UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D. C. 20549
  FORM
10-K
  Annual
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
 For
the fiscal year ended December 31, 2007
  COMMISION
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)
  Securities
registered pursuant to Section 12(b) of the Act:
 Title
      of each class
                    Name
      of each exchange on which registeredCommon
      Stock (Par Value $.10 Per Share)
                    American
      Stock Exchange
  Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  Yes o    No
x
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act.  Yes o    No
x
 
 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 and 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.  x Yes     o No
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K . x
 
 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 definition of “large accelerated filer,” “accelerated
filer” and “small reporting company” in Rule 12b-2 of the Exchange
Act.
 Large
accelerated filer o                                       Accelerated
filer o                                       Non-accelerated
filer o                                       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
aggregate market value of the shares of the voting stock held by nonaffiliates
of the registrant as of June 30, 2007 was approximately
$55,964,000.
 
 The
number of shares of the registrant’s $.10 par value common stock outstanding as
of March 14, 2008 was 8,274,743.
 
 DOCUMENTS
INCORPORATED BY REFERENCE
 
 The
information required by Part III of Form 10-K will be incorporated by reference
to certain portions of a definitive proxy statement which is expected to be
filed by the registrant pursuant to Regulation 14A within 120 days after the
close of its fiscal year.
 PART
I
 
 FORWARD-LOOKING
STATEMENTS
 
 Certain
statements in this annual report on Form 10-K and other statements made by
United Capital Corp. (“we,” “our” or 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.
 
 ITEM
1.                        
BUSINESS
 
 General
 
 United
Capital Corp., incorporated in 1980 in the State of Delaware, currently has
three industry segments:
 
 1.       Real
Estate Investment and Management.
 2.       Hotel
Operations.
 3.       Engineered
Products.
 
 The
Company also invests excess available cash in marketable securities and other
financial instruments.
 
 Description
of Business
 
 Real
Estate Investment and Management
 
 The
Company is engaged in the business of investing in and managing real estate
properties and the making of high-yield, short-term loans secured by desirable
properties.  Most real estate properties owned by the Company are
leased under net leases whereby the tenants are responsible for all expenses
relating to the leased premises, including taxes, utilities, insurance and
maintenance.  The Company owns properties that it manages which are
leased primarily as department stores, shopping centers, restaurants and office
buildings around the country.  The Company also owns day-care centers
located in New York City, which are primarily operated by the City of New
York.  In addition, the Company owns properties available for sale and
lease with the assistance of a consultant or realtor working in the locale of
the premises.
 
 The
majority of properties are leased to single tenants.  As of December
31, 2007, 96.8% of the total square footage of the Company’s real estate
properties was leased.
 
 Hotel
Operations
 
 The
Company’s hotel operations segment consists of three hotels located in the
United States.  Two of these hotels are currently managed through
regional hotel management companies with local on-site management responsible
for all day-to-day operations of the hotels.
 
 The hotel
industry is seasonal in nature.  However, the periods during which the
Company’s properties experience higher or lower levels of demand vary from
property to property and depend principally upon location.  Two of the
Company’s hotels are located in the vicinity of an airport which, during extreme
weather conditions, may be favorably impacted from transient
guests.
   1
 
 Engineered
Products
 
 The
Company’s engineered products are manufactured through Metex Mfg. Corporation
(“Metex”) and AFP Transformers, LLC (“AFP Transformers”), wholly-owned
subsidiaries of the Company.  The knitted wire products and components
manufactured by Metex must function in adverse environments and meet rigid
performance requirements.  The principal areas in which these products
have application are as high temperature gaskets, seals, components for use in
airbags, shock and vibration isolators, noise reduction elements, EMI electronic
shielding and air, liquid and solid filtering devices serving the automotive,
aerospace and general industrial markets.
 
 Metex has
been an original equipment manufacturer for the automobile industry since 1974
and presently supplies many automobile manufacturers with exhaust seals and
components for use in airbag inflators.  Our manufacturing facilities
are ISO/TS 16949 certified, an essential qualification for supplying the
automotive industry.
 
 The
Company also manufactures transformers marketed under the brand names of AFP
Transformers and EPOXYCASTTM for a wide variety of applications including
switchgear, motor starters, machine tool power, rectifiers, inverters, furnaces
and a wide variety of custom applications.
 
 Sales by
the engineered products segment to General Motors, its largest customer,
accounted for 14.6% and 15.6% of the segment’s sales for the years ended
December 31, 2007 and 2006, respectively.  Sales to Autoliv in 2006 of
10.5% represents the only other customer whose sales exceeded 10% of this
segment’s net sales in each of the two years ended December 31,
2007.
 
 Approximately
13.7% and 14.2% of 2007 and 2006 total sales generated from the engineered
products segment were to foreign customers.  Substantially all assets
held by the Company’s engineered products segment are located within the United
States or its leased warehouse in Tijuana, Mexico.
 
 Summary
Financial Information
 
 The
following table sets forth the revenues, operating income and identifiable
assets of each business segment of the Company.
  Year
      Ended
                    December
      31,(In
      thousands)
                
                2007
                
                
                2006Net
      revenues and sales:Real
      estate investment and
      management
                
                $
                19,652
                
                
                $
                19,295Hotel
      operations
                
                $
                14,564
                
                
                $
                8,807Engineered
      products
                
                $
                37,820
                
                
                $
                37,158Operating
      income:Real
      estate investment and
      management
                
                $
                11,960
                
                
                $
                12,015Hotel
      operations
                
                $
                2,072
                
                
                $
                418Engineered
      products
                
                $
                2,083
                
                
                $
                2,784Identifiable
      assetsReal
      estate investment and management and corporate
      assets
                
                $
                227,854
                
                
                $
                196,685Hotel
      operations
                
                $
                31,867
                
                
                $
                14,841Engineered
      products
                
                $
                12,349
                
                
                $
                12,074
 
 Distribution
 
 The
Company’s manufactured products are distributed by a direct sales force and
through distributors to industrial consumers and original equipment
manufacturers.
  2
 
 Product
Methods and Sources of Raw Materials
 
 The
Company’s products are manufactured at its own facilities and a leased facility
in Mexico.  Raw materials used in the Company’s engineered products
segment, which consist primarily of stainless steel wire, steel-related products
and copper, are typically purchased from multiple suppliers throughout the
world.  The price and availability of raw materials can be volatile
due to numerous factors beyond the Company’s control, including general domestic
and international economic conditions, labor costs, supply and demand,
competition, import duties and tariffs and currency exchange
rates.  Although these factors could significantly affect the
availability and cost of the Company’s raw materials, they are generally
purchased at levels that the Company believes will satisfy the anticipated needs
of the Company’s customers based upon contractual commitments, historical buying
practices and market conditions.  To date, the Company has limited
their exposure related to the effects that have arisen from these factors by
various methods including finding alternate sources or by having suppliers
and/or customers absorb any additional related costs.  Although
management does not expect such matters to adversely affect the Company’s
financial position in the future, it is uncertain what effect, if any, such
factors could have on the cost of such materials.  An interruption in
the supply, or a significant increase in the cost, of the Company’s raw
materials could have a material adverse effect on the Company’s revenues,
results of operations or cash flows.  The Company has not had and does
not expect to have any problems fulfilling its raw material requirements during
2008.
 
 Patents
and Trademarks
 
 The
Company owns several patents, patent licenses and trademarks.  While
the Company considers that in the aggregate its patents, patent licenses and
trademarks used in the engineered products operations are significant to this
segment, it does not believe that any of them are of such importance that the
loss of one or more of them would materially affect its consolidated financial
condition or results of operations.  The Company is not currently
involved in any litigation regarding infringement upon its intellectual property
or of the Company’s infringement upon the intellectual property of
others.
 
 Working
Capital Practices
 
 The
Company believes its practices regarding inventories, receivables or other items
of working capital to be typical for the industries involved.  There
are no special practices or conditions affecting working capital items that are
significant to an understanding of the Company’s businesses.  Its
inventory levels, payment terms and return policies are in accordance with
general practices associated with the industries in which it operates and
standard business procedures.
 
 The cash
needs of the Company have been satisfied from funds generated by current
operations.  In addition, the Company received additional financing
from mortgages obtained on two of its hotels.  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.  For additional information on
working capital, see Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Liquidity and Capital Resources,” which is
incorporated by reference herein.
 
 Employees
 
 At March
14, 2008, the Company employed approximately 350 persons, approximately 130 of
which are covered by a collective bargaining agreement that expires in February
2011.  The Company believes that its relationship with its employees
is good.
 
 Competition
 
 The
Company has established close relationships with a large number of major
national and regional real estate brokers and maintains a broad network of
industry contacts.  There are numerous regional and local commercial
developers, real estate companies, financial institutions and other investors
who compete with the Company for the acquisition of properties and
tenants.
   3
  The
Company’s hotels compete with national, regional and local hotels in each of
their geographic markets.  Competition is based on a number of
factors, most notably convenience of location, brand affiliation, price, range
of services and guest amenities offered, quality of customer service and the
overall condition of the property.
 
 The
Company competes with at least 20 other companies in the sale of engineered
products. The Company emphasizes product performance and service in connection
with the sale of these products. The principal competition faced by the Company
results from the sales price of the products sold by its
competitors.
 
 Backlog
 
 The
dollar value of unfilled orders of the Company’s engineered products segment was
approximately $3.1 million at both December 31, 2007 and
2006.  Although total backlog did not change, fluctuations within the
components did occur principally due to growth in the Company’s knitted wire and
transformer product lines, offset by a special project that was completed during
the year.  It is anticipated that substantially all of the 2007
backlog will be filled in 2008.  Substantially all of the 2006 backlog
was filled in 2007.  The order backlog referred to above does not
include any order backlog with respect to sales of knitted wire mesh components
for exhaust emission control devices, exhaust seals or airbag components because
of the manner in which customer orders are received.
 
 Environmental
Regulations
 
 Federal,
state and local requirements regulating the discharge of materials into the
environment or otherwise relating to the protection of the environment have had
and will continue to have a significant impact upon the operations of the
Company.  It is the policy of the Company to manage, operate and
maintain its facilities in compliance, in all material respects, with applicable
standards for the prevention, control and abatement of environmental pollution
to prevent damage to the quality of air, land and resources.
 
 The
Company has undertaken the completion of environmental studies and/or remedial
action at Metex’ 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”).  Environmental experts engaged by the Company estimate
that, under the most probable scenario, the remediation of this site is
anticipated to require initial expenditures of $860,000, including the cost of
capital equipment, and $86,000 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, environmental
experts have advised the Company that, under the most probable remediation
scenario, the estimated cost to remediate this site is anticipated to require
$2.3 million in initial costs, including capital equipment expenditures, and
$258,000 in annual operating and maintenance costs over a 10 year
period.  These estimated costs of future expenses for 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 becomes 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 $9.5 million and $9.7 million recorded in accounts
payable and accrued liabilities and other long-term liabilities as of December
31, 2007 and 2006, respectively, to cover such matters.
   4
 
 Available
Information
 
 The
Company’s filings with the Securities and Exchange Commission (“SEC”) may be
read and copied at the SEC’s Public Reference Room at 100 F Street, NE,
Washington, DC 20549.  Information on the operation of the Public
Reference Room may be obtained by calling the SEC at
1-800-SEC-0330.  In addition, the SEC maintains an Internet site that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC.  The SEC’s
Internet address is http://www.sec.gov.  The
Company’s SEC filing number is 1-10104.
 
 A copy of
the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, if any, and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, may be obtained as soon as reasonably practicable after the
Company electronically files such material with, or furnishes it to, the SEC
without charge by writing to Anthony J. Miceli, Chief Financial Officer and
Secretary of the Company, at its executive offices, United Capital Building, 9
Park Place, Great Neck, NY 11021.
 
 
 ITEM
1A.                      RISK
FACTORS
 
 The
following are some of the risks that could cause actual results to differ
significantly from those expressed or implied by such statements:
 
 Our
performance is subject to risks associated with the real estate
industry.
 
 Although
the Company’s leases are generally long-term and may be below market, real
property investments are subject to varying degrees of risk and are relatively
illiquid.  Among the factors that may impact our real estate property
values or the revenues derived from our portfolio are changes in the national,
regional and local economic climate, the attractiveness of our properties to
tenants, competition from other available property owners and changes in market
rental rates.  Our performance also depends on the financial condition
of our tenants and our ability to collect rent from tenants and to pay for
adequate maintenance, insurance and other operating costs, including real estate
taxes, which could increase over time.  Also, the expenses of owning
and operating a property are not necessarily reduced when circumstances such as
market factors and competition cause a reduction in income from the
property.
 
 Our
results could be negatively affected by delinquencies in our mortgage or
high-yield loan receivables.
 
 On a
limited basis we provide high-yield, short-term mortgage loans that we believe
are collateralized by desirable properties at substantial value-to-loan
ratios.  In addition, we have provided purchase money notes to buyers
of certain real estate properties.  Although we believe that the
collateral for these loans is sufficient to recover its carrying value, changes
in the real estate market in the locale in which the property is located or
delinquencies by the borrower could negatively affect our carrying value for
these loans and, ultimately, our results of operations and cash
flows.
 
 Off-balance
sheet obligations could deplete our liquidity and capital
resources.
 
 We do not
have any off-balance sheet arrangements that we believe are reasonably likely to
have a material current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources.  The debt of the joint
venture in which we currently have an ownership interest is a non-recourse
obligation and is collateralized by the entity’s real property.  We
believe that with each arrangement the value of the underlying property and its
operating cash flows are sufficient to satisfy its obligations.  In
addition, we are not obligated for the debts of the joint
venture.  However, we could decide to satisfy the debts of the joint
venture to protect our investment.  In such event, our capital
resources and financial condition would be reduced and, in certain instances,
the carrying value of our investment and our results of operations would be
negatively impacted.
   5
 
 Operating
results of our hotel operations are subject to conditions common in the lodging
industry.
 
 Changes
in certain factors could adversely impact hotel room demand and pricing and
result in reduced occupancy or could otherwise adversely affect our results of
operations and financial condition.  These factors
include:
 ·
                local
      conditions such as an oversupply of, or a reduction in demand for, hotel
      rooms;
 ·
                the
      attractiveness of our hotels to consumers and competition from other
      hotels;
 ·
                the
      quality, philosophy and performance of the managers of our
      hotels;
 ·
                increases
      in operating costs due to inflation and other factors such as increases in
      the price of energy, healthcare or
insurance;
 ·
                changes
      in travel patterns, extreme weather conditions and cancellation of or
      changes in events scheduled to occur in our
  markets;
 ·
                seasonality,
      inherent in the hotel industry, may cause our results to fluctuate
      significantly between quarters; and
 ·
                other
      unpredictable external factors, such as acts of god, war, terrorist
      attacks, epidemics, airline strikes, transportation and fuel price
      increases and severe weather, may reduce business and leisure
      travel.
 
 Our
engineered products segment relies on significant customers.
 
 The
Company sells its engineered products to many customers throughout the
world.  Historically, a small number of customers have accounted for
significant portions of these sales.  For the year ended December 31,
2007, sales by the engineered products segment to General Motors, its largest
customer, accounted for 14.6% of the segment’s sales.  Since our
engineered products segment accounted for 52.5% of our consolidated revenues in
2007, the loss of General Motors as a customer, or a significant decline in
sales to them, would adversely affect our revenues, cash flows and results of
operations.  In addition, such sales could be negatively impacted in
2008 due to the effects of the continued softening of sales in the automotive
industry.
 
 Our
markets are highly competitive.
 
 The
markets for our engineered products are highly competitive.  We cannot
assure that we will be able to successfully compete or that our competitors will
not develop new technologies and products that are more commercially effective
than our own.  Some of our competitors have financial, technical,
marketing, sales and distribution resources greater than ours.
 
 An
interruption in the supply, or a significant increase in the cost, of our raw
materials could have a material adverse effect on our revenues, results of
operations and cash flows.
 
 The
principal raw materials used in the Company’s engineered products business are
stainless steel wire, steel-related products and copper, which are typically
purchased from multiple suppliers throughout the world.  The price and
availability of raw materials can be volatile due to numerous factors beyond our
control, including general domestic and international economic conditions, labor
costs, supply and demand, competition, import duties and tariffs and currency
exchange rates.  These factors could significantly affect the
availability and cost of our raw materials which are generally purchased at
levels that we believe will satisfy the anticipated needs of our customers based
upon contractual commitments, historical buying practices and market
conditions.  We may be unable to recover raw material cost increases
due to contractual or competitive conditions.  Conversely, reductions
in raw material prices could result in lower sales prices for our products and
lower margins as we utilize existing inventories.  Therefore, changing
raw material costs could significantly impact our revenues, gross margins,
operating and net income.  If, in the future, we are unable to obtain
sufficient amounts of stainless steel wire or other critical raw materials on a
timely basis and at competitive prices, we may be unable to fulfill our
customers’ requirements, which could have a material adverse effect on our
business, financial condition, results of operations and cash
flows.
  Protection
of our intellectual property is limited; we are subject to the risk of third
party claims of infringement.
 
 Our
engineered products business relies in large part upon our proprietary
scientific and engineering “know-how” and production
techniques.  Historically, patents have not been an important part of
our protection of our intellectual property rights.  We rely upon the
laws regarding unfair competition, restrictions in licensing agreements and
confidentiality agreements to protect our intellectual property.  We
limit access to and distribution of our proprietary information.
   6
  Our
ability to compete successfully and achieve future revenue growth will depend,
in part, on our ability to protect our proprietary technology and operate
without infringing upon the rights of others.  We are not currently
involved in any litigation regarding the infringement upon our intellectual
property or regarding our infringement upon the intellectual property of
others.
 
 Our
operations are subject to environmental regulation and environmental problems
which are possible and can be costly.
 
 Our
engineered products segment is subject to a variety of federal, state and local
governmental regulations relating to the storage, discharge, handling, emission,
generation, manufacture and disposal of toxic or other hazardous substances used
to manufacture our products.  We believe that we are currently in
compliance in all material respects with such regulations and that we have
obtained all necessary environmental permits to conduct our
business.  Nevertheless, the failure to comply with current or future
regulations could result in the imposition of fines, suspension of production,
alteration of our manufacturing processes or cessation of
operations.
 
 Federal,
state and local laws and regulations relating to the protection of the
environment require a current or previous owner or operator of real estate to
investigate and clean up hazardous or toxic substances at such
property.
 
 We have
undertaken the completion of environmental studies and/or remedial action at
Metex’ two New Jersey facilities and have recorded a liability for the estimated
investigation, remediation and administrative costs associated therewith (See
“Environmental Regulations” in Item 1 of Part I and Note 17, “Commitments and
Contingencies” of Notes to Consolidated Financial Statements).
 
 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
these sites, should an appropriate regulatory agency deem such efforts to be
necessary.  The estimates may also be revised as new or additional
information in these matters becomes available or should the NJDEP or other
regulatory agencies require additional or alternative remediation efforts in the
future.  Although we do not expect such events to significantly change
our estimates, adverse decisions or events, particularly as to the merits of our
factual and legal basis, could cause us to change our estimate of liability with
respect to such matters in the future.  Accordingly, we are unable to
predict whether our estimate of future remediation costs will materially
increase in the future.
 
 Our
stock price may be volatile.
 
 The
market price of our common stock has been volatile in the past and may be
volatile in the future.  For example, during the twelve months ended
December 31, 2007, the sales price of our common stock fluctuated between $36.00
and $22.50 per share and subsequent to December 31, 2007 the market price had a
high of $25.10 per share.
 
 The stock
market has experienced extreme volatility that often has been unrelated to the
performance of particular companies.  These market fluctuations may
cause our stock price to fall regardless of our performance.
 
 Mr.
A.F. Petrocelli can control the outcome of all matters requiring stockholder
approval.
 
 As of the
date of this Annual Report on Form 10-K, Mr. A.F. Petrocelli, the
Company’s Chairman, President and Chief Executive Officer, beneficially owns, in
the aggregate, approximately 66.7% of the Company’s outstanding common stock
(exclusive of options).  Such amount includes shares held by his wife
but does not include shares held by the adult children or grandchildren of
Mr. Petrocelli.  Accordingly, Mr. Petrocelli is therefore
able to exercise considerable influence over the outcome of all matters
requiring stockholder approval, including the election of directors and the
approval of significant corporate transactions, such as mergers or other
business combinations.
 ITEM
1B.                      UNRESOLVED
STAFF COMMENTS
 
 None
  7
 ITEM
2.                       
 PROPERTIES
 
 Real
Property Held for Rental or Sale
 
 As of
March 14, 2008, the Company owned 152 properties throughout the United
States.  The properties are primarily leased under long-term net
leases.  The Company’s classification and gross carrying value of its
properties at December 31, 2007 are as follows:
 
 (Dollars
      in thousands)
                
                Gross
                    Carrying
                    Value
                
                
                Percentage
                
                
                Number
      of
                    PropertiesShopping
      centers and retail
      outlets
                
                $
                57,944
                
                
                
                42.8
                %
                
                
                19Commercial
      properties
                
                
                40,911
                
                
                
                30.2
                %
                
                
                83Day-care
      centers
                
                
                5,724
                
                
                
                4.2
                %
                
                
                9Hotel
      properties
                
                
                27,433
                
                
                
                20.2
                %
                
                
                3Other
                
                
                3,503
                
                
                
                2.6
                %
                
                
                36$
                135,515
                
                
                
                100.0
                %
                
                
                150
 
 The
following summarizes the Company’s properties by geographic area at December 31,
2007:
 
 (Dollars
      in thousands)
                
                Gross
                    Carrying
                    Value
                
                
                Number
                    of
                    PropertiesNortheast
                
                $
                70,027
                
                
                
                94Southeast
                
                
                24,392
                
                
                
                18Midwest
                
                
                21,354
                
                
                
                23Southwest
                
                
                5,435
                
                
                
                4Pacific
      Coast
                
                
                11,173
                
                
                
                4Pacific
      Northwest
                
                
                861
                
                
                
                4Rocky
      Mountain
                
                
                2,273
                
                
                
                3$
                135,515
                
                
                
                150
 
 Shopping
Centers and Retail Outlets
 
 Shopping
centers and retail outlets include 12 department stores and other properties,
primarily leased under net leases.  The tenants are responsible for
taxes, maintenance and all other expenses of the properties.  The
leases for certain shopping centers and retail outlets provide for additional
rents based on sales volume and renewal options at higher rents.  The
department stores include eight properties leased to Kmart Corporation (“Kmart”)
and two Macy’s stores, with a total of approximately 747,000 and 364,000 square
feet, respectively.  The Kmart stores are primarily located in the
Midwest region of the United States.  The Macy’s stores are located in
the Pacific Coast and Southwest regions of the United States.
 
 Commercial
Properties
 
 Commercial
properties consist of properties leased as 50 restaurants, 10 Midas Muffler
Shops, two convenience stores, seven office buildings and miscellaneous other
properties.  These properties are primarily leased under net leases,
which in certain cases have renewal options at higher rents.  Certain
of these leases also provide for additional rents based on sales
volume.  The restaurants, located throughout the United States,
include properties leased as McDonald’s, Burger King, Dunkin’ Donuts, Pizza Hut,
Hardee’s, Wendy’s, Kentucky Fried Chicken and Boston Market.
 
 8
 Day-Care
Centers
  The
Company has nine day-care centers located in New York City, eight of which are
leased to the City of New York.  The City of New York is responsible
for real estate taxes and certain maintenance costs on those properties they
lease, while the Company maintains insurance and certain other maintenance
obligations.  All such leases provide for the reimbursement of
operating costs above base year levels, and certain leases include rental
increases and renewal options.
 
 Hotel
Properties
 
 The
Company’s hotel properties, located in Connecticut and Georgia, are each managed
currently through a regional hotel management company with local on-site
management responsible for all day-to-day operations of the
hotels.  The Company’s hotel located in New York is managed by the
Company.
 
 Manufacturing
Facilities
 
 The
Company’s engineered products are manufactured at 970 New Durham Road, Edison,
New Jersey, in a one-story building having approximately 55,000 square feet of
floor space, and also in a second facility at 206 Talmadge Road, Edison, New
Jersey, which has approximately 55,000 square feet of floor
space.  The Company owns these facilities together with the
sites.  Metex also leases a manufacturing facility in Tijuana, Mexico,
with approximately 24,000 square feet of floor space.
  ITEM
3.                         LEGAL
PROCEEDINGS
 
 The
Company currently and from time to time is involved in litigation arising in the
ordinary course of its business.  The Company does not believe that it
is involved in any litigation that is likely, individually or in the aggregate,
to have a material adverse effect on its financial condition or results of
operations or cash flows.
  ITEM
4.                        
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
 None
 
 
 PART
II
 
 ITEM
      5.
                MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES
 
 The
Company’s Common Stock, $.10 par value (the “Common Stock”), is traded on the
American Stock Exchange under the symbol AFP.  The table below shows
the high and low sales prices as reported in the composite transactions for the
American Stock Exchange.
 
 2007
                
                
                2006High
                
                
                Low
                
                
                High
                
                
                LowFirst
      Quarter
                
                $
                36.00
                
                
                $
                29.25
                
                
                $
                27.13
                
                
                $
                23.90Second
      Quarter
                
                $
                35.50
                
                
                $
                27.35
                
                
                $
                26.50
                
                
                $
                20.75Third
      Quarter
                
                $
                29.80
                
                
                $
                25.00
                
                
                $
                27.80
                
                
                $
                25.07Fourth
      Quarter
                
                $
                26.50
                
                
                $
                22.50
                
                
                $
                30.30
                
                
                $
                25.85
 
 As of
March 14, 2008, there were approximately 208 record holders of the Company’s
Common Stock.  The closing sales price for the Company’s Common Stock
on such date was $23.00.  The Company has not declared a dividend
during the past two years.  While the Company does not currently
expect to pay additional dividends, the Board of Directors could reevaluate this
position in the future.
   9
  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 December 31, 2007:
  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
                
                
                Approximate
      Dollar Value that May Yet Be Purchased Under the Plans or
      ProgramsOctober
      1, 2007 — October 31, 2007
                
                
                900
                
                
                $
                25.95
                
                
                
                900
                
                
                $
                3,939,000November
      1, 2007 — November 30, 2007
                
                
                15,900
                
                
                $
                25.89
                
                
                
                15,900
                
                
                $
                3,527,000December
      1, 2007 — December 31, 2007
                
                
                3,400
                
                
                $
                24.71
                
                
                
                3,400
                
                
                $
                3,443,000Total
                
                
                20,200
                
                
                $
                25.69
                
                
                
                20,200
 
 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 December 31, 2007, $3.4 million remains to be
purchased under such plans.  These authorizations are ongoing and do
not have an expiration date.
 
 Equity
Compensation Plan Information
 The
Company maintains two stock option plans.  Both plans provide for the
granting of incentive or non-qualified stock options.  The Company has
no outstanding warrants or rights or plans which provide for the grant or
issuance of warrants or rights.  The following table gives information
about stock option awards under these plans as of December 31,
2007.  See Note 9 of Notes to Consolidated Financial Statements for
further discussion on these plans.
 
 Plan
      Category
                
                Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
                    (a)
                
                
                Weighted-average
      exercise price of outstanding options, warrants and rights
                    (b)
                
                
                Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in column
      (a))
                    (c)Equity
      compensation plans approved by security holders
                
                
                4,748,668
                
                
                $
                11.91
                
                
                
                —Equity
      compensation plans not approved  by security
    holders
                
                
                —
                
                
                
                —
                
                
                
                —Total
                
                
                4,748,668
                
                
                $
                11.91
                
                
                
                —
  ITEM
6.                        
SELECTED CONSOLIDATED FINANCIAL DATA
 
 Not
applicable, as the Company is a smaller reporting company.
   10
   ITEM
      7.
                MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
 
 GENERAL
 
 The
following discussion of the Company’s financial condition and results of
operations should be read in conjunction with the description of the Company’s
business and properties contained in Items 1 and 2 of Part I and the
Consolidated Financial Statements and Notes thereto, included elsewhere in this
report.
 
 Results
of Operations:  2007 and 2006
 
 Total
revenues for the year ended December 31, 2007 were $72.0 million, an increase of
$6.8 million or 10.4% from $65.3 million for the year ended December 31, 2006,
primarily due to the acquisition of a hotel in May 2007.  Income from
continuing operations before income taxes was $26.6 million for the twelve
months ended December 31, 2007 versus $20.0 million for the same 2006
period.  Net income for 2007 was $27.5 million or $3.32 per basic
share compared to net income of $30.6 million or $3.68 per basic share for
2006.  The 2007 results include $9.5 million in gains on the sale of
real estate, net of tax, above those recognized in the prior year
period.
 
 Included
in other income and expense, net during the year ended December 31, 2007 is a
$5.7 million litigation award from a prior condemnation related to a property
taken by the City of New York in 2001.
 
 The 2006
results were favorably impacted by the reversal of $17.3 million in long-term
and deferred income tax liabilities related to certain tax matters for which the
statue of limitations had expired.
 
 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:
 
 (In
      thousands)
                
                Year
      Ended
                    December
      31, 2007
                
                
                Year
      Ended
                    December
      31, 2006Real
      Estate
                
                
                Hotel
      Operations
                
                
                Total
                
                
                Real
      Estate
                
                
                Hotel
      Operations
                
                
                TotalRevenues
                
                $
                19,652
                
                
                $
                14,564
                
                
                $
                34,216
                
                
                $
                19,295
                
                
                $
                8,807
                
                
                $
                28,102Mortgage
      interest expense
                
                
                247
                
                
                
                849
                
                
                
                1,096
                
                
                
                268
                
                
                
                529
                
                
                
                797Depreciation
      expense
                
                
                1,878
                
                
                
                1,279
                
                
                
                3,157
                
                
                
                1,555
                
                
                
                782
                
                
                
                2,337Other
      operating expenses
                
                
                5,567
                
                
                
                10,364
                
                
                
                15,931
                
                
                
                5,457
                
                
                
                7,078
                
                
                
                12,535Operating
      income
                
                $
                11,960
                
                
                $
                2,072
                
                
                $
                14,032
                
                
                $
                12,015
                
                
                $
                418
                
                
                $
                12,433
 
 Real
Estate Investment and Management
 
 Revenues
from the real estate investment and management segment were $19.7 million for
the year ended December 31, 2007, an increased of $357,000 or 1.9% from $19.3
million for the year ended December 31, 2006.  This increase was
primarily as the result of new leases and/or renewals at higher rents ($1.1
million).  This increase was partially offset by non-recurring
transactions ($300,000) and a decrease in the timing of tenant reimbursements
($131,000).  Revenues from the Company’s real estate properties are
generally derived from properties with single tenant and long-term
leases.  Therefore, rental revenues recognized under generally
accepted accounting principles do not fluctuate significantly.  Rental
revenue can vary due to future lease renewals, terminations and by the purchase
or sale of additional properties.
 
 Mortgage
interest expense continued to decrease as a result of continuing mortgage
amortization.  Such expense decreased $21,000 or 7.8% for the year
ended December 31, 2007, compared to 2006.  Mortgage interest expense
on existing obligations of the Company’s real estate investment and management
segment will continue to decline with scheduled principal
reductions.  At December 31, 2007, the outstanding mortgage balance on
the Company’s real estate investment properties was reduced to $3.9
million.
 
 Depreciation
expense associated with real properties held for rental increased $323,000 or
20.8% for the year ended December 31, 2007, compared to 2006, primarily
attributable to depreciation expense ($502,000) related to additions to real
estate assets during the current and prior year, partially offset by a reduction
in depreciation expense associated with certain
   11
  properties
or improvements becoming fully depreciated in the prior year
($162,000).  Due to a purchase of two commercial properties subsequent
to year end and other expenditures for capital improvements incurred during
2007, depreciation expense on the Company’s properties should be higher in 2008
than in 2007.
 
 Other
operating expenses associated with the management of real properties increased
$110,000 or 2.0% for the year ended December 31, 2007, compared to such expenses
incurred in 2006.  The increase is primarily related to increases in
compensation expense ($126,000) and property maintenance costs ($83,000),
partially offset by a decrease in professional fees
($152,000).  Operating expenses, such as property maintenance and
utility costs, could fluctuate in the future from those previously incurred due
to the extent of the property age, location and vacancies.
 
 Hotel
Operations
 
 Hotel
revenues were $14.6 million for the year ended December 31, 2007, an increase of
$5.8 million or 65.4% from $8.8 million for the year ended December 31,
2006.  This increase was primarily as the result of additional hotel
revenues ($4.9 million) received as a result of the May 2007 acquisition of a
hotel located in Utica, New York (the “Utica Hotel”).  The Company
also received increased revenues from its hotels located in Connecticut and
Georgia during 2007 primarily due to renovations and improvements in 2006 which
allowed the Company to increase average room rates.  Due to the
acquisition of the Utica Hotel, hotel revenues should increase during the first
half of 2008 as compared to the first half of 2007.
 
 Mortgage
interest expense for the year ended December 31, 2007 increased $320,000 or
60.5% to $849,000, compared to $529,000 in 2006.  The increase is
primarily due to a second mortgage obtained during August 2007 on the Utica
Hotel in the amount of $12.0 million, which bears interest at 6.18% per annum,
is payable monthly based on a 25-year amortization and matures in August
2017.  The Company’s hotel operations also incurred mortgage interest
expense in connection with the mortgage assumed on the acquisition of the Utica
Hotel in May 2007.  During December 2007, the Company obtained a
mortgage on its Atlanta, Georgia hotel in the amount of $7.5 million, which
bears interest at 6.57%, is payable monthly based on a 30-year amortization and
matures in January 2018.  As a result, 2008 mortgage interest expense
should be higher than that of 2007.
 
 Depreciation
expense associated with the Company’s hotel operations increased $497,000 for
the year ended December 31, 2007, compared to 2006, primarily attributable to
depreciation expense related to the Utica Hotel acquired in May
2007.  In addition, increased depreciation expense results from
renovations and improvements to the Company’s two other hotels completed during
the second half of 2006.  Due to the acquisition of the Utica Hotel,
depreciation expense of the Company’s hotel operations should increase during
the first half of 2008.
 
 Other
operating expenses related to the management of the Company’s hotels increased
$3.3 million to $10.4 million for the year ended December 31, 2007, compared to
$7.1 million in 2006, primarily due to additional operating expenses related to
the acquisition of the Utica Hotel.  In addition, other operating
expenses increased at the Company’s two other hotels during this period
primarily as a result of higher revenues, as noted above.
 
 Future
hotel revenues and expenses will vary based on demand and desirability of these
properties compared to others in their immediate proximity and may be influenced
by local and other economic conditions, including the room rate of the
hotels.
 
 Engineered
Products
 
 The
Company’s engineered products segment includes Metex and AFP
Transformers.  The operating results of the engineered products
segment are as follows:
 
 (In
      thousands)
                
                Year
      Ended December 31,2007
                
                
                2006Net
      sales
                
                $
                37,820
                
                
                $
                37,158Cost
      of
      sales
                
                
                28,868
                
                
                
                27,522Selling,
      general and administrative
      expenses
                
                
                6,869
                
                
                
                6,852Operating
      income
                
                $
                2,083
                
                
                $
                2,784
   12
 
 Net sales
of the engineered products segment increased 1.8% for the year ended December
31, 2007 to $37.8 million from $37.2 million for the year ended December 31,
2006 primarily due to an increased demand in the Company’s transformer product
line which was brought about by an increase in capital spending.  This
increase is partially offset by a slight decrease in the Company’s automotive
product line which is still feeling the effects of continued softening of sales
in the automotive industry.  Sales of this segment are directly
influenced by general economic conditions, worldwide automotive demand and
industrial capital spending and could also be affected by changes in technology,
competitive forces or challenges to its intellectual property.
 
 Cost of
sales as a percentage of sales increased 2.3% for the year ended December 31,
2007, compared to 2006, primarily related to an increase in the cost of raw
materials, primarily copper and steel components, which, where possible, have
been passed along to customers.
 
 Selling,
general and administrative expenses of the engineered products segment increased
less than one percent for the year ended December 31, 2007, compared to 2006,
which is in line with the sales increase noted above.
 
 General
and Administrative Expenses
 
 General
and administrative expenses not associated with the manufacturing operations
decreased $1.3 million or 32.1% for the year ended December 31, 2007, compared
to such expenses incurred in 2006, primarily related to compensation expense
associated with unvested stock options recorded during 2006 in connection with
the adoption of SFAS No. 123R ($807,000 - see Note 1 of Notes to Consolidated
Financial Statements).  No compensation costs relating to share-based
payments were recognized in 2007.
 
 Other
Income and Expense, Net
 
 Other
income and expense, net increased $3.6 million to $5.6 million in 2007 from $2.0
million in 2006 primarily due to a $5.7 million litigation award from a prior
condemnation related to a property taken by the City of New York in 2001,
partially offset by a $1.2 million reduction in net realized and unrealized
gains on derivative instruments.
 
 Income
Taxes
 
 The
effective tax rate from continuing and discontinued operations for the year
ended December 31, 2007 was 36.3%.  For the year ended December 31,
2006, the effective tax rate was favorably impacted by the reversal of
approximately $17.3 million in long-term and deferred income tax liabilities
related to certain tax matters for which the statue of limitations has
expired.  Excluding this reversal, the effective tax rate from
continuing and discontinued operations for the year ended December 31, 2006 was
35.5%.
 
 Discontinued
Operations
 
 Loss from
operations on properties sold and accounted for as discontinued operations was
$11,000 and $33,000, on a net of tax basis, for the years ended December 31,
2007 and 2006, respectively.  Prior year amounts have been
reclassified to reflect results of operations of real properties disposed of
during 2007 and 2006, as discontinued operations.
 
 During
2007, the Company divested itself of five commercial properties and two other
properties which had a net book value of $1.2 million.  The aggregate
proceeds from these transactions were $17.9 million resulting in a gain of $10.0
million, on a net of tax basis.
 
 During
2006, the Company divested itself of two properties which had a net book value
of $936,000.  The aggregate proceeds from these transactions were $1.8
million resulting in a gain of $548,000, on a net of tax basis.
  Liquidity
and Capital Resources
 
 Net cash
provided by operating activities was $14.5 million for the year ended December
31, 2007, compared to $15.1 million for 2006.  The components that
provided the decline in operating cash flows from 2006 to 2007 vary widely each
year.  Operating income before non-cash charges, including
depreciation and compensation costs from the adoption of SFAS No. 123R, was
$16.9 million for 2007 versus $14.7 million in 2006.  Interest and
dividend income, which was $1.1 million higher in 2007 than 2006, also accounted
for this change.  The
   13
  provision
for income taxes, before the non-recurring adjustment in 2006, offset these
increases ($2.1 million).  Changes in the components of working
capital, which includes a contribution to the Company’s defined benefit pension
plan in 2007 ($700,000), account for the remaining differences.
 
 Net cash
provided by investing activities was $26.2 million for 2007 versus net cash used
in investing activities of $25.2 million for 2006, which primarily results from
the timing of the purchase or sale of available-for-sale securities ($50.3
million).  Other changes that effected cash flows from investing
activities were net proceeds received from a litigation award from a prior
condemnation ($5.7 million) and the sale of real estate assets ($1.0 million),
net of proceeds which are held in escrow by a third-party in connection with a
Section 1031 tax-deferred exchange.  In addition, the Company incurred
an increase in acquisition of/additions to real estate assets ($5.3 million),
which includes the purchase of the Utica Hotel in May 2007, net of the related
mortgage assumed.
 
 During
May 2007, the Company purchased the Utica Hotel for approximately $16.0 million
plus closing costs, including the assumption of an underlying mortgage of $2.3
million, of which $872,000 of the purchase price was allocated to furniture,
fixtures and equipment and is included in property, plant and equipment in the
Consolidated Balance Sheet.  The mortgage assumed bears interest at
7.5% per annum, with monthly installments of interest and principal of $30,000
through December 2015.  The total cost of the acquisition, less the
assumption of the mortgage, is reflected in acquisition of/additions to real
estate assets in the Consolidated Statements of Cash Flows.  In August
2007, the Company obtained an additional mortgage on this property in the amount
of $12.0 million.  This mortgage bears interest at 6.18% per annum, is
payable monthly based on a 25-year amortization and matures in August
2017.
 
 Net cash
provided by financing activities was $11.6 million for 2007, compared to net
cash used in financing activities of $12.8 million for 2006.  This
change in financing activities primarily results from proceeds received from
additional financing of the Utica Hotel ($12.0 million), financing of the
Company’s Atlanta, Georgia hotel ($7.5 million) and from the exercise of stock
options ($4.2 million) and the additional tax benefits related to the exercise
of stock options ($3.3 million) during the current and prior years, partially
offset by an increase in the purchase and retirement of common stock during 2007
($2.6 million) versus that purchased during 2006.
 
 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
December 31, 2007, the Company’s cash and marketable securities were $156.2
million and working capital was $172.5 million, compared to cash and marketable
securities of $139.6 million and working capital of $140.2 million at December
31, 2006.  Included in notes and accounts receivable, net at December
31, 2007 is $15.0 million in proceeds from the sale of one of the Company’s
properties which is being held in escrow by a third party, on behalf of the
Company.  Subsequent to year end, the Company utilized $13.6 million
of the amount held in escrow to acquire a property in connection with a Section
1031 tax-deferred exchange.  The remaining balance of the escrow, plus
interest, was remitted to the Company.  Management continues to
believe that while there has been a decline in the value of certain real estate
properties, the overall real estate market in the United States continues to be
overvalued and accordingly acquisitions have been limited to those select
properties that meet the Company’s stringent financial
requirements.  Management believes that the available working capital
puts the Company in an opportune position to fund acquisitions and grow the
portfolio, if and when attractive long-term opportunities become
available.
 
 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 is not 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.
   14
 
 The cash
needs of the Company have been satisfied from funds generated by current
operations.  In addition, the Company received additional financing
from mortgages obtained on two of its hotels.  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 other companies
or the acquisition of real properties in exchange for equity or debt
securities.
 
 Funds of
the Company in excess of those 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.  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, changes in U.S. interest rates could
impact the Company’s earnings.
 
 In
strategies designed to hedge overall market risk, the Company may sell common
stock short or 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
are recorded as a component of accounts payable and accrued liabilities in the
Consolidated Balance Sheets.
 
 The
Company sells its engineered products to many customers throughout the
world.  Historically, a small number of customers have accounted for
significant portions of these sales.  For the year ended December 31,
2007, sales by the engineered products segment to General Motors, its largest
customer, accounted for 14.6% of the segment’s sales.  Since our
engineered products segment accounted for 52.5% of our consolidated revenues in
2007, the loss of General Motors as a customer, or a significant decline in
sales to them, would adversely affect the Company’s revenues, cash flows and
results of operations.
 
 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.  For the years ended December 31, 2007 and 2006, 8.2% and
5.9% of the net sales of the Company’s engineered products segment were
denominated in Euros, 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.  Even with the recent
strength of the Euro in relation to the U.S. dollar, 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 were to
increase in the future, the Company may reexamine this practice to minimize the
associated risks.
 
 The
Company has undertaken the completion of environmental studies and/or remedial
action at Metex’ two New Jersey facilities and has recorded a liability for the
estimated investigation, remediation and administrative costs associated
therewith.  See “Environmental Regulations” in Item 1 of Part I and
Note 17, “Commitments and Contingencies” of Notes to Consolidated Financial
Statements for further discussion on 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 Consolidated
Financial Statements, depending on the anticipated payment date.  None
of these matters are expected to result in a material adverse effect on the
Company’s consolidated financial position or results of operations.
   15
 
 Related
Party Transactions
 
 The
Company has a 50% interest in an unconsolidated limited liability corporation,
whose principal assets are two distribution centers leased to
Kmart.  A group that includes the wife of the Company’s Board
Chairman, two Directors of the Company and the wife of one of the Directors has
an 8% interest in this entity.  The Company’s share of income arising
from this investment, accounted for as a leveraged lease, was $191,000 and
$279,000 for the years ended December 31, 2007 and 2006,
respectively.
 
 
 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.  The following is a
description of those accounting policies believed by management to require
subjective and complex judgments which could potentially affect reported
results.
 
 Revenue
Recognition and Accounts Receivable – Real Estate Investment and
Management
 
 The
Company leases substantially all of its properties to tenants under net leases
which are accounted for as operating leases.  Under this type of
lease, the tenant is obligated to pay all operating costs of the property
including real estate taxes, insurance and repairs and
maintenance.  Revenue is recognized as earned and deemed
collectible.  The effect of stepped-rent increases on significant
leases are recorded, net of allowances, on a straight-line
basis.  Gains on sales of real estate assets and equity investments
are recorded when the gain recognition criteria under generally accepted
accounting principles in the United States of America have been
met.
 
 The
Company does not generally have leases that include significant rent concessions
or provisions that require the lessee to fund capital improvements or to pay the
lessor any revenues based upon indexes or rates that are not explicitly stated
in the lease.
 
 Reimbursements
of certain costs received from tenants are recognized as tenant reimbursement
revenues.
 
 Certain
lease agreements provide for additional rent based on a percentage of tenants’
sales.  These percentage rents are recorded once the required sales
levels are achieved.
 
 Income on
leveraged leases is recognized by a method that produces a constant rate of
return on the outstanding investment in the lease, net of the related deferred
tax liability, in the years in which the net investment is
positive.
 
 Accounts
receivable are recorded at the outstanding amounts, net of allowances for
doubtful accounts.  The Company makes estimates of the
uncollectibility of its accounts receivable related to base rents, tenant
escalations, expense reimbursements and other revenues.  The Company
analyzes accounts receivable, historical bad debt levels, customer credit
worthiness and current economic trends when evaluating the adequacy of the
allowance for doubtful accounts.  In addition, tenants in bankruptcy
are analyzed and estimates are made in connection with the expected recovery of
pre-petition and post-petition claims.  The Company’s net income is
directly affected by management’s estimate of the collectibility of accounts
receivable.
 
 Revenue
Recognition and Accounts Receivable – Hotel Operations
 
 Revenues
from the Company’s hotel operations are generally recognized when
earned.  Hotel revenues primarily represent room rental and food and
beverage sales and are recognized at the time of the hotel stay or sale of
restaurant services.
 
 Accounts
receivable are recorded at the outstanding amounts, net of allowances for
doubtful accounts.  The Company determines the allowance for doubtful
accounts based on an assessment of the collectibility of specific customer
accounts which include the length of time the receivables are past due, the
financial health of the customer and historical experience.  The
Company’s net income is directly affected by management’s assessment of the
collectibility of accounts receivable.
   16
 
 Revenue
Recognition and Accounts Receivable – Engineered Products
 
 In
general, sales are recorded when products are shipped, title has passed and
collection is reasonably assured.  Management believes that adequate
controls are in place to ensure compliance with contractual product
specifications, a substantial history of such performance has been established
and historical returns and allowances have not been significant.  If
actual sales returns and allowances exceed historical amounts, the Company’s
sales would be adversely affected.
 
 Accounts
receivable are recorded at the outstanding amounts, net of allowances for
doubtful accounts.  Estimates are used in determining the Company’s
allowance for doubtful accounts based on historical collections experience,
current economic trends and a percentage of its accounts receivable by aging
category.  In determining these percentages, the Company looks at
historical write-offs of its receivables.  The Company also looks at
the credit quality of its customer base as well as changes in its credit
policies.  The Company continuously monitors collections and payments
from its customers.  While credit losses have historically been within
expectations and the provisions established, the Company cannot guarantee that
it will continue to experience the same credit loss rates that it has in the
past.  The Company’s net income is directly affected by management’s
estimate of the collectibility of accounts receivable.
 
 Marketable
Securities
 
 The
Company determines the appropriate classification of marketable securities at
the time of purchase and reassesses the appropriateness of such classification
at each reporting date.  At December 31, 2007 and 2006, all marketable
securities held by the Company have been classified as available-for-sale and,
as a result, are stated at fair value, based on quoted market
prices.  Unrealized gains and losses on available-for-sale securities
are recorded as a separate component of stockholders’
equity.  Realized gains and losses on the sale of securities, as
determined on a first-in, first-out basis, are included in the Consolidated
Statements of Income.
 
 The
Company reviews its investments on a regular basis to evaluate whether or not
each security has experienced an other-than-temporary decline in fair
value.  If it is believed that an other-than-temporary decline exists,
the Company will write down the investment to market value and record the
related write-down as a loss in the Consolidated Statements of
Income.
 
 The
Company’s net income is directly affected by management’s classification of
marketable securities, as well as its determination of whether an
other-than-temporary decline in the value of its investments
exists.
 
 Inventories
 
 The
Company values inventory at the lower of cost or market, cost being determined
on a first-in, first-out basis.  The Company regularly reviews
inventory quantities on hand and records a provision for excess and obsolete
inventory based primarily on existing and anticipated design and engineering
changes to its products as well as forecasts of future product
demand.  The Company’s net income is directly affected by management’s
estimate of the realizability of inventories.
 
 Real
Estate
 
 Land,
buildings and improvements and equipment are recorded at cost, less accumulated
depreciation and amortization.  Expenditures for maintenance and
repairs are charged to operations as incurred.  Significant
renovations and replacements, which improve the life of the asset, are
capitalized and depreciated over their estimated useful lives.
 
 Depreciation
is computed utilizing the straight-line method over the estimated useful lives
of 19 to 39 years for buildings, five to 39 years for renovations and
improvements and five to 15 years for equipment and fixtures.
 
 Assets
held for sale are reported at the lower of the carrying amount or fair value
less costs to sell and depreciation is discontinued.  Property sales
or dispositions are recorded when title transfers.  Upon disposition,
the related costs and accumulated depreciation are removed from the respective
accounts.  Any gain or loss on sale or disposition is recognized in
accordance with accounting principles generally accepted in the United States of
America.  In the normal course of business, the Company receives
offers for the sale of properties,
   17
  either
solicited or unsolicited.  For those offers that are accepted, the
prospective buyer usually requires a due diligence period before consummation of
the transaction.  It is not unusual for matters to arise that result
in the withdrawal or rejection of the offer during this process.  If
circumstances arise that previously were considered unlikely and, as a result,
management decides not to sell a property classified as held for sale, the
property is reclassified as held for rental.  A property that is
reclassified is measured and recorded individually at the lower of its carrying
amount before being classified as held for sale, adjusted for any depreciation
expense that would have been recognized had the property been continuously
classified as held for rental or its fair market value at the date of the
subsequent decision not to sell.
 
 The
Company is required to make subjective assessments as to the useful lives of its
properties for purposes of determining the amount of depreciation to reflect on
an annual basis with respect to those properties.  These assessments
have a direct impact on the Company’s net income.  Should the Company
adjust the expected useful life of a particular asset, it would be depreciated
over the adjusted years, and result in a revised depreciation expense and net
income.
 
 Discontinued
Operations
 
 The
Company is required to make certain subjective assessments utilizing the
provisions of SFAS No. 144 in determining whether a long-lived asset to be
disposed of should be reclassified as discontinued operations.  The
Company considers real property to be held for sale and reported as discontinued
operations if management commits to a plan to sell the asset under usual and
customary terms and believes such sale will be completed within one
year.  In such event, the financial results associated with these
assets are reclassified as discontinued operations for all periods
presented.  Although operating income, income from continuing
operations and income from discontinued operations are directly affected by
management’s assessments, the reclassification has no impact on net
income.
 
 Long-Lived
Assets
 
 On a
periodic basis, management assesses whether there are any indicators that the
value of its long-lived assets may be impaired.  An asset’s value is
considered impaired only if management’s estimate of current and projected
operating cash flows (undiscounted and without interest charges) of the asset
over its remaining useful life is less than the net carrying value of the
asset.  Such cash flow projections consider factors such as expected
future operating income, trends and prospects, as well as the effects of demand,
competition and other factors.  To the extent impairment has occurred,
the carrying amount of the asset would be written down to an amount to reflect
the fair value of the asset.
 
 The
Company is required to make subjective assessments as to whether there are
impairments in the value of its long-lived assets and other
investments.  The Company’s net income is directly affected by
management’s estimate of impairments.  In determining impairment, if
any, the Company has adopted SFAS No. 144.
 
 Pension
Plan
 
 Pension
plans can be a significant cost of doing business, but represent obligations
that will ultimately be settled far in the future and therefore are subject to
estimates.  Pension accounting is intended to reflect the recognition
of future benefit costs over the employee’s approximate service period based on
the terms of the plan and the investment and funding decisions made by the
Company.  The Company is required to make assumptions regarding such
variables as the expected long-term rate of return on assets and the discount
rate applied to determine service cost and interest cost to arrive at pension
income or expense for the year.  These assumptions are used in
actuarial calculations to estimate pension costs as well as pension assets or
liabilities included in the Company’s Consolidated Financial
Statements.  While the Company believes that the assumptions used are
appropriate, significant differences in actual experience or significant changes
in assumptions would affect the Company’s pension costs and
obligations.
 
 The
Company has assumed the expected long-term rate of return on plan assets to be
8% in each of the last two years.  Based on the Company’s existing and
forecasted asset allocation and related long-term investment performance
results, the Company believes that its assumption of future returns of 8% is
reasonable.  The assumed long-term rate of return on assets is applied
to a calculated value of plan assets, which recognizes changes in the fair value
of plan assets in a systematic manner.  This produces the expected
return on plan assets that is included in net periodic pension income
(expense).  The difference between this expected return and the actual
return on plan assets is deferred.  The net deferral of past asset
gains (losses) affects the calculated value of plan assets and, ultimately,
future net periodic pension income (expense).  A 100 basis point
change in the expected long-term rate of return on plan assets would have
changed fiscal 2007 net periodic pension expense by $91,000.
   18
 
 Recent
Accounting Pronouncements
 
 See Note
1 of Notes to Consolidated Financial Statements for a full description of recent
accounting pronouncements including the respective dates of adoption and effects
on results of operations and financial condition.
 
 
 ITEM
7A.                      QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 Not
applicable, as the Company is a smaller reporting company.
 
 
 ITEM
8.                        
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 The
financial statements and supplementary information filed as part of this Item 8
are listed under Item 15, “Exhibits and Financial Statement Schedules” and are
contained in this Form 10-K, beginning on page 24.
 
 
 ITEM
      9.
                CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
 
 The
Company’s auditors for the year ended December 31, 2006 were Goldstein Golub
Kessler LLP (“GGK”).  As stated in the Company’s proxy statement dated
May 22, 2007, the Company annually reviews the selection of its independent
auditors and solicited bids from independent accountants to audit the Company’s
financial statements for the year ended December 31, 2007.  As a
result of financial and other considerations the Audit Committee voted on
November 13, 2007 to appoint Holtz Rubenstein Reminick LLP as the Company’s new
independent accountants.
  Pursuant
to Item 304(a) of Regulation S-K, the Company reports the
following:
  (a)
                Previous
      Independent Accountants
  (i)
                On
      November 13, 2007, the Company retained Holtz Rubenstein Reminick LLP as
      its independent certified public accountants in place of GGK, who were
      dismissed as independent auditors of the Company effective November 13,
      2007.
  (ii)
                The
      reports of GGK on the Company’s financial statements for the past two
      fiscal years did not contain an adverse opinion or a disclaimer of opinion
      and were not qualified or modified as to uncertainty, audit scope, or
      accounting principles.
  (iii)
                The
      decision to change accountants was approved by the Audit Committee of the
      Board of Directors.
  (iv)
                In
      connection with the audits of the Company’s financial statements for each
      of the two most recent fiscal years ended December 31, 2006 and through
      November 13, 2007, there were no disagreements with GGK on any matter of
      accounting principles or practices, financial statement disclosure, or
      auditing scope and procedure which, if not resolved to the satisfaction of
      GGK, would have caused it to make reference to the matter in their
      report.
  (v)
                There
      were no “reportable events” as that term is described in Item 304 (a) (1)
      (v) of Regulation S-K.
  (vi)
                The
      Company has requested GGK to furnish a letter addressed to the Securities
      and Exchange Commission stating whether it agrees with the above
      statements.  A copy of that letter, dated November 14, 2007, was
      filed as Exhibit 16 on Form 8-K dated November 13,
  2007.
  (b)
                New
      Independent Accountants
  (i)
                The
      Company engaged Holtz Rubenstein Reminick LLP as its new independent
      accountants effective November 13, 2007.  During the two most
      recent fiscal years and through November 13, 2007, the Company has not
      consulted with Holtz Rubenstein Reminick LLP concerning the Company’s
      financial statements, including the application of accounting principles
      to a specified transaction (proposed or completed) or the type of audit
      opinion that might be rendered on the Company’s financial statements or
      any matter that was either the subject of a “disagreement” or “reportable
      event” (as such terms are defined in Item 304 of Regulation S-K) with the
      previous independent accountants.
   19
  
 ITEM
9A(T).                 CONTROLS
AND PROCEDURES
 
 Evaluation
of Disclosure Controls and Procedures
 
 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 Securities Exchange Act Rule 13a-15(e) and 15d-15(e) as of the end
of the period covered by this report.  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.
 
 Management’s
Annual Report on Internal Control Over Financial Reporting
 
 The
Company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Securities
Exchange Act Rule 13a-15(f).  Under the supervision and with the
participation of Company’s management, including the Chief Executive Officer and
Chief Financial Officer, an evaluation was performed of the effectiveness of the
Company's internal control over financial reporting. The evaluation was based on
the framework in “Internal Control—Integrated Framework” issued by the Committee
of Sponsoring Organizations of the Treadway Commission
(“COSO”).  Management’s assessment included an evaluation of the
design of the Company’s internal control over financial reporting and testing of
the operational effectiveness of its internal control over financial
reporting.  There are inherent limitations in the effectiveness of any
internal control, including the possibility of human error and the circumvention
or overriding of controls. Accordingly, even effective internal controls over
financial reporting can provide only reasonable assurance with respect to
financial statement preparation. Further, because of changes in conditions, the
effectiveness of internal control may vary over time.  Based on the
evaluation under the framework in “Internal Control—Integrated Framework,” the
Company’s management concluded that the Company’s internal control over
financial reporting was effective at the reasonable assurance level as of
December 31, 2007.
 
 This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting,
pursuant to temporary rules of the Securities and Exchange Commission that
permit the Company to provide only management’s report in this annual
report.
 
 Changes
in Internal Control Over Financial Reporting
 
 The
Company has made no significant changes in its internal controls over financial
reporting, or in other factors that could significantly affect these controls,
during the three months ended December 31, 2007, that have materially affected,
or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.
 
 
 ITEM
9B.                      OTHER
INFORMATION
 
 The
salary of A.F. Petrocelli, the Company’s Chairman, President and Chief
Executive Officer, is set forth in his employment agreement, as amended from
time to time by the Company’s Compensation and Stock Option Committee (the
“Committee”).  The employment agreement was filed as an exhibit to the
Company’s Form 10-K for the fiscal year ended December 31, 2003.  Per
Mr. Petrocelli’s employment agreement, the Committee determines the amount
of salary and bonus paid to him annually.  The Committee, in
consultation with Mr. Petrocelli, determines the salaries and bonuses of
Michael T. Lamoretti and Michael J. Weinbaum, who are both Vice Presidents
of the Company’s real estate operations, and Anthony J. Miceli, the
Company’s Vice President and Chief Financial Officer.  Messrs.
Lamoretti, Weinbaum and Miceli do not have written employment agreements with
the Company.  Effective January 2008, Messrs. Lamoretti, Weinbaum and
Miceli received salary increases.  In December 2007, the Committee
approved bonuses for Messrs. Petrocelli, Lamoretti, Weinbaum and Miceli payable
in 2008.  Such bonuses were consistent with the bonuses paid in prior
years and the Company does not believe the salary increases constitute a
material change from the disclosure in the Company’s Proxy Statement for its
2007 Annual Meeting of Stockholders.
   20
  PART III
 
 ITEM
      10.
                DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
 
 This
information will be contained in the Proxy Statement of the Company for the 2008
Annual Meeting of Stockholders under the caption “Election of Directors” and is
incorporated herein by reference.
 
 
 ITEM
      11.
                EXECUTIVE
      COMPENSATION
 
 This
information will be contained in the Proxy Statement of the Company for the 2008
Annual Meeting of Stockholders under the caption “Executive Compensation” and is
incorporated herein by reference.
 
 
 ITEM
      12.
                SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
 
 This
information will be contained in the Proxy Statement of the Company for the 2008
Annual Meeting of Stockholders under the caption “Security Ownership” and is
incorporated herein by reference.
 
 
 ITEM
13.                      CERTAIN
RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
 
 This
information will be contained in the Proxy Statement of the Company for the 2008
Annual Meeting of Stockholders under the caption “Certain Relationships, Related
Transactions and Director Independence” and is incorporated herein by
reference.  Also see “Related Party Transactions” in Item 7 and Note
11, “Transactions with Related Parties,” of Notes to Consolidated Financial
Statements, contained elsewhere in this report.
 
 
 ITEM
14.                      PRINCIPAL
ACCOUNTANT FEES AND SERVICES
 
 This
information will be contained in the Proxy Statement of the Company for the 2008
Annual Meeting of Stockholders under the caption “Independent Auditors” and is
incorporated herein by reference.
 
 
 PART
IV
 
 ITEM
      15.
                EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES
 
 (a)
                (1)
                Consolidated Financial Statements.  The
      following Consolidated Financial Statements and Consolidated Financial
      Statement Schedules of the Company are included in this Form 10-K on the
      pages indicated:
 
 Index to Consolidated Financial
Statements Page
 Report
      of Independent Registered Public Accounting Firm – Holtz Rubenstein
      Reminick LLP
                    24Report
      of Independent Registered Public Accounting Firm – Goldstein Golub Kessler
      LLP
                    25Consolidated
      Balance Sheets as of December 31, 2007 and 2006
                    26Consolidated
      Statements of Income for the Years Ended December 31, 2007 and
      2006
                    27Consolidated
      Statements of Stockholders’ Equity and Comprehensive
Incomefor
      the Years Ended December 31, 2007 and 2006
                    28Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2007 and
      2006
                    29-30Notes
      to Consolidated Financial Statements
                    31-47
 (2)
                Consolidated
      Financial Statements Schedules.
 
 Schedules
      not included, as the Company is a smaller reporting
    company.
   21
 
 (b)
Exhibits
 
 3.1.
                Amended
      and Restated Certificate of Incorporation of the Company (incorporated by
      reference to exhibit 3.1 filed with the Company’s report on Form 10-K for
      the fiscal year ended December 31,
1993).
 
 3.2.
                Amendment
      to the Amended and Restated Certificate of Incorporation of the Company
      (incorporated by reference to exhibit 3.2 filed with the Company’s report
      on Form 10-K for the fiscal year ended December 31,
  2003).
 
 3.3.
                By-laws
      of the Company (incorporated by reference to exhibit 3.2 filed with the
      Company’s report on Form 8-K dated April 14,
  2005).
 
 10.1.
                Incentive
      and Non-Qualified Stock Option Plan of the Company, as amended
      (incorporated by reference to exhibit 10.1 filed with the Company’s report
      on Form 10-K for the fiscal year ended December 31,
  2000).
 
 10.2.
                Additional
      amendment to Incentive and Non-Qualified Stock Option Plan of the Company
      (incorporated by reference to exhibit 4.2 filed with the Company’s report
      on Form S-8 dated August 23, 2002).
 
 10.3.
                1988
      Joint Incentive and Non-Qualified Stock Option Plan, as amended
      (incorporated by reference to exhibit 10.2 filed with the Company’s report
      on Form 10-K for the fiscal year ended December 31,
  1998).
 
 10.4.
                Amended
      and Restated Employment Agreement dated as of November 17, 2003 by and
      between the Company and A. F. Petrocelli (incorporated by
      reference to exhibit 10.4 filed with the Company’s report on Form 10-K for
      the fiscal year ended December 31,
2003).
 
 14.
                Code
      of Business Conduct and Ethics (incorporated by reference to exhibit 14
      filed with the Company’s report on Form 10-Q for the quarter ended June
      30, 2006).
 *
                  21.
                  Subsidiaries
      of the Company.
 *
                23.1
                Consent
      of Independent Registered Public Accounting Firm – Holtz Rubenstein
      Reminick LLP.
 *
                  23.2.
                  Consent
      of Independent Registered Public Accounting Firm – Goldstein Golub Kessler
      LLP.
 *
                      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.
 * Filed
herewith
   22
 
 SIGNATURES
  Pursuant
to the requirements of Section 13 or 15(d) 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.Dated:                      March
      20, 2008
                By:
                /s/
      A. F. PetrocelliA.
      F. PetrocelliChairman,
      President and
                  Chief
      Executive Officer
 
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Company in the capacities
and on the date indicated.
 
 Dated:                      March
      20, 2008
                By:
                /s/
      A. F. PetrocelliA.
      F. PetrocelliChairman,
      President and
                  Chief
      Executive Officer
 
 
 Dated:                      March
      20, 2008
                By:
                /s/
      Michael T. LamorettiMichael
      T. LamorettiVice
      President – Real Estate Operations
                  and
      Director
 
 
 Dated:                      March
      20, 2008
                By:
                /s/
      Howard M. LorberHoward
      M. LorberDirector
 
 
 Dated:                      March
      20, 2008
                By:
                /s/
      Robert M. MannRobert
      M. MannDirector
 
 
 Dated:                      March
      20, 2008
                By:
                /s/
      Anthony J. MiceliAnthony
      J. MiceliChief
      Financial Officer,
                  Chief
      Accountant, Secretary and Director
 
 
 Dated:                      March
      20, 2008
                By:
                /s/
      Arnold S. PennerArnold
      S. PennerDirector
 
 
 Dated:                      March
      20, 2008
                By:
                /s/
      Michael J. WeinbaumMichael
      J. WeinbaumVice
      President – Real Estate Operations
                  and
      Director
 
 23
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  
 
 
 
 To the
Board of Directors
 and
Stockholders of
 United
Capital Corp.
 
 
 We have
audited the accompanying consolidated balance sheet of United Capital Corp. and
Subsidiaries (the “Company”) as of December 31, 2007, and the related
consolidated statements of income, stockholders’ equity and comprehensive
income, and cash flows for the year then ended.  These financial
statements are the responsibility of the Company’s management.  Our
responsibility is to express an opinion on these financial statements based on
our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting.  Accordingly, we express no
such opinion.  An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provides a reasonable basis
for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of United Capital Corp.
and Subsidiaries as of December 31, 2007 and the consolidated results of its
operations and its consolidated cash flows for the year then ended in conformity
with accounting principles generally accepted in the United States of
America.
 
 As
described in Note 2 to the consolidated financial statements, the Company has
reclassified the 2006 consolidated financial statements to reflect certain
discontinued operations.
 
 We have
audited the adjustments to the 2006 consolidated financial statements to
retrospectively apply the change in accounting classification, as described in
Note 2.  In our opinion, such adjustments are appropriate and have
been properly applied.  We were not engaged to audit, review, or apply
any procedures to the 2006 consolidated financial statements of the Company
other than with respect to the adjustments and, accordingly, we do not express
an opinion or any other form of assurance on the 2006 consolidated financial
statements taken as a whole.
 
 
 
 
 /s/ Holtz Rubenstein
Reminick LLP
 HOLTZ
RUBENSTEIN REMINICK LLP
 
 Melville,
New York
 March 19,
2008
   24
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  
 
 
 
 To the
Board of Directors
 and
Stockholders of
 United
Capital Corp.
 
 
 We have
audited, before the effects of the change in accounting classification described
in Note 2, the consolidated balance sheet of United Capital Corp. and
Subsidiaries (the “Company”) as of December 31, 2006 and the related
consolidated statements of income, stockholders’ equity and comprehensive income
and cash flows for the year then ended.  These financial statements
are the responsibility of the Company’s management.  Our
responsibility is to express an opinion on these financial statements based on
our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provides a reasonable basis
for our opinion.
 
 In our
opinion, the 2006 financial statements, before the effect of the change in
accounting classification described in Note 2, present fairly, in all material
respects, the consolidated financial position of United Capital Corp. and
Subsidiaries as of December 31, 2006 and the consolidated results of its
operations and its consolidated cash flows for the year then ended in conformity
with United States generally accepted accounting principles.
 
 We were
not engaged to audit, review, or apply any procedures to the change in
accounting classification described in Note 2 and, accordingly, we do not
express an opinion or any other form of assurance about whether such adjustments
are appropriate and have been properly applied.  Those adjustments
were audited by Holtz Rubenstein Reminick LLP.
 
 As
discussed in Note 1 to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No. 123R, “Share-Based
Payment,” as of January 1, 2006, which changed its method of accounting for
stock-based compensation.  Also, as discussed in Note 1 to the
consolidated financial statements, the Company adopted Statement of Financial
Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit
Pension and Other Postretirement Plans,” as of December 31, 2006, which changed
its method of accounting for pension benefits.
 
 
 
 
 
 /s/ Goldstein Golub Kessler
LLP
 GOLDSTEIN
GOLUB KESSLER LLP
 
 New York,
New York
 March 26,
2007
   25
 
 UNITED
CAPITAL CORP. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 (In
thousands, except per share data)
 
 
 As
      of December 31,2007
                
                
                2006AssetsCurrent
      assets:Cash
      and cash equivalents
                
                $
                129,003
                
                
                $
                76,688Marketable
      securities
                
                
                27,191
                
                
                
                62,917Notes
      and accounts receivable, net
                
                
                24,209
                
                
                
                8,832Inventories
                
                
                5,458
                
                
                
                4,894Prepaid
      expenses and other current assets
                
                
                1,787
                
                
                
                1,659Deferred
      income taxes
                
                
                1,143
                
                
                
                583Current
      assets of discontinued operations
                
                
                —
                
                
                
                14Total current assets
                
                
                188,791
                
                
                
                155,587Property,
      plant and equipment, net
                
                
                6,249
                
                
                
                6,250Real
      property held for rental, net
                
                
                66,494
                
                
                
                49,183Investment
      in joint venture
                
                
                6,125
                
                
                
                6,711Noncurrent
      notes receivable
                
                
                352
                
                
                
                1,694Other
      assets
                
                
                4,059
                
                
                
                2,976Noncurrent
      assets of discontinued operations
                
                
                —
                
                
                
                1,199Total assets
                
                $
                272,070
                
                
                $
                223,600Liabilities
      and Stockholders’ EquityCurrent
      liabilities:Current
      maturities of long-term debt
                
                $
                1,002
                
                
                $
                471Accounts
      payable and accrued liabilities
                
                
                10,934
                
                
                
                9,598Income
      taxes payable
                
                
                4,343
                
                
                
                5,253Current
      liabilities of discontinued operations
                
                
                —
                
                
                
                66Total current liabilities
                
                
                16,279
                
                
                
                15,388Long-term
      debt
                
                
                32,334
                
                
                
                11,669Other
      long-term liabilities
                
                
                15,233
                
                
                
                14,277Deferred
      income taxes
                
                
                9,615
                
                
                
                2,793Total liabilities
                
                
                73,461
                
                
                
                44,127Commitments
      and contingenciesStockholders’
      equity:Common
      stock, $.10 par value, authorized 17,500 shares; issued
                  and outstanding
      8,286 and 8,278 shares, respectively
                
                
                829
                
                
                
                828Retained
      earnings
                
                
                196,817
                
                
                
                176,520Accumulated
      other comprehensive income, net of tax
                
                
                963
                
                
                
                2,125Total
      stockholders’ equity
                
                
                198,609
                
                
                
                179,473Total
      liabilities and stockholders’ equity
                
                $
                272,070
                
                
                $
                223,600
  
 The
accompanying Notes to Consolidated Financial Statements are an integral part of
these statements.
  26
 
 UNITED
CAPITAL CORP. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF INCOME
 (In
thousands, except per share data)
 
 
 For
      the years ended
                    December
      31,2007
                
                
                2006Revenues:Net sales
                
                $
                37,820
                
                
                $
                37,158Revenues from real estate
      operations
                
                
                34,216
                
                
                
                28,102Total revenues
                
                
                72,036
                
                
                
                65,260Costs
      and expenses:Cost of sales
                
                
                28,868
                
                
                
                27,522Real estate
      operations:Mortgage interest
      expense
                
                
                1,096
                
                
                
                797Depreciation
      expense
                
                
                3,157
                
                
                
                2,337Other operating
      expenses
                
                
                15,931
                
                
                
                12,535General and administrative
      expenses
                
                
                6,220
                
                
                
                7,320Selling
expenses
                
                
                3,425
                
                
                
                3,621Total costs and
      expenses
                
                
                58,697
                
                
                
                54,132Operating
    income
                
                
                13,339
                
                
                
                11,128Other
      income:Interest and dividend
      income
                
                
                7,605
                
                
                
                6,498Other income and expense,
      net
                
                
                5,617
                
                
                
                2,040Total other
    income
                
                
                13,222
                
                
                
                8,538Income from continuing
      operations before income taxes
                
                
                26,561
                
                
                
                19,666Provision (benefit) for income
      taxes
                
                
                9,016
                
                
                
                (10,379
                )Income from continuing
      operations
                
                
                17,545
                
                
                
                30,045Discontinued
      operations:Loss from discontinued
      operations, net of tax benefit of $8 and $22, respectively
                
                
                (11
                )
                
                
                (33
                )Net gain on disposal of
      discontinued operations, net of tax provision of $6,668 and $365,
      respectively
                
                
                10,002
                
                
                
                548Income from discontinued
      operations
                
                
                9,991
                
                
                
                515Net income
                
                $
                27,536
                
                
                $
                30,560Basic
      earnings per share:Income from continuing
      operations
                
                $
                2.12
                
                
                $
                3.62Income from discontinued
      operations
                
                
                1.20
                
                
                
                .06Net income per
      share
                
                $
                3.32
                
                
                $
                3.68Diluted
      earnings per share:Income from continuing
      operations
                
                $
                1.72
                
                
                $
                2.94Income from discontinued
      operations
                
                
                .98
                
                
                
                .05Net income per share assuming
      dilution
                
                $
                2.70
                
                
                $
                2.99
 
  The
accompanying Notes to Consolidated Financial Statements are an integral part of
these statements.
  27
  UNITED
CAPITAL CORP. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
 FOR
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
 (In
thousands)
 
 
 Accumulated
                  Other
                  Comprehensive
                
                
                TotalCommon
      Stock Issued
                
                
                Retained
                
                
                Income
      (Loss),
                
                
                Stockholders’
                
                
                ComprehensiveShares
                
                
                Amount
                
                
                Earnings
                
                
                Net
      of Tax
                
                
                Equity
                
                
                IncomeBalance
      – January 1, 2006
                
                
                8,737
                
                
                $
                874
                
                
                $
                157,235
                
                
                $
                (2,459
                )
                
                $
                155,650Purchase
      and retirement of common shares
                
                
                (558
                )
                
                
                (56
                )
                
                
                (13,570
                )
                
                
                —
                
                
                
                (13,626
                )Proceeds
      from the exercise of stock options
                
                
                99
                
                
                
                10
                
                
                
                787
                
                
                
                —
                
                
                
                797Tax
      benefit from employee stock options
                
                
                —
                
                
                
                —
                
                
                
                701
                
                
                
                —
                
                
                
                701Stock-based
      compensation
                
                
                —
                
                
                
                —
                
                
                
                807
                
                
                
                —
                
                
                
                807Adjustment
      to initially apply SFAS No. 158, net of tax effect of $417
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                775
                
                
                
                775Net
      income
                
                
                —
                
                
                
                —
                
                
                
                30,560
                
                
                
                —
                
                
                
                30,560
                
                
                $
                30,560Other
      comprehensive income, net of tax:Change
      in net unrealized gain on available-for-sale securities, net of tax effect
      of $2,005
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                3,723
                
                
                
                3,723
                
                
                
                3,723Reclassification
      adjustment for net loss realized in net income, net of tax effect of
      $47
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                86
                
                
                
                86
                
                
                
                86Comprehensive
      income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                34,369Balance
      – December 31, 2006
                
                
                8,278
                
                
                
                828
                
                
                
                176,520
                
                
                
                2,125
                
                
                
                179,473Purchase
      and retirement of common shares
                
                
                (542
                )
                
                
                (54
                )
                
                
                (16,146
                )
                
                
                —
                
                
                
                (16,200
                )Proceeds
      from the exercise of stock options
                
                
                550
                
                
                
                55
                
                
                
                4,924
                
                
                
                —
                
                
                
                4,979Tax
      benefit from employee stock options
                
                
                —
                
                
                
                —
                
                
                
                3,983
                
                
                
                —
                
                
                
                3,983Net
      income
                
                
                —
                
                
                
                —
                
                
                
                27,536
                
                
                
                —
                
                
                
                27,536
                
                
                $
                27,536Other
      comprehensive income, net of tax:Change
      in net unrealized loss on available for sale securities, net of tax effect
      of $783
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (1,455
                )
                
                
                (1,455
                )
                
                
                (1,455
                )Reclassification
      adjustment for net loss realized in net income, net of tax effect of
      $191
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                356
                
                
                
                356
                
                
                
                356Amortization
      of unrecognized net gains from pension plan, net of tax effect of
      $34
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (63
                )
                
                
                (63
                )
                
                
                (63
                )Comprehensive
      income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                26,374Balance
      – December 31, 2007
                
                
                8,286
                
                
                $
                829
                
                
                $
                196,817
                
                
                $
                963
                
                
                $
                198,609
 
 The
accompanying Notes to Consolidated Financial Statements are an integral part of
these statements.
   28
 
 UNITED
CAPITAL CORP. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (In
thousands)
 
 For
      the years ended
                    December
      31,2007
                
                
                2006Cash flows from operating
      activities:Net
      income
                
                $
                27,536
                
                
                $
                30,560Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
                
                
                3,591
                
                
                
                2,776Gain
      on disposal of discontinued operations, net of tax
                
                
                (10,002
                )
                
                
                (548
                )Litigation
      award from prior condemnation
                
                
                (5,665
                )
                
                
                —Net
      loss (gain) on sale of available-for-sale securities
                
                
                402
                
                
                
                (73
                )Net
      realized and unrealized gain on derivative instruments
                
                
                (371
                )
                
                
                (1,584
                )Income
      from equity investments
                
                
                (191
                )
                
                
                (279
                )Deferred
      income taxes
                
                
                (87
                )
                
                
                (1,366
                )Non-cash
      stock based compensation
                
                
                —
                
                
                
                807Other,
      net
                
                
                218
                
                
                
                265Changes
      in assets and liabilities:Notes
      and accounts receivable, net
                
                
                (417
                )
                
                
                893Inventories
                
                
                (564
                )
                
                
                (468
                )Prepaid
      expenses and other current assets
                
                
                (128
                )
                
                
                (258
                )Other
      assets
                
                
                (1,499
                )
                
                
                (132
                )Accounts
      payable and accrued liabilities
                
                
                1,374
                
                
                
                589Income
      taxes payable
                
                
                325
                
                
                
                (254
                )Other
      long-term liabilities
                
                
                28
                
                
                
                (15,893
                )Net
      cash provided by operating activities of continuing
    operations
                
                
                14,550
                
                
                
                15,035Operating
      activities of discontinued operations
                
                
                (53
                )
                
                
                44Net
      cash provided by operating activities
                
                
                14,497
                
                
                
                15,079Cash flows from investing
      activities:Purchase
      of available-for-sale securities
                
                
                (19,862
                )
                
                
                (33,303
                )Proceeds
      from sale of available-for-sale securities
                
                
                53,548
                
                
                
                16,739Proceeds
      from sale of real estate assets
                
                
                17,855
                
                
                
                1,849Proceeds
      held in escrow
                
                
                (15,000
                )
                
                
                —Net
      proceeds from litigation award from prior condemnation
                
                
                5,665
                
                
                
                —Proceeds
      from sale of derivative instruments
                
                
                366
                
                
                
                1,603Purchase/issuance
      of notes receivable
                
                
                —
                
                
                
                (1,118
                )Principal
      payments on notes receivable
                
                
                1,382
                
                
                
                2,436Acquisition
      of property, plant and equipment
                
                
                (421
                )
                
                
                (1,341
                )Acquisition
      of/additions to real estate assets
                
                
                (18,150
                )
                
                
                (12,842
                )Distributions
      from joint ventures
                
                
                777
                
                
                
                776Net
      cash provided by (used in) investing activities of continuing
      operations
                
                
                26,160
                
                
                
                (25,201
                )Investing
      activities of discontinued operations
                
                
                15
                
                
                
                (38
                )Net
      cash provided by (used in) investing activities
                
                
                26,175
                
                
                
                (25,239
                )
 
 Continued
   29
 
 UNITED
CAPITAL CORP. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (CONTINUED)
 (In
thousands)
 
 
 For
      the years ended
                    December
      31,2007
                
                
                2006Cash flows from financing
      activities:Proceeds
      from mortgage obligations
                
                
                19,500
                
                
                
                —Principal
      payments on mortgage obligations
                
                
                (619
                )
                
                
                (652
                )Purchase
      and retirement of common stock
                
                
                (16,200
                )
                
                
                (13,626
                )Proceeds
      from the exercise of stock options
                
                
                4,979
                
                
                
                797Tax
      benefit from employee stock options
                
                
                3,983
                
                
                
                701Net
      cash provided by (used in) financing activities
                
                
                11,643
                
                
                
                (12,780
                )Net
      increase (decrease) in cash and cash equivalents
                
                
                52,315
                
                
                
                (22,940
                )Cash
      and cash equivalents, beginning of year
                
                
                76,688
                
                
                
                99,628Cash
      and cash equivalents, end of year
                
                $
                129,003
                
                
                $
                76,688Supplemental disclosures of
      cash flow information:Cash
      paid during the year for:Interest
                
                $
                1,089
                
                
                $
                799Taxes
                
                $
                4,520
                
                
                $
                6,205Non-cash
      investing and financing activities:Mortgage
      obligation assumed in connection with acquisition of hotel property (see
      Note 2)
                
                $
                2,315
                
                
                $
                —
 
 
 
 The
accompanying Notes to Consolidated Financial Statements are an integral part of
these statements.
   30
 
 UNITED
CAPITAL CORP. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
 (In
thousands, except per share data)
 
 1.       Nature
of Business and Summary of Significant Accounting Policies
 
 Nature
of Business
 
 United
Capital Corp. (the “Company”) and its subsidiaries are engaged in the investment
and management of real estate, including the operation of full and
limited-service hotels, and in the manufacture and sale of engineered
products.  The Company also invests excess available cash in
marketable securities and other financial instruments.
 
 Principles
of Consolidation
 
 The
Consolidated Financial Statements include the accounts of the Company and its
wholly-owned subsidiaries.  All significant intercompany accounts and
transactions have been eliminated.  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.
 
 Revenue
Recognition and Accounts Receivable – Real Estate Investment and
Management
 
 The
Company leases substantially all of its properties to tenants under net leases
which are accounted for as operating leases.  Under this type of
lease, the tenant is obligated to pay all operating costs of the property
including real estate taxes, insurance and repairs and
maintenance.  Revenue is recognized as earned and deemed
collectible.  The effect of stepped-rent increases on significant
leases are recorded, net of allowances, on a straight-line
basis.  Gains on sales of real estate assets and equity investments
are recorded when the gain recognition criteria under generally accepted
accounting principles in the United States of America have been
met.
 
 The
Company does not generally have leases that include significant rent concessions
or provisions that require the lessee to fund capital improvements or to pay the
lessor any revenues based upon indexes or rates that are not explicitly stated
in the lease.
 
 Reimbursements
of certain costs received from tenants are recognized as tenant reimbursement
revenues.
 
 Certain
lease agreements provide for additional rent based on a percentage of tenants’
sales.  These percentage rents are recorded once the required sales
levels are achieved.
 
 Income on
leveraged leases is recognized by a method that produces a constant rate of
return on the outstanding investment in the lease, net of the related deferred
tax liability, in the years in which the net investment is
positive.
 
 Accounts
receivable are recorded at the outstanding amounts, net of allowances for
doubtful accounts.  The Company makes estimates of the
uncollectibility of its accounts receivable related to base rents, tenant
escalations, expense reimbursements and other revenues.  The Company
analyzes accounts receivable, historical bad debt levels, customer credit
worthiness and current economic trends when evaluating the adequacy of the
allowance for doubtful accounts.  In addition, tenants in bankruptcy
are analyzed and estimates are made in connection with the expected recovery of
pre-petition and post-petition claims.
 
 Revenue
Recognition and Accounts Receivable – Hotel Operations
 
 Revenues
from the Company’s hotel operations are generally recognized when
earned.  Hotel revenues primarily represent room rental and food and
beverage sales and are recognized at the time of the hotel stay or sale of
restaurant services.
 
 Accounts
receivable are recorded at the outstanding amounts, net of allowances for
doubtful accounts.  The Company determines the allowance for doubtful
accounts based on an assessment of the collectibility of specific customer
accounts which include the length of time the receivables are past due, the
financial health of the customer and historical experience.
   31
 
 Revenue
Recognition and Accounts Receivable – Engineered Products
 
 In
general, sales are recorded when products are shipped, title has passed and
collection is reasonably assured.  Management believes that adequate
controls are in place to ensure compliance with contractual product
specifications, a substantial history of such performance has been established
and historical returns and allowances have not been significant.  If
actual sales returns and allowances exceed historical amounts, the Company’s
sales would be adversely affected.
 
 Accounts
receivable are recorded at the outstanding amounts, net of allowances for
doubtful accounts.  Estimates are used in determining the Company’s
allowance for doubtful accounts based on historical collections experience,
current economic trends and a percentage of its accounts receivable by aging
category.  In determining these percentages, the Company looks at
historical write-offs of its receivables.  The Company also looks at
the credit quality of its customer base as well as changes in its credit
policies.  The Company continuously monitors collections and payments
from its customers.  While credit losses have historically been within
expectations and the provisions established, the Company cannot guarantee that
it will continue to experience the same credit loss rates that it has in the
past.
 
 Cash
and Cash Equivalents
 
 Cash
equivalents of $16,122 and $43,428 at December 31, 2007 and 2006, respectively,
consisted of commercial paper, overnight repurchase agreements and certificates
of deposit.  The Company considers all highly liquid investments with
a maturity, at the purchase date, of three months or less to be cash
equivalents.  The Company maintains balances with various financial
institutions which, at times, exceed federally insured limits.
 
 Marketable
Securities
 
 The
Company determines the appropriate classification of securities at the time of
purchase and reassesses the appropriateness of such classification at each
reporting date.  At December 31, 2007 and 2006, all marketable
securities held by the Company have been classified as available-for-sale and,
as a result, are stated at fair value, based on quoted market
prices.  Unrealized gains and losses on available-for-sale securities
are recorded as a separate component of stockholders’
equity.  Realized gains and losses on the sale of securities, as
determined on a first-in, first-out basis, are included in the Consolidated
Statements of Income.
 
 The
Company reviews its investments on a regular basis to evaluate whether or not
each security has experienced an other-than-temporary decline in fair
value.  If it is believed that an other-than-temporary decline exists,
the Company will write down the investment to market value and record the
related write-down in the Consolidated Statements of Income.
 
 Notes
and Accounts Receivable, Net
 
 Notes and
accounts receivable, net consist of the following:
 December
      31,2007
                
                
                2006Trade
      receivables
                
                $
                5,494
                
                
                $
                5,835Rental
      receivables
                
                
                2,185
                
                
                
                1,729Other
      receivables (see Note 2)
                
                
                16,032
                
                
                
                756Current
      portion of notes receivable
                
                
                795
                
                
                
                836Total
                
                
                24,506
                
                
                
                9,156Less:  Allowance
      for doubtful accounts
                
                
                297
                
                
                
                324$
                24,209
                
                
                $
                8,832
   32
 
 Inventories
 
 Inventories
are stated at the lower of cost or market and include material, labor and
manufacturing overhead.  The first-in, first-out (FIFO) method is used
to determine the cost of inventories.  Inventories consist of the
following:
 
 December
      31,2007
                
                
                2006Raw
      materials
                
                $
                2,446
                
                
                $
                2,197Work
      in process
                
                
                542
                
                
                
                506Finished
      goods
                
                
                2,470
                
                
                
                2,191$
                5,458
                
                
                $
                4,894
 
 Depreciation
and Amortization
 
 Depreciation
and amortization are provided on a straight-line basis over the estimated useful
lives of the related assets as follows:
 
 Real
      property held for rental:Buildings
                  19
      to 39 yearsBuilding
      renovations and improvements
                  5
      to 39 yearsEquipment
      and fixtures
                  5
      to 15 yearsProperty,
      plant and equipment:Buildings
      and improvements
                  18
      to 39 yearsFurniture,
      fixtures and equipment
                  3
      to 15 yearsIntangible
      assets with definite lives:Patents
      and trademarks
                  17
      to 20 years
 Real
Estate
 
 Land,
buildings and improvements, and equipment and fixtures are recorded at cost,
less accumulated depreciation.  Expenditures for maintenance and
repairs are charged to operations as incurred.  Significant
renovations and replacements, which improve the life of the asset, are
capitalized and depreciated over their estimated useful lives.
 
 Assets
held for sale are reported at the lower of the carrying amount or fair value
less costs to sell and depreciation is discontinued.  Property sales
or dispositions are recorded when title transfers.  Upon disposition,
the related costs and accumulated depreciation are removed from the respective
accounts.  Any gain or loss on sale or disposition is recognized in
accordance with accounting principles generally accepted in the United States of
America.
 
 Property,
Plant and Equipment
 
 Property,
plant and equipment is recorded at cost, less accumulated
depreciation.  Major improvements are capitalized and maintenance and
repairs are expensed as incurred.
 
 Long-Lived
Assets
 
 On a
periodic basis, management assesses whether there are any indicators that the
value of its long-lived assets may be impaired.  An asset’s value is
considered impaired only if management’s estimate of current and projected
operating cash flows (undiscounted and without interest charges) of the asset
over its remaining useful life is less than the net carrying value of the
asset.  Such cash flow projections consider factors such as expected
future operating income, trends and prospects, as well as the effects of demand,
competition and other factors.  To the extent impairment has occurred,
the carrying amount of the asset would be written down to an amount to reflect
the fair value of the asset.
   33
  Pension
Plan
 
 Pension
plans can be a significant cost of doing business, but represent obligations
that will ultimately be settled far in the future and therefore are subject to
estimates.  Pension accounting is intended to reflect the recognition
of future benefit costs over the employee’s approximate service period based on
the terms of the plan and the investment and funding decisions made by the
Company.  The Company is required to make assumptions regarding such
variables as the expected long-term rate of return on assets and the discount
rate applied to determine service cost and interest cost to arrive at net
periodic pension income or expense for the year.  These assumptions
are used in actuarial calculations to estimate net periodic pension costs as
well as pension assets or liabilities included in the Company’s Consolidated
Financial Statements.  While the Company believes that the assumptions
used are appropriate, significant differences in actual experience or
significant changes in assumptions would affect the Company’s pension costs and
obligations.
 
 Research
and Development
 
 The
Company expenses research, development and product engineering costs as
incurred.  Approximately $46 and $53 of such costs were incurred by
the Company in 2007 and 2006, respectively.
 
 Shipping
and Handling Costs
 
 Shipping
and handling costs billed to a customer are included in net sales and the
related costs are included in cost of sales or selling expenses.  For
the years ended December 31, 2007 and 2006, shipping and handling costs included
in selling expenses were $430 and $350, respectively.
 
 Earnings
Per Share
 
 Basic
earnings per share is calculated by dividing net income by the weighted-average
number of shares outstanding and excludes any dilutive effects of stock
options.  Diluted earnings per share gives effect to all potentially
dilutive shares that were outstanding during the period.  Dilutive
shares used in the computation of diluted earnings per share result from the
assumed exercise of stock options, using the treasury stock method.
 
 Stock-Based
Compensation
 
 The
Company accounts for all stock-based compensation in accordance with Statement
of Financial Accounting Standards No. 123 (Revised 2004) – “Share-Based Payment”
(“SFAS No. 123R”) which was adopted on January 1, 2006 using the modified
prospective transition method.  SFAS No. 123R requires the Company to
measure all employee stock-based compensation awards using a fair value method
and record the related expense in the financial statements.  The
Company has used the Black-Scholes model to estimate the value of options
granted.  The Company did not grant any options during 2007 and
2006.
 
 The
Black-Scholes model was developed for use in estimating the fair value of traded
options, which have no vesting restrictions and are fully
transferable.  In addition, option valuation models require the input
of highly subjective assumptions including the expected stock price
volatility.  Because the Company’s employee stock options have
characteristics significantly different from those of traded options and because
changes in the subjective input assumptions can materially affect the fair value
estimate, in management’s opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of the Company’s employee
stock options.
 
 The
adoption of SFAS No. 123R reduced income from continuing operations before
income taxes and net income by $807 and $518, respectively, for the year ended
December 31, 2006.  The impact on net income per basic and diluted
share for this period was $.06 and $.05 per share, respectively.  Tax
benefits resulting from deductions in excess of compensation cost recognized for
those options are classified as a financing cash flow in the Consolidated
Statements of Cash Flows.
 
 All
options previously granted were fully vested as of June 30,
2006.  Therefore, no compensation costs related to share-based
payments were recognized during the second half of 2006 or in the twelve months
ended December 31, 2007.
   34
 
 Derivative
Financial Instruments
 
 The
Company recognizes all derivative financial instruments, such as put and/or call
options, in the Consolidated Financial Statements at fair value regardless of
the purpose or intent for holding the instrument.  Changes in the fair
value of derivative financial instruments are either recognized periodically in
income or in stockholders’ equity as a component of accumulated other
comprehensive income depending on whether the derivative financial instrument
qualifies for hedge accounting and, if so, whether it qualifies as a fair value
or cash flow hedge.  Generally, changes in the fair value of
derivatives accounted for as fair value hedges are recorded in income along with
the portions of the changes in the fair values of the hedged items that relate
to the hedged risks.  Changes in the fair value of derivatives
accounted for as cash flow hedges, to the extent they are effective as hedges,
are recorded in accumulated other comprehensive income, net of
tax.  Changes in the fair value of derivatives not qualifying as
hedges are reported in income.
 
 In
strategies designed to hedge overall market risks and manage its interest rate
exposure, the Company may sell common stock short, participate in put and/or
call options or enter into interest rate swap agreements.
 
 Management
maintains a diversified portfolio of cash equivalents and investments in a
variety of securities, primarily U.S. investments in both common and preferred
equity issues, 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, 2007 and 2006, the fair value of such
derivatives was ($15) and ($20), respectively, which are recorded as a component
of accounts payable and accrued liabilities in the Consolidated Balance
Sheets.  These instruments do not qualify for hedge accounting, and
therefore changes in the derivatives’ fair value are recognized in
earnings.  The Company recognized $371 and $1,584 in net realized and
unrealized gains from derivative instruments for the years ended December 31,
2007 and 2006, respectively, which are included in other income and expense, net
in the Consolidated Statements of Income.
 
 Reclassifications
 
 Certain
prior year amounts have been reclassified to present them on a basis consistent
with the current year.
 
 Use
of Estimates
 
 The
preparation of consolidated financial statements in conformity 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, revenue 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.
 
 Recent
Accounting Pronouncements
 
 In
September 2006, the Financial Accounting Standard Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value
Measurements” (“SFAS No. 157”).  SFAS No. 157 defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value
measurements.  SFAS No. 157 applies under other accounting
pronouncements that require or permit fair value measurements and, accordingly,
does not require any new fair value measurements.  SFAS No. 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years, which would be
the first quarter of 2008 for the Company.  The Company is currently
evaluating the effect, if any, that SFAS No. 157 will have on its consolidated
financial position or results of operations.  However, the Company
does not expect the adoption of SFAS No. 157 to have a material effect on
the Company’s financial position or results of operations.
 
 In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities – Including an Amendment of FASB
Statement No. 115” (“SFAS No. 159”).  SFAS No. 159 permits entities to
choose to measure many financial instruments and certain other items at fair
value that are not currently required to be measured at fair
value.  SFAS No. 159 is effective for fiscal years beginning after
November 15, 2007, which would be the first quarter of 2008 for the
Company.  The Company is currently evaluating the effect, if any, that
SFAS No. 159 will have on its consolidated financial position or results of
operations.  However, the Company does not expect the adoption of SFAS
No. 159 to have a material effect on the Company’s financial position or results
of operations.
   35
 
 In
December 2007, the FASB issued SFAS No. 141 (Revised), “Business
Combinations” (“SFAS No. 141R”).  SFAS No. 141R establishes
principles and requirements for how the acquirer in a business combination
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed and any noncontrolling interest in the
acquiree.  SFAS No. 141R also provides guidance for recognizing
and measuring the goodwill acquired in the business combination and determines
what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business
combination.  SFAS No. 141R is effective for fiscal years
beginning after December 15, 2008, which would be January 1, 2009 for the
Company.  The impact of adopting SFAS No. 141R will be dependent
on the future business combinations, if any, that the Company may pursue after
its effective date.
 
 In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements–an amendment of ARB No. 51” (“SFAS
No. 160”).  SFAS No. 160 establishes accounting and
reporting standards for parent company’s noncontrolling interest in a subsidiary
and for the deconsolidation of a subsidiary.  SFAS No. 160 is
effective for fiscal years beginning after December 15, 2008, which would be
January 1, 2009 for the Company.  The Company is currently evaluating
the effect, if any, that SFAS No. 160 will have on its consolidated
financial position or results of operations.
 
 2.       Real
Estate
 
 The
Company is the lessor of real estate under operating leases which expire in
various years through 2078.  The following is a summary of real
property held for rental:
  December
      31,2007
                
                
                2006Land
                
                $
                15,398
                
                
                $
                14,587Buildings
                
                
                102,555
                
                
                
                88,954Building
      renovations and improvements
                
                
                13,991
                
                
                
                10,373Equipment
      and fixtures
                
                
                3,571
                
                
                
                3,000135,515
                
                
                
                116,914Less:  Accumulated
      depreciation
                
                
                69,021
                
                
                
                67,731$
                66,494
                
                
                $
                49,183
 
 As of
December 31, 2007, total minimum future rentals to be received under
noncancelable leases for each of the next five years and thereafter are as
follows:
 
 Years
      ending December 31,2008
                
                
                2009
                
                
                2010
                
                
                2011
                
                
                2012
                
                
                There-
                    after
                
                
                TotalMinimum
      future rentals
                
                $
                19,272
                
                
                $
                16,064
                
                
                $
                14,335
                
                
                $
                11,088
                
                
                $
                9,038
                
                
                $
                52,270
                
                
                $
                122,067
 
 Minimum
future rentals do not include amounts for renewals, tenant reimbursement or
additional rentals that may be received under certain leases which provide for
such rentals based upon a percentage of lessees’ sales.  Percentage
rents included in net income from real properties held for rental for 2007 and
2006 were approximately $299 and $379, respectively.
 
 Property
Acquisitions
 
 During
May 2007, the Company purchased a hotel located in Utica, New York (the “Utica
Hotel”) for approximately $16,000 plus closing costs, including the assumption
of an underlying mortgage of $2,315 (see Note 7), of which $872 of the purchase
price was allocated to furniture, fixtures and equipment and is included in
property, plant and equipment in the Consolidated Balance Sheet.  The
total cost of acquisition, less the assumption of the mortgage is reflected in
acquisition of/additions to real estate assets in the Consolidated Statements of
Cash Flows.
  36
  During
2006, the Company purchased, for cash, a commercial property located in Long
Island City, New York for approximately $8,531.
 
 Property
Sales
 
 During
2007, the Company divested itself of five commercial properties and two other
properties which had a net book value of $1,185 from its real estate investment
and management segment.  The aggregate proceeds from these
transactions were $17,855 resulting in a gain of $10,002, on a net of tax
basis.
 
 Proceeds
from the sale of one of the other properties, amounting to $15,000, was held in
escrow by a third-party, on behalf of the Company, to acquire a property in
connection with a Section 1031 tax-deferred exchange, and is included in notes
and accounts receivable, net in the accompanying Consolidated Balance Sheet at
December 31, 2007 (see Note 1).  Subsequent to year end, the Company
utilized approximately $13,600 of the amount held in escrow to purchase a
qualified property.  The remaining balance, plus interest, was
remitted to the Company.
 
 During
2006, the Company divested itself of two commercial properties which had a net
book value of $936 from its real estate investment and management
segment.  The aggregate proceeds from these transactions were $1,849
resulting in a gain of $548, on a net of tax basis.
 
 The
results of operations for properties sold have been reclassified to discontinued
operations, on a net of tax basis, for each of the years
presented.  In addition, the assets and liabilities associated with
those properties sold in 2007 have been reclassified to discontinued operations
in the Consolidated Balance Sheet at December 31, 2006.  These amounts
primarily consist of real property, net of accumulated depreciation, rents
receivable, prepaid or accrued charges and mortgage obligations, if
any.
 
 Summarized
financial information for properties sold and accounted for as discontinued
operations is as follows:
 
 For
      the years ended
                    December
      31,2007
                
                
                2006Revenues
      from real estate operations
                
                $
                45
                
                
                $
                242Depreciation
      expense
                
                
                3
                
                
                
                60Other
      operating expenses
                
                
                61
                
                
                
                237Operating
      loss
                
                $
                (19
                )
                
                $
                (55
                )
 
 Properties
Held for Sale
 
 As of
December 31, 2007, there were no properties considered by the Company to be held
for sale.
 
 3.       Property,
Plant and Equipment
 
 Property,
plant and equipment, including furniture, fixtures and equipment related to the
Company’s hotel operations segment, consists of the following:
 
 December
      31,2007
                
                
                2006Land
                
                $
                28
                
                
                $
                28Buildings
      and improvements
                
                
                1,428
                
                
                
                1,428Furniture,
      fixtures and equipment
                
                
                18,584
                
                
                
                18,23120,040
                
                
                
                19,687Less:
      Accumulated depreciation
                
                
                13,791
                
                
                
                13,437$
                6,249
                
                
                $
                6,250
   37
 
 4.       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
                    ValueDecember
      31, 2007:Equity
      securities
                
                $
                24,900
                
                
                $
                1,988
                
                
                $
                (1,577
                )
                
                $
                25,311Bonds
                
                
                1,904
                
                
                
                1
                
                
                
                (25
                )
                
                
                1,880$
                26,804
                
                
                $
                1,989
                
                
                $
                (1,602
                )
                
                $
                27,191December
      31, 2006:Equity
      securities
                
                $
                57,708
                
                
                $
                4,778
                
                
                $
                (2,741
                )
                
                $
                59,745Bonds
                
                
                3,131
                
                
                
                43
                
                
                
                (2
                )
                
                
                3,172$
                60,839
                
                
                $
                4,821
                
                
                $
                (2,743
                )
                
                $
                62,917
 
 The
following table shows the fair value and unrealized losses, aggregated by
investment type and length of time that individual securities have been in a
continuous unrealized loss position:
 
 Less
      Than 12 Months
                
                
                12
      Months or More
                
                
                TotalDecember
      31, 2007:
                
                Fair
                    Value
                
                
                Unrealized
      Losses
                
                
                Fair
                    Value
                
                
                Unrealized
      Losses
                
                
                Fair
                    Value
                
                
                Unrealized
      LossesEquity
      securities
                
                $
                7,858
                
                
                $
                (1,577
                )
                
                $
                —
                
                
                $
                —
                
                
                $
                7,858
                
                
                $
                (1,577
                )Bonds
                
                
                24
                
                
                
                (25
                )
                
                
                —
                
                
                
                —
                
                
                
                24
                
                
                
                (25
                )$
                7,882
                
                
                $
                (1,602
                )
                
                $
                —
                
                
                $
                —
                
                
                $
                7,882
                
                
                $
                (1,602
                )December
      31, 2006:Equity
      Securities
                
                $
                32,226
                
                
                $
                (2,741
                )
                
                $
                —
                
                
                $
                —
                
                
                $
                32,226
                
                
                $
                (2,741
                )Bonds
                
                
                91
                
                
                
                (1
                )
                
                
                123
                
                
                
                (1
                )
                
                
                214
                
                
                
                (2
                )$
                32,317
                
                
                $
                (2,742
                )
                
                $
                123
                
                
                $
                (1
                )
                
                $
                32,440
                
                
                $
                (2,743
                )
 
 The
Company continuously reviews its investment portfolio to identify and evaluate
investments that have indications of possible impairment.  The Company
does not believe that its investments in marketable securities with unrealized
losses at December 31, 2007 are other-then-temporary due to market volatility of
the security’s fair value, analysts’ expectations and the Company’s ability to
hold the securities for a period of time sufficient to allow for any anticipated
recoveries in market value.
 
 Proceeds
from the sale of available-for-sale securities and the resulting gross realized
gains and losses included in the determination of net income are as
follows:
 For
      the years ended
                    December
      31,2007
                
                
                2006Proceeds
                
                $
                53,548
                
                
                $
                16,739Gross
      realized gains
                
                $
                2,954
                
                
                $
                1,559Gross
      realized losses
                
                $
                (3,356
                )
                
                $
                (1,486
                )
 
 5.       Investment
in Joint Ventures
 
 The
Company has a 50% interest in a limited partnership whose principal assets are
two distribution centers leased to Kmart Corporation (“Kmart”), which are
accounted for as leveraged leases (see Note 11).
   38
  The
following represents the components of the net investment in the leveraged
leases:
  December
      31,2007
                
                
                2006Rents
      receivable
                
                $
                57,410
                
                
                $
                61,439Residual
      values
                
                
                10,000
                
                
                
                10,000Nonrecourse
      debt service
                
                
                (45,345
                )
                
                
                (48,598
                )Unearned
      income
                
                
                (15,940
                )
                
                
                (16,130
                )6,125
                
                
                
                6,711Less:
      Deferred taxes arising from leveraged leases
                
                
                5,837
                
                
                
                6,127$
                288
                
                
                $
                584
 
 The
Company’s share of income arising from this investment was $191 and $279 for the
years ended December 31, 2007 and 2006, respectively, and is included in
revenues from real estate operations in the Consolidated Statements of
Income.
 
 6.       Accounts
Payable and Accrued Liabilities
 
 Accounts
payable and accrued liabilities consist of the following:
 December
      31,2007
                
                
                2006Accounts
      payable
                
                $
                4,072
                
                
                $
                3,999Accrued
      wages and benefits
                
                
                1,942
                
                
                
                1,821Other
      accrued expenses
                
                
                4,920
                
                
                
                3,778$
                10,934
                
                
                $
                9,598
 
 7.       Long-term
Debt
 
 Long-term
debt consists of the following:
 December
      31,2007
                
                
                2006Mortgages
      on real property
                
                $
                33,336
                
                
                $
                12,140Less:  Current
      maturities
                
                
                1,002
                
                
                
                471$
                32,334
                
                
                $
                11,669
 
 Mortgages
bear interest at rates ranging from 4% to 8% per annum and are collateralized by
the related real property which had a net carrying value at December 31, 2007 of
$28,938, exclusive of hotel furniture, fixtures and equipment.  Such
amounts are scheduled to mature at various dates from December 2008 through
January 2018.
 
 In
connection with the acquisition of the Utica Hotel (see Note 2), the Company
assumed a mortgage in the amount of $2,315 which bears interest at 7.5% per
annum, with monthly installments of interest and principal of $30 through
December 2015.  In August 2007, the Company obtained an additional
mortgage on the Utica Hotel in the amount of $12,000.  This mortgage
bears interest at 6.18% per annum, is payable monthly based on a 25-year
amortization and matures in August 2017.
 
 During
December 2007, the Company obtained a mortgage on its hotel located in Atlanta,
Georgia in the amount of $7.5 million, which bears interest at 6.57%, is payable
monthly based on a 30-year amortization and matures in January
2018.
 
 The
approximate aggregate maturities of these obligations at December 31, 2007 are
as follows:
 
 Years
      ending December 31,2008
                
                
                2009
                
                
                2010
                
                
                2011
                
                
                2012
                
                
                There-
                    after
                
                
                TotalAggregate
      maturities
                
                $
                1,002
                
                
                $
                2,710
                
                
                $
                1,025
                
                
                $
                1,027
                
                
                $
                1,099
                
                
                $
                26,473
                
                
                $
                33,336
   39
 
 8.       Fair
Value of Financial Instruments
 
 The
following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
 
 The
carrying amounts reported in the Consolidated Balance Sheets for cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities
approximate their fair value due to the short maturity of such
items.
 
 The fair
value of notes receivable are estimated using discounted cash flow analyses,
with interest rates comparable to loans with similar terms and borrowers of
similar credit quality.  The fair value of notes receivable at
December 31, 2007 and 2006 was approximately $1,190 and $2,763, respectively,
while the carrying value was $1,147 and $2,530 for the same
periods.
 
 At
December 31, 2007 and 2006, all marketable securities held by the Company have
been classified as available-for-sale and, as a result, are carried at fair
value based on quoted market prices or dealer quotes.  If a quoted
market price is not available, fair value is estimated using quoted market
prices for similar securities.
 
 The fair
value of long-term debt was calculated based on interest rates available for
debt with terms and due dates similar to the Company’s existing debt
arrangements.  The fair value of long-term debt at December 31, 2007
and 2006 was approximately $29,968 and $11,142, respectively, while the carrying
value was $33,336 and $12,140 for the same periods.
 
 The
derivative instruments held by the Company, representing put and/or call
options, are carried at fair value based on quoted market prices or dealer
quotes.  At December 31, 2007 and 2006, the fair value of these
derivatives was ($15) and ($20), respectively.
 
 9.       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.
 
 In
November 2005, the Board of Directors authorized a “Dutch Auction” self-tender
offer for up to 1,000 shares of the Company’s common stock resulting in the
January 2006 repurchase and retirement of 544 shares of common stock for an
aggregate purchase price of $13,323 or $24.50 per share.  In addition,
during the years ended December 31, 2007 and 2006, the Company purchased and
retired 542 and 14 shares of common stock for an aggregated purchase price of
$16,200 and $303, respectively.
 
 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.
 
 Stock
Options
 
 The
Company has two stock option plans, the Incentive and Non-Qualified Stock Option
Plan (the “Incentive Plan”) and the 1988 Joint Incentive and Non-Qualified Stock
Option Plan (the “Joint Plan”), under which qualified and nonqualified 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.  The number of authorized shares reserved for
issuance is 3,650 under the Incentive Plan and 2,650 under the Joint
Plan.
 
 At
December 31, 2007, there were 1,917 and 2,832 options outstanding under the
Joint Plan and Incentive Plan, respectively.  At December 31, 2006,
there were 2,153 and 3,146 options outstanding under the Joint Plan and
Incentive Plan, respectively.
   40
 
 Outstanding
stock options as of December 31, 2007, and changes during the year then ended
are summarized below:
 
 Shares
                
                
                Weighted-Average
      Exercise Price
                
                Weighted-Average
      Remaining Contractual Life
                
                Aggregate
      Intrinsic
                    ValueOutstanding
      at January 1, 2007
                
                
                5,299
                
                
                $
                11.61Exercised
                
                
                (550
                )
                
                $
                9.05Outstanding
      and exercisable at December 31, 2007
                
                
                4,749
                
                
                $
                11.91
                
                3.0
      years
                
                $
                57,434
 
 The
aggregate intrinsic value of options outstanding and exercisable as of December
31, 2007 represents the difference between the Company’s closing stock price at
the end of the year ($24.00) 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 stock.  The total
intrinsic value of options exercised during the years ended December 31, 2007
and 2006 was $11,530 and $1,635, respectively, based on the market price on the
date of exercise.
 
 10.           Earnings
Per Share
 
 The
following table sets forth the computation of basic and diluted earnings per
share from continuing operations:
 
 For
      the years ended
                    December
      31,2007
                
                
                2006Numerator:Income
      from continuing operations
                
                $
                17,545
                
                
                $
                30,045Denominator:Basic
      -
      weighted-average shares outstanding
                
                
                8,290
                
                
                
                8,299Dilutive
      effect of employee stock options
                
                
                1,895
                
                
                
                1,918Diluted
      -
      weighted-average shares outstanding
                
                
                10,185
                
                
                
                10,217Basic
      earnings per share - continuing
      operations
                
                $
                2.12
                
                
                $
                3.62Diluted
      earnings per share - continuing
      operations
                
                $
                1.72
                
                
                $
                2.94
 
 11.         Transactions
with Related Parties
 
 The
Company has a 50% interest in an unconsolidated limited liability corporation,
whose principal assets are two distribution centers leased to
Kmart.  A group that includes the wife of the Company’s Board
Chairman, two Directors of the Company and the wife of one of the Directors have
an 8% interest in this entity (see Note 5).
 
 12.         Income
Taxes
 
 Deferred
income taxes are determined on the liability method in accordance with SFAS
No. 109, “Accounting for Income Taxes” (“SFAS
No. 109”).  Under SFAS No. 109, deferred tax assets and
liabilities are determined based on the difference between the tax basis of an
asset or liability and its reported amount in the Consolidated Financial
Statements using enacted tax rates.  Future tax benefits attributable
to these differences are recognized to the extent that realization of such
benefits are more likely than not.
   41
  The
components of the net deferred tax liability are as follows:
  December
      31,2007
                
                
                2006Realization
      allowances related to accounts receivable and inventories
                
                $
                449
                
                
                $
                421Net
      unrealized gain on available-for-sale securities
                
                
                (125
                )
                
                
                (693
                )Basis
      differences relating to real property
                
                
                (5,676
                )
                
                
                1,271Accrued
      expenses, deductible when paid
                
                
                4,470
                
                
                
                4,554Deferred
      profit
                
                
                (481
                )
                
                
                (414
                )Basis
      differences relating to business acquisitions
                
                
                (223
                )
                
                
                (223
                )Leveraged
      lease
                
                
                (5,837
                )
                
                
                (6,127
                )Property,
      plant and equipment
                
                
                (731
                )
                
                
                (636
                )Pensions
                
                
                (309
                )
                
                
                (193
                )Stock-based
      compensation
                
                
                267
                
                
                
                —Other,
      net
                
                
                (276
                )
                
                
                (170
                )Net
      deferred tax liability
                
                
                (8,472
                )
                
                
                (2,210
                )Less:  Current
      portion – asset
                
                
                1,143
                
                
                
                583Noncurrent
      portion
                
                $
                (9,615
                )
                
                $
                (2,793
                )
 
 The
income tax provision (benefit) from continuing operations reflected in the
Consolidated Statements of Income is as follows:
  For
      the years ended
                    December
      31,2007
                
                
                2006Current:Federal
                
                $
                2,285
                
                
                $
                (10,111
                )State
                
                
                742
                
                
                
                (985
                )Deferred
                
                
                5,989
                
                
                
                717$
                9,016
                
                
                $
                (10,379
                )
 
 A
reconciliation of the tax provision from continuing operations computed at
statutory rates to the amounts shown in the Consolidated Statements of Income
are as follows:
 For
      the years ended
                    December
      31,2007
                
                
                2006Computed
      federal income tax provision at statutory rates
                
                $
                9,296
                
                
                $
                6,883State
      tax (benefit), net of federal tax effect
                
                
                424
                
                
                
                (641
                )Reversal
      of long-term and deferred tax liabilities
                
                
                —
                
                
                
                (17,330
                )Other,
      net
                
                
                (704
                )
                
                
                709$
                9,016
                
                
                $
                (10,379
                )
 
 During
2006, the Company reversed $17,330 in long-term and deferred income tax
liabilities relating to certain tax matters for which the statue of limitations
had expired.
 
 On
January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN
48”), which clarifies the accounting for uncertainty in tax positions by
prescribing a recognition threshold for positions taken or expected to be taken
in a tax return that result in a benefit.
   42
 
 At the
date of the adoption, the Company had a total of $4,324 of gross unrecognized
tax benefits.  The adoption of FIN 48 did not result in a cumulative
effect adjustment to retained earnings.  FIN 48 also requires
companies to reclassify uncertain tax positions not expected to be settled
within one year to long-term liabilities.  Therefore upon adoption of
FIN 48, the Company reclassed $1,128 from income taxes payable to other
long-term liabilities.  As of December 31, 2007, the Company had a
total of $4,700 of gross unrecognized tax benefits.  A reconciliation
of the beginning and ending amount of unrecognized tax benefits is as
follows:
 
 2007Balance
      at January 1, 2007
                
                $
                4,324Additions
      based on tax positions related to the current year
                
                
                560Lapse
      of statute of limitations
                
                
                (184
                )Balance
      at December 31, 2007
                
                $
                4,700
 
 Substantially
the entire amount, if recognized, would favorably effect the Company’s effective
tax rate in future periods.
 
 The
Company recognizes interest and penalties related to unrecognized tax positions
as a component of income tax expense.  As of December 31, 2007, the
Company had approximately $2,268 of accrued interest and penalties related to
uncertain tax positions.  During the year ended December 31, 2007, the
Company recognized $352 of interest and penalties within income tax
expense.
 
 The
Company is subject to U.S. federal income tax, as well as income tax in multiple
states.  For all major taxing jurisdictions, the tax years 2004
through 2006 remain open to examination.  As of December 31, 2007, the
Company does not anticipate that total unrecognized tax benefits will
significantly change during the next twelve months.
 
 13.         Other
Income and Expense, Net
 
 The
components of other income and expense, net in the Consolidated Statements of
Income are as follows:
 
 For
      the years ended
                    December
      31,2007
                
                
                2006Litigation
      award from prior condemnation
                
                $
                5,665
                
                
                $
                —Net
      realized and unrealized gain on derivative instruments
                
                
                371
                
                
                
                1,584Net
      (loss) gain on the sale of available-for-sale securities
                
                
                (402
                )
                
                
                73Litigation
      settlement
                
                
                —
                
                
                
                422Other,
      net
                
                
                (17
                )
                
                
                (39
                )$
                5,617
                
                
                $
                2,040
 
 14.         Pension
Plan
 
 The
Company has a noncontributory defined benefit pension plan that covers
substantially all full-time employees and the former employees of one of the
Company’s discontinued manufacturing segments.  The plan provides
defined benefits based on years of service and compensation level.
   43
 
 Changes
in benefit obligation, plan assets and funded status of the plan are as
follows:
  December
      31,2007
                
                
                2006Change
      in benefit obligation:Benefit
      obligation, beginning of year
                
                $
                8,906
                
                
                $
                8,559Service
      cost
                
                
                315
                
                
                
                306Interest
      cost
                
                
                683
                
                
                
                654Actuarial
      loss
                
                
                241
                
                
                
                148Benefits
      paid
                
                
                (729
                )
                
                
                (761
                )Benefit
      obligation, end of year
                
                
                9,416
                
                
                
                8,906Change
      in plan assets:Fair
      value of plan assets, beginning of year
                
                
                9,457
                
                
                
                9,190Actual
      return on plan assets
                
                
                871
                
                
                
                1,028Contributions
                
                
                700
                
                
                
                —Benefits
      paid
                
                
                (729
                )
                
                
                (761
                )Fair
      value of plan assets, end of year
                
                
                10,299
                
                
                
                9,457Funded
      status
                
                $
                883
                
                
                $
                551
 
 The
funded status at December 31, 2007 and 2006 is included in other assets in the
Consolidated Balance Sheets.  As of December 31, 2007 and 2006, the
accumulated benefit obligation was $9,185 and $8,671, respectively.
 
 Amounts
recognized in accumulated other comprehensive income, before income taxes,
consist of the following:
 
 December
      31,2007
                
                
                2006Unrecognized
      net actuarial gain
                
                $
                599
                
                
                $
                840Unrecognized
      net gain
                
                
                496
                
                
                
                352$
                1,095
                
                
                $
                1,192
 
 Net
periodic pension expense consists of the following:
 For
      the years ended
                    December
      31,2007
                
                
                2006Service
      cost
                
                $
                (315
                )
                
                $
                (306
                )Interest
      cost
                
                
                (683
                )
                
                
                (654
                )Expected
      return on plan assets
                
                
                727
                
                
                
                695Net
      periodic pension expense
                
                $
                (271
                )
                
                $
                (265
                )
 
 In
determining the projected benefit obligation and net periodic pension cost, the
weighted-average assumed discount rate and expected long-term rate of return on
plan assets was 8%, while the rate of expected increases in future compensation
was 3.5%, in all periods presented.  A 100 basis point change in the
expected long-term rate of return on plan assets would have changed fiscal 2007
pension expense by $91.
 
 The
expected long-term rate of return on plan assets is determined by considering
historical rates of return, the current return trends, the mix of investments
that comprise plan assets and forecasts of future long-term investment
returns.
 
 The
Company does not expect any of the amounts in accumulated other comprehensive
income to be recognized as a component of net periodic cost during
2008.
   44
 
 The
allocations of plan assets by category are as follows:
  December
      31,2007
                
                
                2006Equity
      securities
                
                
                88.2
                %
                
                
                77.2
                %Debt
      securities
                
                
                6.0
                
                
                
                10.7U.S.
      government securities
                
                
                0.6
                
                
                
                3.8Cash
      and other investments
                
                
                5.2
                
                
                
                8.3100.0
                %
                
                
                100.0
                %
 
 The
Company’s pension plan assets are managed by outside investment managers and the
plan’s trustees.  The Company’s investment strategy with respect to
pension assets is to maximize return while protecting principal.  The
investment managers have the flexibility to adjust the asset allocations and
move funds to the asset class that offers the most opportunity for investment
returns.
 
 Benefit
payments, which include the effects of expected future service, are expected to
be paid as follows:
 
 Years
      ending December 31,2008
                
                
                2009
                
                
                2010
                
                
                2011
                
                
                2012
                
                
                
                2013-2017Expected
      benefit payments
                
                $
                892
                
                
                $
                884
                
                
                $
                884
                
                
                $
                900
                
                
                $
                900
                
                
                $
                4,423
 
 15.         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
which are located throughout the United States.  The hotel operations
segment currently 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 which are sold worldwide.
 
 Operating
results of the Company’s business segments are as follows:
 For
      the years ended
                    December
      31,2007
                
                
                2006Net
      revenues and sales:Real
      estate investment and management
                
                $
                19,652
                
                
                $
                19,295Hotel
      operations
                
                
                14,564
                
                
                
                8,807Engineered
      products
                
                
                37,820
                
                
                
                37,158$
                72,036
                
                
                $
                65,260Operating
      income (loss):Real
      estate investment and management
                
                $
                11,960
                
                
                $
                12,015Hotel
      operations
                
                
                2,072
                
                
                
                418Engineered
      products
                
                
                2,083
                
                
                
                2,784General
      corporate expenses
                
                
                (2,776
                )
                
                
                (4,089
                )13,339
                
                
                
                11,128Other
      income, net
                
                
                13,222
                
                
                
                8,538Income
      from continuing operations before income taxes
                
                $
                26,561
                
                
                $
                19,666
   45
 
 For
      the years ended
                    December
      31,2007
                
                
                2006Depreciation
      and amortization expense:Real
      estate investment and management
                
                $
                1,878
                
                
                $
                1,555Hotel
      operations
                
                
                1,279
                
                
                
                782Engineered
      products
                
                
                339
                
                
                
                343General
      corporate expenses
                
                
                95
                
                
                
                96$
                3,591
                
                
                $
                2,776Mortgage
      interest expense:Real
      estate investment and management
                
                $
                247
                
                
                $
                268Hotel
      operations
                
                
                849
                
                
                
                529$
                1,096
                
                
                $
                797
 
 Sales by
the Company’s engineered products segment to automobile original equipment
manufacturers and their first tier suppliers accounted for approximately 24.6%
and 27.8% of 2007 and 2006 consolidated revenues, respectively.  Sales
by the engineered products segment to General Motors, its largest customer,
accounted for 14.6% and 15.6% of the segment’s sales for the years ended
December 31, 2007 and 2006, respectively.  Sales to Autoliv in 2006 of
10.5% represents the only other customer whose sales exceeded 10% of this
segment’s net sales in each of the two years ended December 31,
2007.
 
 Approximately
13.7% and 14.2% of 2007 and 2006 total sales generated from the engineered
products segment were to foreign customers.  Substantially all assets
held by the Company’s engineered products segment are located within the United
States or its leased warehouse in Tijuana, Mexico.
 
 Selected
information on the Company’s business segments is as follows:
 December
      31,2007
                
                
                2006Identifiable
      assets:Real
      estate investment and management and corporate assets
                
                $
                227,854
                
                
                $
                196,685Hotel
      operations
                
                
                31,867
                
                
                
                14,841Engineered
      products
                
                
                12,349
                
                
                
                12,074$
                272,070
                
                
                $
                223,600Additions
      to long-lived assets:Real
      estate investment and management and corporate assets
                
                $
                4,146
                
                
                $
                11,685Hotel operations
                
                
                16,564
                
                
                
                2,215Engineered
      products
                
                
                176
                
                
                
                283$
                20,886
                
                
                $
                14,183
 
 The cost
of long-lived asset additions includes the assumption of mortgage obligations
($2,315) in connection with the acquisition of the Utica Hotel in 2007 (see Note
2).
 
 16.         Lease
Obligations
 
 At
December 31, 2007, the Company was obligated under various noncancelable
operating leases which expire on various dates through 2040.  These
leases include certain facilities and equipment of the engineered products
segment, as well as land leases of the real estate investment and management
segment.  Certain leases contain renewal options and/or increased
rental amounts.  The future minimum rental commitments under operating
leases are as follows:
 
 Years
      ending December 31,2008
                
                
                2009
                
                
                2010
                
                
                2011
                
                
                2012
                
                
                There-
                    after
                
                
                TotalMinimum
      rental commitments
                
                $
                607
                
                
                $
                465
                
                
                $
                178
                
                
                $
                125
                
                
                $
                118
                
                
                $
                1,527
                
                
                $
                3,020
 
 Rental
expense under operating leases was $623 and $635 for 2007 and 2006,
respectively.
   46
 
 17.           Commitments
and Contingencies
 
 The
Company has undertaken the completion of environmental studies and/or remedial
action at Metex’ 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”).  Environmental experts engaged by the Company estimate 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, environmental
experts have advised the Company 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 becomes 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 has approximately $9,500 and $9,700 recorded in accounts payable and
accrued liabilities and other long-term liabilities as of December 31, 2007 and
2006, 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 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 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, 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 Consolidated
Financial Statements, depending on the anticipated payment
date.  During 2006, the Company reversed $17,330 in long-term and
deferred income tax liabilities relating to certain tax matters for which the
statue of limitations had expired.  None of the remaining matters are
expected to result in a material adverse effect on the Company’s consolidated
financial position or results of operations.
   47