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, 2009
 
 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)
              
              NYSE
      Alternext
  Indicate by check
      mark if the registrant is awell-known seasoned
      issuer, as defined in Rule 405 of the Securities
      Act.
                    o Yes
                    xNoIndicate
      by check mark if the registrant is not required to file reports pursuant
      to Section 13 or 15(d) of the Act.
                    o Yes
                    xNoIndicate
      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
                    oNoIndicate
      by check mark whether the registrant has submitted electronically and
      posted on its corporate Website, if any, every Interactive Data File
      required to be submitted and posted pursuant to Rule 405 of Regulations
      S-T (§232.405 of this chapter) during the preceding 12 months (or for such
      shorter period that the registrant was required to submit and post such
      files).
                    o Yes
                    oNo
  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 “smaller 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).
                  oYes
                  xNo


The
aggregate market value of the shares of the voting stock held by nonaffiliates
of the registrant as of June 30, 2010 was approximately
$34,633,000.





The
number of shares of the registrant’s $.10 par value common stock outstanding as
of March 17, 2010 was 9,060,541.





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, 2009, 98.5% of the total square footage of the Company’s real estate
properties was leased.





Hotel Operations





The
Company’s hotel operations segment consists of four full and limited-service
hotels located in the United States which are managed by the
Company.





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.  Three 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.  The properties also experience fluctuations in occupancy
levels based on economic conditions, which have recently been unfavorable due to
the declining economy.




1





Engineered Products





The
Company’s engineered products are manufactured through Metal Textiles
Corporation (“Metal Textiles”) and AFP Transformers Corporation (“AFP
Transformers”), wholly-owned subsidiaries of the Company.  The knitted
wire products and components manufactured by Metal Textiles 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.





Metal
Textiles 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, motor drive systems, 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 10.8% of the segment’s sales for each of the years ended December
31, 2009 and 2008.  No other customer exceeded 10% of the segment’s
sales during the last two years.





Approximately
17.8% and 13.3%, respectively, of 2009 and 2008 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 (table in
thousands).





Years
      ended December 31,
            
            2009
            
            
            2008Net
      revenues and sales:Real
      estate investment and management
            
            $
            19,814
            
            
            $
            19,872Hotel
      operations
            
            $
            17,253
            
            
            $
            16,317Engineered
      products
            
            $
            23,031
            
            
            $
            36,212Operating
      income (loss):Real
      estate investment and management
            
            $
            12,080
            
            
            $
            12,031Hotel
      operations
            
            $
            (677
            )
            
            $
            1,020Engineered
      products
            
            $
            (653
            )
            
            $
            264Identifiable
      assetsReal
      estate investment and management and corporate assets
            
            $
            223,308
            
            
            $
            220,222Hotel
      operations
            
            $
            49,558
            
            
            $
            30,586Engineered
      products
            
            $
            10,392
            
            
            $
            12,077





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 facilities owned by the Company and a
leased facility in Tijuana, 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 its
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 and availability 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
2010.





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 in which it
operates.  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.  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
17, 2010, the Company employed approximately 390 persons, approximately 80 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.





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 25 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.




3





Backlog





The
dollar value of unfilled orders of the Company’s engineered products segment was
approximately $2.5 million and $2.9 million at December 31, 2009 and 2008,
respectively.  The decrease in backlog is principally due to slowdown
in demand for the Company’s engineered product lines which is related to the
current economic conditions.  It is anticipated that substantially all
of the 2009 backlog will be filled in 2010.  Substantially all of the
2008 backlog was filled in 2009.  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 the Company’s two New Jersey facilities and has recorded a liability
for the estimated investigation, remediation and administrative costs associated
therewith.





The
process of remediation has begun at one facility pursuant to a plan filed with
the New Jersey Department of Environmental Protection
(“NJDEP”).  Management’s assessment, based on estimates from
environmental contractors, is that under the most probable scenario, the
remediation of this site is anticipated to require initial expenditures of
$860,000, 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, management’s
assessment, based on estimates from environmental contractors, is that, under
the most probable remediation scenario, the estimated cost to remediate this
site is anticipated to require $2.3 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 $8.8 million and $9.3 million recorded in accounts
payable and accrued liabilities and other long-term liabilities as of December
31, 2009 and 2008, respectively, to cover such matters.





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 from the Company’s website at http://www.unitedcapitalcorp.net
or 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.  The Company’s website also contains a copy of
the Company’s Code of Business Conduct and Ethics, which was filed as Exhibit 14
to the Company’s report on Form 10-Q for the quarter ended June 30,
2006.




4







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:





The
recent economic downturn and financial crisis could negatively affect our
businesses, results of operations and financial condition.


Although
recent economic trends appear to have stabilized, current U.S. and global
economic conditions have affected and, most likely, will continue to affect our
results of operations and financial position. Slower economic activity,
increased unemployment, the continued crisis in the financial and credit
markets, concerns about inflation and energy costs, decreased business and
consumer confidence, reduced corporate profits and capital spending, adverse
business conditions and liquidity concerns have and will continue to have a
negative affect on the Company’s business segments.  If the economic
and market conditions remain uncertain or weaken further, the Company may
experience material adverse impacts on its businesses, financial condition and
results of operations.





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.





The
Company reviews the carrying value of its properties when circumstances, such as
adverse market conditions, indicate potential impairment may
exist.  If the evaluation indicates an inability to recover the
carrying value of a real estate investment, an impairment loss is
recorded.  Impairment charges could adversely affect our financial
condition, results of operations and cash flows.





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.  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





Our
cash and cash equivalents could be adversely affected if the financial
institutions in which we hold our cash and cash equivalents fail.


Our cash
and cash equivalents are highly liquid investments with original maturities of
three months or less at the time of purchase.  We maintain the cash
and cash equivalents with reputable major financial
institutions.  Deposits with these banks exceed the Federal Deposit
Insurance Corporation (“FDIC”) insurance limits.  These balances could
be impacted if one or more of the financial institutions with which we deposit
fails or is subject to other adverse conditions in the financial or credit
markets.  To date, we have experienced no loss or lack of access to
our invested cash or cash equivalents, however, we can provide no assurance that
access to our invested cash and cash equivalents will not be impacted by adverse
conditions in the financial and credit markets.





Our
investments in marketable securities are subject to risks which may cause losses
and affect the liquidity of these investments.


We invest
funds in excess of those needed for working capital, purchasing real estate and
arranging financing for real estate acquisitions in corporate equity securities,
corporate notes, certificates of deposit, government securities and other
financial instruments.  Significant declines in the value of these
investments due to operating performance of the companies we invest in or
general economic or market conditions may result in the recognition of realized
or impairment losses which could be material.





Operating
results of our hotel operations are subject to conditions common in the lodging
industry.


The
performance of the lodging industry has traditionally been closely linked with
the performance of the general economy.  As the global financial
crisis continues, other sectors of the global economy have been adversely
impacted and has prolonged the global recession.  As the hotel
business is dependent upon consumer and business spending, significant reduction
in lodging demand, as has been experienced in 2009 and likely to continue
throughout 2010, could have a material adverse impact on the operating results
of our hotels.





In
addition, 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 and has a
concentration of customers in the automotive industry.


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,
2009, sales by the engineered products segment to General Motors, its largest
customer, accounted for 10.8% of the segment’s sales.  Since our
engineered products segment accounted for 38.3% of our consolidated revenues in
2009, 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, the deterioration in the global economy has
negatively impacted business activity in general, and specifically the
engineered product markets in which the Company operates.  These
conditions had a dramatic impact on global automotive production and, in turn,
negatively impacted sales of our automotive product line.  Modest
signs of recovery were evident by late 2009 and are continuing into 2010, but at
levels far below those of 2007 and prior.  Continued adverse
developments in the automotive industry, including but not limited to continued
share declines in demand, customer bankruptcies and increased demands on the
Company for pricing decreases, have had, and will continue to have, a
significant adverse affect on the Company’s financial results and cash
flows.





Our
engineered products segment could be adversely affected by technological and
regulatory changes.


Changes
in legislative, regulatory or industry requirements or competitive technologies
may render certain of our products obsolete. Our ability to anticipate changes
in technology and regulatory standards and to develop and introduce new and
enhanced products successfully on a timely basis will be a significant factor in
our ability to grow and to remain competitive. There can be no assurance that we
will be able to achieve the technological advances that may be necessary for the
Company to remain competitive or that certain of our products will not become
obsolete. We are also subject to the risks generally associated with new product
introductions and applications, including lack of market acceptance, delays in
product development and failure of products to operate properly.




6





Our
markets are highly competitive.


The
markets for our engineered products are highly competitive.  We
compete with a number of other manufacturers that produce and sell similar
products.  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.  In addition, the global economy
continues to be in a period of weak economic growth.  While recent
increases in demand for our engineered products towards the end of 2009 and into
the beginning of 2010 are encouraging, it is uncertain if such recoveries are
sustainable or to what extent the Company will benefit from increased
demand.  Continued declines in sales of our engineered products
segment could negatively impact our financial results and cash
flows.





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.





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 our
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 18, “Commitments and
Contingencies” of Notes to Consolidated Financial Statements).




7





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.





Current
and future litigation could have an adverse effect on the Company.


The
Company is subject to various litigation, legal, regulatory and tax matters,
some of which could be considered frivolous, that arise in the ordinary course
of business activities.  These lawsuits and other legal proceedings
can involve substantial costs, including the costs associated with
investigation, litigation and possible settlement, judgment, penalty or
fine.  Although insurance is maintained to mitigate these costs, there
can be no assurance that costs associated with lawsuits or other legal
proceedings will be covered by insurance or will not exceed the limits of
insurance policies.  The Company’s results of operations could be
adversely affected if a judgment, penalty or fine is not fully covered by
insurance.





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, 2009, the sales price of our common stock fluctuated between $13.95
and $25.00 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 69.2% 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 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.





Our
Company is a controlled company pursuant to NYSE Amex rules and, therefore, is
not required to comply with certain governance requirements.


The
Company has elected to be a controlled company pursuant to NYSE Amex
rules.  The Company is eligible to make this election because A.F.
Petrocelli, the Company’s Chairman of the Board, President and Chief Executive
Officer beneficially owns more than 50% of the Company’s outstanding
stock.  As a result of being a controlled company, the Company is not
required to comply with the following corporate governance requirements of the
NYSE Amex:  (i) majority of independent directors, (ii) fully
independent nominating committee and (iii) fully independent compensation
committee.  While the Company currently has a fully independent
compensation committee, it does not have a majority of independent directors or
a fully independent nominating committee.  As a result, the quality of
Board oversight may be reduced as compared with companies which have a fully
independent nominating committee and a majority of independent directors and the
Company has a greater risk of conflicts of interest without these
safeguards.  In addition, the lack of an independent nominating
committee increases the possibility that the Company will not have independent
directors serving on the Board of Directors.





ITEM
1B. UNRESOLVED STAFF
COMMENTS





None




8




ITEM
2.  PROPERTIES





Real
Property Held for Rental or Sale





As of
March 17, 2010, 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, 2009 are as follows:





(Dollars
      in thousands)
            
            Gross
              Carrying
              Value
            
            
            Percentage
            
            
            Number
      of Properties
            
            
            Aggregate
      Value of Encumbrances
            
            
            Number
      of Properties EncumberedShopping
      centers and retail outlets
            
            $
            63,090
            
            
            
            38.5
            %
            
            
            19
            
            
            $
            1,488
            
            
            
            1Commercial
      properties
            
            
            47,238
            
            
            
            28.8
            
            
            
            84
            
            
            
            4,427
            
            
            
            3Hotel
      properties
            
            
            44,249
            
            
            
            27.0
            
            
            
            4
            
            
            
            28,080
            
            
            
            3Child
      care
      centers
            
            
            5,781
            
            
            
            3.5
            
            
            
            9
            
            
            
            —
            
            
            
            —Other
            
            
            3,514
            
            
            
            2.2
            
            
            
            36
            
            
            
            —
            
            
            
            —$
            163,872
            
            
            
            100.0
            %
            
            
            152
            
            
            $
            33,995
            
            
            
            7





The
following summarizes the Company’s properties by geographic area at December 31,
2009:





(Dollars
      in thousands)
            
            Gross
              Carrying
              Value
            
            
            Number
              of
              PropertiesNortheast
            
            $
            78,081
            
            
            
            96Southeast
            
            
            32,672
            
            
            
            17Midwest
            
            
            35,404
            
            
            
            25Southwest
            
            
            5,435
            
            
            
            4Pacific
      Coast
            
            
            9,146
            
            
            
            3Pacific
      Northwest
            
            
            861
            
            
            
            4Rocky
      Mountain
            
            
            2,273
            
            
            
            3$
            163,872
            
            
            
            152





Shopping Centers and Retail
Outlets





Shopping
centers and retail outlets include 12 department stores and miscellaneous 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.  The Company has one shopping
center and retail outlet subject to an encumbrance of approximately $1,488,000
at December 31, 2009.  In addition, two of the Company’s properties
are held through long-term ground leases with a gross carrying value of
approximately $2,574,000.





Commercial Properties





Commercial
properties consist of properties leased as 49 restaurants, 8 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.  The
Company has three commercial properties subject to encumbrances of approximately
$4,427,000 at December 31, 2009.  In addition, three of the Company’s
properties are held through long-term ground leases with a gross carrying value
of approximately $1,760,000.




9





Child Care Centers





The
Company has one school and eight day-care centers located in New York City,
seven 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 the
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 are comprised of almost 900 rooms, over 42,000 square
feet of meeting space, and a 132,000 square foot convention center available
from its four full and limited-service hotels located in Connecticut, Florida,
Georgia and New York State.  The full-service hotels operate under
Doubletree and Radisson franchise agreements, while the limited-service hotel
operates as an independent.  Each property is managed by the Company
with on-site managers responsible for all day-to-day
operations.  Three of these hotels are subject to encumbrances of
approximately $28,080,000 at December 31, 2009.





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.  These facilities are owned by a subsidiary of the
Company.  The engineered products segment also leases a manufacturing
facility in Tijuana, Mexico, with approximately 24,000 square feet of floor
space.





ITEM
3. LEGAL
PROCEEDINGS





In May
2008, an insurance company for one of the Company’s subsidiaries, purchased as
part of a bankruptcy reorganization, filed suit in Supreme Court of the State of
New York against such entity’s other insurance companies seeking, among other
things, contribution for insurance settlements from carriers, some of which now
claim to be exhausted.  The complaint also names the Company’s
subsidiary and several underlying claimants with whom such settlements were
reached.  The action challenges the exhaustion of the underlying
policies and seeks contribution as well as a declaration of the rights, duties
and liabilities of the parties under the insurance policies.  In June
2008, the Company removed the action to the U.S. Court for the Southern District
of New York.  Plaintiffs and certain defendants contested the
removal.  In October 2008, a stipulation was reached to remand certain
issues to State Court while staying the remaining issues in Federal
Court.  Plaintiffs have also agreed to dismiss the underlying
claimants.  In February 2009, the Company succeeded on a motion for
summary judgment against one of the primary insurance companies who claimed
exhaustion. The insurance company was ordered to defend the underlying actions
and reimburse certain costs to the other carriers.  This decision was
appealed by the carrier in April 2009.  In July 2009, the Company
asked the lower court for leave to amend its complaint to correct a procedural
deficiency.  The lower court granted such leave, but withdrew its
earlier summary judgment motion, pending a rehearing of the matter, rendering
the appeal moot.  The lower court, however, stayed the defense
obligations, pending a decision based on a new hearing held in September
2009.  The Company intends to vigorously defend this
matter.  The Company is subject to various other litigation, legal and
regulatory matters that arise in the ordinary course of business
activities.  When management believes it is probable that a liability
has been incurred and such amounts are reasonably estimable, the Company
provides for amounts that include judgments and penalties that may be
assessed.  These liabilities are usually included in accounts payable
and accrued liabilities or other long-term liabilities in the Condensed
Consolidated Financial Statements, depending on the anticipated payment
date.  Based on the facts presently available, the Company does not
believe that the disposition of matters that are pending or asserted will have a
material adverse effect on the Company’s consolidated financial position or
results of operations.  However, new or additional facts or an adverse
judgment by a court, arbitrator or a settlement could adversely impact the
Company’s results of operations or financial condition in any given
period.





ITEM
4. RESERVED




10








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 NYSE
Amex under the symbol AFP.  The table below shows the high and low
sales prices as reported in the composite transactions for the NYSE Amex for the
quarterly periods indicated.





2009
            2008High
            Low
            High
            LowFirst
      Quarter
            $21.89
            $13.95
            $24.50
            $21.00Second
      Quarter
            $23.45
            $16.30
            $25.40
            $19.20Third
      Quarter
            $25.00
            $17.70
            $27.25
            $17.58Fourth
      Quarter
            $24.17
            $17.55
            $26.50
            $15.75





As of
March 17, 2010, there were approximately 180 record holders of the Company’s
Common Stock.  The closing sales price for the Company’s Common Stock
on such date was $24.50.  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.





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, 2009:




Issuer
Purchases of Equity Securities


(Table in
thousands, except per share data)





Period
            Total
      Number of Shares Purchased
            Average
      Price Paid per Share
            Total
      Number of Shares Purchased as Part of Publicly Announced Plans or
      Programs
            Maximum
      Number of Shares that May Yet Be Purchased Under the Plans or
      ProgramsOctober
      1, 2009 — October 31, 2009
            2
            $18.93
            2
            350November
      1, 2009 — November 30, 2009
            13
            $19.15
            13
            337December
      1, 2009 — December 31, 2009
            11
            $22.93
            11
            32626
            $20.72
            26





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, 2009 approximately 326,000 shares
remain to be purchased under such plans.  These authorizations are
ongoing and have no 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,
2009.  See Note 10 of Notes to Consolidated Financial Statements for
further discussion on these plans.




11





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
            
            
            3,184,668
            
            
            $
            13.18
            
            
            
            —Equity
      compensation plans not approved  by security
    holders
            
            
            —
            
            
            
            —
            
            
            
            —Total
            
            
            3,184,668
            
            
            $
            13.18
            
            
            
            —








ITEM
6. SELECTED FINANCIAL
DATA





Not
applicable, as the Company is a smaller reporting company.





ITEM
7. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS





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:  2009 and 2008





Total
revenues for the year ended December 31, 2009 were $60.1 million, generating
operating income of $6.9 million.  This compares to total revenues and
operating income for the year ended December 31, 2008 of $72.4 million and $10.0
million, respectively.  The 2009 results reflect the impact that the
economic conditions have had on the Company’s engineered products and hotel
segments.  Net income for 2009 was $5.7 million or $.63 per basic
share, compared to $1.6 million or $.19 per basic share for 2008.





The 2008
results includes ($24.1) million in realized losses on the Company’s marketable
securities portfolio and a $6.6 million gain from the sale of a property,
reflected as income from discontinued operations, on a net of tax
basis.





Although
business trends improved near the end of 2009 and early 2010, the Company will
continue to conservatively manage its resources given the difficulty in
predicting whether such trends will continue.





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:





Year
      ended December 31, 2009
            
            
            Year
      ended December 31, 2008(In
      thousands)
            
            Real
      Estate
            
            
            Hotel
      Operations
            
            
            Total
            
            
            Real
      Estate
            
            
            Hotel
      Operations
            
            
            TotalRevenues
            
            $
            19,814
            
            
            $
            17,253
            
            
            $
            37,067
            
            
            $
            19,872
            
            
            $
            16,317
            
            
            $
            36,189Mortgage
      interest expense
            
            
            195
            
            
            
            1,922
            
            
            
            2,117
            
            
            
            241
            
            
            
            1,874
            
            
            
            2,115Depreciation
      expense
            
            
            2,295
            
            
            
            1,893
            
            
            
            4,188
            
            
            
            2,183
            
            
            
            1,431
            
            
            
            3,614Other
      operating expenses
            
            
            5,244
            
            
            
            14,115
            
            
            
            19,359
            
            
            
            5,417
            
            
            
            11,992
            
            
            
            17,409Operating
      income (loss)
            
            $
            12,080
            
            
            $
            (677
            )
            
            $
            11,403
            
            
            $
            12,031
            
            
            $
            1,020
            
            
            $
            13,051




12




Real Estate Investment and
Management





Revenues
from the real estate investment and management segment for the year ended
December 31, 2009 were $19.8 million, a fluctuation of less than 1% from that
reported for the year ended December 31, 2008.  Revenues from the
Company’s real estate portfolio are generally derived from properties with
single tenant, long-term leases.  Therefore, rental revenues
recognized under generally accepted accounting principles do not fluctuate
significantly, but are affected by lease renewals, terminations and the purchase
or sale of additional properties.





Mortgage
interest expense on real property held for rental decreased $46,000 or 19.1% for
the year ended December 31, 2009, compared to 2008, primarily as a result of
continuing mortgage amortization.  This was offset by additional
interest from mortgages associated with property acquisitions in the current and
prior year.  The 2009 mortgage assumed ($3,881,000) bears interest at
5.7% per annum, is payable monthly and matures in November 2016.  As a
result of this additional obligation, mortgage interest expense from the
Company’s real estate investment and management segment will increase in
2010.  At December 31, 2009, the outstanding mortgage balance on the
Company’s real estate investment and management portfolio was less than $6.0
million.





Depreciation
expense associated with real properties held for rental increased $112,000 for
the year ended December 31, 2009, compared to 2008, as the result of building
improvements made to real estate assets during the current and prior
years.  Due to the purchase of a commercial property in November 2009,
depreciation expense on the Company’s properties should be slightly higher in
2010 than in 2009.





Other
operating expenses associated with the management of real properties decreased
$173,000 or 3.2% for the year ended December 31, 2009, compared to such expenses
incurred in 2008.  This decline is primarily the result of decreases
in personnel costs ($115,000), the cost of utilities ($89,000), and lower
professional fees ($88,000) associated with lease renewals and other property
related transactions.  These decreases are partially offset by
increases in license fees ($40,000) and property maintenance costs ($39,000)
which are the result of the timing of certain repairs and
renovations.  Operating expenses could fluctuate in the future from
those previously incurred due to the extent of property age, location and
vacancies.





Hotel Operations





Hotel
revenues were $17.3 million for the year ended December 31, 2009, an increase of
$936,000 or 5.7% from $16.3 million for the year ended December 31,
2008.  This increase is primarily the result of additional revenues
($3.4 million) resulting from the August 2009 acquisition of a hotel located in
Miami, Florida (the “Miami Hotel”).  The remaining three properties in
the Company’s hotel operating segment experienced revenue declines as a result
of the overall weakness in the U.S. economy which caused a reduction in both
consumer and business travel.  Due to the acquisition of the Miami
Hotel, hotel revenues are expected to increase during 2010.





Mortgage
interest expense related to the Company’s hotel properties increased $48,000 for
the year ended December 31, 2009, compared with that reported in
2008.  The additional cost is primarily the result of a mortgage
obtained on one of the Company’s hotels in the prior year.  Without
refinancing or additional borrowings, mortgage interest expense from the
Company’s hotel operations will decline with scheduled principal
reductions.





Depreciation
expense associated with the Company’s hotel operations increased $462,000 for
the year ended December 31, 2009.  This increase is primarily
attributable to additional depreciation expense ($303,000) related to the Miami
Hotel acquired in August 2009 and from additional depreciation expense
($104,000) related to renovations and improvements added during the year at two
of the Company’s hotels.  As a result of the Miami Hotel acquisition
and these renovations and improvements, depreciation expense for 2010 should be
higher than that reported in 2009.





Other
operating expenses related to the management of the Company’s hotels increased
$2.1 million to $14.1 million for the year ended December 31, 2009, compared to
$12.0 million in 2008.  This increase is primarily related to
additional operating expenses ($3.8 million) from the Miami Hotel.  As
a result of the lower revenues, noted above, operating expenses at the Company’s
other hotels declined in 2009.





The
present economic slowdown and the uncertainty over its duration have had a
negative impact on the hotel industry resulting in steep declines in
demand.  As noted above, each of the Company’s hotels owned for the
full year reported declines in operating performance over the prior
year.  These general economic trends make it difficult to predict
future hotel operating results.  The Company’s hotel operations may
experience further declines in revenues for any number of reasons, including,
but not limited to, greater than anticipated weakness in the economy and changes
in travel patterns.




13





Engineered
Products





The
operating results of the Company’s engineered products segment are as follows
(table in thousands):





Years
      ended December 31,
            
            2009
            
            
            2008Net
      sales
            
            $
            23,031
            
            
            $
            36,212Cost
      of sales
            
            
            17,641
            
            
            
            28,530Selling,
      general and administrative expenses
            
            
            6,043
            
            
            
            7,418Operating
      (loss) income
            
            $
            (653
            )
            
            $
            264





Net sales
of the engineered products segment decreased $13.2 million or 36.4% for the year
ended December 31, 2009.  The deterioration in the global economy has
negatively impacted business activity in general, and specifically the
engineered product markets in which this segment operates.  These
conditions had a dramatic impact on global automotive production and, in turn,
negatively impacted sales of our automotive product line, which was down
approximately 30% from 2008 levels.  Each of the Company’s engineered
product lines experienced a decline in 2009.  Modest signs of recovery
were evident by late 2009 and are continuing into 2010, but at levels far below
those of 2007 and prior.  Management remains cautiously optimistic
that results will improve as the economy continues to recover.





Cost of
sales as a percentage of net sales decreased 2.2% for the year ended December
31, 2009, compared to 2008.  The decrease is primarily attributable to
a reduction in material costs as a percentage of net sales (4.6%) which reflects
reductions in the cost of raw materials and changes in the mix of products
sold.  This decrease is partially offset by reduced overhead
absorption (2.2%) caused by a lower sales levels in 2009, as noted
above.  During the year, the Company reduced its operating costs,
including the elimination of almost 30% of its direct and indirect
positions.  Management will continue to carefully monitor these costs
during 2010.





Selling,
general and administrative expenses of the engineered products segment decreased
$1.4 million or 18.5% for the year ended December 31, 2009, compared to
2008.  As a result of the significant decline in net sales and
personnel reductions noted above, payroll and payroll related expenses
($677,000), freight charges ($185,000), and professional fees ($163,000) were
substantially lower than in 2008.





The
economic recession, and in particular its impact on global automotive demand,
has caused the Company to incur an operating loss from this segment in
2009.  While recent increases in demand are encouraging, it is
uncertain if such recoveries are sustainable for an extended period of time or
to what extent the Company will benefit from increased automotive
demand.  Management is closely monitoring this situation and is
committed to returning this segment to profitability, but the success of such
efforts is uncertain.





General
and Administrative Expenses





General
and administrative expenses not associated with the manufacturing operations
increased $584,000 or 17.8% for the year ended December 31, 2009, compared to
such expenses incurred in 2008.  This increase is primarily as a
result of acquisition costs that are not capitalizable ($272,000), additional
payroll and payroll related expenses ($127,000), as well as from additional
depreciation expense ($84,000).





Total
Other Income (Expense)





Total
other income (expense) was $3.6 million in 2009, versus ($16.7) million in
2008.  The change in total other income (expense) was primarily
related to realized losses on the Company’s marketable security portfolio of
($104,000) in 2009 versus ($24.1) million in 2008.  Fluctuations also
occurred as the result of decreases in interest and dividends generated on the
Company’s cash and marketable security portfolios ($1.7 million) and in realized
and unrealized gains on derivative instruments recognized ($1.3
million).




14





Income
Taxes





In 2009,
the Company’s effective tax rate from continuing operations was
40.5%.  In 2008, the effective tax benefit from continuing operations
was (27.8%).  This amount differs from statutorily enacted rates as a
result of income or losses in certain state jurisdictions which were not
offsettable.  The amount of property gains in a given year, reported
net of tax at statuary rates, as discontinued operations, also altered the
effective tax rate from continuing operations reported by the
Company.





Discontinued
Operations





During
2009, the Company divested itself of one commercial property and one of its
shopping centers and retail outlets which had a net book value of
$3,948,000.  The aggregate proceeds from these transactions were $3.3
million resulting in a loss of ($414,000), on a net of tax basis.





During
2008, the Company divested itself of one of its shopping centers and retail
outlets which had a net book value of $1,537,000.  The aggregate
proceeds from this transaction were $12.5 million resulting in a gain of $6.6
million, on a net of tax basis.





The
operating loss from properties sold and accounted for as discontinued operations
in 2009 and 2008 were ($117,000) and ($120,000), on a net of tax basis,
respectively.  Prior year amounts have been reclassified to reflect
results of operations of real properties disposed of during 2009 and 2008 as
discontinued operations.





Liquidity
and Capital Resources





Net cash
provided by operating activities was $16.8 million for the year ended December
31, 2009, compared to $11.3 million for 2008.  The increase in
operating cash flows results principally from changes in income taxes, including
the receipt of $4.2 million in tax refunds and $2.6 million less in payments, as
well as the reduction in inventories ($1.3 million).  These increases
in cash flows are partially offset by lower operating income before depreciation
($2.5 million) and interest and dividend income ($1.7 million).





Net cash
used in investing activities was $32.1 million in 2009 versus $369,000 in
2008.  This change primarily results from lower proceeds received from
the sale of real estate assets in the current year ($24.4 million) including the
release of proceeds held in escrow on the sale of real estate in 2008 ($15.0
million), from cash used in a business acquisition, net of cash acquired, in
August 2009 ($17.1 million), and from the purchase of notes receivable ($9.4
million) during the current year.  These uses are offset by the timing
of the purchase or sale of available-for-sale securities ($11.3 million) and
acquisition of/additions to real estate assets ($10.0 million).





Net cash
provided by financing activities was $1.6 million in 2009 versus $1.8 million
which was used for such activities in 2008.  This change results from
a decrease in the purchase and retirement of common stock ($10.2 million) during
the current year, offset by a reduction in proceeds from the exercise of stock
options and related tax benefits ($4.5 million), an increase in principal
payments on mortgage obligations ($1.8 million), and lower proceeds from
mortgage obligations ($500,000).





In July
2009, the Company purchased a non-performing mortgage note encumbering a hotel
located in Miami, Florida (the “Miami Hotel”).  The Company took title
to the Miami Hotel in mid-August and has undertaken operation of the
hotel.  The Company anticipates investing up to $10.0 million in
renovations and improvements to this property during its first year of
ownership.





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, 2009, the Company’s cash and marketable securities were $149.6
million and working capital was $147.4 million, compared to cash and marketable
securities of $147.3 million and working capital of $153.9 million at December
31, 2008.  While there has been a decline in the value of real estate
properties in the United States, the recession could cause real estate prices to
drop even further.  Management has limited acquisitions to those
select properties that meet the Company’s stringent financial
requirements.  Management believes that opportunities to acquire
additional properties at favorable prices may soon be available and the
Company’s available working capital provides a considerable advantage to fund
acquisitions and grow its portfolio, if and when attractive long-term
opportunities become available.  The tightened credit markets however,
could limit the Company’s ability to leverage future acquisitions.




15





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.





The cash
needs of the Company have been satisfied from funds generated by current
operations.  It is expected that future operational cash needs will
also be satisfied from existing cash balances, marketable securities, ongoing
operations or borrowings.  The primary source of capital to fund
additional real estate acquisitions and to make additional high-yield mortgage
loans may come from existing funds, the sale, financing and refinancing of the
Company’s properties and from third party mortgages and purchase money notes
obtained in connection with specific acquisitions.





In
addition to the acquisition of properties for consideration consisting of cash
and mortgage financing proceeds, the Company may acquire real properties in
exchange for the issuance of the Company’s equity securities.  The
Company may also finance acquisitions of other companies in the future with
borrowings from institutional lenders and/or the public or private offerings of
debt or equity securities.  The Company currently has no agreements,
commitments or understandings with respect to the acquisition of 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.  Although these excess funds are invested in investment
grade securities, they are subject to significant fluctuations in fair value due
to the volatility of the stock market and changes in general economic
conditions.  Changes in U.S. interest rates affect the interest earned
on the Company’s cash and cash equivalent balances and other interest bearing
investments.  Given the level of cash and other interest bearing
investments held by the Company, declines in U.S. interest rates have adversely
impacted the Company’s earnings in 2009.





In
strategies designed to hedge overall market risk, the Company may sell common
stock short 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
as of December 31, 2008 were recorded as a component of accounts payable and
accrued liabilities in the Consolidated Balance Sheet.  The Company
held no such derivatives at December 31, 2009.  The Company recognized
$139,000 and $1.4 million in net realized and unrealized gains on derivative
instruments in 2009 and 2008, respectively.





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,
2009, sales by the engineered products segment to General Motors, its largest
customer, accounted for 10.8% of the segment’s sales.  Since our
engineered products segment accounted for 38.3% of our consolidated revenues in
2009, 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 deterioration in the global economy has
negatively impacted business activity in general, and specifically the
engineered product markets in which the Company operates.  These
conditions had a dramatic impact on global automotive production and, in turn,
negatively impacted sales of our automotive product line.  Modest
signs of recovery were evident by late 2009 and are continuing into 2010, but at
levels far below those of 2007 and prior.  Management remains
cautiously optimistic that results will improve as the economy continues to
recover.  Continued adverse developments in the automotive industry,
including but not limited to continued share declines in demand, customer
bankruptcies and increased demands on the Company for pricing decreases, have
had, and will continue to have, a significant adverse affect on our engineered
products segment.




16





The
Company manufactures its products in the United States and Mexico and sells its
products in those markets as well as 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, 2009 and 2008, 11.0% and
7.9% 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 as the Company’s historical results
have not been significantly impacted by foreign exchange gains or
losses.  Accordingly, the Company has not entered into forward
exchange contracts to hedge this exposure.  If such exposure were to
increase in the future, the Company may reexamine this practice to minimize the
associated risks.





The
continued weakness in the economy has pressured results of the Company’s
engineered products and hotel segments.  These factors are expected to
continue to impact the Company in 2010.  While the depth and duration
of the current negative economic environment and its impact on the Company are
uncertain, management believes the Company’s strong balance sheet together with
the significant cash flow generated from its core real estate portfolio, should
allow the Company to weather this downturn.





The plan
assets of the Company’s defined benefit pension plan are valued at fair value
using quoted market prices.  Investments, in general, are subject to
various risks, including credit, interest and overall market
volatility.  During 2008, the equity markets saw a significant decline
in value.  As such, the fair value of plan assets decreased
significantly in that year.  The funded status of the plan at December
31, 2008 decreased by $3.7 million from December 31, 2007, due in large part to
the decrease in the fair value of plan assets.  This affected the
amounts reported in the Consolidated Balance Sheet at December 31,
2008.  During 2009, the markets had a significant recovery from the
prior year providing an actual return on plan assets of $3.6
million.  During September 2009, the pension plan was frozen, ceasing
the accrual of further benefits.  The plan is now in a funded status,
however market fluctuations will continue to effect the need for, and amount of,
future contributions.





The
Company has undertaken the completion of environmental studies and/or remedial
action at the Company’s two New Jersey facilities and has recorded a liability
for the estimated investigation, remediation and administrative costs associated
therewith.  See “Environmental Regulations” in Item 1 of Part I and
Note 18, “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.  Based on the facts presently available, the Company does not
believe that the disposition of matters that are pending or asserted will have a
material adverse effect on the Company’s consolidated financial position or
results of operations.  However, new or additional facts or an adverse
judgment by a court, arbitrator or a settlement could adversely impact the
Company’s results of operations in any given period.





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.  Also participating in this transaction were Mrs. Petrocelli
(the wife of Mr. Petrocelli, the Company’s Board Chairman), Mr. Lorber and Mr.
Penner, Directors of the Company, as well as Ms. Madaleine Berley (the wife of
Mr. Penner), who together have approximately an 8% interest in this
transaction.  Income on leveraged leases are recognized by a method
which 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
investment is positive.  Accordingly, although the Company received
$776,000 in cash distributions from this investment, it did not record any
income during the year ended December 31, 2009.  The Company’s share
of income arising from this investment, accounted for as a leveraged lease, was
$92,000 for the year ended December 31, 2008.  Cash distributions from
this investment to each of Mrs. Petrocelli, Mr. Penner, Ms. Berley, and Mr.
Lorber were approximately $36,000, $26,000, $26,000, and $26,000, respectively,
in both 2009 and 2008.




17





During
July 2009, the Company purchased a $5.0 million participation in a note secured
by a warehouse located in New York of which Mrs. Petrocelli holds a 20%
interest.  The participation, which matures in July 2012, bears
interest at 18% per annum payable monthly.  The participants also
received a commitment fee of 1% in connection with the note.





Hallman
& Lorber Associates, Inc. (“H&L”) provided pension plan services to the
Company during its last fiscal year.  The amount paid by the Company
to H&L in 2009 was $42,000.  The Company anticipates it will
continue such relationship in this fiscal year.  Mr. Lorber, a
Director of the Company and Chairman of the Company’s Compensation and Stock
Option and Audit Committees, is a consultant to H&L.





Critical
Accounting Policies





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.  The Company’s
significant accounting policies are described in the Notes to Consolidated
Financial Statements.  Certain of these policies require the
application of subjective or complex judgments often as a result of the need to
make estimates about the effect of matters that are inherently
uncertain.  These estimates and assumptions are based on historical
experience, changes in the business environment and other factors that we
believe to be reasonable under the circumstances.  Different estimates
that could have been applied in the current period or changes in the accounting
estimates that are reasonably likely can result in a material impact on our
financial condition and operating results in the current and future
periods.  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
accounting policies we believe to be most critical to understanding our
financial results and condition and that require complex and subjective
management judgments are discussed below and should be read in conjunction with
the Summary of Significant Accounting Policies in Notes to Consolidated
Financial Statements.





Long-Lived
Assets





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.  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’s net income is directly affected by management’s
estimate of impairments.





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
cost.  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 cost.  A 100 basis point change in the
expected long-term rate of return on plan assets would have changed fiscal 2009
net periodic pension expense by $66,000.




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





None





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 as of the end of the period
covered by this report.





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, 2009.




19





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 changes in its internal controls over financial reporting,
or in other factors that could affect these controls during the three months
ended December 31, 2009 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.  In December
2009, the Committee approved bonuses for Messrs. Petrocelli, Lamoretti, Weinbaum
and Miceli payable in 2010.  Such bonuses were substantially
consistent with the bonuses paid in prior years.








PART
III





ITEM
10. DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE





This
information will be contained in the Proxy Statement of the Company for the 2010
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 2010
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 2010
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 2010
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
12, “Transactions with Related Parties,” of Notes to Consolidated Financial
Statements, contained elsewhere in this report.




20




ITEM
14.          PRINCIPAL ACCOUNTANT
FEES AND SERVICES





This
information will be contained in the Proxy Statement of the Company for the 2010
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 of the Company are included in
      this Form 10-K on the pages indicated:Index
      to Consolidated Financial Statements
                PageReport
      of Independent Registered Public Accounting Firm – Holtz Rubenstein
      Reminick LLP
                24Consolidated
      Balance Sheets as of December 31, 2009 and 2008
                25Consolidated
      Statements of Income for the Years Ended December 31, 2009 and
      2008
                26Consolidated
      Statements of Stockholders’ Equity and Comprehensive Income
      (Loss)for
      the Years Ended December 31, 2009 and 2008
                27Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2009 and
      2008
                28Notes
      to Consolidated Financial Statements
                29-45(2)
                Consolidated
      Financial Statement Schedules.Schedules
      not included, as the Company is a smaller reporting
    company.
  (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).  21
  10.5
                Form
      of Indemnity Agreement dated as of May 7, 1991, by and between the Company
      and A.F. Petrocelli, Arnold S. Penner and Howard M. Lorber (incorporated
      by reference to exhibit 10.5 filed with the Company’s report on Form 10-Q
      for the quarter ended June 30, 2009).10.6
                Supplemental
      Retirement and Death Benefit Program, as amended and restated
      (incorporated by reference to exhibit 10.6 filed with the Company’s report
      on Form 10-Q for the quarter ended June 30, 2009).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.*
                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
      23, 2010
                  By:
                  /s/ A. F. PetrocelliA.
      F. PetrocelliChairman,
      President andChief
      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
      23, 2010
                  By:
                  /s/ A. F. PetrocelliA.
      F. PetrocelliChairman,
      President andChief
      Executive Officer(Principal
      Executive Officer)
 
 Dated:
                  March
      23, 2010
                  By:
                  /s/ Michael T. LamorettiMichael
      T. LamorettiVice
      President – Real Estate Operationsand
      Director
 
 Dated:
                  March
      23, 2010
                  By:
                  /s/ Howard M. LorberHoward
      M. LorberDirector
 
 Dated:
                  March
      23, 2010
                  By:
                  /s/ Robert M. MannRobert
      M. MannDirector
 
 Dated:
                  March
      23, 2010
                  By:
                  /s/ Anthony J. MiceliAnthony
      J. MiceliChief
      Financial Officer, Secretary andDirector  (Principal
      Financial Officerand
      Principal Accounting Officer)
 
 Dated:
                  March
      23, 2010
                  By:
                  /s/ Arnold S. PennerArnold
      S. PennerDirector
 
 
 Dated:
                  March
      23, 2010
                  By:
                  /s/ Michael J. WeinbaumMichael
      J. WeinbaumVice
      President – Real Estate Operationsand
      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 sheets of United Capital Corp. and
Subsidiaries (the “Company”) as of December 31, 2009 and 2008, and the related
consolidated statements of income, stockholders’ equity and comprehensive income
(loss), and cash flows for the years 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 audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits 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 audits 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 audits provide 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, 2009 and 2008 and the consolidated results
of its operations and its consolidated cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.





As
described in Note 3 to the consolidated financial statements, the Company has
reclassified the 2008 consolidated financial statements to reflect certain
discontinued operations.








/s/ Holtz Rubenstein
Reminick
LLP


Holtz
Rubenstein Reminick LLP





Melville,
New York


March 23,
2010




24





United
Capital Corp. and Subsidiaries


Consolidated
Balance sheets


(In
thousands, except per share data)








As
      of December 31,
            
            2009
            
            
            2008AssetsCurrent
      assets:Cash
      and cash equivalents
            
            $
            124,354
            
            
            $
            138,142Marketable
      securities
            
            
            25,227
            
            
            
            9,178Notes
      and accounts receivable, net
            
            
            7,225
            
            
            
            7,427Income
      taxes receivable
            
            
            —
            
            
            
            4,163Inventories
            
            
            4,450
            
            
            
            5,624Prepaid
      expenses and other current assets
            
            
            2,066
            
            
            
            1,732Deferred
      income taxes
            
            
            —
            
            
            
            4,011Total current assets
            
            
            163,322
            
            
            
            170,277Property,
      plant and equipment, net
            
            
            8,088
            
            
            
            5,591Real
      property held for rental, net
            
            
            92,900
            
            
            
            73,060Investment
      in joint venture
            
            
            4,664
            
            
            
            5,440Noncurrent
      notes receivable
            
            
            9,687
            
            
            
            1,058Other
      assets
            
            
            4,597
            
            
            
            3,317Noncurrent
      assets of discontinued operations
            
            
            —
            
            
            
            4,142Total assets
            
            $
            283,258
            
            
            $
            262,885Liabilities
      and Stockholders’ EquityCurrent
      liabilities:Current
      maturities of long-term debt
            
            $
            1,080
            
            
            $
            2,717Accounts
      payable and accrued liabilities
            
            
            10,134
            
            
            
            10,036Income
      taxes payable
            
            
            4,658
            
            
            
            3,629Deferred income taxes
            
            
            96
            
            
            
            —Total current liabilities
            
            
            15,968
            
            
            
            16,382Long-term
      debt
            
            
            32,915
            
            
            
            30,146Other
      long-term liabilities
            
            
            14,817
            
            
            
            18,076Deferred
      income taxes
            
            
            9,575
            
            
            
            8,314Total liabilities
            
            
            73,275
            
            
            
            72,918Commitments
      and contingenciesStockholders’
      equity:Common
      stock, $.10 par value, authorized 17,500 shares; issuedand outstanding 9,081 and 8,483 shares, respectively
            
            
            908
            
            
            
            848Retained
      earnings
            
            
            207,029
            
            
            
            197,056Accumulated
      other comprehensive income (loss), net of tax
            
            
            2,046
            
            
            
            (7,937
            )Total stockholders’ equity
            
            
            209,983
            
            
            
            189,967Total liabilities and stockholders’ equity
            
            $
            283,258
            
            
            $
            262,885







The
accompanying Notes to Consolidated Financial Statements are an integral part of
these statements.




25





United
Capital Corp. and Subsidiaries


Consolidated
Statements of Income


(In
thousands, except per share data)








For
      the years ended December 31,
            
            2009
            
            
            2008Revenues:Net sales
            
            $
            23,031
            
            
            $
            36,212Revenues from real estate
      operations
            
            
            37,067
            
            
            
            36,189Total revenues
            
            
            60,098
            
            
            
            72,401Costs
      and expenses:Cost of sales
            
            
            17,641
            
            
            
            28,530Real estate
      operations:Mortgage interest
      expense
            
            
            2,117
            
            
            
            2,115Depreciation
      expense
            
            
            4,188
            
            
            
            3,614Other operating
      expenses
            
            
            19,359
            
            
            
            17,409General and administrative
      expenses
            
            
            6,754
            
            
            
            6,626Selling
expenses
            
            
            3,152
            
            
            
            4,071Total costs and
      expenses
            
            
            53,211
            
            
            
            62,365Operating
    income
            
            
            6,887
            
            
            
            10,036Other income
      (expense):Interest and dividend
      income
            
            
            3,620
            
            
            
            5,355Other income and (expense),
      net
            
            
            (48
            )
            
            
            (22,096
            )Total other income
      (expense)
            
            
            3,572
            
            
            
            (16,741
            )Income (loss) from continuing
      operations before income taxes
            
            
            10,459
            
            
            
            (6,705
            )Provision (benefit) for income
      taxes
            
            
            4,241
            
            
            
            (1,863
            )Income (loss) from continuing
      operations
            
            
            6,218
            
            
            
            (4,842
            )Discontinued
      operations:Loss from discontinued
      operations, net of tax (benefit) of ($78) and ($80),
      respectively
            
            
            (117
            )
            
            
            (120
            )Net (loss) gain on disposal of
      discontinued operations, net of tax (benefit) provision of ($276) and
      $4,385, respectively
            
            
            (414
            )
            
            
            6,578(Loss) income from discontinued
      operations
            
            
            (531
            )
            
            
            6,458Net income
            
            $
            5,687
            
            
            $
            1,616Basic
      earnings per share:Income (loss) from continuing
      operations
            
            $
            .69
            
            
            $
            (.58
            )(Loss) income from discontinued
      operations
            
            
            (.06
            )
            
            
            .77Net income per
      share
            
            $
            .63
            
            
            $
            .19Diluted
      earnings per share:Income (loss) from continuing
      operations
            
            $
            .64
            
            
            $
            (.58
            )(Loss) income from discontinued
      operations
            
            
            (.06
            )
            
            
            .77Net income per share assuming
      dilution
            
            $
            .58
            
            
            $
            .19







The
accompanying Notes to Consolidated Financial Statements are an integral part of
these statements.




26


United
Capital Corp. and Subsidiaries


Consolidated
Statements of Stockholders’ Equity


and
Comprehensive Income (Loss)


(In
thousands)








Accumulated
              Other
              Comprehensive
            
            
            Total
            
            
            ComprehensiveCommon
      Stock Issued
            
            
            Retained
            
            
            Income
      (Loss),
            
            
            Stockholders’
            
            
            IncomeYears
      ended December 31, 2009 and 2008
            
            Shares
            
            
            Amount
            
            
            Earnings
            
            
            Net
      of Tax
            
            
            Equity
            
            
            (Loss)Balance
      – January 1, 2008
            
            
            8,286
            
            
            $
            829
            
            
            $
            196,817
            
            
            $
            963
            
            
            $
            198,609Purchase
      and retirement of common shares
            
            
            (607
            )
            
            
            (61
            )
            
            
            (13,270
            )
            
            
            —
            
            
            
            (13,331
            )Proceeds
      from the exercise of stock options
            
            
            804
            
            
            
            80
            
            
            
            9,144
            
            
            
            —
            
            
            
            9,224Tax
      benefit from employee stock options
            
            
            —
            
            
            
            —
            
            
            
            2,749
            
            
            
            —
            
            
            
            2,749Net
      income
            
            
            —
            
            
            
            —
            
            
            
            1,616
            
            
            
            —
            
            
            
            1,616
            
            
            $
            1,616Other
      comprehensive loss, net of tax:Change
      in net unrealized loss on available for sale securities, net of tax effect
      of $6,532
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (12,131
            )
            
            
            (12,131
            )
            
            
            (12,131
            )Reclassification
      adjustment for net loss realized in net income, net of tax effect of
      $3,494
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            6,489
            
            
            
            6,489
            
            
            
            6,489Pension
      plan adjustments, net of tax effect of $1,754
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (3,258
            )
            
            
            (3,258
            )
            
            
            (3,258
            )Comprehensive
      loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            (7,284
            )Balance
      – December 31, 2008
            
            
            8,483
            
            
            
            848
            
            
            
            197,056
            
            
            
            (7,937
            )
            
            
            189,967Purchase
      and retirement of common shares
            
            
            (162
            )
            
            
            (16
            )
            
            
            (3,079
            )
            
            
            —
            
            
            
            (3,095
            )Proceeds
      from the exercise of stock options
            
            
            760
            
            
            
            76
            
            
            
            5,268
            
            
            
            —
            
            
            
            5,344Tax
      benefit from employee stock options
            
            
            —
            
            
            
            —
            
            
            
            2,097
            
            
            
            —
            
            
            
            2,097Net
      income
            
            
            —
            
            
            
            —
            
            
            
            5,687
            
            
            
            —
            
            
            
            5,687
            
            
            $
            5,687Other
      comprehensive income, net of tax:Change
      in net unrealized gain on available for sale securities, net of tax effect
      of $3,967
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            7,369
            
            
            
            7,369
            
            
            
            7,369Reclassification
      adjustment for net loss realized in net income, net of tax effect of
      $36
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            68
            
            
            
            68
            
            
            
            68Pension
      plan adjustments, net of tax effect of $1,371
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            2,546
            
            
            
            2,546
            
            
            
            2,546Comprehensive
      income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            15,670Balance
      – December 31, 2009
            
            
            9,081
            
            
            $
            908
            
            
            $
            207,029
            
            
            $
            2,046
            
            
            $
            209,983








The accompanying Notes to Consolidated
Financial Statements are an integral part of these statements.




27





United
Capital Corp. and Subsidiaries


Consolidated
Statements of Cash Flows


(In
thousands)






For
      the years ended December 31,
              
              2009
              
              
              2008Cash flows from operating
      activities:Net
      income
              
              $
              5,687
              
              
              $
              1,616Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
              
              
              4,618
              
              
              
              4,027Loss
      (gain) on disposal of discontinued operations, net of tax
              
              
              414
              
              
              
              (6,578
              )Litigation
      award from prior condemnation
              
              
              —
              
              
              
              (457
              )Net
      loss on sale of available-for-sale securities
              
              
              104
              
              
              
              24,079Net
      realized and unrealized gain on derivative instruments
              
              
              (139
              )
              
              
              (1,418
              )Deferred
      income taxes
              
              
              (6
              )
              
              
              623Accrued
      dividends receivable
              
              
              (1,329
              )
              
              
              —Other,
      net
              
              
              (160
              )
              
              
              65Changes
      in assets and liabilities:Notes
      and accounts receivable, net
              
              
              1,094
              
              
              
              1,030Inventories
              
              
              1,174
              
              
              
              (166
              )Prepaid
      expenses and other current assets
              
              
              193
              
              
              
              55Other
      assets
              
              
              (387
              )
              
              
              (1,674
              )Accounts
      payable and accrued liabilities
              
              
              (164
              )
              
              
              (889
              )Income
      taxes payable
              
              
              5,468
              
              
              
              (9,262
              )Net
      cash provided by operating activities of continuing
    operations
              
              
              16,567
              
              
              
              11,051Operating
      activities of discontinued operations
              
              
              194
              
              
              
              288Net
      cash provided by operating activities
              
              
              16,761
              
              
              
              11,339Cash flows from investing
      activities:Purchase
      of available-for-sale securities
              
              
              (4,088
              )
              
              
              (27,242
              )Proceeds/maturities
      from sale of available-for-sale securities
              
              
              730
              
              
              
              12,553Proceeds
      from sale of real estate assets
              
              
              3,258
              
              
              
              12,500Escrowed
      proceeds from sale of real estate assets
              
              
              —
              
              
              
              15,000Net
      proceeds from litigation award from prior condemnation
              
              
              —
              
              
              
              457Proceeds
      from sale of derivative instruments
              
              
              134
              
              
              
              1,433Purchase
      of notes receivable
              
              
              (9,428
              )
              
              
              —Acquisition
      of property, plant and equipment
              
              
              (1,080
              )
              
              
              (561
              )Acquisition
      of/additions to real estate assets
              
              
              (5,411
              )
              
              
              (15,430
              )Business
      acquisition, net of cash acquired
              
              
              (17,081
              )
              
              
              —Distributions
      from joint venture
              
              
              776
              
              
              
              777Other,
      net
              
              
              44
              
              
              
              22Net
      cash used in investing activities of continuing operations
              
              
              (32,146
              )
              
              
              (491
              )Investing
      activities of discontinued operations
              
              
              —
              
              
              
              122Net
      cash used in investing activities
              
              
              (32,146
              )
              
              
              (369
              )Cash flows from financing
      activities:Proceeds
      from mortgage obligations
              
              
              —
              
              
              
              500Principal
      payments on mortgage obligations
              
              
              (2,749
              )
              
              
              (973
              )Purchase
      and retirement of common stock
              
              
              (3,095
              )
              
              
              (13,331
              )Proceeds
      from the exercise of stock options
              
              
              5,344
              
              
              
              9,224Tax
      benefit from exercise of employee stock options
              
              
              2,097
              
              
              
              2,749Net
      cash provided by (used in) financing activities
              
              
              1,597
              
              
              
              (1,831
              )Net
      (decrease) increase in cash and cash equivalents
              
              
              (13,788
              )
              
              
              9,139Cash
      and cash equivalents, beginning of year
              
              
              138,142
              
              
              
              129,003Cash
      and cash equivalents, end of year
              
              $
              124,354
              
              
              $
              138,142Supplemental disclosures of
      cash flow information:Cash
      paid during the year for:Interest
              
              $
              2,049
              
              
              $
              2,112Taxes
              
              $
              1,321
              
              
              $
              3,880Non-cash
      investing and financing activities:Mortgage
      obligation assumed in connection with acquisition of real property held
      for rental (see Note 8)
              
              $
              3,881
              
              
              $
              —


The
accompanying Notes to Consolidated Financial Statements are an integral part of
these statements.




28





United
Capital Corp. and Subsidiaries


Notes
to Consolidated Financial Statements


December
31, 2009 and 2008


(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.





During
the current year, the Company eliminated the one-month lag in reporting the
results of its hotel operating segment.  The effect of eliminating the
lag period did not have a material effect on the Company’s results of operations
and, therefore, prior periods have not been retrospectively
adjusted.





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.




29





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.





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 $137 and $133 at December 31, 2009 and 2008, respectively,
consisted of 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, 2009 and 2008, 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,
            
            2009
            
            
            2008Manufacturing
      receivables
            
            $
            4,829
            
            
            $
            5,357Rental
      receivables
            
            
            1,190
            
            
            
            1,390Hotel
      receivables
            
            
            628
            
            
            
            398Other
      receivables
            
            
            271
            
            
            
            689Current
      portion of notes receivable
            
            
            798
            
            
            
            43Total
            
            
            7,716
            
            
            
            7,877Less:  Allowance
      for doubtful accounts
            
            
            491
            
            
            
            450$
            7,225
            
            
            $
            7,427




30





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,
            
            2009
            
            
            2008Raw
      materials
            
            $
            1,817
            
            
            $
            2,607Work
      in process
            
            
            529
            
            
            
            458Finished
      goods
            
            
            2,104
            
            
            
            2,559$
            4,450
            
            
            $
            5,624





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
              5
      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.





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.




31





Research
and Development





The
Company expenses research, development and product engineering costs as
incurred.  Approximately $18 and $58 of such costs were incurred by
the Company in 2009 and 2008, 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, 2009 and 2008, shipping and handling costs included
in selling expenses were $286 and $470, respectively.





Earnings
Per Share





Basic
earnings per share is calculated by dividing net income by the weighted-average
number of shares outstanding.  Diluted earnings per share gives effect
to all potentially dilutive shares that were outstanding during the period,
unless the effect would be antidilutive.  Dilutive shares used in the
computation of diluted earnings per share result from the assumed exercise of
stock options, using the treasury stock method.





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, as well as corporate bonds, and participates on a limited basis
in transactions involving derivative financial instruments, including short
stock sales and put and/or call options.  At December 31, 2008, the
fair value of such derivatives was ($5), which is recorded as a component of
accounts payable and accrued liabilities in the Consolidated Balance
Sheet.  These instruments do not qualify for hedge accounting, and
therefore changes in the derivatives’ fair value are recognized in
earnings.  The Company recognized $139 and $1,418 in net realized and
unrealized gains on derivative instruments for the years ended December 31, 2009
and 2008, respectively, which are included in other income and (expense), net in
the Consolidated Statements of Income.  The Company held no such
derivatives at December 31, 2009.





Reclassifications





Certain
prior year amounts have been reclassified to present them on a basis consistent
with the current year.




32





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 July
2009, the Financial Accounting Standards Board (“FASB”) issued authoritative
guidance to establish the FASB Accounting Standards Codification
(“Codification”) as the single source of authoritative accounting and reporting
standards applicable for all nongovernmental entities, with the exception of
guidance issued by the SEC.  The Codification does not change current
generally accepted accounting principles (“GAAP”), but changes the referencing
of financial standards, and is intended to simplify user access to authoritative
GAAP by providing all authoritative literature related to a particular topic in
one place. The Codification is effective for interim and annual reporting
periods ending after September 15, 2009.  As the Codification is not
intended to change or alter existing GAAP, it did not have any impact on the
Company’s consolidated financial condition or results of
operations.





In May
2009, the FASB issued authoritative guidance to establish general standards of
accounting for and disclosures of events that occur after the balance sheet date
but before financial statements are issued or are available to be
issued.  In February 2010, the FASB modified its guidance to remove
the requirement to disclose the date through which subsequent events were
evaluated.  The Company has adopted the provisions of this guidance,
as modified, and the adoption has not had a material impact on the Company’s
financial condition, results of operations or disclosures.





In
December 2008, the FASB issued authoritative guidance that requires an employer
to provide certain disclosures about plan assets of its defined benefit pension
or other postretirement plans.  The disclosures required include the
investment policies and strategies of the plans, the fair value of the major
categories of plan assets, the inputs and valuation techniques used to develop
fair value measurements and a description of significant concentrations of risk
in plan assets.  This guidance, which only provides for enhanced
annual disclosures and does not require additional interim disclosures, was
effective for the Company’s current fiscal year ending December 31,
2009.  The Company adopted the provisions of this guidance which only
requires additional disclosures and, therefore, did not have a material impact
on its financial condition or results of operations.





In April
2009, the FASB issued authoritative guidance to address concerns about measuring
the fair value of financial instruments when the markets become inactive and
quoted prices may reflect distressed transactions, recording impairment charges
on investments in debt instruments and requiring the disclosure of fair value of
certain financial instruments in interim financial statements.  The
guidance highlights and expands the factors that should be considered in
estimating fair value when there has been a significant decrease in market
activity for a financial asset.  The guidance also changes the method
for determining whether an other-than-temporary impairment exists for debt
securities and the amount of an impairment charge to be recorded in
earnings.  In addition, the guidance increases the frequency of fair
value disclosures from annual, to quarterly.  This guidance became
effective for the Company in the quarter ended June 30, 2009 and did not have a
material impact on its financial condition or results of
operations.





2.Business Acquisition





In July
2009, the Company purchased a non-performing mortgage note encumbering a hotel
located in Miami, Florida (the “Miami Hotel”).  The Company took title
to the Miami Hotel in mid-August and has undertaken operation of the
hotel.  The Company anticipates investing up to $10,000 in renovations
and improvements to this property during its first year of ownership. The
purchase price, which approximates fair value and includes certain assumed
liabilities, was allocated
as follows:




33





Real
      property
              
              $
              13,684Furniture,
      fixtures and equipment
              
              
              3,000Current
      assets
              
              
              763Current
      liabilities assumed
              
              
              (366
              )Cash
      paid for business acquisition, net of cash acquired
              
              $
              17,081




Included
in the Consolidated Statement of Income for the year ended December 31, 2009,
are revenues of $3,443 and an operating loss of ($611) from the operations of
the Miami Hotel since the date of the acquisition.





The
following represents the unaudited condensed pro forma financial results of the
Company as if the acquisition of the Miami Hotel had occurred as of the
beginning of the annual period presented.  Unaudited condensed pro
forma results are based upon accounting estimates and judgments that the Company
believes are reasonable.  The unaudited condensed pro forma results
also include adjustments to depreciation on acquired real property and
furniture, fixtures and equipment, adjustments to interest expense and the
related tax effects.  The condensed pro forma results are not
necessarily indicative of the actual results of operations of the Company had
the acquisition occurred at the beginning of the years presented, nor does it
purport to represent the results of operations for future periods.





For
      the years ended December 31,
            
            2009
            
            
            2008Total
      revenues
            
            $
            67,113
            
            
            $
            87,247Net
      income
            
            $
            4,723
            
            
            $
            685





3.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,
            
            2009
            
            
            2008Land
            
            $
            16,341
            
            
            $
            15,200Buildings
            
            
            129,081
            
            
            
            111,013Building
      renovations and improvements
            
            
            14,407
            
            
            
            11,067Equipment
      and fixtures
            
            
            4,043
            
            
            
            3,616163,872
            
            
            
            140,896Less:  Accumulated
      depreciation
            
            
            70,972
            
            
            
            67,836$
            92,900
            
            
            $
            73,060





As of
December 31, 2009, 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,
            2010
            2011
            2012
            2013
            2014
            There-
              after
            TotalMinimum
      future rentals
            $18,411
            $12,644
            $10,809
            $8,996
            $7,617
            $49,141
            $107,618





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 2009 and
2008 were approximately $156 and $186, respectively.





Property
Acquisitions





During
2009, the Company purchased a commercial property located in New Jersey for
approximately $5,500, including the assumption of an underlying mortgage of
$3,881 (see Note 8).  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.




34





During
2008, the Company purchased two shopping centers and retail outlets located in
Michigan for approximately $13,600.  These properties were purchased
using proceeds from a 2007 property sale which were held in escrow in connection
with a Section 1031 tax-deferred exchange.  In addition, the Company
purchased a commercial property located in Connecticut for approximately $700
which was partially financed by a $500 mortgage (see Note 8).





Property
Sales





During
2009, the Company divested itself of one commercial property and one of its
shopping centers and retail outlets which had a net book value of $3,948 from
its real estate investment and management segment.  The aggregate
proceeds from these transactions were $3,258 resulting in a net loss of ($414),
on a net of tax basis.





During
2008, the Company divested itself of one of its shopping centers and retail
outlets which had a net book value of $1,537 from its real estate investment and
management segment.  The aggregate proceeds from this transaction were
$12,500 resulting in a gain of $6,578, on a net of tax basis.





The
results of operations of 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 2009 have been reclassified to discontinued operations
in the Consolidated Balance Sheet at December 31, 2008.  These amounts
primarily consist of real property, net of accumulated
depreciation.





Summarized
financial information for properties sold and accounted for as discontinued
operations is as follows:





For
      the years ended December 31,
            
            2009
            
            
            2008Revenues
      from real estate operations
            
            $
            165
            
            
            $
            730Depreciation
      expense
            
            
            194
            
            
            
            288Other
      operating expenses
            
            
            166
            
            
            
            642Operating
      loss
            
            $
            (195
            )
            
            $
            (200
            )





Properties
Held for Sale





As of
December 31, 2009, there were no properties considered by the Company to be held
for sale.





4.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,
            
            2009
            
            
            2008Land
            
            $
            28
            
            
            $
            28Buildings
      and improvements
            
            
            1,428
            
            
            
            1,428Furniture,
      fixtures and equipment
            
            
            23,225
            
            
            
            19,14524,681
            
            
            
            20,601Less:
      Accumulated depreciation
            
            
            16,593
            
            
            
            15,010$
            8,088
            
            
            $
            5,591





5.       Marketable
Securities





The cost,
gross unrealized gains, gross unrealized losses and fair market value of
available-for-sale securities are as follows:


December 31, 2009:
            
            Cost
            
            
            Gross
              Unrealized
              Gains
            
            
            Gross
              Unrealized
              Losses
            
            
            Fair
              Market
              ValueEquity
      securities
            
            $
            21,860
            
            
            $
            4,239
            
            
            $
            (1,128
            )
            
            $
            24,971Bonds
            
            
            220
            
            
            
            41
            
            
            
            (5
            )
            
            
            256$
            22,080
            
            
            $
            4,280
            
            
            $
            (1,133
            )
            
            $
            25,227




35




December
      31, 2008:
            
            Cost
            
            
            Gross
              Unrealized
              Gains
            
            
            Gross
              Unrealized
              Losses
            
            
            Fair
              Market
              ValueEquity
      securities
            
            $
            16,440
            
            
            $
            1,050
            
            
            $
            (9,184
            )
            
            $
            8,306Bonds
            
            
            1,031
            
            
            
            4
            
            
            
            (163
            )
            
            
            872$
            17,471
            
            
            $
            1,054
            
            
            $
            (9,347
            )
            
            $
            9,178





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
            
            
            TotalFair
              Value
            
            
            Unrealized
      Losses
            
            
            Fair
              Value
            
            
            Unrealized
      Losses
            
            
            Fair
              Value
            
            
            Unrealized
      LossesDecember
      31, 2009:Equity
      Securities
            
            $
            3,174
            
            
            $
            (801
            )
            
            $
            2,241
            
            
            $
            (327
            )
            
            $
            5,415
            
            
            $
            (1,128
            )Bonds
            
            
            6
            
            
            
            (2
            )
            
            
            47
            
            
            
            (3
            )
            
            
            53
            
            
            
            (5
            )$
            3,180
            
            
            $
            (803
            )
            
            $
            2,288
            
            
            $
            (330
            )
            
            $
            5,468
            
            
            $
            (1,133
            )December
      31, 2008:Equity
      securities
            
            $
            3,643
            
            
            $
            (7,804
            )
            
            $
            1,120
            
            
            $
            (1,380
            )
            
            $
            4,763
            
            
            $
            (9,184
            )Bonds
            
            
            684
            
            
            
            (143
            )
            
            
            29
            
            
            
            (20
            )
            
            
            713
            
            
            
            (163
            )$
            4,327
            
            
            $
            (7,947
            )
            
            $
            1,149
            
            
            $
            (1,400
            )
            
            $
            5,476
            
            
            $
            (9,347
            )





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, 2009 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/maturities
from the sale of available-for-sale securities as well as the gains and losses
recognized in earnings on available for-sale-securities included in the
determination of net income are as follows:





For
      the years ended December 31,
            
            2009
            
            
            2008Proceeds/maturities
            
            $
            730
            
            
            $
            12,553Gains
      recognized in earnings
            
            $
            —
            
            
            $
            106Losses
      recognized in earnings
            
            $
            (104
            )
            
            $
            (24,185
            )





6.Investment in Joint
Venture





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 12).





The
following represents the components of the net investment in the leveraged
leases:





December
      31,
            
            2009
            
            
            2008Rents
      receivable
            
            $
            49,352
            
            
            $
            53,381Residual
      values
            
            
            10,000
            
            
            
            10,000Nonrecourse
      debt service
            
            
            (38,840
            )
            
            
            (42,093
            )Unearned
      income
            
            
            (15,848
            )
            
            
            (15,848
            )4,664
            
            
            
            5,440Less:
      Deferred taxes arising from leveraged leases
            
            
            5,108
            
            
            
            5,504$
            (444
            )
            
            $
            (64
            )





Income on
leveraged leases is recognized by a method which 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 investment is
positive.  Accordingly, although the Company received $776 in cash
distributions from this investment, it did not recognize any income during the
year ended December 31, 2009.  The Company’s share of income arising
from this investment was $92 for the year ended December 31, 2008, which is
included in revenues from real estate operations in the Consolidated Statements
of Income.




36





7.Accounts Payable and Accrued
Liabilities





Accounts
payable and accrued liabilities consist of the following:





December
      31,
            
            2009
            
            
            2008Accounts
      payable
            
            $
            4,384
            
            
            $
            3,932Accrued
      wages and benefits
            
            
            1,983
            
            
            
            1,817Tenant
      security deposits
            
            
            1,031
            
            
            
            1,042Other
      accrued expenses
            
            
            2,736
            
            
            
            3,245$
            10,134
            
            
            $
            10,036





8.Long-term Debt





Long-term
debt consists of the following:





December
      31,
            
            2009
            
            
            2008Mortgages
      on real property
            
            $
            33,995
            
            
            $
            32,863Less:  Current
      maturities
            
            
            1,080
            
            
            
            2,717$
            32,915
            
            
            $
            30,146





Mortgages
bear interest at rates ranging from 5.7% to 8% per annum and are collateralized
by the related real property which had a net carrying value at December 31, 2009
of $31,068, exclusive of hotel furniture, fixtures and
equipment.  Such amounts are scheduled to mature at various dates from
February 2010 through January 2018.





In
connection with the purchase of a commercial property during 2009 (see Note 3),
the Company assumed a mortgage in the amount of $3,881 which bears interest at
5.7% per annum, is payable monthly based on a 30-year amortization and matures
in November 2016.





The
commercial property purchased in July 2008 (see Note 3), was partially financed
by a $500 mortgage which bears interest at 6.73% per annum, is payable monthly
based on a 25-year amortization and matures in July 2013.





The
approximate aggregate maturities of these obligations at December 31, 2009 are
as follows:





Years
      ending December 31,
            2010
            2011
            2012
            2013
            2014
            There-
              after
            TotalAggregate
      maturities
            $1,080
            $1,086
            $1,159
            $1,690
            $1,315
            $27,665
            $33,995





9.Fair Value Measurements





The
authoritative guidance defines fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.  The guidance also
establishes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value.  The guidance requires that
assets and liabilities carried at fair value be classified and disclosed in one
of the following three categories:





Level 1:  Quoted market
prices in active markets for identical assets or liabilities.


Level 2:  Observable market
based inputs or unobservable inputs that are corroborated by market
data.


Level 3:  Unobservable
inputs reflecting the reporting entity’s own assumptions.





The
guidance establishes a hierarchy which requires an entity to maximize the use of
quoted market prices and minimize the use of unobservable inputs.  An
asset or liability’s classification is based on the lowest level of input that
is significant to the fair value measurement.




37





The
following table sets forth the Company’s financial assets and liabilities that
were measured at fair value on a recurring basis, by classification within the
fair value hierarchy:





Fair
      Value Measurements at Reporting Date UsingTotal
              Fair
      Value
            
            
            Quoted
      Prices in Active Markets for Identical Assets
              (Level
      1)
            
            
            Significant
      Other Observable Inputs
              (Level
      2)
            
            
            Significant
      Unobservable Inputs
              (Level
      3)December
      31, 2009:Marketable
      Securities
            
            $
            25,227
            
            
            $
            23,033
            
            
            $
            2,194
            
            
            $
            —December
      31, 2008:Marketable
      securities
            
            $
            9,178
            
            
            $
            9,144
            
            
            $
            34
            
            
            $
            —Derivative financial
      instruments
            
            $
            (5
            )
            
            $
            (5
            )
            
            $
            —
            
            
            $
            —





The
carrying amounts of financial instruments such as cash and cash equivalents,
accounts receivable, accounts payable, and accrued liabilities approximate their
fair value due to the short maturity of such items. The estimated fair values of
our other financial assets and liabilities not measured at fair value on a
recurring basis at December 31, 2009 and 2008 are as follows:





2009
            
            
            2008Carrying
            
            
            Fair
            
            
            Carrying
            
            
            FairDecember
      31,
            
            Amount
            
            
            Value
            
            
            Amount
            
            
            ValueNotes
      receivable
            
            $
            10,485
            
            
            $
            11,452
            
            
            $
            1,101
            
            
            $
            1,169Long-term
      debt, including current portion
            
            $
            33,995
            
            
            $
            30,847
            
            
            $
            32,863
            
            
            $
            29,435





The fair
value of notes receivable is estimated using discounted cash flow analyses, with
interest rates comparable to loans with similar terms and borrowers of similar
credit quality.  In May 2009, the Company purchased a non-performing
mortgage note for $5,428 encumbering a property located in Jericho, New York
which is subject to a pending foreclosure action.  Management believes
that the fair value of the note approximates its carrying
amount.  Upon foreclosure, such amounts will be reclassified to real
property held for rental.  The fair value of long-term debt is
estimated based on interest rates available for debt with terms and due dates
similar to the Company’s existing debt arrangements.





10.Stockholders’ Equity





Previous
purchases of the Company’s common stock have reduced the Company’s additional
paid-in capital to zero and have also reduced retained earnings by amounts in
excess of par value.  Any future purchases in excess of par value will
also reduce retained earnings.





Repurchases
of the Company’s common stock may be made from time to time in the open market
at prevailing market prices and may be made in privately negotiated
transactions, subject to available resources.  Future proceeds from
the issuance of common stock in excess of par value will be credited to retained
earnings until such time that previously recorded reductions have been
recovered.  During the years ended December 31, 2009 and 2008, the
Company purchased and retired 162 and 607 shares of common stock for an
aggregated purchase price of $3,095 and $13,331, respectively.





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.




38





At
December 31, 2009, there were options to purchase 378 and 2,807 shares
outstanding under the Joint Plan and Incentive Plan, respectively.  At
December 31, 2008, there were options to purchase 1,138 and 2,807 shares
outstanding under the Joint Plan and Incentive Plan, respectively.





Outstanding
stock options as of December 31, 2009, 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, 2009
            
            
            3,945
            
            
            $
            11.99Exercised
            
            
            (760
            )
            
            $
            7.03Outstanding
      and exercisable at December 31, 2009
            
            
            3,185
            
            
            $
            13.18
            
            2.0
      years
            
            $
            33,893





The
aggregate intrinsic value of options outstanding and exercisable at December 31,
2009 represents the difference between the Company’s closing stock price at the
end of the year ($23.82) and the exercise price of each option, multiplied by
the number of “in-the-money” options.  This amount changes based upon
the fair market value of the Company’s common stock.  The total
intrinsic value of options exercised during the years ended December 31, 2009
and 2008 was $11,514 and $17,549, respectively, based on the market price on the
date of exercise.





11.Earnings Per Share





The
following table sets forth the computation of basic and diluted earnings (loss)
per share from continuing operations:





For
      the years ended December 31,
            
            2009
            
            
            2008Numerator:Income
      (loss) from continuing operations
            
            $
            6,218
            
            
            $
            (4,842
            )Denominator:Basic
      -
      weighted-average shares outstanding
            
            
            8,990
            
            
            
            8,418Dilutive
      effect of employee stock options
            
            
            801
            
            
            
            —Diluted
      -
      weighted-average shares outstanding
            
            
            9,791
            
            
            
            8,418Basic
      earnings (loss) per share - continuing
      operations
            
            $
            .69
            
            
            $
            (.58
            )Diluted
      earnings (loss) per share - continuing
      operations
            
            $
            .64
            
            
            $
            (.58
            )





Potentially
dilutive securities, related to outstanding options to purchase 740 shares of
the Company’s common stock for the year-ended December 31, 2009 were excluded
from the computation of diluted earnings per share because their effect would
have been anti-dilutive.





As a
result of the loss from continuing operations in 2008, 1,301 incremental shares,
related to outstanding employee stock options calculated under the treasury
stock method, were excluded from the computation of diluted loss per share
because their inclusion would have been anti-dilutive.





12.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.  Also participating in this transaction were Mrs. Petrocelli
(the wife of Mr. Petrocelli, the Company’s Board Chairman), Mr. Lorber and Mr.
Penner, Directors of the Company, as well as Ms. Madaleine Berley (the wife of
Mr. Penner), who together have approximately an 8% interest in this transaction
(see Note 6).  Cash distributions from this investment to each of Mrs.
Petrocelli, Mr. Penner, Ms. Berley, and Mr. Lorber were approximately $36,000,
$26,000, $26,000, and $26,000, respectively, in both 2009 and 2008.





During
July 2009, the Company purchased a $5.0 million participation in a note secured
by a warehouse located in New York of which Mrs. Petrocelli holds a 20%
interest.  The participation, which matures in July 2012, bears
interest at 18% per annum payable monthly.  The participants also
received a commitment fee of 1% in connection with the note.




39





Hallman
& Lorber Associates, Inc. (“H&L”) provided pension plan services to the
Company during its last fiscal year.  The amount paid by the Company
to H&L in 2009 was $42.  The Company anticipates it will continue
such relationship in this fiscal year.  Mr. Lorber, a Director of the
Company and Chairman of the Company’s Compensation and Stock Option and Audit
Committees, is a consultant to H&L.





13.Income Taxes





In
accordance with the authoritative guidance, deferred income taxes are determined
on the liability method.  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.





The
components of the net deferred tax liability are as follows:





December
      31,
            
            2009
            
            
            2008Realization
      allowances related to accounts receivable and inventories
            
            $
            304
            
            
            $
            378Net
      unrealized (gain) loss on available-for-sale securities
            
            
            (1,065
            )
            
            
            2,903Basis
      differences relating to real property
            
            
            (6,036
            )
            
            
            (5,976
            )Accrued
      expenses, deductible when paid
            
            
            4,095
            
            
            
            4,384Deferred
      profit
            
            
            (391
            )
            
            
            (430
            )Basis
      differences relating to business acquisitions
            
            
            (223
            )
            
            
            (223
            )Leveraged
      lease
            
            
            (5,108
            )
            
            
            (5,504
            )Property,
      plant and equipment
            
            
            (796
            )
            
            
            (731
            )Pensions
            
            
            (374
            )
            
            
            997Stock-based
      compensation
            
            
            267
            
            
            
            267Other,
      net
            
            
            (344
            )
            
            
            (368
            )Net
      deferred tax liability
            
            
            (9,671
            )
            
            
            (4,303
            )Less:  Current
      portion – (liability) asset
            
            
            (96
            )
            
            
            4,011Noncurrent
      portion
            
            $
            (9,575
            )
            
            $
            (8,314
            )





The
income tax provision (benefit) from continuing operations reflected in the
Consolidated Statements of Income is as follows:





For
      the years ended December 31,
            
            2009
            
            
            2008Current:Federal
            
            $
            1,647
            
            
            $
            (6,378
            )State
            
            
            434
            
            
            
            1,234Deferred
            
            
            2,160
            
            
            
            3,281$
            4,241
            
            
            $
            (1,863
            )





A
reconciliation of the tax provision (benefit) 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,
            
            2009
            
            
            2008Computed
      federal income tax provision (benefit) at statutory rates
            
            $
            3,556
            
            
            $
            (2,280
            )State
      tax, net of federal tax effect
            
            
            340
            
            
            
            822Other,
      net
            
            
            345
            
            
            
            (405
            )$
            4,241
            
            
            $
            (1,863
            )




40





As of
December 31, 2009 and 2008, the Company had a total of $4,692 and $4,685 of
gross unrecognized tax benefits, respectively.  A reconciliation of
the beginning and ending amount of unrecognized tax benefits is as
follows:





2009
            
            
            2008Balance,
      beginning of year
            
            $
            4,685
            
            
            $
            4,700Additions
      based on tax positions in prior year
            
            
            312
            
            
            
            —Additions
      based on tax positions related to the current year
            
            
            540
            
            
            
            512Lapse
      of statute of limitations
            
            
            (845
            )
            
            
            (527
            )Balance,
      end of year
            
            $
            4,692
            
            
            $
            4,685





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, 2009 and
2008, the Company had approximately $2,519 and $2,471 of accrued interest and
penalties related to uncertain tax positions, respectively.  During
the years ended December 31, 2009 and 2008, the Company recognized $48 and $203
of interest and penalties within income tax expense, respectively.





The
Company is subject to U.S. federal income tax, as well as income tax in multiple
states.  The Company is currently under audit by the U.S. Internal
Revenue Service for the year ended December 31, 2008.  For all major
taxing jurisdictions, the tax years 2006 through 2008 remain open to
examination.  As of December 31, 2009, the Company does not anticipate
that total unrecognized tax benefits will significantly change during the next
twelve months.





14.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,
            
            2009
            
            
            2008Net
      loss on the sale of available-for-sale securities
            
            $
            (104
            )
            
            $
            (24,079
            )Net
      realized and unrealized gain on derivative instruments
            
            
            139
            
            
            
            1,418Litigation
      award from prior condemnation
            
            
            —
            
            
            
            457Other,
      net
            
            
            (83
            )
            
            
            108$
            (48
            )
            
            $
            (22,096
            )





15.Pension Plan





The
Company has a noncontributory defined benefit pension plan that covers
substantially all full-time employees of the engineered products and real estate
investment and management segments.  The plan, which provides defined
benefits based on years of service and compensation level, was frozen in
September 2009 ceasing the accrual of further benefits.





Changes
in benefit obligation, plan assets and funded (unfunded) status of the plan are
as follows:





December
      31,
            
            2009
            
            
            2008Change
      in benefit obligation:Benefit
      obligation, beginning of year
            
            $
            9,833
            
            
            $
            9,416Service
      cost
            
            
            228
            
            
            
            290Interest
      cost
            
            
            758
            
            
            
            723Actuarial
      (gain) loss
            
            
            (99
            )
            
            
            161Curtailment
      gain
            
            
            (1,062
            )
            
            
            —Benefits
      paid
            
            
            (707
            )
            
            
            (757
            )Benefit
      obligation, end of year
            
            
            8,951
            
            
            
            9,833Change
      in plan assets:Fair
      value of plan assets, beginning of year
            
            
            6,985
            
            
            
            10,299Actual
      return on plan assets
            
            
            3,591
            
            
            
            (4,057
            )Contributions
            
            
            150
            
            
            
            1,500Benefits
      paid
            
            
            (707
            )
            
            
            (757
            )Fair
      value of plan assets, end of year
            
            
            10,019
            
            
            
            6,985Funded
      (unfunded) status
            
            $
            1,068
            
            
            $
            (2,848
            )




41




The
funded status at December 31, 2009 is included in other assets while the
unfunded status at December 31, 2008 is included in other long-term liabilities
in the Consolidated Balance Sheets.  At December 31, 2009 and 2008,
the accumulated benefit obligation was $8,951 and $9,605,
respectively.





Amounts
recognized in accumulated other comprehensive income (loss), before income
taxes, consist of the following:





December
      31,
            
            2008Unrecognized
      net actuarial gain
            
            $
            438Unrecognized
      net loss
            
            
            (4,355
            )$
            (3,917
            )





Net
periodic pension expense consists of the following:





For
      the years ended December 31,
            
            2009
            
            
            2008Service
      cost
            
            $
            (228
            )
            
            $
            (290
            )Interest
      cost
            
            
            (758
            )
            
            
            (723
            )Expected
      return on plan assets
            
            
            531
            
            
            
            794Plan
      curtailment
            
            
            549
            
            
            
            —Amortization
      of net loss
            
            
            (245
            )
            
            
            —Net
      periodic pension expense
            
            $
            (151
            )
            
            $
            (219
            )





In
determining the projected benefit obligation and net periodic pension expense,
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 2009 pension expense by $66.





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
allocations of plan assets by category are as follows:





December
      31,
            
            2009
            
            
            2008Equity
      securities
            
            
            49.1
            %
            
            
            39.5
            %Debt
      securities
            
            
            48.7
            
            
            
            50.9U.S.
      government securities
            
            
            —
            
            
            
            0.8Cash
      and other investments
            
            
            2.2
            
            
            
            8.8100.0
            %
            
            
            100.0
            %





The
Company’s pension plan assets are managed by the plan’s trustees.  The
Company’s investment strategy with respect to pension assets is to maximize
return while protecting principal.  The plan’s trustees have the
flexibility to adjust the asset allocations and move funds to the asset class
that offers the most opportunity for investment returns.  The
following table presents the fair value of plan assets by classification within
the fair value hierarchy (as defined in Note 9) as of December 31,
2009:


Fair
      Value MeasurementsTotal
              Fair
      Value
            
            
            Quoted
      Prices in Active Markets for Identical Assets
              (Level
      1)
            
            
            Significant
      Other Observable Inputs
              (Level
      2)
            
            
            Significant
      Unobservable Inputs
              (Level
      3)Equity
      securities
            
            $
            4,924
            
            
            $
            4,917
            
            
            $
            7
            
            
            $
            —Debt
      securities
            
            
            4,877
            
            
            
            4,877
            
            
            
            —
            
            
            
            —Cash
      and other investments
            
            
            218
            
            
            
            218
            
            
            
            —
            
            
            
            —$
            10,019
            
            
            $
            10,012
            
            
            $
            7
            
            
            $
            —





42





During
2009, the Company contributed $150 to the pension plan and made an additional
contribution of approximately $650 during the first quarter of
2010.





Benefit
payments are expected to be paid from the plan for the periods indicated as
follows:





Years
      ending December 31,
            2010
            2011
            2012
            2013
            2014
            2015-2019Expected
      benefit payments
            $963
            $962
            $942
            $916
            $918
            $4,123





16.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 four hotels located in the United
States.  Engineered products are manufactured through wholly-owned
subsidiaries of the Company and primarily consist of knitted wire products and
components and transformer products sold worldwide.





Operating
results of the Company’s business segments are as follows:





For
      the years ended December 31,
            
            2009
            
            
            2008Net
      revenues and sales:Real
      estate investment and management
            
            $
            19,814
            
            
            $
            19,872Hotel
      operations
            
            
            17,253
            
            
            
            16,317Engineered
      products
            
            
            23,031
            
            
            
            36,212$
            60,098
            
            
            $
            72,401Operating
      income (loss):Real
      estate investment and management
            
            $
            12,080
            
            
            $
            12,031Hotel
      operations
            
            
            (677
            )
            
            
            1,020Engineered
      products
            
            
            (653
            )
            
            
            264General
      corporate expenses
            
            
            (3,863
            )
            
            
            (3,279
            )6,887
            
            
            
            10,036Other
      income (expense), net
            
            
            3,572
            
            
            
            (16,741
            )Income
      (loss) from continuing operations before income taxes
            
            $
            10,459
            
            
            $
            (6,705
            )





For
      the years ended December 31,
            
            2009
            
            
            2008Depreciation
      and amortization expense:Real
      estate investment and management
            
            $
            2,295
            
            
            $
            2,183Hotel
      operations
            
            
            1,893
            
            
            
            1,431Engineered
      products
            
            
            240
            
            
            
            309General
      corporate expenses
            
            
            190
            
            
            
            104$
            4,618
            
            
            $
            4,027Mortgage
      interest expense:Real
      estate investment and management
            
            $
            195
            
            
            $
            241Hotel
      operations
            
            
            1,922
            
            
            
            1,874$
            2,117
            
            
            $
            2,115





Sales by
the Company’s engineered products segment to automobile original equipment
manufacturers and their first tier suppliers accounted for approximately 16.6%
and 20.7% of 2009 and 2008 consolidated revenues, respectively.  Sales
by the engineered products segment to General Motors, its largest customer,
accounted for 10.8% of the segment’s sales for each of the years ended December
31, 2009 and 2008.




43





Approximately
17.8% and 13.3%, respectively, of 2009 and 2008 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,
            
            2009
            
            
            2008Identifiable
      assets:Real
      estate investment and management and corporate assets
            
            $
            223,308
            
            
            $
            220,222Hotel
      operations
            
            
            49,558
            
            
            
            30,586Engineered
      products
            
            
            10,392
            
            
            
            12,077$
            283,258
            
            
            $
            262,885Additions
      to long-lived assets:Real
      estate investment and management and corporate assets
            
            $
            2,848
            
            
            $
            14,771Hotel operations
            
            
            20,258
            
            
            
            962Engineered
      products
            
            
            69
            
            
            
            136$
            23,175
            
            
            $
            15,869





Long-lived
asset additions to the real estate investment and management segment in 2009 are
net of the $3,881 mortgage assumed in connection with the acquisition of a
commercial property (see Note 3).





17.
Lease Obligations





At
December 31, 2009, 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,
            2010
            2011
            2012
            2013
            2014
            There-
              after
            TotalMinimum
      rental commitments
            $ 447
            $ 165
            $ 146
            $ 137
            $ 103
            $1,730
            $2,728





Rental
expense under operating leases was $620 and $639 for 2009 and 2008,
respectively.





18.Commitments and
Contingencies





The
Company has undertaken the completion of environmental studies and/or remedial
action at its two New Jersey facilities and has recorded a liability for the
estimated investigation, remediation and administrative costs associated
therewith.





The
process of remediation has begun at one facility pursuant to a plan filed with
the New Jersey Department of Environmental Protection
(“NJDEP”).  Management’s assessment, based on estimates from
environmental contractors, is that under the most probable scenario, the
remediation of this site is anticipated to require initial expenditures of $860,
including the cost of capital equipment, and $86 in annual operating and
maintenance costs over a 15 year period.





Environmental
studies at the second facility indicate that remediation may be
necessary.  Based upon the facts presently available, management’s
assessment, based on estimates from environmental contractors, is that under the
most probable remediation scenario, the estimated cost to remediate this site is
anticipated to require $2,300 in initial costs, including capital equipment
expenditures, and $258 in annual operating and maintenance costs over a 10 year
period.  These estimated costs of future expenses for environmental
remediation obligations are not discounted to their present
value.  The Company may revise such estimates in the future due to the
uncertainty regarding the nature, timing, and extent of any remediation efforts
that may be required at this site, should an appropriate regulatory agency deem
such efforts to be necessary.





The
foregoing estimates may also be revised by the Company as new or additional
information in these matters 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 $8,800 and $9,300 recorded in accounts payable and
accrued liabilities and other long-term liabilities as of December 31, 2009 and
2008, respectively, to cover such matters.




44





The
Company has an employment agreement with its Chairman, President and Chief
Executive Officer (the “Officer”) which provides for a base salary of $800 per
annum plus a discretionary bonus as determined by the Compensation and Stock
Option Committee of the Board of Directors.  In the event of
termination or a change in control, as defined in the employment agreement, the
Company is required to pay the Officer a lump sum severance payment equal to
three years salary and purchase outstanding options.  The employment
agreement contains non-competition, non-solicitation, and confidentiality
provisions which apply for one-year after cessation of employment and also
provides for successive one-year terms unless either the Company or the Officer
gives the other written notice that the employment agreement is terminated and
also provides a death benefit which the Company secures through an insurance
policy.





The
Company is subject to various other litigation, legal, 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.  Based on the facts presently available, the Company does not
believe that the disposition of matters that are pending or asserted will have a
material adverse effect on the Company’s consolidated financial position or
results of operations.  However, new or additional facts or an adverse
judgment by a court, arbitrator or a settlement could adversely impact the
Company’s results of operations or financial position in any given
period.




45