993
                                                          --------   --------
 
Shareholders' equity:
  Common stock, $.50 par value; authorized shares,
    15,000; issued shares 8,672 and 8,601                    4,336      4,300
  Additional paid-in capital                                44,189     44,708
  Retained earnings                                         56,315     50,791
  Less treasury stock, at cost, 2,941 and 2,941 shares     (36,806)   (36,806)
                                                          --------   --------
    Total shareholders' equity                              68,034     62,993
                                                          --------   --------
    Total liabilities and shareholders' equity            $122,569   $122,986
                                                          ========   ========
</TABLE>

                                       3
<PAGE>
 
                    THE UNION CORPORATION AND SUBSIDIARIES
                Condensed Consolidated Statements of Operations
                                  (Unaudited)
               For the Nine Months Ended March 31, 1997 and 1996
               (Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
 
 
                                                    1997      1996
                                                  --------  --------
<S>                                               <C>       <C>
 
Operating revenues                                $89,892   $75,293
                                                  -------   -------
 
Expenses:
  Operating expenses                               58,789    49,421
  Selling, general and administrative expenses     17,900    15,219
  Depreciation and amortization                     3,426     3,033
                                                  -------   -------
 
  Total expenses                                   80,115    67,673
                                                  -------   -------
 
Operating income                                    9,777     7,620
 
Interest expense                                   (1,060)   (1,120)
Interest income                                     1,151     1,121
                                                  -------   -------
 
Income from continuing operations
  before income taxes                               9,868     7,621
 
Provision for income taxes                          4,344     3,353
                                                  -------   -------
 
Income from continuing operations                   5,524     4,268
 
Discontinued operations loss provision
  (net of tax benefit of $935)                          -    (2,065)
                                                  -------   -------
 
Net income                                        $ 5,524   $ 2,203
                                                  =======   =======
 

Primary and fully diluted income (loss) per common share:

  Income from continuing operations                  $.94     $ .74
  Discontinued operations loss provision                -      (.36)
                                                     ----     -----
  Net income                                         $.94     $ .38
                                                     ====     =====
 
Average number of common and common equivalent
 shares outstanding:
  Primary                                       5,905,684 5,766,198
  Fully diluted                                 5,906,706 5,789,978
</TABLE> 

                                       4
<PAGE>
 
                    THE UNION CORPORATION AND SUBSIDIARIES
                Condensed Consolidated Statements of Operations
                                  (Unaudited)
              For the Three Months Ended March 31, 1997 and 1996
               (Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
 
 
                                                    1997      1996
                                                  --------  --------
<S>                                               <C>       <C>
 
Operating revenues                                $32,174   $27,237
                                                  -------   -------
 
Expenses:
  Operating expenses                               20,099    16,963
  Selling, general and administrative expenses      6,501     5,563
  Depreciation and amortization                     1,100     1,015
                                                  -------   -------
 
  Total expenses                                   27,700    23,541
                                                  -------   -------
 
Operating income                                    4,474     3,696
 
Interest expense                                     (364)     (332)
Interest income                                       405       373
                                                  -------   -------
 
Income before income taxes                          4,515     3,737
 
Provision for income taxes                          1,989     1,644
                                                  -------   -------
 
Net income                                        $ 2,526   $ 2,093
                                                  =======   =======
 
Primary and fully diluted net 
income per common share                           $   .43   $   .36
                                                  =======    ====== 
           

Average number of common and common equivalent
 shares outstanding:
  Primary                                       5,907,467 5,824,765
  Fully diluted                                 5,907,499 5,825,615

</TABLE> 

                                       5
<PAGE>
 
                    THE UNION CORPORATION AND SUBSIDIARIES
          Condensed Consolidated Statements of Cash Flows (Unaudited)
               For the Nine Months Ended March 31, 1997 and 1996
                                (In thousands)

<TABLE>
<CAPTION>
 
                                                                         1997       1996
                                                                      -------    -------
<S>                                                                  <C>        <C>

Cash Flows From Operating Activities:
Net income                                                            $ 5,524    $ 2,203
Adjustments to reconcile net income to net cash
  provided by operations:
 Discontinued operations loss provision, net of tax benefit                 -      2,065
 Depreciation and amortization                                          3,426      3,033
 Deferred compensation expense                                            290        290
 Non-cash compensation expense                                              -        391
 Provision for doubtful accounts                                          298        136
 Provision for deferred income taxes                                    1,350      2,190
Changes in assets and liabilities:
  Accounts receivable - (increase)                                     (1,153)    (1,054)
  Prepaid expenses and other current assets - decrease (increase)         251       (610)
  Other assets and deferred charges - decrease (increase)                 166     (1,136)
  Accounts payable and accrued expenses - (decrease) increase          (5,719)       945
  Income taxes payable - increase (decrease)                              283       (312)
  Other liabilities - (decrease)                                         (108)    (1,676)
                                                                      -------    -------
Net cash  provided by operating activities                              4,608      6,465
                                                                      -------    -------
Cash Flows From Investing Activities:
 Capital expenditures                                                  (2,065)      (976)
 Additional purchase price related to the
  purchase of Allied Bond & Collection Agency                            (192)      (199)
 Other                                                                     14         38
                                                                      -------    -------
Net cash (used by) investing activities                                (2,243)    (1,137)
                                                                      -------    -------
 
Cash Flows From Financing Activities:
 Principal payments on long-term debt                                     (90)       (82)
 Principal payments on capital lease obligations                         (114)       (77)
 Fair market value of shares of common stock received
  from an optionee to satisfy withholding tax obligation                 (868)         -
 Proceeds from the exercise of stock options                              385        690
                                                                      -------    -------
Net cash (used by) provided by financing activities                      (687)       531
                                                                      -------    -------
 
Net increase in cash and short-term  investments                        1,678      5,859
 
Cash and short-term investments at June 30                             43,163     36,735
                                                                      -------    -------
 
Cash and short-term investments at March 31                           $44,841    $42,594
                                                                      =======    =======
 
Supplemental disclosures of cash flow information:
 Interest paid                                                        $ 1,049    $ 1,143
 Income taxes paid                                                      2,711      1,475
 
</TABLE>

                                       6
<PAGE>
 
                    THE UNION CORPORATION AND SUBSIDIARIES
                      Condensed Consolidated Statement of
                       Shareholders' Equity (Unaudited)
                   For the Nine Months Ended March 31, 1997
                            (Dollars in thousands)

<TABLE>
<CAPTION>
 
 
                                               Additional
                                      Common     paid-in    Retained   Treasury
                                       stock     capital    earnings    stock
                                      -------  -----------  --------  ----------
<S>                                   <C>      <C>          <C>       <C>
 
Balance at June 30, 1996               $4,300     $44,708    $50,791   $(36,806)
 
Net income                                  -           -      1,557          -
 
Proceeds from common stock issued
    upon exercise of stock options
    (67,613 shares, net)                   34        (570)         -          -
                                       ------     -------    -------  ---------
 
Balance at September 30, 1996           4,334      44,138     52,348    (36,806)
 
Net income                                  -           -      1,441          -
 
Proceeds from common stock issued
    upon exercise of stock options
    (2,333 shares)                          1          28          -          -
                                       ------     -------    -------  ---------
 
Balance at December 31, 1996            4,335      44,166     53,789    (36,806)
 
Net income                                  -           -      2,526          -
 
Proceeds from common stock issued
    upon exercise of stock options
    (1,665 shares)                          1          23          -          -
                                       ------     -------    -------  ---------
 
Balance at March 31, 1997              $4,336     $44,189    $56,315   $(36,806)
                                       ======     =======    =======  =========
 
</TABLE>

During the quarter ended September 30, 1996, options were exercised to purchase
131,000 shares of common stock of the Company and the optionee elected to pay
the aggregate exercise price of these options by surrendering to the Company
56,050 shares of common stock of the Company, previously acquired by the
optionee, that had a fair market value on the date of exercise equal to the
aggregate exercise price.  In addition, the optionee elected to satisfy the
withholding tax obligations resulting from such exercise by surrendering 12,977
shares of common stock of the Company previously acquired by the optionee and
21,524 shares of common stock of the Company acquired by the optionee in
conjunction with the exercise of the options.  The shares surrendered to satisfy
the withholding tax obligations were valued at the fair market value on the date
of exercise of the options.

                                       7
<PAGE>
 
                    THE UNION CORPORATION AND SUBSIDIARIES

       Notes to Condensed Consolidated Financial Statements (Unaudited)
 

     The amounts set forth in this Form 10-Q have not been audited by
independent auditors; however, in the opinion of the management of The Union
Corporation (the "Company"), all adjustments (including normal recurring
accruals) necessary for a fair statement of the results of such periods have
been made.

     The financial statements included in this Form 10-Q are presented in
accordance with the requirements of the form and may not include all disclosures
required by generally accepted accounting principles. For additional
information, reference is made to the Company's Annual Report for the year ended
June 30, 1996.



1. Discontinued Operations
   -----------------------

     The Company reached agreements with the federal government in January 1996,
subject to certain agency approvals and final approval by the Court, which
approvals were given in August 1996, to settle the previously reported matters
involving false pricing information and claims made by certain senior officers
of the Company's former Gichner Systems Group division (the "Gichner Division").
In accordance with the agreements, which recognize the Company's co-operation in
and substantial contribution to the investigation of these matters, the Company
fulfilled its commitment to make compensation for the government's civil claims
by paying $5,550,000 in September 1996. The Company also accepted responsibility
for the actions of the officers of the former Gichner Division by entering a
plea of guilty under the federal False Claims Act, although those actions were
concealed from the management of the Company, and paid a fine of $250,000 in
August 1996. As previously reported, the Company recorded a $3,000,000 loss
provision ($2,065,000 net of tax benefit), or $.36 loss per share, during the
second quarter of fiscal 1996 for its Discontinued Operations, which provision,
combined with amounts previously reserved in connection with these matters,
covered all costs of the above settlements with the government, and included an
accrual for the estimated legal and accounting fees related to the government
claims and other costs related to certain discontinued operations of the
Company, all of which were terminated or otherwise disposed of prior to fiscal
1990. The net loss provision of $2,065,000 was included in the Condensed
Consolidated Statements of Operations under the caption "Discontinued operations
loss provision" beginning in the second quarter of fiscal 1996.

     As previously reported, the Company also recorded an $8,000,000 loss
provision ($5,200,000 net of tax benefit), or $.92 loss per share, during the
third quarter of fiscal 1995 for costs related to certain of its discontinued
operations, all of which were terminated or otherwise disposed of prior to
fiscal 1990.  This provision was recorded as a result of developments regarding
the former Gichner 

                                       8
<PAGE>
 
Division (discussed in the preceding paragraph) and environmental matters,
principally involving a site where an inactive subsidiary of the Company fully
performed a settlement with the federal government which has reopened the
matter. The net loss provision of $5,200,000 was included in the Condensed
Consolidated Statements of Operations under the caption "Discontinued operations
loss provision" beginning in the third quarter of fiscal 1995.

     The $8,000,000 loss provision included an accrual of $3,500,000 for
estimated legal and accounting fees and settlement costs which were expected to
be incurred as a result of government claims for the matter involving the former
Gichner Division and the estimated legal costs to defend the Company against the
claims asserted by the purchaser of the Gichner Division.  The $8,000,000 loss
provision also included $4,000,000 for environmental matters and approximately
$500,000 of costs incurred by the Company during the quarter ended March 31,
1995 for the Gichner Division and environmental matters.

     See Part II, Item 1 of this Form 10-Q for additional information regarding
these discontinued operations and claims in connection with the sale of the
former Gichner Division.

                                       9
<PAGE>
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                  (UNAUDITED)

Liquidity and Capital Resources
-------------------------------

     The Company's financial condition remained very strong and liquid at March
31, 1997 with cash and short-term investments totaling $44,841,000, working
capital of $33,278,000 and net worth of $68,034,000.  During the nine months
ended March 31, 1997, the net cash provided by operating activities was
$4,608,000 compared to $6,465,000 a year ago.  This decrease was principally the
result of the $5,800,000 aggregate payment made to the federal government
regarding the matters involving the former Gichner Division of the Company (See
Note 1 of Notes to Condensed Consolidated Financial Statements and the section
titled "Gichner Systems Group Division" of Part II, Item 1 of this Form 10-Q for
additional information).  Excluding the aggregate payment to the federal
government, the net cash provided by operating activities was $10,408,000, an
increase of $3,943,000 compared to a year ago.  This increase was principally
the result of improved year-to-date operating results at the preexisting
accounts receivable management companies and the inclusion of the results of new
outsourcing companies. The nine months ended March 31, 1996 also included an
increase in other current assets and other assets of $1,250,000 for cash
deposited into a trust established to fund deferred bonuses for a chairman of a
subsidiary of the Company.

     The Company's capital spending during the nine months ended March 31, 1997
was $2,065,000 compared with $976,000 a year ago.  This increase was principally
attributable to the purchase of computer and office equipment and leasehold
improvements by Interactive Performance, Inc. ("Interactive Performance") and
High Performance Services, Inc. ("High Performance Services"), primarily in
connection with the start-up of the new outsourcing businesses.

     As of May 7, 1997, the Company holds approximately 2,941,000 shares of its
common stock at an aggregate cost of approximately $36,806,000.  On April 30,
1997, the Company announced that it may repurchase, from time to time, up to
$15,000,000 of the Company's common stock.  Such repurchases by the Company of
its common stock will be made with currently available funds and/or funds
generated from operations.

     Interactive Performance and High Performance Services, wholly-owned
subsidiaries of the Company, signed multi-year contracts in fiscal 1996 to
provide outsourcing services to AT&T Corp. and Advanta Corp., respectively.  As
previously announced, Interactive Performance is also providing outsourcing
services to Lucent Technologies under a letter of intent.  The Company began
providing services to AT&T Corp. late in the third quarter of fiscal 1996 while
services for Advanta Corp. and Lucent Technologies began late in the fourth
quarter of fiscal 1996.

     In December 1992, the Company completed the acquisition of Allied Bond &
Collection Agency ("Allied Bond") for an initial purchase price of approximately
$40,300,000. In addition, contingent payments not to exceed approximately
$8,300,000 may be payable by the Company based upon Allied Bond attaining
certain earnings levels over the five and one-half year period ending June 

                                       10
<PAGE>
 
30, 1998. As of March 31, 1997, approximately $1,096,000 of such contingent
payments have been made. The acquisition was financed in part from $20,000,000
borrowed under an existing unsecured $25,000,000 two year revolving line of
credit furnished by a bank (the "Credit Agreement"). During fiscal 1996, the
bank extended the revolving line of credit until December 31, 1998, at which
time the revolving line of credit will convert to a three year term loan.

     Under the new terms of the Credit Agreement, the aggregate principal amount
outstanding,  which is limited to a maximum of $20,000,000, under the revolving
line of credit on December 31, 1998 must be repaid by the Company in twelve
quarterly installments commencing March 31, 1999 and ending December 31, 2001.
Each of the first eleven installments must be in an amount equal to one-
twentieth of the outstanding loan balance on December 31, 1998, with the twelfth
installment equal to the amount necessary to repay the then unpaid principal
amount of the loan.  The loans bear interest, at the Company's option, at either
the bank's base rate, which is announced by the bank from time to time; or at
3/4% above the bank's Eurodollar rate during both the revolving and term loan
periods.  The interest rate, which is reset periodically, on the revolving term
loan was approximately 6.19% at March 31, 1997.

     The maximum amount of letters of credit that the bank will issue under the
Credit Agreement is currently limited to $5,000,000.  As of May 7, 1997, the
Company was contingently liable for outstanding letters of credit aggregating
approximately $3,725,000 which reduced the amount currently available for
letters of credit under the Credit Agreement to approximately $1,275,000.

     Pursuant to a March 1995 amendment (the "Amendment") to the Company's
employment agreement with the Chairman of the Company (the "Employment
Agreement"), an amount equal to the discounted net present value of the deferred
compensation payable to the Chairman under the Employment Agreement will,
together with certain other amounts, be paid to the Chairman at the time of his
retirement.  The discounted net present value of the deferred compensation at
March 31, 1997 was approximately $3,100,000, which amount is included in
"Accrued expenses" in the Condensed Consolidated Balance Sheet.  The Amendment
also extends the term of the Chairman's employment to December 31, 1997 and
provides for the Company to deposit into a trust, at the time of the Chairman's
retirement, an amount equal to the discounted net present value of the aggregate
consulting fees to be paid by the Company to the Chairman for consulting
services to be rendered by the Chairman for a period of up to ten years
following his retirement; previously such consulting services were to be
rendered by the Chairman for the remainder of his life.  The discounted net
present value of the aggregate consulting fees was approximately $2,500,000 at
March 31, 1997, which will be expensed as the services are rendered.

     In accordance with the employment agreement dated July 1, 1995 with the
chairman of a subsidiary of the Company, the subsidiary deposited approximately
$1,500,000 into a trust during fiscal 1996, which represented the deferred
bonuses, and related interest, previously earned by the chairman.  In accordance
with the agreement, the chairman withdrew $250,000 in January 1996 and may
withdraw $250,000 each January thereafter until the entire amount deposited in
the trust, including all earnings and net of any losses, has been paid.  The
chairman may also withdraw the 

                                       11
<PAGE>
 
balance remaining in the trust upon retirement. As of March 31, 1997, $250,000
of the balance remaining in the trust is included in the Condensed Consolidated
Balance Sheet in "Prepaid and other current assets" and approximately $1,000,000
is included in "Other assets and deferred charges".

     The Company and its subsidiaries are involved in litigation and
administrative proceedings described in Part II, Item 1 of this Form 10-Q.  The
Company periodically reviews and updates the status of these matters and the
past costs incurred with respect to each.  Estimates of future costs are based
upon currently available data.

     Management believes that reserves established to meet known and potential
environmental liabilities for the pending environmental proceedings referred to
above are adequate based on current information.  The Company does not
anticipate, based on current information, that the resolution of the Legal
Proceedings and the matters relating to Discontinued Operations described in
Part II, Item 1 of this Form 10-Q will have a material adverse impact on the
Company's overall financial condition given its available cash and short-term
investments, nor that the resolution of the Legal Proceedings described on page
16 will have a material adverse impact on the Company's future results of
operations.  However, there is no way to be certain that future developments
relating to the environmental matters, or the matters involving the Company's
former Gichner Systems Group division described in Part II, Item 1 of this Form
10-Q, will not involve additional substantial costs that may require future
charges to the Discontinued operations loss provision.

     Management believes that current cash and short-term investments and the
Company's future cash flows from operations are sufficient to provide for
anticipated working capital, debt service, stock repurchases and capital
expenditure requirements.


Nine Months Ended March 31, 1997  vs. Nine Months Ended March 31, 1996
----------------------------------------------------------------------

Operating Revenues
------------------

     Operating revenues increased by 19% to $89,892,000 for the nine months
ended March 31, 1997 compared with $75,293,000 for the nine months ended March
31, 1996 reflecting increases at Transworld Systems Inc. ("Transworld Systems")
and Capital Credit Corporation ("Capital Credit") and, most significantly, the
inclusion of revenues from the Company's Interactive Performance and High
Performance Services subsidiaries, which began operations late in the third and
fourth quarters of fiscal 1996, respectively.  Revenues at Transworld Systems
were $45,449,000 for the nine months ended March 31, 1997 compared with
$43,267,000 a year ago.  Revenues at Capital Credit increased by 12% for the
nine months ended March 31, 1997 compared with a year ago, which was the result
of an increase in the dollar value of accounts placed for collection from its
clients.  Allied Bond reported a 3% decrease in revenues compared with a year
ago primarily resulting from a decrease in the number of collectors employed by
Allied Bond and lower commission rates, partially offset by an increase in
revenues from a collection program being performed by Allied Bond to cure
delinquent student loans.

                                       12
<PAGE>
 
Operating Expenses
------------------

     Operating expenses increased by $9,368,000 for the nine months ended March
31, 1997 compared with the nine months ended March 31, 1996.  The increase was
attributable to increases in operating expenses at Transworld Systems and
Capital Credit, which expenses increased at rates proportionately less than the
rates of increase in revenues at the respective companies, and, most
significantly, the inclusion of the operating expenses of Interactive
Performance and High Performance Services, partially offset by a decrease in
operating expenses at Allied Bond.

Selling, General and Administrative Expenses
--------------------------------------------

     Selling, general and administrative expenses increased by $2,681,000 for
the nine months ended March 31, 1997 compared with the nine months ended March
31, 1996.  The increase was attributable to the inclusion of the selling,
general and administrative expenses of Interactive Performance and High
Performance Services, and increases in expenses at Transworld Systems, Capital
Credit, Allied Bond and the Corporate office.  The increase in Corporate office
expenses primarily resulted from increases in professional fees and compensation
expense.

Depreciation and Amortization
-----------------------------

     Depreciation and amortization expense increased by $393,000 for the nine
months ended March 31, 1997 compared with the nine months ended March 31, 1996
due to the inclusion of the depreciation expense of Interactive Performance and
High Performance Services, partially offset by decreases in depreciation expense
at Transworld Systems, Capital Credit and Allied Bond.

Operating Income
----------------

     Operating income increased by 28% to $9,777,000 for the nine months ended
March 31, 1997 compared with $7,620,000 for the nine months ended March 31,
1996.  This increase was due to increases at Transworld Systems, Capital Credit
and Allied Bond, and the inclusion of the operating results of Interactive
Performance and High Performance Services, partially offset by an increase in
Corporate office expenses.  Transworld Systems reported operating income, before
amortization of goodwill, of $10,869,000 for the nine months ended March 31,
1997, an increase of 11%, compared with $9,797,000 a year ago, principally
reflecting the increase in its revenues and an operating margin of 24%, before
amortization of goodwill, for the nine months ended March 31, 1997.  Capital
Credit's operating income increased significantly for the nine months ended
March 31, 1997 compared with a year ago.  Allied Bond reported a substantial
improvement in operating income, before amortization of goodwill and
depreciation expense related to its acquisition, for the nine months ended March
31, 1997 compared to a year ago despite a 3% decrease in revenues compared with
a year ago.

                                       13
<PAGE>
 
Interest Expense and Interest Income
------------------------------------

     Interest expense decreased by $60,000 for the nine months ended March 31,
1997 compared with a year ago principally due to a decrease in the interest rate
charged for the borrowings under the Credit Agreement.  Interest income
increased by $30,000 for the nine months ended March 31, 1997 compared with a
year ago.  During the nine months ended March 31, 1997 and 1996, the Company
primarily invested in commercial paper with short-term maturities and overnight
time deposits.

Income Taxes
------------

     The Company's effective income tax rate for continuing operations was 44%
for the nine months ended March 31, 1997 and 1996.


Three Months Ended March 31, 1997  vs. Three Months Ended March 31, 1996
------------------------------------------------------------------------

Operating Revenues
------------------

     Operating revenues increased by 18% to $32,174,000 for the three months
ended March 31, 1997 compared with $27,237,000 for the three months ended March
31, 1996 reflecting increases at Transworld Systems, Capital Credit and Allied
Bond and, most significantly, the inclusion of revenues from the Company's
Interactive Performance and High Performance Services subsidiaries, which began
operations late in the third and fourth quarters of fiscal 1996, respectively.
Revenues at Transworld Systems were $15,993,000 for the three months ended March
31, 1997 compared with $15,277,000 a year ago.  Revenues at Capital Credit were
essentially unchanged for the three months ended March 31, 1997 compared with a
year ago.  Allied Bond reported a 7% increase in revenues compared with a year
ago primarily resulting from an increase in revenues from a collection program
being performed by Allied Bond to cure delinquent student loans.

Operating Expenses
------------------

     Operating expenses increased by $3,136,000 for the three months ended March
31, 1997 compared with the three months ended March 31, 1996.  The increase was
attributable to an increase in operating expenses at Transworld Systems, which
expenses increased at a rate proportionately less than the rate of increase in
revenues at Transworld Systems, and, most significantly, the inclusion of the
operating expenses of Interactive Performance and High Performance Services.
Operating expenses at Capital Credit and Allied Bond were essentially unchanged
compared with a year ago.

                                       14
<PAGE>
 
Selling, General and Administrative Expenses
--------------------------------------------

     Selling, general and administrative expenses increased by $938,000 for the
three months ended March 31, 1997 compared with the three months ended March 31,
1996.  The increase was attributable to the inclusion of the selling, general
and administrative expenses of Interactive Performance and High Performance
Services, and increases in expenses at Transworld Systems, Allied Bond and the
Corporate office, partially offset by a slight decrease in expenses at Capital
Credit.  The increase in Corporate office expenses primarily resulted from
increases in professional fees and compensation expense.

Depreciation and Amortization
-----------------------------

     Depreciation and amortization expenses increased by $85,000 for the three
months ended March 31, 1997 compared with the three months ended March 31, 1996
due to the inclusion of the depreciation expense of Interactive Performance and
High Performance Services, partially offset by decreases in depreciation expense
at Transworld Systems, Capital Credit and Allied Bond.

Operating Income
----------------

     Operating income increased by 21% to $4,474,000 for the three months ended
March 31, 1997 compared with $3,696,000 for the three months ended March 31,
1996.  This increase was due to increases at Transworld Systems, Capital Credit
and Allied Bond, and the inclusion of the operating results of Interactive
Performance and High Performance Services, partially offset by an increase in
Corporate office expenses.  Transworld Systems reported operating income, before
amortization of goodwill, of $4,269,000 for the three months ended March 31,
1997, an increase of 9%, compared with $3,918,000 a year ago, principally
reflecting the increase in its revenues and an operating margin of 27%, before
amortization of goodwill, for the three months ended March 31, 1997. Operating
income at Capital Credit and Allied Bond increased significantly for the three
months ended March 31, 1997 compared with a year ago.

Interest Expense and Interest Income
------------------------------------

     Interest expense increased by $32,000 for the three months ended March 31,
1997 compared with a year ago.  Interest income increased by $32,000 for the
three months ended March 31, 1997 compared with a year ago.  During the three
months ended March 31, 1997 and 1996, the Company primarily invested in
commercial paper with short-term maturities and overnight time deposits.

Income Taxes
------------

     The Company's effective income tax rate was 44% for the three months ended
March 31, 1997 and 1996.

                                       15
<PAGE>
 
Part II - Other Information (Unaudited)
---------------------------------------

Item 1.  Legal Proceedings:
-------------------------- 

     In addition to the continuing environmental clean-up efforts and other
matters described below, the Company and certain subsidiaries are parties to a
number of lawsuits arising in the ordinary course of business.

     In a lawsuit brought in 1993 by three individuals engaged by Transworld
Systems as independent contractors, in which it was alleged that Transworld
Systems has improperly treated the plaintiffs as independent contractors rather
than employees, all of the asserted claims were dismissed by the Court in 1996
with prejudice.

     Some of the same persons and others have also brought suit against
Transworld Systems and certain of its directors and officers, alleging breach of
contract and mental distress as a result of Transworld Systems' failure to
supply plaintiffs with certain business information including copies of a
monthly publication distributed by Transworld Systems.  Several persons have
also brought suit alleging wrongful termination.  The claims in these actions
against Transworld Systems have been reviewed by counsel and, based upon their
assessment, management has concluded that the claims are without merit.

     Five alleged class actions are currently pending against Transworld Systems
and one alleged class action is currently pending against Allied Bond, which
actions have been brought by debtors who received written collection notices
from either Transworld Systems or its Credit Management Services division, or
Allied Bond, respectively. Plaintiffs in these actions allege that such letters
violated various provisions of the federal Fair Debt Collection Practices Act or
comparable state regulations. Allied Bond has agreed to settle the action
brought against it for an immaterial amount, subject to court approval. A United
States Magistrate Judge appointed in one of the alleged class actions against
Transworld Systems has, upon motion of Transworld Systems, recommended that the
District Court Judge in the case grant summary judgment in favor of Transworld
Systems. Of the four other class actions against Transworld Systems, the claims
in two actions have been reviewed by counsel to Transworld Systems and, based on
their assessment, management has concluded that the claims are of doubtful
merit; the other two actions were only recently served on Transworld Systems
and, accordingly, no assessment of the claims in those cases has yet been made.
Transworld Systems intends to vigorously defend each of these actions.

     Based on current estimates and information, the Company does not believe
that the ultimate resolution of the above lawsuits will have a material adverse
impact on the Company's overall financial condition or future results of
operations.

                                       16
<PAGE>
 
Gichner Systems Group Division:

     The Company sold the assets and business of the Company's Gichner Systems
Group division (the "Gichner Division") to Gichner Systems Group, Inc. (the
"Purchaser") in 1989 and, accordingly, reflected the Gichner Division as a
discontinued operation in the Company's Consolidated Statements of Operations.
In 1991 the Purchaser informed the Company that false pricing information might
have been supplied by former officers of the Gichner Division, who were also
members of the group that purchased the Gichner Division from the Company and
who were officers of the Purchaser, in connection with certain government
contracts negotiated prior to the sale.  After investigation, the former
officers who were then working for the Purchaser were terminated for cause by
the Purchaser, and the Company and Purchaser tendered to the Department of
Defense a report of the results of their investigation.

     The Company reached agreements with the federal government in January 1996,
subject to certain agency approvals and final approval by the Court, which
approvals were given in August 1996, to settle the government's claims against
the Company.  In accordance with the agreements, which recognize the Company's
co-operation in and substantial contribution to the investigation of these
matters, the Company fulfilled its commitment to make compensation for the
government's civil claims by paying $5,550,000 in September 1996.  The Company
also accepted responsibility for the actions of the officers of the former
Gichner Division by entering a plea of guilty under the federal False Claims
Act, although those actions were concealed from the management of the Company,
and paid a fine of $250,000 in August 1996.

     The Purchaser, which has pled guilty to obstruction of justice as a result
of its hindrance of the government's investigation and its destruction of
documents related to this matter, commenced suit against the Company in which it
alleges misrepresentation and breach by the Company of the provisions of the
Purchase Agreement and asserts claims for damages and indemnification.  The
Company denies each of the claims and intends to vigorously defend this action.
Although management believes the reserve established for this matter is adequate
based on current information, there is no way to be certain that future
developments will not involve additional substantial costs that may require
future charges to the Discontinued operations loss provision.  The Company does
not anticipate, based on current information, that the resolution of this matter
will have a material adverse impact on the Company's overall financial condition
given its available cash and short-term investments.

     Two former officers of the Gichner Division filed suit against the Company
for retirement benefits which the Company terminated when their alleged
misconduct was reported to the Company. All of their claims, and their refiled
claims, have been dismissed by the Court.  The Company has counterclaimed for
damages resulting from the misconduct of the two former officers of the Gichner
Division.  Appeals are pending in these matters.  The estate of a third former
officer of the Gichner Division has filed suit against the Company for similar
claims, which the Company denies and intends to vigorously defend.

                                       17
<PAGE>
 
Environmental Matters:

     Current commercial operations of the Company and its subsidiaries do not
involve activities affecting the environment.  However, the Company is a party
in several pending environmental proceedings involving the federal Environmental
Protection Agency ("EPA") and comparable state agencies in Indiana, Maryland,
Massachusetts, New Jersey, Ohio, Pennsylvania, South Carolina and Virginia.  All
of these matters relate to discontinued operations of former divisions or
subsidiaries for which the Company has potential continuing responsibility.

     One group of the Company's known environmental proceedings relates to
Superfund or other sites where the Company's liability arises from arranging for
the disposal of allegedly hazardous substances in the ordinary course of prior
business operations.  In most of these "generator" liability cases, the
Company's involvement is considered to be de minimus (i.e. a volumetric share of
approximately 1% or less) and in each of these cases the Company is only one of
many potentially responsible parties.  From the information currently available,
there are a sufficient number of other economically viable participating parties
so that the Company's projected liability, although potentially joint and
several, is consistent with its allocable share of liability.  At one
"generator" liability site, the Company's involvement is potentially more
significant because of the volume of waste contributed in past years by a
currently inactive subsidiary.  Insufficient information is available regarding
the need for or extent and scope of any remedial actions which may be required.
The Company has recorded what it believes to be a reasonable estimate of its
potential liability, based on current information, for this site.

     The second group of matters relates to environmental issues on properties
currently or formerly owned or operated by a subsidiary or division of the
Company.  These cases generally involve matters for which the Company or an
inactive subsidiary is the sole or primary responsible party.  In one such case,
however, although the affected subsidiary fully performed a settlement with the
federal government, the government has reopened the matter.  A group of
financially solvent responsible parties has completed an extensive investigation
of this Superfund site under a consent order with the EPA and submitted Remedial
Investigation and Feasibility Study Reports (the "Reports") to the EPA, which
outline a range of various remedial alternatives for the site.  The EPA issued a
proposed plan which was subject to public comment.  The Company's environmental
counsel retained two environmental consulting firms to review and evaluate the
Reports and proposed plan. The findings of these consulting firms indicated that
many of the assumptions, purported facts and conclusions contained in the
Reports and proposed plan are significantly flawed and such findings have been
submitted to the EPA.  Notwithstanding the foregoing and the Company's denial of
liability because of the prior settlement with the government, the $8,000,000
loss provision recorded during the third quarter of fiscal 1995 for costs
related to certain of its discontinued operations, all of which were terminated
or otherwise disposed of prior to fiscal 1990, included a provision of
approximately $4,000,000 for environmental matters.  The provision for
environmental matters included the estimated legal and consulting costs for this
and other sites involving the Company or an inactive subsidiary, the estimated
costs to defend the Company's aforementioned settlement with the government
regarding this site, and the estimated remediation costs that the Company will
incur, 

                                       18
<PAGE>
 
based on current information, if its prior settlement with the government is not
upheld in court. However, the Company may be exposed to additional substantial
liability for this site as additional information becomes available over the
long-term. A better estimate of costs associated with any further remediation to
be taken at the site cannot be made until a Record of Decision is issued by the
EPA, which is expected to be issued within the next twelve months. Actual
remediation costs cannot be computed until such remedial action is completed.
Some of the other sites involving the Company or an inactive subsidiary are at a
stage where an assessment of liability, if any, cannot reasonably be made.

     It is the Company's policy to comply fully with all laws regulating
activities affecting the environment and to meet its obligations in this area.
In many "generator" liability cases, reasonable cost estimates are available on
which to base reserves on the Company's likely allocated share among viable
parties.  Where insufficient information is available regarding projected
remedial actions for these "generator" liability cases, the Company has recorded
what it believes to be reasonable estimates of its potential liabilities.
Reserves for liability for sites on which former operations were conducted are
based on cost estimates of remedial actions projected for these sites.  All
known environmental claims are periodically reviewed by the Company, where
information is available, to provide reasonable assurance that adequate reserves
are maintained.  Reserves recorded for environmental liabilities are not net of
insurance or other expected recoveries.  Other than the aforementioned loss
provision that was recorded by the Company during the third quarter of fiscal
1995, no significant expenses related to environmental matters were recorded by
the Company during the nine months ended March 31, 1997 or the three years ended
June 30, 1996 due to the adequacy of previously recorded reserve balances based
on information available at that time. Management believes that reserves
established to meet known and potential environmental liabilities are adequate
based on current information.  The Company does not anticipate, based on current
information, that the resolution of these matters will have a material adverse
impact on the Company's overall financial condition given its available cash and
short-term investments.  However, there is no way to be certain that future
developments relating to environmental matters will not involve additional
substantial costs that may require future charges to the Discontinued operations
loss provision.

                                       19
<PAGE>
 
Item 6.  Exhibits and Reports on Form 8-K:
----------------------------------------- 


(a)  Exhibits:
     -------- 

     Exhibit No. 11    Computation of Primary and Fully Diluted Earnings Per
                       Share  (Unaudited)

     Exhibit No. 27    Financial Data Schedule (Unaudited)


(b)  Reports on Form 8-K:
     ------------------- 

     There were no reports on Form 8-K filed for the three months ended March
     31, 1997.

                                       20
<PAGE>
 
                                 SIGNATURES
                                 ----------



  Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                       THE UNION CORPORATION
                                       (Registrant)



Date:  May 13, 1997                    By:    Melvin L. Cooper
                                              ------------------------------
                                              Melvin L. Cooper
                                              Chairman of the Board
                                              (Chief Executive Officer)



Date:  May 13, 1997                    By:    Nicholas P. Gill
                                              ------------------------------
                                              Nicholas P. Gill
                                              Vice President,
                                              Treasurer and Secretary
                                              (Chief Financial Officer)

                                       21