UNITED STATES


SECURITIES AND EXCHANGE
COMMISSION


Washington, D.C.
20549





FORM 10-Q





(Mark
One)





xQUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
quarterly period ended June 30,
2009




or





oTRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
transition period from 
to





Commission File Number:
1-10104





UNITED CAPITAL
      CORP.(Exact
      name of registrant as specified in its
charter)





Delaware
                04-2294493(State
      or other jurisdiction of incorporation or organization)
                (I.R.S.
      Employer Identification
No.)





9 Park Place, Great Neck,
      NY
            11021(Address
      of principal executive offices)
            (Zip
      Code)





516-466-6464(Registrant’s
      telephone number, including area code)N/A(Former
      name, former address and former fiscal year, if changed since last
      report)





Indicate
by check mark whether the 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
 ̈




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).    
Yes o    
No o


Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 
(Check one):




Large
      accelerated filer  ̈
              Accelerated
      filer  ̈Non-accelerated
      filer  ̈ (Do
      not check if a smaller reporting company)
              Smaller
      reporting company x
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).     Yes o    No
x
  The
registrant had 9,107,430 shares of common stock, $.10 par value, outstanding as
of August 11, 2009.







United
Capital Corp. and Subsidiaries
 
 Index
 PagePART I – FINANCIAL INFORMATIONITEM 1.
                          FINANCIAL STATEMENTSCondensed Consolidated Balance Sheets as of
                            June 30, 2009 (Unaudited) and December 31,
      2008
                          3Condensed Consolidated Statements of Income for
      the
                            Three and Six Months Ended June 30, 2009 and 2008
      (Unaudited)
                          4Condensed Consolidated Statements of Cash Flows for
      the
                            Six Months Ended June 30, 2009 and 2008
      (Unaudited)
                          5Notes to Condensed Consolidated Financial Statements
      (Unaudited)
                          6-13ITEM 2.
                          MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
      AND RESULTS OF OPERATIONS
                          13-18ITEM 3.
                          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK
                          18ITEM 4.
                          CONTROLS AND PROCEDURES
                          18-19PART II – OTHER INFORMATIONITEM 1.
                          LEGAL PROCEEDINGS
                          19ITEM 1A.
                          RISK FACTORS
                          19-20ITEM 2.
                          UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS
                          20ITEM 4.
                          SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS
                          21ITEM 6.
                          EXHIBITS
                          21SIGNATURES
                          21
  2
 Index
 PART I – FINANCIAL INFORMATION
 ITEM
1                      FINANCIAL
STATEMENTS
 United
Capital Corp. and Subsidiaries
 CondensedConsolidated Balance Sheets
 (In
thousands, except per share data)
 
 June
      30,
                    2009
                
                
                December
      31,2008(Unaudited)AssetCurrent
      assets:Cash
      and cash equivalents
                
                $
                142,772
                
                
                $
                138,142Marketable
      securities
                
                
                16,659
                
                
                
                9,178Notes
      and accounts receivable, net
                
                
                6,316
                
                
                
                7,427Income
      taxes receivable
                
                
                —
                
                
                
                4,163Inventories
                
                
                3,833
                
                
                
                5,624Prepaid
      expenses and other current assets
                
                
                1,592
                
                
                
                1,732Deferred
      income taxes
                
                
                2,633
                
                
                
                4,011Total
      current assets
                
                
                173,805
                
                
                
                170,277Property,
      plant and equipment, net
                
                
                5,417
                
                
                
                5,591Real
      property held for rental, net
                
                
                72,722
                
                
                
                73,060Investment
      in joint venture
                
                
                5,051
                
                
                
                5,440Noncurrent
      notes receivable
                
                
                5,711
                
                
                
                1,058Other
      assets
                
                
                3,412
                
                
                
                3,317Noncurrent
      assets of discontinued operations
                
                
                3,298
                
                
                
                4,142Total
      assets
                
                $
                269,416
                
                
                $
                262,885Liabilities
      and Stockholders’ EquityCurrent
      liabilities:Current
      maturities of long-term debt
                
                $
                1,038
                
                
                $
                2,717Accounts
      payable and accrued liabilities
                
                
                8,102
                
                
                
                10,036Income
      taxes payable
                
                
                3,945
                
                
                
                3,629Total
      current liabilities
                
                
                13,085
                
                
                
                16,382Long-term
      debt
                
                
                29,608
                
                
                
                30,146Other
      long-term liabilities
                
                
                18,135
                
                
                
                18,076Deferred
      income taxes
                
                
                7,956
                
                
                
                8,314Total
      liabilities
                
                
                68,784
                
                
                
                72,918Commitments
      and contingenciesStockholders’
      equity:Common
      stock, $.10 par value, authorized 17,500 shares;issued
      and outstanding 9,092 and 8,483 shares, respectively
                
                
                909
                
                
                
                848Retained
      earnings
                
                
                205,056
                
                
                
                197,056Accumulated
      other comprehensive loss, net of tax
                
                
                (5,333
                )
                
                
                (7,937
                )Total
      stockholders’ equity
                
                
                200,632
                
                
                
                189,967Total
      liabilities and stockholders’ equity
                
                $
                269,416
                
                
                $
                262,885
  
 The
accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
  3
 Index
  United
Capital Corp. and Subsidiaries
 Condensed Consolidated Statements of Income
 (Unaudited)
 (In
thousands, except per share data)
 
 Three
      Months Ended
                    June
      30,
                
                
                Six
      Months Ended
                    June
      30,2009
                
                
                2008
                
                
                2009
                
                
                2008Revenues:Revenues from real estate
      operations
                
                $
                8,497
                
                
                $
                9,377
                
                
                $
                16,449
                
                
                $
                17,930Net sales
                
                
                5,201
                
                
                
                9,620
                
                
                
                10,985
                
                
                
                19,519Total revenues
                
                
                13,698
                
                
                
                18,997
                
                
                $
                27,434
                
                
                
                37,449Costs
      and expenses:Cost of sales
                
                
                4,290
                
                
                
                7,647
                
                
                
                8,802
                
                
                
                15,181Real estate
      operations:Mortgage interest
      expense
                
                
                520
                
                
                
                536
                
                
                
                1,052
                
                
                
                1,050Depreciation
      expense
                
                
                960
                
                
                
                921
                
                
                
                1,900
                
                
                
                1,811Other operating
      expenses
                
                
                3,793
                
                
                
                4,393
                
                
                
                7,776
                
                
                
                8,590General and administrative
      expenses
                
                
                1,672
                
                
                
                1,622
                
                
                
                3,462
                
                
                
                3,412Selling
expenses
                
                
                743
                
                
                
                990
                
                
                
                1,561
                
                
                
                1,924Total costs and
      expenses
                
                
                11,978
                
                
                
                16,109
                
                
                
                24,553
                
                
                
                31,968Operating
income
                
                
                1,720
                
                
                
                2,888
                
                
                
                2,881
                
                
                
                5,481Other
      income (expense):Interest and dividend
      income
                
                
                827
                
                
                
                1,261
                
                
                
                1,662
                
                
                
                2,815Other income and (expense),
      net
                
                
                124
                
                
                
                (234
                )
                
                
                15
                
                
                
                (211
                )Total other income
      (expense)
                
                
                951
                
                
                
                1,027
                
                
                
                1,677
                
                
                
                2,604Income
      from continuing operations before income taxes
                
                
                2,671
                
                
                
                3,915
                
                
                
                4,558
                
                
                
                8,085Provision
      for income taxes
                
                
                988
                
                
                
                1,468
                
                
                
                1,681
                
                
                
                2,988Income
      from continuing operations
                
                
                1,683
                
                
                
                2,447
                
                
                
                2,877
                
                
                
                5,097Discontinued
      operations:(Loss)
      income from discontinued operations, net of tax (benefit) provision of
      ($37), $44, ($89) and $69, respectively
                
                
                (57
                )
                
                
                65
                
                
                
                (134
                )
                
                
                103Impairment
      of property held for sale, net of tax benefit of $260
                
                
                (390
                )
                
                
                —
                
                
                
                (390
                )
                
                
                —(Loss)
      income from discontinued operations
                
                
                (447
                )
                
                
                65
                
                
                
                (524
                )
                
                
                103Net
      income
                
                $
                1,236
                
                
                $
                2,512
                
                
                $
                2,353
                
                
                $
                5,200Basic
      earnings per share:Income from continuing
      operations
                
                $
                .19
                
                
                $
                .29
                
                
                $
                .33
                
                
                $
                .61(Loss) income from discontinued
      operations
                
                
                (.05
                )
                
                
                .01
                
                
                
                (.06
                )
                
                
                .01Net income per
      share
                
                $
                .14
                
                
                $
                .30
                
                
                $
                .27
                
                
                $
                .62Diluted
      earnings per share:Income from continuing
      operations
                
                $
                .17
                
                
                $
                .25
                
                
                $
                .30
                
                
                $
                .53(Loss) income from discontinued
      operations
                
                
                (.04
                )
                
                
                .01
                
                
                
                (.06
                )
                
                
                .01Net income per share assuming
      dilution
                
                $
                .13
                
                
                $
                .26
                
                
                $
                .24
                
                
                $
                .54
 
 
 The
accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
  4
 Index
  United
Capital Corp. and Subsidiaries
 Condensed Consolidated Statements of Cash Flows
 (Unaudited)
 (In
thousands)
 Six
      Months Ended
                      June
      30,2009
                  
                  
                  2008Cash
      flows from operating activities:Net income
                  
                  $
                  2,353
                  
                  
                  $
                  5,200Adjustments to reconcile net
      income to net cash provided by operating activities:Depreciation
      and amortization
                  
                  
                  2,091
                  
                  
                  
                  2,039Impairment
      of property held for sale, net of tax
                  
                  
                  390
                  
                  
                  
                  —Net
      loss on available-for-sale securities
                  
                  
                  104
                  
                  
                  
                  417Net
      realized and unrealized gains on derivative instruments
                  
                  
                  (139
                  )
                  
                  
                  (222
                  )Deferred
      income taxes
                  
                  
                  (382
                  )
                  
                  
                  (162
                  )Other,
      net
                  
                  
                  245
                  
                  
                  
                  (234
                  )Changes
      in assets and liabilities:Notes
      and accounts receivable, net
                  
                  
                  1,864
                  
                  
                  
                  (583
                  )Inventories
                  
                  
                  1,791
                  
                  
                  
                  307Prepaid
      expenses and other current assets
                  
                  
                  140
                  
                  
                  
                  121Accounts
      payable and accrued liabilities
                  
                  
                  (1,930
                  )
                  
                  
                  (86
                  )Income
      taxes payable
                  
                  
                  4,739
                  
                  
                  
                  (1,818
                  )Other
      long-term liabilities
                  
                  
                  (311
                  )
                  
                  
                  141Net
      cash provided by operating activities of continuing
    operations
                  
                  
                  10,955
                  
                  
                  
                  5,120Operating
      activities of discontinued operations
                  
                  
                  194
                  
                  
                  
                  111Net
      cash provided by operating activities
                  
                  
                  11,149
                  
                  
                  
                  5,231Cash
      flows from investing activities:Purchase
      of available-for-sale securities
                  
                  
                  (3,939
                  )
                  
                  
                  (24,902
                  )Proceeds/maturities
      from sale of available-for-sale securities
                  
                  
                  376
                  
                  
                  
                  997Escrowed
      proceeds from sale of real estate assets
                  
                  
                  —
                  
                  
                  
                  15,000Proceeds
      from sale of derivative instruments
                  
                  
                  135
                  
                  
                  
                  242Purchase
      of notes receivable
                  
                  
                  (5,428
                  )
                  
                  
                  —Principal
      payments on notes receivable
                  
                  
                  22
                  
                  
                  
                  23Acquisition
      of property, plant and equipment
                  
                  
                  (453
                  )
                  
                  
                  (455
                  )Acquisition
      of/additions to real estate assets
                  
                  
                  (1,112
                  )
                  
                  
                  (13,666
                  )Distributions
      from joint venture
                  
                  
                  389
                  
                  
                  
                  390Net
      cash used in investing activities of continuing operations
                  
                  
                  (10,010
                  )
                  
                  
                  (22,371
                  )Investing activities of
      discontinued operations
                  
                  
                  —
                  
                  
                  
                  133Net cash used in investing
      activities
                  
                  
                  (10,010
                  )
                  
                  
                  (22,238
                  )Cash
      flows from financing activities:Principal
      payments on mortgage obligations
                  
                  
                  (2,217
                  )
                  
                  
                  (482
                  )Purchase
      and retirement of common stock
                  
                  
                  (180
                  )
                  
                  
                  (12,808
                  )Proceeds
      from exercise of stock options
                  
                  
                  4,359
                  
                  
                  
                  9,224Tax
      benefit from exercise of stock options
                  
                  
                  1,529
                  
                  
                  
                  2,830Net
      cash provided by (used in) financing activities
                  
                  
                  3,491
                  
                  
                  
                  (1,236
                  )Net
      increase (decrease) in cash and cash equivalents
                  
                  
                  4,630
                  
                  
                  
                  (18,243
                  )Cash
      and cash equivalents, beginning of period
                  
                  
                  138,142
                  
                  
                  
                  129,003Cash
      and cash equivalents, end of period
                  
                  $
                  142,772
                  
                  
                  $
                  110,760Supplemental
      disclosures of cash flow information:Cash paid during the period
      for:Interest
                  
                  $
                  1,039
                  
                  
                  $
                  1,050Taxes
                  
                  $
                  600
                  
                  
                  $
                  1,959
 
 The
accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
  5
 Index
  United
Capital Corp. and Subsidiaries
 Notes to Condensed Consolidated Financial Statements
 (In
thousands, except per share data)
 (Unaudited)
 
 1.            
Basis of Presentation
 
 The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”) for interim financial information and with the
instructions to Form 10-Q and Article 8 of Regulation S-X, as promulgated by the
Securities and Exchange Commission (“SEC”).  Accordingly, they do not
include all information and footnotes required by GAAP for complete financial
statements.
 
 In the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for the interim
periods presented have been recorded.  These financial statements have
been prepared in conformity with the accounting principles, and methods of
applying those accounting principles, as reflected in the audited financial
statements and notes thereto included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2008 and should be read in conjunction
therewith.  The results of operations for the periods presented are
not necessarily indicative of the results to be expected for the full
year.  The Company has evaluated subsequent events through August 11,
2009, the date the financial statements were issued (see Note 17).
 
 2.            
Stockholders’ Equity
 
 Previous
purchases of the Company’s common stock have reduced the Company’s additional
paid-in-capital to zero and have also reduced retained earnings by amounts in
excess of par value.  Any future purchases in excess of par value will
also reduce retained earnings.
 
 Repurchases
of the Company’s common stock may be made from time to time in the open market
at prevailing market prices and may be made in privately negotiated
transactions, subject to available resources.  Future proceeds from
the issuance of common stock in excess of par value will be credited to retained
earnings until such time that previously recorded reductions have been
recovered.  During the six months ended June 30, 2009 and 2008, the
Company received proceeds of $4,359 and $9,224 from the exercise of 620 and 804
stock options, respectively.  During the six months ended June 30,
2009 and 2008, the Company recorded a tax benefit of $1,529 and $2,830 to
retained earnings related to the exercise of stock options.
 
 During
the six months ended June 30, 2009 and 2008, the Company purchased and retired
11 and 585 shares of common stock for an aggregate purchase price of $180 and
$12,808, respectively.
 
 3.             Earnings
Per Share
 
 The
following table sets forth the computation of basic and diluted earnings per
share from continuing operations:
 
 Three
      Months Ended
                    June
      30,
                
                
                Six
      Months Ended
                    June
      30,2009
                
                
                2008
                
                
                2009
                
                
                2008Numerator:Income from continuing
      operations
                
                $
                1,683
                
                
                $
                2,447
                
                
                $
                2,877
                
                
                $
                5,097Denominator:Basic – weighted-average shares
      outstanding
                
                
                9,076
                
                
                
                8,405
                
                
                
                8,877
                
                
                
                8,342Dilutive effect of employee
      stock options
                
                
                806
                
                
                
                1,211
                
                
                
                764
                
                
                
                1,374Diluted – weighted-average
      shares outstanding
                
                
                9,882
                
                
                
                9,616
                
                
                
                9,641
                
                
                
                9,716Basic
      earnings per share – continuing operations
                
                $
                .19
                
                
                $
                .29
                
                
                $
                .33
                
                
                $
                .61Diluted
      earnings per share – continuing operations
                
                $
                .17
                
                
                $
                .25
                
                
                $
                .30
                
                
                $
                .53
 
 Potentially
dilutive common shares, related to outstanding employee stock options, amounting
to 740 shares for the three and six months ended June 30, 2009, respectively,
were not included in the computation of diluted earnings per share because their
effect would have been anti-dilutive.
  6
 Index
 
 4.            
Stock-Based Compensation
 
 The
Company has two stock option plans, the Incentive and Non-Qualified Stock Option
Plan and the 1988 Joint Incentive and Non-Qualified Stock Option Plan, under
which qualified and non-qualified options may be granted to key employees to
purchase the Company’s common stock at the fair market value on the date of
grant.  Under both plans, the options typically become exercisable in
three equal installments, beginning one year from the date of
grant.  Stock options generally expire ten years from the date of
grant.  Currently, there are no options available for grant under
these plans.
 
 As of
June 30, 2009 and December 31, 2008, the Company had outstanding options to
purchase 3,325 and 3,945 shares with a weighted-average exercise price of $12.92
and $11.99 per share, respectively.  As of June 30, 2009, these
options had a weighted-average remaining contractual term of 2.4 years and an
aggregate intrinsic value of $20,533.  The aggregate intrinsic value
represents the difference between the Company’s closing stock price on June 30,
2009 ($18.32) and the exercise price of each option, multiplied by the number of
“in-the-money” options.  This amount changes based upon the fair
market value of the Company’s common stock.  During the six months
ended June 30, 2009, options to purchase 620 shares were exercised which had a
weighted-average exercise price of $7.03 per share.
 
 5.            
Marketable Securities
 
 The cost,
gross unrealized gains, gross unrealized losses and fair market value of
available-for-sale securities are as follows:
 Cost
                  
                  
                  Gross
                    Unrealized
                    Gains
                  
                  
                  Gross
                    Unrealized
                    Losses
                  
                  
                  Fair
                    Market
                    ValueJune
      30, 2009:Equity
    securities
                  
                  $
                  20,379
                  
                  
                  $
                  567
                  
                  
                  $
                  (4,839
                  )
                  
                  $
                  16,107Bonds
                  
                  
                  567
                  
                  
                  
                  3
                  
                  
                  
                  (18
                  )
                  
                  
                  552$
                  20,946
                  
                  
                  $
                  570
                  
                  
                  $
                  (4,857
                  )
                  
                  $
                  16,659December
      31, 2008:Equity
    securities
                  
                  $
                  16,440
                  
                  
                  $
                  1,050
                  
                  
                  $
                  (9,184
                  )
                  
                  $
                  8,306Bonds
                  
                  
                  1,031
                  
                  
                  
                  4
                  
                  
                  
                  (163
                  )
                  
                  
                  872$
                  17,471
                  
                  
                  $
                  1,054
                  
                  
                  $
                  (9,347
                  )
                  
                  $
                  9,178
 
 Proceeds/maturities
from the sale of available-for-sale securities as well as the gains and losses
recognized in earnings on available-for-sale securities included in the
determination of net income are as follows:
 
 Six
      Months Ended
                    June
      30,2009
                
                
                2008Proceeds/maturities
                
                $
                376
                
                
                $
                997Gains
      recognized in earnings
                
                $
                —
                
                
                $
                32Losses
      recognized in earnings
                
                $
                (104
                )
                
                $
                (449
                )
 
 6.             Inventories
 
 The
components of inventories are as follows:
 June
      30,
                    2009
                
                
                December
      31, 2008Raw
      materials
                
                $
                1,811
                
                
                $
                2,607Work
      in process
                
                
                322
                
                
                
                458Finished
      goods
                
                
                1,700
                
                
                
                2,559$
                3,833
                
                
                $
                5,624
  7
 Index
 7.             Real
Estate
 Property
acquisitions
 
 During
January 2008, the Company purchased two commercial properties located in
Michigan for approximately $13,600.  These properties were purchased
using funds available from a property sold during 2007 in connection with a
Section 1031 tax-deferred exchange.
 
 Property
sales
 
 The
results of operations of properties sold prior to June 30, 2009, consisting
primarily of $67 and $133 of revenues and $8 and $20 of depreciation expense,
have been reclassified to discontinued operations, on a net of tax basis, for
the three and six months ended June 30, 2008.
 
 Properties
held for sale
 
 At June
30, 2009, the Company considered one commercial property and one of its shopping
centers and retail outlets from its real estate investment and management
segment to be held for sale and reported as discontinued
operations.  The results of operations of these properties have been
reclassified to discontinued operations, on a net of tax basis, in the Condensed
Consolidated Statements of Income for the three and six months ended June 30,
2009 and 2008.  In addition, the assets and liabilities associated
with these properties, which primarily consist of real property, net of
accumulated depreciation, have been reclassified to discontinued operations in
the Condensed Consolidated Balance Sheets at June 30, 2009 and December 31,
2008.  During the six months ended June 30, 2009, the Company
recognized a non-cash impairment charge amounting to $390, on a net of tax
basis, on the carrying value of one of these properties.
 
 Summarized
financial information for these properties held for sale and accounted for as
discontinued operations is as follows:
  Three
      Months Ended
                      June
      30,
                    
                    
                    Six
      Months Ended
                      June
      30,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Revenues
                    
                    $
                    59
                    
                    
                    $
                    223
                    
                    
                    $
                    123
                    
                    
                    $
                    447Depreciation
      expense
                    
                    
                    97
                    
                    
                    
                    45
                    
                    
                    
                    194
                    
                    
                    
                    91Other
      operating expenses
                    
                    
                    56
                    
                    
                    
                    128
                    
                    
                    
                    152
                    
                    
                    
                    297(Loss)
      income from operations
                    
                    $
                    (94
                    )
                    
                    $
                    50
                    
                    
                    $
                    (223
                    )
                    
                    $
                    59
 
 8.            
Derivative Financial Instruments
 
 Management
maintains a diversified portfolio of cash equivalents and investments in a
variety of securities, primarily U.S. investments in common and preferred equity
issues, as well as corporate bonds, and participates on a limited basis in
transactions involving derivative financial instruments, including short stock
sales and put and/or call options.  At December 31, 2008, the fair
value of such derivatives was ($5), which is recorded as a component of accounts
payable and accrued liabilities in the Condensed Consolidated Balance
Sheet.  These instruments do not qualify for hedge accounting and
therefore changes in the derivatives’ fair value are recognized in
earnings.  The Company recognized $139 and $222 in net realized and
unrealized gains on derivative instruments for the six months ended June 30,
2009 and 2008, respectively, which are included in other income and (expense),
net in the Condensed Consolidated Statements of Income.  The Company
held no such derivatives at June 30, 2009.
 
 9.             Fair
Value Measurements
 
 The
following table sets forth the Company’s financial assets and liabilities that
were measured at fair value on a recurring basis, by level, within the fair
value hierarchy in accordance with Statement of Financial Accounting Standards
(“SFAS”) No. 157, “Fair Value Measurements”:
  8
 Index
 
 Fair
      Value Measurements at Reporting Date UsingTotal
                    Fair
      Value
                
                
                Quoted
      Prices in Active Markets for Identical Assets
                    (Level
      1)
                
                
                Significant
      Other Observable Inputs
                    (Level
      2)
                
                
                Significant
      Unobservable Inputs
                    (Level
      3)June
      30, 2009:Marketable
      securities
                
                $
                16,659
                
                
                $
                16,618
                
                
                $
                41
                
                
                $
                —December
      31, 2008:Marketable
      securities
                
                $
                9,178
                
                
                $
                9,144
                
                
                $
                34
                
                
                $
                —Derivative financial
      instruments
                
                $
                (5
                )
                
                $
                (5
                )
                
                $
                —
                
                
                $
                —
 
 The
carrying amounts of financial instruments such as cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities approximate their
fair value due to the short-term maturity of such items.  The
estimated fair values of the Company’s other financial assets and liabilities
not measured at fair value on a recurring basis at June 30, 2009 and December
31, 2008 are as follows:
  June
      30, 2009
                
                
                December
      31, 2008Carrying
                
                
                Fair
                
                
                Carrying
                
                
                FairAmount
                
                
                Value
                
                
                Amount
                
                
                ValueNotes
      receivable
                
                $
                1,080
                
                
                $
                1,126
                
                
                $
                1,101
                
                
                $
                1,169Note
      receivable – non-performing
                
                $
                5,428
                
                
                $
                5,428
                
                
                $
                —
                
                
                $
                —Long-term
      debt, including current portion
                
                $
                30,646
                
                
                $
                28,238
                
                
                $
                32,863
                
                
                $
                29,435
 
 The fair
value of notes receivable is estimated using discounted cash flow analyses, with
interest rates comparable to loans with similar terms and borrowers of similar
credit quality.  In May 2009, the Company purchased a non-performing
mortgage note for $5,428 encumbering a property located in Jericho, New York
which is subject to a pending foreclosure action.  Management believes
that the fair value of the note approximates its carrying
amount.  Upon foreclosure, such amounts will be reclassified to real
property held for rental.  The fair value of long-term debt is
estimated based on interest rates available for debt with terms and due dates
similar to the Company’s existing debt arrangements.
 
 In
February 2008, the Financial Accounting Standards Board (“FASB”) issued Staff
Position No. 157-2, which delayed the effective date of SFAS 157 for one year
for all nonfinancial assets and liabilities, except those that are recognized or
disclosed at fair value in the financial statements on a recurring
basis.  The Company adopted the provisions of SFAS 157 as they relate
to long-lived assets effective January 1, 2009 and it did not have a material
impact on the Company’s financial statements.
 
 10.           Pension
Plan
 
 The
Company has a noncontributory defined benefit pension plan that covers
substantially all full-time employees of the engineered products and real estate
investment and management segments.  The plan provides defined
benefits based on years of service and compensation level.
 
 Net
periodic pension cost consists of the following:
 Three
      Months Ended
                    June
      30,
                
                
                Six
      Months Ended
                    June
      30,2009
                
                
                2008
                
                
                2009
                
                
                2008Service
      cost
                
                $
                (61
                )
                
                $
                (75
                )
                
                $
                (141
                )
                
                $
                (150
                )Interest
      cost
                
                
                (189
                )
                
                
                (180
                )
                
                
                (379
                )
                
                
                (350
                )Expected
      return on plan assets
                
                
                134
                
                
                
                201
                
                
                
                272
                
                
                
                405Amortization
      of net loss
                
                
                (61
                )
                
                
                —
                
                
                
                (122
                )
                
                
                —Net
      periodic pension cost
                
                $
                (177
                )
                
                $
                (54
                )
                
                $
                (370
                )
                
                $
                (95
                )
  9
 Index
  11. Comprehensive
Income (Loss)
 
 The
components of comprehensive income (loss) are as follows:
 Three
      Months Ended
                    June
      30,
                
                
                Six
      Months Ended
                    June
      30,2009
                
                
                2008
                
                
                2009
                
                
                2008Net
      income
                
                $
                1,236
                
                
                $
                2,512
                
                
                $
                2,353
                
                
                $
                5,200Other
      comprehensive income (loss), net of tax:Change
      in net unrealized gain (loss) on available-for-sale securities, net of tax
      effect of ($1,891), $2,180, ($1,365) and $3,497,
    respectively
                
                
                3,511
                
                
                
                (4,048
                )
                
                
                2,536
                
                
                
                (6,494
                )Reclassification
      adjustment for net losses (gains) realized in net income, net of tax
      effect of ($147), ($36) and $11, respectively
                
                
                —
                
                
                
                271
                
                
                
                68
                
                
                
                (21
                )Comprehensive
      income (loss)
                
                $
                4,747
                
                
                $
                (1,265
                )
                
                $
                4,957
                
                
                $
                (1,315
                )
 
 The
components of accumulated other comprehensive loss, net of tax are as
follows:
 June
      30,
                    2009
                
                
                December
      31,
                    2008Net
      unrealized loss on available-for-sale securities, net of tax effect of
      $1,500 and $2,902, respectively
                
                $
                (2,787
                )
                
                $
                (5,391
                )Unrecognized
      net gains from pension plan, net of tax effect of $1,371
                
                
                (2,546
                )
                
                
                (2,546
                )Accumulated
      other comprehensive loss, net of tax
                
                $
                (5,333
                )
                
                $
                (7,937
                )
 
 12.           Business
Segments
 
 The
Company operates through three business segments: real estate investment and
management, hotel operations and engineered products.  The real estate
investment and management segment is engaged in the business of investing in and
managing real estate properties located throughout the United
States.  The hotel operations segment owns and operates three hotels
located in the United States.  Engineered products are manufactured
through wholly-owned subsidiaries of the Company and primarily consist of
knitted wire products and components and transformer products sold
worldwide.
 
 The
accounting policies of the Company’s segments are the same as those described in
the Summary of Significant Accounting Policies included in the Notes to
Consolidated Financial Statements in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2008.
 
 Operating
results of the Company's business segments are as follows:
 Three
      Months Ended
                    June
      30,
                
                
                Six
      Months Ended
                    June
      30,2009
                
                
                2008
                
                
                2009
                
                
                2008Net
      revenues and sales:Real estate investment and
      management
                
                $
                5,068
                
                
                $
                5,137
                
                
                $
                9,904
                
                
                $
                10,020Hotel
operations
                
                
                3,429
                
                
                
                4,240
                
                
                
                6,545
                
                
                
                7,910Engineered
    products
                
                
                5,201
                
                
                
                9,620
                
                
                
                10,985
                
                
                
                19,519$
                13,698
                
                
                $
                18,997
                
                
                $
                27,434
                
                
                $
                37,449Operating
      income (loss):Real estate investment and
      management
                
                $
                3,211
                
                
                $
                3,212
                
                
                $
                6,136
                
                
                $
                6,268Hotel
operations
                
                
                13
                
                
                
                315
                
                
                
                (415
                )
                
                
                211Engineered
    products
                
                
                (555
                )
                
                
                184
                
                
                
                (874
                )
                
                
                733General corporate
      expenses
                
                
                (949
                )
                
                
                (823
                )
                
                
                (1,966
                )
                
                
                (1,731
                )1,720
                
                
                
                2,888
                
                
                
                2,881
                
                
                
                5,481Other
      income (expense), net
                
                
                951
                
                
                
                1,027
                
                
                
                1,677
                
                
                
                2,604Income
      from continuing operations before income taxes
                
                $
                2,671
                
                
                $
                3,915
                
                
                $
                4,558
                
                
                $
                8,085
  10
 Index
  13.           Commitments
and Contingencies
 
 The
Company has undertaken the completion of environmental studies and/or remedial
action at its two New Jersey facilities and has recorded a liability for the
estimated investigation, remediation and administrative costs associated
therewith.
 
 The
process of remediation has begun at one facility pursuant to a plan filed with
the New Jersey Department of Environmental Protection
(“NJDEP”).  Management’s assessment, based on estimates from
environmental contractors, is that under the most probable scenario, the
remediation of this site is anticipated to require initial expenditures of $860,
including the cost of capital equipment, and $86 in annual operating and
maintenance costs over a 15 year period.
 
 Environmental
studies at the second facility indicate that remediation may be
necessary.  Based upon the facts presently available, management’s
assessment, based on estimates from environmental contractors, is that under the
most probable remediation scenario, the estimated cost to remediate this site is
anticipated to require $2,300 in initial costs, including capital equipment
expenditures, and $258 in annual operating and maintenance costs over a 10 year
period.  These estimated costs of future expenses for environmental
remediation obligations are not discounted to their present
value.  The Company may revise such estimates in the future due to the
uncertainty regarding the nature, timing and extent of any remediation efforts
that may be required at this site, should an appropriate regulatory agency deem
such efforts to be necessary.
 
 The
foregoing estimates may also be revised by the Company as new or additional
information in these matters become available or should the NJDEP or other
regulatory agencies require additional or alternative remediation efforts in the
future.  Although such events are not expected to change these
estimates, adverse decisions or events, particularly as to the merits of the
Company’s factual and legal basis, could cause the Company to change its
estimate of liability with respect to such matters in the future.  The
Company had approximately $9,000 and $9,300 recorded in accounts payable and
accrued liabilities and other long-term liabilities at June 30, 2009 and
December 31, 2008, respectively, to cover such matters.
 
 The
Company has an employment agreement with its Chairman, President and Chief
Executive Officer (the “Officer”) which provides for a base salary of $800 per
annum plus a discretionary bonus as determined by the Compensation and Stock
Option Committee of the Board of Directors.  In the event of
termination or a change in control, as defined in the employment agreement, the
Company is required to pay the Officer a lump sum severance payment equal to
three years salary and purchase outstanding options.  The employment
agreement contains non-competition, non-solicitation and confidentiality
provisions which apply for one year after cessation of employment and also
provides for successive one-year terms, unless either the Company or the Officer
gives the other written notice that the employment agreement is terminated, and
also provides a death benefit which the Company secures through an insurance
policy.
 
 The
Company is subject to various other litigation, legal and regulatory matters
that arise in the ordinary course of business activities.  When
management believes it is probable that a liability has been incurred and such
amounts are reasonably estimable, the Company provides for amounts that include
judgments and penalties that may be assessed.  These liabilities are
usually included in accounts payable and accrued liabilities or other long-term
liabilities in the Condensed Consolidated Financial Statements, depending on the
anticipated payment date.  Based on the facts presently available, the
Company does not believe that the disposition of matters that are pending or
asserted will have a material adverse effect on the Company’s consolidated
financial position or results of operations.  However, new or
additional facts or an adverse judgment by a court, arbitrator or a settlement
could adversely impact the Company’s results of operations in any given
period.
 
 14.           Recent
Accounting Pronouncements
  In July
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards CodificationTM
and the Hierarchy of Generally Accepted Accounting Principles — a replacement of
FASB Statement No. 162” (“FAS 168”).  With the issuance of FAS 168,
the FASB Accounting Standards Codification (“Codification”) becomes the single
source of authoritative accounting and reporting standards applicable for all
nongovernmental entities, with the exception of guidance issued by the
SEC.  The Codification does not change current GAAP, but changes the
referencing of financial standards, and is intended to simplify user access to
authoritative GAAP by providing all the authoritative literature related to a
particular topic in one place. The Codification is effective for interim and
annual periods ending after September 15, 2009, and is effective for the
Company’s third quarter of 2009.  At that time, all references made to
GAAP will use the new Codification numbering system prescribed by the
FASB.  The Company is currently evaluating the impact to its financial
reporting process of providing Codification references in the Company’s public
filings.  However, as the Codification is not intended to change or
alter existing GAAP, it is not expected to have any impact on the Company’s
consolidated financial condition or results of operations.
  11
 Index
 
 In May
2009, the FASB issued SFAS No. 165, “Subsequent Events” (“FAS 165”), which
provides guidance to establish general standards of accounting for and
disclosures of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued.  FAS
165 also requires entities to disclose the date through which subsequent events
were evaluated as well as the rationale for why that date was
selected.  FAS 165 is effective for interim and annual periods ending
after June 15, 2009.  Accordingly, the Company has adopted the
provisions of FAS 165 and the adoption has not had a material impact on the
Company’s financial condition, results of operations or
disclosures.
 
 In
December 2008, the FASB issued FASB Staff Positions (“FSP”) FSP FAS 132(R)-1,
“Employers’ Disclosures about Postretirement Benefit Plan
Assets.”  This FSP requires an employer to provide certain disclosures
about plan assets of its defined benefit pension or other postretirement
plans.  The disclosures required include the investment policies and
strategies of the plans, the fair value of the major categories of plan assets,
the inputs and valuation techniques used to develop fair value measurements and
a description of significant concentrations of risk in plan
assets.  This FSP, which only provides for enhanced annual disclosures
and does not require additional interim disclosures, will be effective for the
Company’s current fiscal year ending December 31, 2009.  The Company
does not expect the adoption of FSP FAS 123(R)-1 will have a material impact on
its financial condition or results of operations.
 
 In April
2009, the FASB issued three FSPs to address concerns about measuring the fair
value of financial instruments when the markets become inactive and quoted
prices may reflect distressed transactions, recording impairment charges on
investments in debt instruments, and requiring the disclosure of fair value of
certain financial instruments in interim financial statements.  The
first Staff Position, FSP FAS 157-4, “Determining Whether a Market is Not Active
and a Transaction is Not Distressed,” provides additional guidance to highlight
and expand the factors that should be considered in estimating fair value when
there has been a significant decrease in market activity for a financial
asset.  The second Staff Position, FSP FAS 115-2 and FAS 124-2,
“Recognition and Presentation of Other-Than-Temporary Impairments,” changes the
method for determining whether an other-than-temporary impairment exists for
debt securities and the amount of an impairment charge to be recorded in
earnings.  The third Staff Position, FSP FAS 107-1 and APB 28-1,
“Interim Disclosures about Fair Value of Financial Instruments” increases the
frequency of fair value disclosures from annual, to quarterly.  All
three FSPs are effective for interim periods ending after June 15, 2009, with
the option for early adoption in interim periods ending after March 15,
2009.  The Company adopted all three FSPs effective April 1, 2009
which did not have a material impact on its financial statements.  See
Note 9 for the additional interim disclosures required by the third Staff
Position.
 
 15.           Use
of Estimates
 
 The
preparation of consolidated financial statements in conformity with GAAP
requires management to use judgment in making estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses and
related disclosure of contingent assets and liabilities.  Certain of
the estimates and assumptions required to be made relate to matters that are
inherently uncertain as they pertain to future events.  While
management believes that the estimates and assumptions used were the most
appropriate, actual results could differ significantly from those estimates
under different assumptions and conditions.
 
 16.           Reclassifications
 
 Certain
prior year amounts have been reclassified to present them on a basis consistent
with the current year.
  12
 Index
 
 17.           Subsequent
Events
 
 On July
14, 2009, the Company purchased a non-performing mortgage note for approximately
$17,000 encumbering a hotel located in Miami, Florida.  On July 30,
2009, the Company was the successful bidder at the foreclosure auction and
expects to take title to the property at the expiration of the redemption period
in mid-August.
 
  ITEM 2.
                MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL

                    CONDITION
      AND RESULTS OF OPERATIONS

                      (In
      thousands, except per share data or as otherwise
      noted)
 The
following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements of United Capital Corp. (the “Company”) and
related notes thereto.
 
 Results
of Operations:  Three and Six Months Ended June 30, 2009 and
2008
 
 Total
revenues for the three and six months ended June 30, 2009 were $13,698 and
$27,434, compared to $18,997 and $37,449 for the three and six months ended June
30, 2008, respectively.  As a result of the weakened economy and its
consequences on the Company’s engineered products and hotel operations segments,
operating income decreased $1,168 and $2,600 for the current quarter and six
month period, respectively.  Net income for the second quarter of 2009
was $1,236 or $.14 per basic share, compared to net income of $2,512 or $.30 per
basic share for the same period in 2008.  Net income for the first
half of 2009 was $2,353 or $.27 per basic share, compared to net income of
$5,200 or $.62 per basic share for the six months ended June 30,
2008.
 
 The
ongoing weakness in the economy continues to impact the results of the Company’s
engineered products and hotel operations segments.  These factors are
expected to continue to impact the Company for the remainder of the
year.
 
 Real
Estate Operations
 
 The
Company’s real estate operations consist of the real estate investment and
management and hotel operations segments.  The operating results for
these segments are as follows:
 
 Three
      Months Ended June 30, 2009
                
                
                Six
      Months Ended June 30, 2009Real
                    Estate
                
                
                Hotel
                    Operations
                
                
                Total
                
                
                Real
                    Estate
                
                
                Hotel
                    Operations
                
                
                TotalRevenues
                
                $
                5,068
                
                
                $
                3,429
                
                
                $
                8,497
                
                
                $
                9,904
                
                
                $
                6,545
                
                
                $
                16,449Mortgage
      interest expense
                
                
                37
                
                
                
                483
                
                
                
                520
                
                
                
                97
                
                
                
                955
                
                
                
                1,052Depreciation
      expense
                
                
                570
                
                
                
                390
                
                
                
                960
                
                
                
                1,125
                
                
                
                775
                
                
                
                1,900Other
      operating expenses
                
                
                1,250
                
                
                
                2,543
                
                
                
                3,793
                
                
                
                2,546
                
                
                
                5,230
                
                
                
                7,776Income
      (loss) from operations
                
                $
                3,211
                
                
                $
                13
                
                
                $
                3,224
                
                
                $
                6,136
                
                
                $
                (415
                )
                
                $
                5,721
 
 Three
      Months Ended June 30, 2008
                
                
                Six
      Months Ended June 30, 2008Real
                    Estate
                
                
                Hotel
                    Operations
                
                
                Total
                
                
                Real
                    Estate
                
                
                Hotel
                    Operations
                
                
                TotalRevenues
                
                $
                5,137
                
                
                $
                4,240
                
                
                $
                9,377
                
                
                $
                10,020
                
                
                $
                7,910
                
                
                $
                17,930Mortgage
      interest expense
                
                
                56
                
                
                
                480
                
                
                
                536
                
                
                
                115
                
                
                
                935
                
                
                
                1,050Depreciation
      expense
                
                
                550
                
                
                
                371
                
                
                
                921
                
                
                
                1,082
                
                
                
                729
                
                
                
                1,811Other
      operating expenses
                
                
                1,319
                
                
                
                3,074
                
                
                
                4,393
                
                
                
                2,555
                
                
                
                6,035
                
                
                
                8,590Income
      from operations
                
                $
                3,212
                
                
                $
                315
                
                
                $
                3,527
                
                
                $
                6,268
                
                
                $
                211
                
                
                $
                6,479
 
 Real
Estate Investment and Management
 
 Revenues
from the real estate investment and management segment decreased slightly for
the three and six months ended June 30, 2009, compared to the corresponding
periods of 2008, with no significant fluctuations.  In general, rental
revenues from the Company’s real estate properties do not fluctuate
significantly due to the long-term nature of the Company’s
leases.  However, future rental revenues could be affected by lease
renewals, terminations and by the purchase or sale of additional
properties.
  13
 Index
 
 Mortgage
interest expense decreased $19 or 33.9% for the second quarter and $18 or 15.7%
for the first half of 2009, compared to the corresponding 2008
periods.  These decreases are primarily the result of continuing
mortgage amortization, partially offset by an increase in mortgage interest due
to a mortgage obtained in connection with the purchase of a commercial property
in the second quarter of 2008.  At June 30, 2009, the outstanding
mortgage balance on the Company’s three real estate investment properties which
are currently encumbered is below $2,200.  Based on scheduled
amortizations, mortgage interest expense on existing obligations of the
Company’s real estate investment and management segment will continue to
decline.
 
 Depreciation
expense associated with real properties held for rental increased $20 for the
quarter and $43 for the six months ended June 30, 2009, compared to the
corresponding periods of 2008.  These increases are primarily
attributable to depreciation expense ($32 and $49 for the three and six month
periods, respectively) related to additions to real estate assets over the past
twelve months.  As a result of the purchase of commercial properties
during the prior year and other expenditures for capital improvements incurred
during the current and prior year, the Company expects that depreciation expense
on the Company’s properties for each of the quarters and full year of 2009
should be higher than that reported in the corresponding 2008
periods.
 
 Other
operating expenses associated with the management of real properties decreased
$69 for the quarter and less than 1% for the six month period ended June 30,
2009, compared to the corresponding periods of 2008.  The decrease for
the quarterly period primarily relates to a decrease in professional fees ($59)
which is related to the timing of lease renewals and other property related
transactions.  For the six month period, the most significant
fluctuations were declines in professional fees ($64) and the cost of utilities
($41), primarily offset by an increase in property maintenance ($107) which is
the result of the timing of certain repairs and renovations.  Future
operating expenses of the Company’s real estate properties may vary as a result
of property age, location and vacancies.
 
 Hotel
Operations
 
 Hotel
revenues decreased $811 or 19.1% to $3,429 for the quarter ended June 30, 2009
and $1,365 or 17.3% to $6,545 for the first half of 2009, compared to the
corresponding 2008 periods, primarily related to the overall weakness in the
U.S. economy which has resulted in a reduction in both consumer and business
travel.  As a result, the Company expects lodging demand to continue
to decline through the remainder of 2009, which will likely result in lower
reported revenues from existing properties for the balance of the
year.
 
 Mortgage
interest expense related to the Company’s hotel properties increased less than
1% for the second quarter and $20 for the first half of 2009, compared to the
corresponding periods of 2008.  The increase for the six month period
is primarily the result of a mortgage obtained on one of the Company’s hotels in
the prior year.  Although mortgage interest expense on existing
obligations related to the Company’s hotel properties has increased, the Company
expects that, with continued amortization, mortgage interest expense for the
full year of 2009 should be less that that reported in 2008.
 
 Depreciation
expense associated with the Company’s hotel operations increased $19 for the
three months and $46 for the six months ended June 30, 2009, compared to the
corresponding periods of 2008, primarily attributable to additional depreciation
expenses ($41 and $80 for the three and six month periods, respectively) on
renovations and improvements added during the past twelve months at two of the
Company’s hotels.  As a result of these renovations and improvements,
and additional renovations and improvements currently occurring at one of the
hotels, depreciation expense for each of the quarters and the full year of 2009
should be higher than that reported in the corresponding 2008
periods.
 
 Other
operating expenses related to the management of the Company’s hotels decreased
$531 to $2,543 for the second quarter and $805 to $5,230 for the first half of
2009, compared to the corresponding 2008 periods, primarily as a result of the
lower revenues, noted above.  The Company is continuously working to
streamline operations, control expenses and maximize cash flow from
operations.  The growing weakness in the economy has pressured results
in the Company’s hotel operations.   This condition is expected
to continue to impact this segment for the remainder of 2009.  The
success of these efforts and the depth and duration of the current negative
economic environment and its impact on future hotel operations remain
uncertain.
  14
 Index
 
 Engineered
Products
 
 The
operating results of the engineered products segment are as
follows:
 
 Three
      Months Ended
                      June
      30,
                  
                  
                  Six
      Months Ended
                      June
      30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Net
      sales
                  
                  $
                  5,201
                  
                  
                  $
                  9,620
                  
                  
                  $
                  10,985
                  
                  
                  $
                  19,519Cost
      of sales
                  
                  
                  4,290
                  
                  
                  
                  7,647
                  
                  
                  
                  8,802
                  
                  
                  
                  15,181Selling,
      general and administrative expenses
                  
                  
                  1,466
                  
                  
                  
                  1,789
                  
                  
                  
                  3,057
                  
                  
                  
                  3,605Operating
      (loss) income
                  
                  $
                  (555
                  )
                  
                  $
                  184
                  
                  
                  $
                  (874
                  )
                  
                  $
                  733
 
 Net sales
of the engineered products segment decreased $4,419 or 45.9% for the three
months and $8,534 or 43.7% for the six months ended June 30, 2009, compared with
the results of the corresponding periods of 2008, primarily related to decreases
in demand for the Company’s automotive product line which continues to be down
approximately 50% from the prior year periods.  These declines are the
result of a significant reduction in North American automotive production,
especially from General Motors, our largest customer, and the general slowdown
in the global vehicle market.  The filing for bankruptcy of General
Motors during the second quarter, which lead to extended plant shut-downs, has
had a significant adverse affect on our engineered products
segment.  Although the automotive companies have started re-opening
certain plants, the Company expects continued declines in sales of its
automotive product line during the remainder of the year.
 
 Cost of
sales as a percentage of net sales increased 3.0% and 2.4% in the three and six
months ended June 30, 2009, compared to the corresponding 2008
periods.  These increases are primarily attributable to the
significant reduction in net sales, noted above, which led to lower absorption
of incurred manufacturing costs.  Labor and overhead costs as a
percentage of net sales increased in both periods (6.6% and 5.9% for the three
and six month periods, respectively) while material costs as a percentage of net
sales declined (3.9% and 3.8% for the three and six month periods, respectively)
reflecting a reduction in the cost of raw materials and changes in the mix of
products sold.  As a result of the significant decline in sales and
ongoing uncertainty, the Company has taken significant steps to reduce its
operating costs, including the reduction of 40% of its direct and indirect
positions since the beginning of the year.
 
 Selling,
general and administrative expenses of the engineered products segment decreased
$323 or 18.1% for the second quarter and $548 or 15.2% for the first half of
2009, compared to the corresponding periods of 2008.  These decreases
are the result of cost containment efforts which include reductions in payroll
and payroll related expenses ($207 and $318 for the three and six month period,
respectively), professional fees ($55 and $117 for the three and six month
period, respectively) and freight charges ($57 and $111 for the three and six
month period, respectively).  In light of the significant decline in
sales, the Company is continuously working to control expenses and maximize cash
flow.
 
 General
and Administrative Expenses
 
 General
and administrative expenses not associated with the manufacturing operations
increased $126 for the second quarter and $235 for the first half of 2009,
compared to such expenses incurred in the comparable 2008
periods.  These increases are primarily attributable to the increase
in net periodic pension expense ($123 and $275 for the three and six month
period, respectively) which results from the significant decline in the fair
value of the Company’s pension assets in 2008.
  15
 Index
 
 Other
Income and Expense, Net
 
 The
components of other income and (expense), net in the Condensed Consolidated
Statements of Income are as follows:
  Three
      Months Ended
                    June
      30,
                
                
                Six
      Months Ended
                    June
      30,2009
                
                
                2008
                
                
                2009
                
                
                2008Net
      realized and unrealized gains on derivative instruments
                
                $
                134
                
                
                $
                192
                
                
                $
                139
                
                
                $
                222Net
      loss on available-for-sale securities
                
                
                —
                
                
                
                (417
                )
                
                
                (104
                )
                
                
                (417
                )Other,
      net
                
                
                (10
                )
                
                
                (9
                )
                
                
                (20
                )
                
                
                (16
                )$
                124
                
                
                $
                (234
                )
                
                $
                15
                
                
                $
                (211
                )
 
 Discontinued
Operations
 
 Losses
from operations on properties held for sale and accounted for as discontinued
operations were $57 and $134, on a net of tax basis, for the three and six
months ended June 30, 2009, compared to income from operations on properties
sold or held for sale of $65 and $103, net of tax, for the respective periods in
2008.  Such amounts have been reclassified to reflect results of
operations of real properties held for sale as of June 30, 2009 or sold during
2008 as discontinued operations.  As of June 30, 2009, the Company
classified two properties as held for sale.  During the six months
ended June 30, 2009, the Company recognized a non-cash impairment charge
amounting to $390, on a net of tax basis, on the carrying value of one of these
properties.  No properties were sold during the six months ended June
30, 2009.
 
 Liquidity
and Capital Resources
 
 Net cash
provided by operating activities was $11,149 and $5,231 for the six months ended
June 30, 2009 and 2008, respectively.  This increase in operating cash
flows results primarily from the receipt of tax refunds ($4,163) and reductions
in notes and accounts receivable, net and inventories ($2,447 and $,1484,
respectfully), offset by lower operating income before depreciation ($2,548) and
interest and dividend income ($1,153) in the current year period than realized
in the prior year.
 
 Net cash
used in investing activities was $10,010 and $22,238 for the six months ended
June 30, 2009 and 2008, respectively.  This change primarily results
from decreases in the purchase of available-for-sale securities ($20,963) and
acquisition of/additions to real estate assets ($12,554), less the release of
proceeds held in escrow on the sale of real estate in 2008 ($15,000) and from
the purchase of a note receivable in 2009 ($5,428).
 
 Net cash
provided by financing activities was $3,491 for the six months ended June 30,
2009, compared to net cash used in financing activities of $1,236 for the same
period of 2008.  This change results from a decrease in the purchase
and retirement of common stock ($12,628) during the current year, as compared to
2008, offset by a reduction in proceeds from the exercise of stock options
($4,865), an increase in principal payments on mortgage obligations ($1,735) and
a reduction in the tax benefits related to the exercise of stock options
($1,301).
 
 Previous
purchases of the Company’s common stock have reduced the Company’s additional
paid-in capital to zero and have also reduced retained earnings by amounts in
excess of par value.  Any future purchases in excess of par value will
also reduce retained earnings.  Repurchases of the Company’s common
stock may be made from time to time in the open market at prevailing market
prices and may be made in privately negotiated transactions, subject to
available resources.  Future proceeds from the issuance of common
stock in excess of par value will be credited to retained earnings until such
time that previously recorded reductions have been recovered.
 
 At June
30, 2009, the Company’s cash and marketable securities totaled $159.4 million
and working capital was $160.7 million compared to cash and marketable
securities of $147.3 million and working capital of $153.9 million at December
31, 2008.  While there has been a decline in the value of certain real
estate properties in the United States, the recession could cause real estate
prices to drop even further.  Management has limited acquisitions to
those select properties that meet the Company's stringent financial
requirements.  Management believes that opportunities to acquire
additional properties at favorable prices may soon be available and the
Company’s available working capital provides a considerable advantage to fund
acquisitions and grow its portfolio, if and when attractive long-term
opportunities become available.  The tightened credit market however,
could limit the Company’s ability to leverage future acquisitions.
  16
 Index
 
 On July
14, 2009, the Company purchased a non-performing mortgage note for approximately
$17,000 encumbering a hotel located in Miami, Florida.  On July 30,
2009, the Company was the successful bidder at the foreclosure auction and
expects to take title to the property at the expiration of the redemption period
in mid-August.  The Company will undertake operation of the hotel at
that time and intends to invest additional capital for renovations and
improvements over the next twelve months.
 
 The
equity method of accounting is used for investments in 20% to 50% owned joint
ventures in which the Company has the ability to exercise significant influence,
but not control.  These investments are recorded initially at cost and
subsequently adjusted for equity in earnings and cash contributions and
distributions.  The debt of the joint venture in which the Company
currently has an ownership interest is a non-recourse obligation and is
collateralized by the entity’s real property.  The Company believes
that the value of the underlying property and its operating cash flows are
sufficient to satisfy its obligations.  The Company isnot obligated for the
debts of the joint venture, but could decide to satisfy them in order to protect
its investment.  In such event, the Company’s capital resources and
financial condition would be reduced and, in certain instances, the carrying
value of the Company’s investment and its results of operations would be
negatively impacted.
 
 The cash
needs of the Company have been satisfied from funds generated by current
operations.  It is expected that future operational cash needs will
also be satisfied from existing cash balances, marketable securities, ongoing
operations or borrowings.  The primary source of capital to fund
additional real estate acquisitions and to make additional high-yield mortgage
loans may come from existing funds, the sale, financing and refinancing of the
Company’s properties and from third party mortgages and purchase money notes
obtained in connection with specific acquisitions.
 
 In
addition to the acquisition of properties for consideration consisting of cash
and mortgage financing proceeds, the Company may acquire real properties in
exchange for the issuance of the Company’s equity securities.  The
Company may also finance acquisitions of other companies in the future with
borrowings from institutional lenders and/or the public or private offerings of
debt or equity securities.  The Company currently has no agreements,
commitments or understandings with respect to the acquisition of real properties
or other companies in exchange for its equity or debt securities.
 
 Funds of
the Company in excess of that needed for working capital, purchasing real estate
and arranging financing for real estate acquisitions are invested by the Company
in corporate equity securities, corporate notes, certificates of deposit,
government securities and other financial instruments.  Although these
excess funds are invested in investment grade securities, they are subject to
significant fluctuations in fair value due to the volatility of the stock market
and changes in general economic conditions.  Changes in U.S. interest
rates affect the interest earned on the Company’s cash and cash equivalent
balances and other interest bearing investments.  Given the level of
cash and other interest bearing investments held by the Company, declines in
U.S. interest rates have adversely impacted the Company’s earnings in
2009.
 
 In
strategies designed to hedge overall market risk, the Company may sell common
stock short and participate in put and/or call options.  These
instruments do not qualify for hedge accounting and therefore changes in such
derivatives fair value are recognized in earnings.  These derivatives,
as of December 31, 2008, were recorded as a component of accounts payable and
accrued liabilities in the Condensed Consolidated Balance Sheet.  The
Company held no such derivatives at June 30, 2009.
 
 Globally,
automakers and their suppliers continue to experience significant difficulties
from a weakened economy and tightened credit market.  The automotive
industry also experienced extended production shut-downs as a result of
bankruptcy filings by both General Motors, the largest customer of the
engineered products segment, and Chrysler during the
quarter.  Continued adverse developments in the automotive industry,
including but not limited to continued share declines in demand, customer
bankruptcies and increased demands on the Company for pricing decreases, have
had, and will continue to have, a significant adverse affect on our engineered
products segment.
 
 The
Company manufactures its products in the United States and Mexico and sells its
products in those markets as well as in Europe, South America and
Asia.  As a result, the Company’s operating results could be affected
by factors such as changes in foreign currency exchange rates or weak economic
conditions in the foreign markets in which the Company distributes its
products.  Most of the Company’s sales are denominated in U.S.
dollars.  Net sales of the Company’s engineered products segment
denominated in Euros were 12.5% and 10.3% for the three and six months ended
June 30, 2009 and 8.8% and 9.1% for the three and six months ended June 30,
2008, respectively.  As such, a portion of the Company’s receivables
are exposed to fluctuations with the U.S. dollar.  However, the
Company does not believe this risk to be material to its overall financial
position as the Company’s historical results have not been significantly
impacted by foreign exchange gains or losses.  Accordingly, the
Company has not entered into forward exchange contracts to hedge this
exposure.  If such exposure increased in the future, the Company may
reexamine this practice to minimize the associated risks.
  17
 Index
 
 The
growing weakness in the economy, exacerbated by recent credit market turmoil,
together with higher year-over-year energy, freight and other costs, has
pressured results of the Company’s engineered products and hotel
segments.   These factors are expected to continue to impact the
Company throughout the year.  The Company is working to further
streamline operations, control expenses and maximize cash flow from
operations.  While the depth and duration of the current negative
economic environment and its impact on the Company are uncertain, management
believes the Company’s strong balance sheet together with the significant cash
flow generated from its core real estate portfolio, should allow the company to
weather this downturn.
 
 The
Company has undertaken the completion of environmental studies and/or remedial
action at the Company’s two New Jersey facilities and has recorded a liability
for the estimated investigation, remediation and administrative costs associated
therewith.  See Note 13 of Notes to Condensed Consolidated Financial
Statements for further discussion of this matter.
 
 The
Company is subject to various other litigation, legal, regulatory and tax
matters that arise in the ordinary course of business
activities.  When management believes it is probable that liabilities
have been incurred and such amounts are reasonably estimable, the Company
provides for amounts that include judgments and penalties that may be
assessed.  These liabilities are usually included in accounts payable
and accrued liabilities or other long-term liabilities in the Condensed
Consolidated Financial Statements, depending on the anticipated payment
date.  Based on the facts presently available, the Company does not
believe that the disposition of matters that are pending or asserted will have a
material adverse effect on the Company’s consolidated financial position or
results of operations.  However, new or additional facts or an adverse
judgment by a court, arbitrator or a settlement could adversely impact the
Company’s results of operations in any given period.
 
 Critical
Accounting Policies and Management Estimates
 
 The
preparation of consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to use judgment in making estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities.  Certain of the
estimates and assumptions required to be made relate to matters that are
inherently uncertain as they pertain to future events.  While
management believes that the estimates and assumptions used were the most
appropriate, actual results could differ significantly from those estimates
under different assumptions and conditions.
 
 Refer to
the Company’s 2008 Annual Report on Form 10-K for a discussion of the Company’s
critical accounting policies, which include revenue recognition and accounts
receivable, marketable securities, inventories, real estate, discontinued
operations, long-lived assets and pension plans.  There were no
material changes to the Company’s critical accounting policies during the six
months ended June 30, 2009.
 
 
 ITEM
3.                      QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 Not
applicable, as the Company is a smaller reporting company.
 
 
 ITEM
4.                      CONTROLS
AND PROCEDURES
 
 As of the
end of the period covered by this report, the Company carried out an evaluation,
under the supervision and with the participation of the Company’s management,
including the Company’s Chief Executive Officer and Chief Financial Officer, of
the effectiveness of the design and operation of the Company’s disclosure
controls and procedures pursuant to Exchange Act Rule 13a-15(e) and
15d-15(e).  Based upon that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company’s disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiaries) required to be
included in the Company’s periodic reports.
  18
 Index
 
 The
Company’s internal control over financial reporting is a process designed by, or
under the supervision of, the Chief Executive Officer and Chief Financial
Officer and effected by the Company’s Board of Directors, management and other
personnel, to provide reasonable assurance regarding the reliability of the
Company’s financial reporting and the preparation of the Company’s financial
statements for external purposes in accordance with generally accepted
accounting principles (United States).  Internal control over
financial reporting includes policies and procedures that pertain to the
maintenance of records that in reasonable detail accurately and fairly reflect
the transactions and dispositions of the Company’s assets, provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
the Company’s financial statements in accordance with generally accepted
accounting principles (United States), and that the Company’s receipts and
expenditures are being made only in accordance with the authorization of the
Company’s Board of Directors and management, and provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Company’s assets that could have a material effect on the
Company’s financial statements.
 
 There
have been no changes in the Company’s internal controls over financial reporting
during the quarter ended June 30, 2009 that have materially affected, or are
reasonably likely to materially affect, the Company’s internal controls over
financial reporting.
 
 PART II – OTHER INFORMATION
 
 ITEM
1.                      LEGAL
PROCEEDINGS
 
 In May
2008, an insurance company for one of the Company’s subsidiaries, purchased as
part of a bankruptcy reorganization, filed suit in Supreme Court of the State of
New York against such entity’s other insurance companies seeking, among other
things, contribution for insurance settlements from carriers, some of which now
claim to be exhausted.  The complaint also names the Company’s
subsidiary and several underlying claimants with whom such settlements were
reached.  The action challenges the exhaustion of the underlying
policies and seeks contribution as well as a declaration of the rights, duties
and liabilities of the parties under the insurance policies.  In June
2008, the Company removed the action to the U.S. Court for the Southern District
of New York.  Plaintiffs and certain defendants contested the
removal.  In October 2008, a stipulation was reached to remand certain
issues to State Court while staying the remaining issues in Federal
Court.  Plaintiffs have also agreed to dismiss the underlying
claimants.  In February 2009, the Company succeeded on a motion for
summary judgment against one of the primary insurance companies who claimed
exhaustion.  The insurance company was ordered to defend the
underlying actions and reimburse certain costs to the other
carriers.  This decision was appealed by the carrier in April
2009.  In July 2009, the Company asked the lower court for leave to
amend its complaint to correct a procedural deficiency.  The lower
court granted such leave, but withdrew its earlier summary judgment motion,
pending a rehearing of the matter, rendering the appeal moot.  The
lower court, however, stayed the defense obligations, pending the new
hearing.  The Company intends to vigorously defend this
matter.  The Company is subject to various other litigation, legal and
regulatory matters that arise in the ordinary course of business
activities.  When management believes it is probable that a liability
has been incurred and such amounts are reasonably estimable, the Company
provides for amounts that include judgments and penalties that may be
assessed.  These liabilities are usually included in accounts payable
and accrued liabilities or other long-term liabilities in the Condensed
Consolidated Financial Statements, depending on the anticipated payment
date.  Based on the facts presently available, the Company does not
believe that the disposition of matters that are pending or asserted will have a
material adverse effect on the Company’s consolidated financial position or
results of operations.  However, new or additional facts or an adverse
judgment by a court, arbitrator or a settlement could adversely impact the
Company’s results of operations in any given period.
 
 
 ITEM
1A.                   RISK
FACTORS
 
 The
significant factors known to the Company that could materially effect the
Company’s business, financial position or results of operations are set forth
under Item 1A of the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008, which are incorporated herein by reference.  The
information presented below updates and should be read in conjunction with the
risk factors and information disclosed in our Form 10-K for the fiscal year
ended December 31, 2008.
  19
 Index
 
 Our
engineered products segment has been, and may continue to be, adversely affected
by current conditions in the automotive industry.
 Globally,
automakers and their suppliers continue to experience significant difficulties
from a weakened economy and tightened credit market.  The automotive
industry also experienced extended production shut-downs as a result of
bankruptcy filings by both General Motors, the largest customer of the
engineered products segment, and Chrysler during the
quarter.  Continued adverse developments in the automotive industry,
including but not limited to continued share declines in demand, customer
bankruptcies and increased demands on the Company for pricing decreases, have
had, and will continue to have, a significant adverse affect on our engineered
products segment.
 
 Forward-Looking
Statements
 
 Certain
statements in this Report on Form 10-Q and other statements made by the Company
or its representatives that are not strictly historical facts are
"forward-looking" statements within the meaning of the Private Securities
Litigation Reform Act of 1995 that should be considered as subject to the many
risks and uncertainties that exist in the Company's operations and business
environment.  The forward-looking statements are based on current
expectations and involve a number of known and unknown risks and uncertainties
that could cause the actual results, performance and/or achievements of the
Company to differ materially from any future results, performance or
achievements, expressed or implied, by the forward-looking
statements.  Readers are cautioned not to place undue reliance on
these forward-looking statements, and that in light of the significant
uncertainties inherent in forward-looking statements, the inclusion of such
statements should not be regarded as a representation by the Company or any
other person that the objectives or plans of the Company will be
achieved.  The Company also assumes no obligation to publicly update
or revise its forward-looking statements or to advise of changes in the
assumptions and factors on which they are based.  See the Company’s
2008 Annual Report on Form 10-K and other portions of this Form 10-Q for a
discussion of risk factors that could impact the Company’s future financial
performance and/or cause actual results to differ significantly from those
expressed or implied by such statements.
 
 
 ITEM
2.                      UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
 The
following table details the Company’s repurchases of common stock during the
three months ended June 30, 2009:
  Issuer
Purchases of Equity Securities
 
 Period
                
                Total
      Number of Shares Purchased
                
                
                Average
      Price Paid per Share
                
                
                Total
      Number of Shares Purchased as Part of Publicly Announced Plans or
      Programs
                
                
                Maximum
      Number of Shares that May Yet Be Purchased Under the Plans or
      ProgramsMay
      1, 2009 – May 31, 2009
                
                
                5,541
                
                
                $
                18.24
                
                
                
                5,541
                
                
                
                477,072
 
 As
previously announced, the Board of Directors have approved repurchase plans for
the Company’s common stock, which may be made from time to time in the open
market at prevailing market prices or in privately negotiated
transactions.  At June 30, 2009, 477,072 shares remain to be purchased
under such plans.  These authorizations are ongoing and have no
expiration date.
  20
 Index
 
 ITEM
4.                      SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
 On June
9, 2009, the Company held its Annual Meeting of Stockholders, whereby the
stockholders voted to elect Directors and approve performance criteria for the
payment of bonuses to the Company’s Chief Executive Officer as
follows:
 
 Election
of Directors:
 For
                        
                        WithheldA.F.
      Petrocelli
                        8,204,501
                        
                        595,567Michael
      T.
      Lamoretti
                        8,175,257
                        
                        624,811Howard
      M.
      Lorber
                        8,062,739
                        
                        737,329Robert
      M.
      Mann
                        8,758,569
                        
                        41,499Anthony
      J.
      Miceli
                        8,081,643
                        
                        718,425Arnold
      S.
      Penner
                        8,692,650
                        
                        107,418Michael
      J.
      Weinbaum
                        8,175,257
                        
                        624,811
  
 Approval
of Performance Criteria for the Payment of Bonuses to the Company’s Chief
Executive Officer:
  For
                Against
                Abstain8,614,774
                169,641
                15,653
 
 
 ITEM
6.                      EXHIBITS
 
 10.5
              Form
      of Indemnity Agreement dated as of May 7, 1991, by and between the Company
      and A.F. Petrocelli, Arnold S. Penner and Howard M.
  Lorber.
 10.6
              Supplemental
      Retirement and Death Benefit Program, as amended and
    restated.
 31.1
              Certification
      of the Chief Executive Officer pursuant to Rule 13a-15(e) and
      15d-15(e).
 31.2
              Certification
      of the Chief Financial Officer pursuant  to Rule 13a-15(e) and
      15d-15(e).
 32.1
              Certification
      of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
 32.2
              Certification
      of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
 
 
 
 
 
 
 
 
 SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 UNITED
      CAPITAL CORP.Date:  August
      11, 2009By:
              /s/
      Anthony J. MiceliAnthony
      J. MiceliVice
      President, Chief Financial Officer
                and
      Secretary of the Company
  21
 Index