##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2008
 OR
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 For the transition period from  to
 Commission File Number: 000-50543
 PORTEC RAIL PRODUCTS, INC.
 
 West Virginia
    
    55-0755271(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)900 Old Freeport Road, Pittsburgh, Pennsylvania
    
    15238-8250(Address of Principal Executive Offices)
    
    (Zip Code)
 (412) 782-6000
 
  þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



PORTEC RAIL PRODUCTS, INC.
 INDEX TO FORM 10-Q
 ItemNumber
    
    
    
    Page NumberPART I  FINANCIAL INFORMATION1.
    
    Financial Statements:Condensed Consolidated Balance Sheets March 31, 2008 (Unaudited) and December 31, 2007
    
    3Condensed Consolidated Statements of Income (Unaudited) Three months ended March 31, 2008 and 2007
    
    4Condensed Consolidated Statements of Cash Flows (Unaudited) Three months ended March 31, 2008 and 2007
    
    5Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    62.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    193.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    284.
    
    Controls and Procedures
    
    28PART II  OTHER INFORMATION1.
    
    Legal Proceedings
    
    291A.
    
    Risk Factors
    
    292.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    293.
    
    Defaults Upon Senior Securities
    
    294.
    
    Submission of Matters to a Vote of Security Holders
    
    295.
    
    Other Information
    
    296.
    
    Exhibits
    
    30Signatures
    
    31EX-31.1EX-31.2EX-32
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 Portec Rail Products, Inc.
Condensed Consolidated Balance Sheets
 March 31
    
    December 312008
    
    2007(Unaudited)
    
    (Audited)(In Thousands)AssetsCurrent assetsCash and cash equivalents
    
    $
    3,645
    
    
    $
    4,273Accounts receivable, net
    
    
    14,779
    
    
    
    17,411Inventories, net
    
    
    24,367
    
    
    
    22,990Prepaid expenses and other current assets
    
    
    1,616
    
    
    
    586Deferred income taxes
    
    
    268
    
    
    
    375Total current assets
    
    $
    44,675
    
    
    $
    45,635Property, plant and equipment, net of
accumulated depreciation of $12,996 and
$13,540 at March 31, 2008 and December 31,
2007, respectively.
    
    
    11,392
    
    
    
    11,121Intangible assets, net of accumulated
amortization of $3,583 and $3,140 at March 31,
2008 and December 31, 2007, respectively
    
    
    31,318
    
    
    
    31,542Goodwill
    
    
    14,565
    
    
    
    15,059Other assets
    
    
    883
    
    
    
    869Total assets
    
    $
    102,833
    
    
    $
    104,226Liabilities and Shareholders EquityCurrent liabilitiesCurrent maturities of long-term debt
    
    $
    9,016
    
    
    $
    6,865Accounts payable
    
    
    7,766
    
    
    
    6,167Accrued income taxes
    
    
    239
    
    
    
    706Customer deposits
    
    
    739
    
    
    
    1,380Accrued compensation
    
    
    993
    
    
    
    2,979Other accrued liabilities
    
    
    2,584
    
    
    
    2,795Deferred purchase price  current portion
    
    
    149
    
    
    
    298Total current liabilities
    
    
    21,486
    
    
    
    21,190Long-term debt, less current maturities
    
    
    8,076
    
    
    
    9,463Accrued pension costs
    
    
    1,032
    
    
    
    1,175Deferred income taxes
    
    
    11,087
    
    
    
    11,524Other long-term liabilities
    
    
    953
    
    
    
    977Total liabilities
    
    
    42,634
    
    
    
    44,329Commitments and Contingencies
    
    
    
    
    
    
    Shareholders equity:Common stock, $1 par value, 50,000,000
shares authorized, 9,601,779 shares
issued and outstanding at March 31, 2008
and December 31, 2007, respectively
    
    
    9,602
    
    
    
    9,602Additional paid-in capital
    
    
    25,364
    
    
    
    25,342Retained earnings
    
    
    23,929
    
    
    
    23,161Accumulated other comprehensive gain
    
    
    1,304
    
    
    
    1,792Total shareholders equity
    
    
    60,199
    
    
    
    59,897Total liabilities and shareholders equity
    
    $
    102,833
    
    
    $
    104,226
 See Notes to Condensed Consolidated Financial Statements
 3




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##### Table of Contents



Portec Rail Products, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
 Three Months EndedMarch 312008
    
    2007(Dollars in Thousands, Except PerShare Data)Net sales
    
    $
    24,843
    
    
    $
    27,484Cost of sales
    
    
    17,133
    
    
    
    19,438Gross profit
    
    
    7,710
    
    
    
    8,046Selling, general and administrative
    
    
    5,409
    
    
    
    5,663Amortization expense
    
    
    298
    
    
    
    306Operating income
    
    
    2,003
    
    
    
    2,077Interest expense
    
    
    226
    
    
    
    317Other income, net
    
    
    (78
    )
    
    
    (70
    )Income before income taxes
    
    
    1,855
    
    
    
    1,830Provision for income taxes
    
    
    511
    
    
    
    625Net income
    
    $
    1,344
    
    
    $
    1,205Earnings per shareBasic and diluted
    
    $
    0.14
    
    
    $
    0.13Weighted average shares outstandingBasic and diluted
    
    
    9,601,779
    
    
    
    9,601,779Dividends per share
    
    $
    0.06
    
    
    $
    0.06
 See Notes to Condensed Consolidated Financial Statements
 4




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##### Table of Contents



Portec Rail Products, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Three Months EndedMarch 312008
    
    2007(In Thousands)Operating ActivitiesNet income
    
    $
    1,344
    
    
    $
    1,205Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation expense
    
    
    390
    
    
    
    555Amortization expense
    
    
    298
    
    
    
    306Provision for doubtful accounts
    
    
    
    
    
    
    27Deferred income taxes
    
    
    34
    
    
    
    (66
    )Pension (income) expense
    
    
    (9
    )
    
    
    18Loss on sale of fixed assets
    
    
    7
    
    
    
    43Stock based compensation expense
    
    
    22
    
    
    
    11Changes in operating assets and liabilities:Accounts receivable
    
    
    2,521
    
    
    
    (2,797
    )Inventories
    
    
    (1,572
    )
    
    
    1,254Prepaid expenses and other current assets
    
    
    (1,137
    )
    
    
    (1,472
    )Accounts payable
    
    
    1,832
    
    
    
    1,812Income taxes payable
    
    
    (469
    )
    
    
    (343
    )Accrued expenses
    
    
    (3,170
    )
    
    
    (510
    )Net cash provided by operating activities
    
    
    91
    
    
    
    43Investing ActivitiesPurchase of property, plant and equipment
    
    
    (904
    )
    
    
    (592
    )Proceeds from sale of assets
    
    
    12
    
    
    
    1,988Contingent consideration  business acquisition
    
    
    (52
    )
    
    
    (31
    )Net cash (used in) provided by investing activities
    
    
    (944
    )
    
    
    1,365Financing ActivitiesNet increase in working capital facilities
    
    
    2,234
    
    
    
    561Book overdrafts
    
    
    (193
    )
    
    
    1,159Principal payments on promissory notes
    
    
    (280
    )
    
    
    (280
    )Proceeds from term loans
    
    
    
    
    
    
    54Principal payments on term loans
    
    
    (933
    )
    
    
    (2,594
    )Principal payments on capital leases
    
    
    
    
    
    
    (17
    )Cash dividends paid to shareholders
    
    
    (576
    )
    
    
    (576
    )Net cash provided by (used in) financing activities
    
    
    252
    
    
    
    (1,693
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (27
    )
    
    
    (58
    )Decrease in cash and cash equivalents
    
    
    (628
    )
    
    
    (343
    )Cash and cash equivalents at beginning of period
    
    
    4,273
    
    
    
    1,822Cash and cash equivalents at end of period
    
    $
    3,645
    
    
    $
    1,479Supplemental Disclosures of Cash Flow InformationCash paid during the period for:Interest
    
    $
    255
    
    
    $
    370Income taxes
    
    $
    929
    
    
    $
    1,019
 See Notes to Condensed Consolidated Financial Statements
 5




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##### Table of Contents



Portec Rail Products, Inc.
 
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 Note 1: Organization
  Note 2: Basis of Presentation
  6




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##### Table of Contents



Portec Rail Products, Inc.
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 Note 3: Inventories
   March 31
    
    December 312008
    
    2007(In Thousands)Raw materials
    
    $
    10,571
    
    
    $
    9,849Work in process
    
    
    446
    
    
    
    521Finished goods
    
    
    13,898
    
    
    
    13,01724,915
    
    
    
    23,387Less reserve for slow-moving and obsolete inventory
    
    
    548
    
    
    
    397Net inventory
    
    $
    24,367
    
    
    $
    22,990
 Note 4: Long-Term Debt
  March 31
    
    December 312008
    
    2007(In Thousands)National City Bank Credit Facility: (a)Term loan  Kelsan acquisition
    
    $
    7,551
    
    
    $
    8,435Term loan  Vulcan asset acquisition
    
    
    2,150
    
    
    
    2,300Revolving credit facility  United States
    
    
    4,775
    
    
    
    2,300Revolving credit facility  Canada
    
    
    
    
    
    
    United Kingdom loans: (b)Term loan  Coronet Rail acquisition
    
    
    1,972
    
    
    
    2,119Working capital facility  invoice discounting
    
    
    335
    
    
    
    575Working capital facility  overdraft
    
    
    
    
    
    
    Term loans  vehicles
    
    
    29
    
    
    
    39Promissory notes  Salient Systems acquisition (c)
    
    
    280
    
    
    
    560Revolving credit facility  Boone County Bank, Inc. (d)
    
    
    
    
    
    
    17,092
    
    
    
    16,328Less current maturities
    
    
    9,016
    
    
    
    6,865$
    8,076
    
    
    $
    9,463
 (a) National City Bank Credit Facility
  7




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Portec Rail Products, Inc.
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
   Term Loan  Kelsan Acquisition:
  Term Loan  Vulcan Asset Acquisition:
  Revolving Credit Facility  United States:
  Revolving Credit Facility  Canada:
  8




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##### Table of Contents



Portec Rail Products, Inc.
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 (b) United Kingdom Loans
 Term Loan  Coronet Rail Acquisition:
  Working Capital Facility  Invoice Discounting:
  Working Capital Facility  Overdraft:
  (c) Salient Systems Promissory Notes
  9




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##### Table of Contents



Portec Rail Products, Inc.
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 Wall Street Journal
 d) Revolving Credit Facility  Boone County Bank, Inc.
  Note 5: Income Taxes
 Accounting for Uncertainty in Income
Taxes  an interpretation of FASB Statement No. 109
   Three Months EndedMarch 31, 2008(In Thousands)Balance at January 1, 2008
    
    $
    313Additions based on tax positions related to the current year
    
    
    76Additions for tax positions of prior years
    
    
    Reductions for tax positions of prior years
    
    
    (50
    )Settlements
    
    
    Balance at March 31, 2008
    
    $
    339
  10




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##### Table of Contents



Portec Rail Products, Inc.
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 Note 6: Retirement Plans
  Three Months EndedMarch 312008
    
    2007(In Thousands)Interest cost
    
    $
    138
    
    
    $
    134Expected return on plan assets
    
    
    (165
    )
    
    
    (157
    )Amortization of unrecognized loss
    
    
    18
    
    
    
    32Pension (benefit) expense
    
    $
    (9
    )
    
    $
    9
   Portec RailPlan
    
    ConveyorsPlan
    
    Portec RailPlan
    
    ConveyorsPlan2008
    
    2008
    
    2007
    
    2007(In Thousands)Service cost
    
    $
    11
    
    
    $
    1
    
    
    $
    
    
    
    $
    Interest cost
    
    
    84
    
    
    
    19
    
    
    
    79
    
    
    
    18Expected return on plan assets
    
    
    (98
    )
    
    
    (20
    )
    
    
    (86
    )
    
    
    (18
    )Amortization of transition amount
    
    
    (15
    )
    
    
    (3
    )
    
    
    (15
    )
    
    
    (3
    )Amortization of unrecognized loss
    
    
    21
    
    
    
    
    
    
    
    33
    
    
    
    1Pension expense (benefit)
    
    $
    3
    
    
    $
    (3
    )
    
    $
    11
    
    
    $
    (2
    )
  11




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##### Table of Contents



Portec Rail Products, Inc.
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 Note 7: Comprehensive Income
  Three Months EndedMarch 312008
    
    2007(In Thousands)Net income
    
    $
    1,344
    
    
    $
    1,205Minimum pension liability adjustment, net of tax
    
    
    4
    
    
    
    (9
    )Foreign currency translation adjustments, net of tax
    
    
    (492
    )
    
    
    112Comprehensive income
    
    $
    856
    
    
    $
    1,308
 Note 8: Earnings Per Share
 Earnings per Share
 12




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##### Table of Contents



Portec Rail Products, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 Note 9: Commitments and Contingencies
 Contractual Obligations
  MoreLess
    
    
    1  3
    
    
    3  5
    
    
    than 5Contractual Obligations
    
    Total
    
    
    than 1 year
    
    
    years
    
    
    years
    
    
    years(In Thousands)Long-term debt obligations
    
    $
    11,982
    
    
    $
    2,726
    
    
    $
    7,666
    
    
    $
    1,590
    
    
    $
    Purchase obligations
    
    
    7,604
    
    
    
    5,226
    
    
    
    2,378
    
    
    
    
    
    
    
    Operating leases (1) Capital
leases
    
    
    5,747
    
    
    
    1,016
    
    
    
    2,260
    
    
    
    1,121
    
    
    
    1,350Working capital facilities
    
    
    5,110
    
    
    
    5,110
    
    
    
    
    
    
    
    
    
    
    
    Future interest payments (2)
    
    
    1,054
    
    
    
    435
    
    
    
    593
    
    
    
    26
    
    
    
    Pension contributions (3)
    
    
    951
    
    
    
    662
    
    
    
    289
    
    
    
    
    
    
    
    Deferred purchase price (4)
    
    
    149
    
    
    
    149
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations (5)
    
    $
    32,597
    
    
    $
    15,324
    
    
    $
    13,186
    
    
    $
    2,737
    
    
    $
    1,350
 
 (1)
    
    The majority of our future operating lease obligations are for property leases at our operating
locations. There are no unusual terms or conditions within these leases.(2)
    
    Represents future interest payments on long-term debt obligations as of March 31, 2008.
Assumes that the interest rates on our long-term debt agreements at March 31, 2008 (See Note 4,
Long-Term Debt, Page 7) will continue for the life of the agreements.(3)
    
    Pension plan contributions that may be required more than one year from March 31, 2008 will be
dependent upon the performance of plan assets. Of the $662,000 to be funded in 2008, $287,000 was
funded to the U.S. pension plan in April 2008.(4)
    
    Represents the deferred purchase price obligation related to the purchase of Coronet Rail in
April 2006.(5)
    
    During the first quarter 2007, we recognized a liability of $313,000 for uncertain tax
positions in accordance with Financial Accounting Standards Board (FASB) Interpretation No. 48,
Accounting for Uncertainty in Income Taxes  an Interpretation of FASB Statement No. 109 (FIN 48).
During the first quarter 2008, we recognized $26,000 of additional liability. See Note 5, Income
Taxes, Page 10. The total amount of $339,000 is included within other long-term liabilities on the
March 31, 2008 consolidated balance sheet. However, because of the high degree of uncertainty
regarding the timing of future cash outflows associated with this FIN 48 liability, we cannot
reasonably estimate the periods of related future payments, and as such, we have excluded the FIN
48 liability from the contractual obligations table. Contingencies
  Accounting for Contingencies, specifically
Accrual for Loss Contingencies and Obligations Related to Product Warranties and Product Defects
 13




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##### Table of Contents



Portec Rail Products, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
  Litigation
  Note 10: Segment Information
  Three Months EndedMarch 312008
    
    2007(In Thousands)External SalesRMP
    
    $
    10,043
    
    
    $
    11,114SSD
    
    
    2,365
    
    
    
    2,148Canada
    
    
    6,415
    
    
    
    7,346United Kingdom
    
    
    6,020
    
    
    
    6,876Total
    
    $
    24,843
    
    
    $
    27,484
 14




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##### Table of Contents



Portec Rail Products, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 Three Months EndedMarch 312008
    
    2007(In Thousands)Intersegment SalesRMP
    
    $
    532
    
    
    $
    491SSD
    
    
    
    
    
    
    (3
    )Canada
    
    
    1,459
    
    
    
    1,791United Kingdom
    
    
    
    
    
    
    Total
    
    $
    1,991
    
    
    $
    2,279Total SalesRMP
    
    $
    10,575
    
    
    $
    11,605SSD
    
    
    2,365
    
    
    
    2,145Canada
    
    
    7,874
    
    
    
    9,137United Kingdom
    
    
    6,020
    
    
    
    6,876Total
    
    $
    26,834
    
    
    $
    29,763Operating Income (Loss)RMP
    
    $
    1,243
    
    
    $
    1,024SSD
    
    
    518
    
    
    
    294Canada
    
    
    496
    
    
    
    1,116United Kingdom
    
    
    572
    
    
    
    698Corporate shared services
    
    
    (826
    )
    
    
    (1,055
    )Total
    
    
    2,003
    
    
    
    2,077Interest Expense
    
    
    226
    
    
    
    317Other Income, net
    
    
    (78
    )
    
    
    (70
    )Income Before Income Taxes
    
    $
    1,855
    
    
    $
    1,830Depreciation ExpenseRMP
    
    $
    120
    
    
    $
    201SSD
    
    
    49
    
    
    
    27Canada
    
    
    197
    
    
    
    175United Kingdom
    
    
    7
    
    
    
    126Corporate shared services
    
    
    17
    
    
    
    26Total
    
    $
    390
    
    
    $
    555Amortization ExpenseRMP
    
    $
    2
    
    
    $
    1SSD
    
    
    54
    
    
    
    53Canada
    
    
    180
    
    
    
    174United Kingdom
    
    
    62
    
    
    
    78Total
    
    $
    298
    
    
    $
    306
 15




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##### Table of Contents



Portec Rail Products, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 Three Months EndedMarch 312008
    
    2007(In Thousands)Capital ExpendituresRMP
    
    $
    771
    
    
    $
    66SSD
    
    
    8
    
    
    
    333Canada
    
    
    59
    
    
    
    68United Kingdom
    
    
    58
    
    
    
    111Corporate shared services
    
    
    8
    
    
    
    14Total
    
    $
    904
    
    
    $
    592
 March 31
    
    December 312008
    
    2007(In Thousands)Total AssetsRMP
    
    $
    39,473
    
    
    $
    40,360SSD
    
    
    8,166
    
    
    
    7,862Canada
    
    
    35,331
    
    
    
    36,014United Kingdom
    
    
    19,657
    
    
    
    19,775Corporate shared services
    
    
    206
    
    
    
    215Total
    
    $
    102,833
    
    
    $
    104,226
 Note 11: Restructuring Costs
 United Kingdom
 , Accounting for Costs Associated with Exit or Disposal Activities
  Kelsan
  16




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Portec Rail Products, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
  Note 12: Recent Accounting Pronouncements
 Business Combinations  a revision of SFAS 141
 The Fair
Value Option for Financial Assets and Financial Liabilities  Including an Amendment of FASB
Statement 115
 Fair Value
Measurements
 Note 13: Stock Options
 Share-Based Payments
 17




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##### Table of Contents



Portec Rail Products, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
   Stock Price on
    
    Exercise Price per
    
    Annual Dividend
    
    
    
    
    
    Expected Term (inGrant Date
    
    Fair Value Price
    
    Grant Date
    
    Stock Option
    
    Yield
    
    Risk-free Rate
    
    Expected Volatility
    
    years)1/30/08
    
    $3.67
    
    $9.68
    
    $9.68
    
    2.48%
    
    4.00%
    
    38.87%
    
    7.51/16/07
    
    $3.61
    
    $9.65
    
    $9.65
    
    2.50%
    
    4.73%
    
    39.40%
    
    6.5
 18




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Cautionary Statement Relevant to Forward-looking Statements
   
    
    customer demand;
    
    competitive dynamics in the North American and worldwide railroad and railway supply
industries;
    
    capital expenditures by the railway industry in North America and worldwide;
    
    economic conditions, including changes in inflation rates or interest rates;
    
    product development and the success of new products;
    
    our ability to successfully pursue, consummate and integrate attractive acquisition
opportunities;
    
    changes in laws and regulations;
    
    the development and retention of sales representation and distribution agreements
with third parties;
    
    limited international protection of our intellectual property;
    
    the loss of key personnel;
    
    fluctuations in the cost and availability of raw materials and supplies, and any
significant disruption of supplies;
    
    foreign economic conditions, including currency rate fluctuations;
    
    political unrest in foreign markets and economic uncertainty due to terrorism or
war;
    
    exposure to pension liabilities;
    
    seasonal fluctuations in our sales;
    
    technological innovations by our competitors; and
    
    the importation of lower cost competitive products into our markets.
  19




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Overview
     Results of Operations
 Three Months Ended March 31, 2008 compared to Three Months Ended March 31, 2007
 Net Sales.
 Gross Profit.
 20




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##### Table of Contents



TM
 Selling, General and Administrative Expenses.
 Interest Expense.
 Provision for Income Taxes.
 Net Income.
 Business Segment Review
 Railway Maintenance Products Division  RMP .
 Three Months EndedMarch 312008
    
    
    2007(In Thousands)External sales
    
    $
    10,043
    
    
    $
    11,114Intersegment sales
    
    
    532
    
    
    
    491Operating income
    
    
    1,243
    
    
    
    1,024Sales by product line(1)Track component products
    
    $
    5,593
    
    
    $
    7,356Friction management products and services
    
    
    2,663
    
    
    
    3,351Wayside data collection and data management systems
    
    
    1,401
    
    
    
    577Other products and services
    
    
    918
    
    
    
    321Total product and service sales
    
    $
    10,575
    
    
    $
    11,605
 
 (1)
    
    Includes intersegment sales. 21




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##### Table of Contents



Shipping Systems Division  SSD .
 Three Months EndedMarch 312008
    
    
    2007(In Thousands)External sales
    
    $
    2,365
    
    
    $
    2,148Intersegment sales
    
    
    
    
    
    
    (3
    )Operating income
    
    
    518
    
    
    
    294Sales by product line(1)Automotive products
    
    $
    1,188
    
    
    $
    929Chain securement systems
    
    
    826
    
    
    
    740Strap securement systems
    
    
    82
    
    
    
    246All other load securement systems
    
    
    269
    
    
    
    230Total product and service sales
    
    $
    2,365
    
    
    $
    2,145
 
 (1)
    
    Includes intersegment sales. TM
 Portec Rail Nova Scotia Company  Canada . ® ®
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##### Table of Contents



Three Months EndedMarch 312008
    
    
    2007(In Thousands, ExceptTranslation Rate)External sales
    
    $
    6,415
    
    
    $
    7,346Intersegment sales
    
    
    1,459
    
    
    
    1,791Operating income
    
    
    496
    
    
    
    1,116Average translation rate of Canadian dollar
to United States dollar
    
    
    0.9980
    
    
    
    0.8569Sales by product line(1)Rail anchors and spikes
    
    $
    4,850
    
    
    $
    5,489Friction management products and services
    
    
    2,611
    
    
    
    3,424Other products and services
    
    
    413
    
    
    
    224Total product and service sales
    
    $
    7,874
    
    
    $
    9,137
 
 (1)
    
    Includes intersegment sales.  Portec Rail Products (UK) Ltd.  United Kingdom .
 Three Months EndedMarch 312008
    
    
    2007(In Thousands, ExceptTranslation Rate)External sales
    
    $
    6,020
    
    
    $
    6,876Operating income
    
    
    572
    
    
    
    698Average translation rate of British pound
sterling to United States dollar
    
    
    1.9883
    
    
    
    1.9656Sales by product lineMaterial handling products
    
    $
    2,000
    
    
    $
    3,244Friction management products and services
    
    
    2,640
    
    
    
    2,098Track component products
    
    
    1,380
    
    
    
    1,534Total product and service sales
    
    $
    6,020
    
    
    $
    6,876
  23




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Liquidity and Capital Resources
  Cash Flow Analysis .
   Financial Condition
   24




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Discussion of Critical Accounting Policies
  Revenue Recognition.
   Allowances for Doubtful Accounts.
  Inventories.
 25




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Goodwill and Other Intangible Assets.
     26




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Warranty Reserves.
 Retirement Benefit Plans.
   27




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Income Taxes.
   
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
 ITEM 4. CONTROLS AND PROCEDURES
  28




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PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  29




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ITEM
6. EXHIBITS
 (a)
    
    Exhibits filed as part of this Form 10-Q:
 31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232
    
    Certification of Chief Executive Officer and Chief
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
 30




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##### Table of Contents



SIGNATURES
  PORTEC RAIL PRODUCTS, INC.Date: May 6, 2008
    By:
    /s/ Richard J. JarosinskiRichard J. Jarosinski, President and ChiefExecutive Officer Date: May 6, 2008
    By:
    /s/ John N. PesarsickJohn N. Pesarsick, Chief Financial Officer 31




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EXHIBIT INDEX
 31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
200231.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
200232
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
 32