##### 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, 2009
 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  (Registrants Telephone Number)
 (Former Name, Former Address and Former Fiscal Year, if changed since last report)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 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 SheetsMarch 31, 2009 (Unaudited) and December 31, 2008
    
    3Condensed Consolidated Statements of Income (Unaudited)Three months ended March 31, 2009 and 2008
    
    4Condensed Consolidated Statements of Cash Flows (Unaudited)Three months ended March 31, 2009 and 2008
    
    5Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    62.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    183.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    274.
    
    Controls and Procedures
    
    27PART II  OTHER INFORMATION1.
    
    Legal Proceedings
    
    281A.
    
    Risk Factors
    
    282.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    283.
    
    Defaults Upon Senior Securities
    
    284.
    
    Submission of Matters to a Vote of Security Holders
    
    285.
    
    Other Information
    
    286.
    
    Exhibits
    
    28Signatures
    
    29EX-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 312009
    
    2008(Unaudited)
    
    (Audited)(In Thousands)AssetsCurrent assetsCash and cash equivalents
    
    $
    4,335
    
    
    $
    5,371Accounts receivable, net
    
    
    14,077
    
    
    
    14,553Inventories, net
    
    
    25,338
    
    
    
    23,856Prepaid expenses and other current assets
    
    
    1,870
    
    
    
    489Deferred income taxes
    
    
    385
    
    
    
    369Total current assets
    
    $
    46,005
    
    
    $
    44,638Property, plant and equipment, net of
accumulated depreciation of $12,709 and
$12,445 at March 31, 2009 and December 31,
2008, respectively
    
    
    9,808
    
    
    
    10,203Intangible assets, net of accumulated
amortization of $3,711 and $3,557 at March
31, 2009 and December 31, 2008, respectively
    
    
    27,161
    
    
    
    27,732Goodwill
    
    
    13,263
    
    
    
    13,413Other assets
    
    
    787
    
    
    
    837Total assets
    
    $
    97,024
    
    
    $
    96,823Liabilities and Shareholders EquityCurrent liabilitiesCurrent maturities of long-term debt
    
    $
    10,298
    
    
    $
    6,500Accounts payable
    
    
    7,123
    
    
    
    7,155Accrued income taxes
    
    
    226
    
    
    
    513Customer deposits
    
    
    1,325
    
    
    
    1,935Accrued compensation
    
    
    976
    
    
    
    2,641Other accrued liabilities
    
    
    2,206
    
    
    
    2,088Total current liabilities
    
    
    22,154
    
    
    
    20,832Long-term debt, less current maturities
    
    
    5,594
    
    
    
    6,110Deferred income taxes
    
    
    6,807
    
    
    
    7,224Accrued pension costs
    
    
    3,578
    
    
    
    3,583Other long-term liabilities
    
    
    812
    
    
    
    898Total liabilities
    
    
    38,945
    
    
    
    38,647Commitments and Contingencies
    
    
    
    
    
    
    Shareholders equity:Common stock, $1 par value, 50,000,000
shares authorized, 9,602,029 shares
issued and outstanding at March 31, 2009
and December 31, 2008
    
    
    9,602
    
    
    
    9,602Additional paid-in capital
    
    
    25,469
    
    
    
    25,443Retained earnings
    
    
    29,196
    
    
    
    28,635Accumulated other comprehensive (loss)
    
    
    (6,188
    )
    
    
    (5,504
    )Total shareholders equity
    
    
    58,079
    
    
    
    58,176Total liabilities and shareholders equity
    
    $
    97,024
    
    
    $
    96,823
 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 312009
    
    2008(Dollars in Thousands,Except Per Share Data)Net sales
    
    $
    22,164
    
    
    $
    24,843Cost of sales
    
    
    14,891
    
    
    
    17,133Gross profit
    
    
    7,273
    
    
    
    7,710Selling, general and administrative
    
    
    5,380
    
    
    
    5,409Amortization expense
    
    
    253
    
    
    
    298Operating income
    
    
    1,640
    
    
    
    2,003Interest expense
    
    
    74
    
    
    
    226Other expense (income), net
    
    
    15
    
    
    
    (78
    )Income before income taxes
    
    
    1,551
    
    
    
    1,855Provision for income taxes
    
    
    415
    
    
    
    511Net income
    
    $
    1,136
    
    
    $
    1,344Earnings per shareBasic and diluted
    
    $
    0.12
    
    
    $
    0.14Weighted average shares outstandingBasic and diluted
    
    
    9,602,029
    
    
    
    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 312009
    
    2008(In Thousands)Operating ActivitiesNet income
    
    $
    1,136
    
    
    $
    1,344Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation expense
    
    
    435
    
    
    
    390Amortization expense
    
    
    253
    
    
    
    298Provision for doubtful accounts
    
    
    14
    
    
    
    Deferred income taxes
    
    
    63
    
    
    
    34Pension expense (income)
    
    
    49
    
    
    
    (9
    )Pension contributions
    
    
    (39
    )
    
    
    (185
    )Loss on sale of fixed assets
    
    
    1
    
    
    
    7Stock based compensation expense
    
    
    26
    
    
    
    22Changes in operating assets and liabilities:Accounts receivable
    
    
    281
    
    
    
    2,521Inventories
    
    
    (1,606
    )
    
    
    (1,572
    )Prepaid expenses and other current assets
    
    
    (1,397
    )
    
    
    (1,137
    )Accounts payable
    
    
    265
    
    
    
    1,832Income taxes payable
    
    
    (267
    )
    
    
    (469
    )Accrued expenses
    
    
    (2,080
    )
    
    
    (2,985
    )Net cash (used in) provided by operating activities
    
    
    (2,866
    )
    
    
    91Investing ActivitiesPurchase of property, plant and equipment
    
    
    (234
    )
    
    
    (904
    )Proceeds from sale of assets
    
    
    
    
    
    
    12Contingent consideration  business acquisition
    
    
    (35
    )
    
    
    (52
    )Net cash used in investing activities
    
    
    (269
    )
    
    
    (944
    )Financing ActivitiesNet increase in working capital facilities
    
    
    3,970
    
    
    
    2,234Book overdrafts
    
    
    (327
    )
    
    
    (193
    )Principal payments on promissory notes
    
    
    (280
    )
    
    
    (280
    )Proceeds from term loans
    
    
    300
    
    
    
    Principal payments on term loans
    
    
    (688
    )
    
    
    (933
    )Cash dividends paid to shareholders
    
    
    (576
    )
    
    
    (576
    )Net cash provided by financing activities
    
    
    2,399
    
    
    
    252Effect of exchange rate changes on cash and cash equivalents
    
    
    (300
    )
    
    
    (27
    )Decrease in cash and cash equivalents
    
    
    (1,036
    )
    
    
    (628
    )Cash and cash equivalents at beginning of period
    
    
    5,371
    
    
    
    4,273Cash and cash equivalents at end of period
    
    $
    4,335
    
    
    $
    3,645Supplemental Disclosures of Cash Flow InformationCash paid during the period for:Interest
    
    $
    87
    
    
    $
    255Income taxes
    
    $
    1,062
    
    
    $
    929
 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 312009
    
    2008(In Thousands)Raw materials
    
    $
    11,394
    
    
    $
    10,617Work in process
    
    
    353
    
    
    
    411Finished goods
    
    
    14,453
    
    
    
    13,72726,200
    
    
    
    24,755Less reserve for slow-moving and obsolete inventory
    
    
    862
    
    
    
    899Net inventory
    
    $
    25,338
    
    
    $
    23,856
 Note 4: Long-Term Debt
  March 31
    
    December 312009
    
    2008(In Thousands)National City Bank Credit Facility: (a)Term loan  Kelsan acquisition
    
    $
    4,536
    
    
    $
    4,884Term loan  Vulcan asset acquisition
    
    
    1,550
    
    
    
    1,700Revolving credit facility  United States
    
    
    6,195
    
    
    
    2,800Revolving credit facility  Canada
    
    
    
    
    
    
    United Kingdom loans: (b)Term loan  Coronet Rail acquisition
    
    
    995
    
    
    
    1,131Working capital facility
    
    
    574
    
    
    
    Term loans  vehicles
    
    
    12
    
    
    
    15Promissory notes  Salient Systems acquisition (c)
    
    
    
    
    
    
    280Credit facility  Boone County Bank, Inc. (d)
    
    
    2,030
    
    
    
    1,80015,892
    
    
    
    12,610Less current maturities
    
    
    10,298
    
    
    
    6,500$
    5,594
    
    
    $
    6,110
 (a) National City Bank Credit Facility
  7




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##### Table of Contents



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:
   (c) Promissory Notes  Salient Systems Acquisition
  d) Credit Facility  Boone County Bank, Inc.
  9




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##### Table of Contents



Portec Rail Products, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
  Note 5: Income Taxes
 Accounting for Uncertainty in Income
Taxes  an interpretation of FASB Statement No. 109
   Three Months EndedMarch 312009
    
    2008(In Thousands)Balance at January 1
    
    $
    313
    
    
    $
    313Additions based on tax positions related to the current year
    
    
    44
    
    
    
    76Additions for tax positions of prior years
    
    
    83
    
    
    
    Reductions for tax positions of prior years
    
    
    (65
    )
    
    
    (50
    )Settlements
    
    
    
    
    
    
    Balance at March 31
    
    $
    375
    
    
    $
    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 312009
    
    2008(In Thousands)Interest cost
    
    $
    144
    
    
    $
    138Expected return on plan assets
    
    
    (162
    )
    
    
    (165
    )Amortization of unrecognized loss
    
    
    25
    
    
    
    18Pension expense (benefit)
    
    $
    7
    
    
    $
    (9
    )
   Portec Rail
    
    Conveyors
    
    Portec Rail
    
    ConveyorsPlan
    
    Plan
    
    Plan
    
    Plan2009
    
    2009
    
    2008
    
    2008(In Thousands)
    
    (In Thousands)Service cost
    
    $
    
    
    
    $
    
    
    
    $
    11
    
    
    $
    1Interest cost
    
    
    60
    
    
    
    12
    
    
    
    84
    
    
    
    19Expected return on plan assets
    
    
    (44
    )
    
    
    (8
    )
    
    
    (98
    )
    
    
    (20
    )Amortization of transition amount
    
    
    (11
    )
    
    
    (2
    )
    
    
    (15
    )
    
    
    (3
    )Amortization of unrecognized loss
    
    
    28
    
    
    
    7
    
    
    
    21
    
    
    
    Pension expense (benefit)
    
    $
    33
    
    
    $
    9
    
    
    $
    3
    
    
    $
    (3
    )
  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 312009
    
    2008(In Thousands)Net income
    
    $
    1,136
    
    
    $
    1,344Minimum pension liability adjustment, net of tax
    
    
    59
    
    
    
    4Foreign currency translation adjustments, net of tax
    
    
    (742
    )
    
    
    (492
    )Comprehensive income
    
    $
    453
    
    
    $
    856
 Note 8: Earnings Per Share
 Earnings per Share
 Note 9: Commitments and Contingencies
 Contractual Obligations
  Less
    
    
    
    
    
    
    
    
    
    
    Morethan 1
    
    
    1  3
    
    
    3  5
    
    
    than 5Contractual Obligations
    
    Total
    
    
    year
    
    
    years
    
    
    years
    
    
    years(In Thousands)Long-term debt obligations
    
    $
    9,123
    
    
    $
    3,529
    
    
    $
    4,718
    
    
    $
    840
    
    
    $
    36Working capital facilities
    
    
    6,769
    
    
    
    6,769
    
    
    
    
    
    
    
    
    
    
    
    Operating leases (1)
    
    
    4,112
    
    
    
    919
    
    
    
    1,730
    
    
    
    633
    
    
    
    830Pension contributions (2)
    
    
    3,681
    
    
    
    217
    
    
    
    1,693
    
    
    
    1,365
    
    
    
    406Purchase obligations
    
    
    3,078
    
    
    
    2,022
    
    
    
    1,056
    
    
    
    
    
    
    
    Future interest payments (3)
    
    
    327
    
    
    
    142
    
    
    
    156
    
    
    
    29
    
    
    
    Total contractual obligations (4)
    
    $
    27,090
    
    
    $
    13,598
    
    
    $
    9,353
    
    
    $
    2,867
    
    
    $
    1,272
 
 (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)
    
    Pension plan contributions that may be required more than one year from March 31, 2009 will be
dependent upon the performance of plan assets.(3)
    
    Represents future interest payments on long-term debt obligations as of March 31, 2009.
Assumes that the interest rates on our long-term debt agreements at March 31, 2009 (See Note 4,
Long-Term Debt, Page 7) will continue for the life of the agreements.(4)
    
    As a result of adopting Financial Accounting Standards Board (FASB) Interpretation No. 48,
Accounting for Uncertainty in Income Taxes  an Interpretation of FASB Statement No. 109 (FIN 48)
during 2007 we recorded an initial liability of $313,000 related to uncertain tax positions.
During the first quarter 2009 and 2008, we recognized $62,000 and 12




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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 312009
    
    2008(In Thousands)External SalesRMP
    
    $
    10,657
    
    
    $
    10,043SSD
    
    
    1,263
    
    
    
    2,365Canada
    
    
    5,837
    
    
    
    6,415United Kingdom
    
    
    4,407
    
    
    
    6,020Total
    
    $
    22,164
    
    
    $
    24,843
 13




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##### Table of Contents



Portec Rail Products, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 Three Months EndedMarch 312009
    
    2008(In Thousands)Intersegment SalesRMP
    
    $
    516
    
    
    $
    532SSD
    
    
    
    
    
    
    Canada
    
    
    1,548
    
    
    
    1,459United Kingdom
    
    
    
    
    
    
    Total
    
    $
    2,064
    
    
    $
    1,991Total SalesRMP
    
    $
    11,173
    
    
    $
    10,575SSD
    
    
    1,263
    
    
    
    2,365Canada
    
    
    7,385
    
    
    
    7,874United Kingdom
    
    
    4,407
    
    
    
    6,020Total
    
    $
    24,228
    
    
    $
    26,834Operating Income (Loss)RMP
    
    $
    1,243
    
    
    $
    1,243SSD
    
    
    (168
    )
    
    
    518Canada
    
    
    1,307
    
    
    
    496United Kingdom
    
    
    219
    
    
    
    572Corporate shared services
    
    
    (961
    )
    
    
    (826
    )Total
    
    
    1,640
    
    
    
    2,003Interest Expense
    
    
    74
    
    
    
    226Other Expense (Income), net
    
    
    15
    
    
    
    (78
    )Income Before Income Taxes
    
    $
    1,551
    
    
    $
    1,855Depreciation ExpenseRMP
    
    $
    180
    
    
    $
    120SSD
    
    
    48
    
    
    
    49Canada
    
    
    148
    
    
    
    197United Kingdom
    
    
    46
    
    
    
    7Corporate shared services
    
    
    13
    
    
    
    17Total
    
    $
    435
    
    
    $
    390Amortization ExpenseRMP
    
    $
    9
    
    
    $
    2SSD
    
    
    53
    
    
    
    54Canada
    
    
    146
    
    
    
    180United Kingdom
    
    
    45
    
    
    
    62Total
    
    $
    253
    
    
    $
    298
 14




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Portec Rail Products, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 Three Months EndedMarch 312009
    
    2008(In Thousands)Capital ExpendituresRMP
    
    $
    39
    
    
    $
    771SSD
    
    
    23
    
    
    
    8Canada
    
    
    149
    
    
    
    59United Kingdom
    
    
    18
    
    
    
    58Corporate shared services
    
    
    5
    
    
    
    8Total
    
    $
    234
    
    
    $
    904
 March 31
    
    December 312009
    
    2008Total AssetsRMP
    
    $
    41,561
    
    
    $
    40,870SSD
    
    
    7,503
    
    
    
    7,882Canada
    
    
    33,679
    
    
    
    32,990United Kingdom
    
    
    14,146
    
    
    
    14,938Corporate shared services
    
    
    135
    
    
    
    143Total
    
    $
    97,024
    
    
    $
    96,823
 Note 11: Fair Value of Financial Instruments
 Fair
Value Measurements
     15




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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
 Disclosures about Derivative Instruments and Hedging Activities
 Note 13: Stock Options
   16




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Portec Rail Products, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 Share-Based Payments
  Stock
    
    Exercise# of
    
    Fair
    
    Price on
    
    Price per
    
    AnnualGrant
    
    Shares
    
    Value
    
    Grant
    
    Stock
    
    Dividend
    
    Risk-free
    
    Expected
    
    Expected TermDate
    
    Granted
    
    Price
    
    Date
    
    Option
    
    Yield
    
    Rate
    
    Volatility
    
    (in years)7/02/08
    
    
    1,750
    
    
    $
    4.56
    
    
    $
    12.01
    
    
    $
    12.01
    
    
    
    2.00
    %
    
    
    4.25
    %
    
    
    36.36
    %
    
    
    7.51/30/08
    
    
    72,750
    
    
    $
    3.67
    
    
    $
    9.68
    
    
    $
    9.68
    
    
    
    2.48
    %
    
    
    4.00
    %
    
    
    38.87
    %
    
    
    7.51/16/07
    
    
    79,250
    
    
    $
    3.61
    
    
    $
    9.65
    
    
    $
    9.65
    
    
    
    2.50
    %
    
    
    4.73
    %
    
    
    39.40
    %
    
    
    6.5
 17




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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.
  18




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Overview
     Results of Operations
 Three Months Ended March 31, 2009 compared to Three Months Ended March 31, 2008
 Net Sales.
 Gross Profit.
 19




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##### Table of Contents



Selling, General and Administrative Expenses.
 Interest Expense.
 Other Expense.
 Provision for Income Taxes.
 Net Income.
 Business Segment Review
 Railway Maintenance Products Division  RMP .
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##### Table of Contents



Three Months EndedMarch 312009
    
    
    2008(In Thousands)External sales
    
    $
    10,657
    
    
    $
    10,043Intersegment sales
    
    
    516
    
    
    
    532Operating income
    
    
    1,243
    
    
    
    1,243Sales by product line(1)Track component products
    
    $
    5,783
    
    
    $
    5,593Friction management products and services
    
    
    3,424
    
    
    
    2,663Wayside data collection and data management systems
    
    
    1,433
    
    
    
    1,401Other products and services
    
    
    533
    
    
    
    918Total product and service sales
    
    $
    11,173
    
    
    $
    10,575
 
 (1)
    
    Includes intersegment sales.  Shipping Systems Division  SSD .
 Three Months EndedMarch 312009
    
    
    2008(In Thousands)External sales
    
    $
    1,263
    
    
    $
    2,365Intersegment sales
    
    
    
    
    
    
    Operating (loss)/income
    
    
    (168
    )
    
    
    518Sales by product lineAutomotive products
    
    $
    626
    
    
    $
    1,188Chain securement systems
    
    
    527
    
    
    
    826Strap securement systems
    
    
    53
    
    
    
    82All other load securement systems
    
    
    57
    
    
    
    269Total product and service sales
    
    $
    1,263
    
    
    $
    2,365
  Portec Rail Nova Scotia Company  Canada .
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##### Table of Contents



® ®
 Three Months EndedMarch 312009
    
    
    2008(In Thousands,Except Translation Rate)External sales
    
    $
    5,837
    
    
    $
    6,415Intersegment sales
    
    
    1,548
    
    
    
    1,459Operating income
    
    
    1,307
    
    
    
    496Average translation rate of Canadian dollar to U.S. dollar
    
    
    0.7982
    
    
    
    0.9980Sales by product line(1)Track component products (2)
    
    $
    3,285
    
    
    $
    4,850Friction management products and services
    
    
    3,885
    
    
    
    2,611Other products and services
    
    
    215
    
    
    
    413Total product and service sales
    
    $
    7,385
    
    
    $
    7,874
 
 (1)
    
    Includes intersegment sales.(2)
    
    Formerly referred to as Rail Anchors and Spikes  Portec Rail Products (UK) Ltd.  United Kingdom" .
 Three Months EndedMarch 312009
    
    
    2008(In Thousands,Except Translation Rate)External sales
    
    $
    4,407
    
    
    $
    6,020Operating income
    
    
    219
    
    
    
    572Average translation rate of British pound sterling to U.S. dollar
    
    
    1.4385
    
    
    
    1.9883Sales by product lineMaterial handling products
    
    $
    1,511
    
    
    $
    2,000Friction management products and services
    
    
    2,240
    
    
    
    2,640Track component products
    
    
    656
    
    
    
    1,380Total product and service sales
    
    $
    4,407
    
    
    $
    6,020
  22




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Liquidity and Capital Resources
  Cash Flow Analysis .
   Financial Condition
    23




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Discussion of Critical Accounting Policies
  Revenue Recognition.
   Allowances for Doubtful Accounts.
  Inventories.
 24




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##### Table of Contents



Goodwill and Other Intangible Assets. Goodwill and Other Intangible Assets.
 Accounting for Impairment or Disposal of Long-Lived Assets.
    25




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Retirement Benefit Plans. Employers Accounting for Pensions Employers
Accounting for Defined Benefit Plans and Other Postretirement Plans.
   Income Taxes.
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Accounting for Uncertainty in
Income Taxes
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
 ITEM 4. CONTROLS AND PROCEDURES
  27




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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
  
 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
 28




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##### Table of Contents



SIGNATURES
  PORTEC RAIL PRODUCTS, INC.Date: May 7, 2009
    By:
    /s/ Richard J. JarosinskiRichard J. Jarosinski, President andChief Executive Officer and Principal
Executive OfficerDate: May 7, 2009
    By:
    /s/ John N. PesarsickJohn N. Pesarsick, Chief Financial Officer andPrincipal Accounting Officer 29




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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
 30