##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended June 30, 2005
 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
 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
June 30, 2005 (Unaudited) and December 31, 2004
    
    
    3Condensed Consolidated Statements of Income (Unaudited)
Three and six months ended June 30, 2005 and 2004
    
    
    4Condensed Consolidated Statements of Cash Flows (Unaudited)
Six months ended June 30, 2005 and 2004
    
    
    5Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    62.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    143.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    234.
    
    Controls and Procedures
    
    
    23PART II  OTHER INFORMATION1.
    
    Legal Proceedings
    
    
    242.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    243.
    
    Defaults Upon Senior Securities
    
    
    244.
    
    Submission of Matters to a Vote of Security Holders
    
    
    245.
    
    Other Information
    
    
    256.
    
    Exhibits
    
    
    25Signatures
    
    
    26
 2




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##### 



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 Portec Rail Products, Inc.
 
 Condensed Consolidated Balance Sheets
 June 30
    
    December 312005
    
    2004(Unaudited)
    
    (Audited)(In Thousands)AssetsCurrent assetsCash and cash equivalents
    
    $
    3,338
    
    
    $
    7,749Accounts receivable, net
    
    
    14,634
    
    
    
    12,452Inventories, net
    
    
    18,824
    
    
    
    18,814Prepaid expenses and other current assets
    
    
    2,299
    
    
    
    895Deferred income taxes
    
    
    561
    
    
    
    762Total current assets
    
    $
    39,656
    
    
    $
    40,672Property, plant and equipment, net
    
    
    12,159
    
    
    
    12,660Intangible assets, net of accumulated
amortization of $355 and $51 at June 30, 2005
and December 31, 2004, respectively
    
    
    23,691
    
    
    
    24,185Goodwill
    
    
    10,849
    
    
    
    10,957Other assets
    
    
    215
    
    
    
    151Total assets
    
    $
    86,570
    
    
    $
    88,625Liabilities and Shareholders EquityCurrent liabilitiesCurrent maturities of long-term debt
    
    $
    3,079
    
    
    $
    3,611Accounts payable
    
    
    6,342
    
    
    
    6,417Accrued income taxes
    
    
    671
    
    
    
    503Customer deposits
    
    
    1,127
    
    
    
    1,572Accrued compensation
    
    
    1,195
    
    
    
    1,484Other accrued liabilities
    
    
    2,278
    
    
    
    1,824Total current liabilities
    
    
    14,692
    
    
    
    15,411Long-term debt, less current maturities
    
    
    12,017
    
    
    
    14,108Accrued pension costs
    
    
    2,663
    
    
    
    2,829Deferred income taxes
    
    
    8,382
    
    
    
    8,889Other long-term liabilities
    
    
    395
    
    
    
    344Total liabilities
    
    
    38,149
    
    
    
    41,581Commitments and Contingencies
    
    
    
    
    
    
    Shareholders equity:Common stock, $1 par value, 50,000,000
shares authorized, 9,601,779 shares
issued and outstanding at June 30, 2005
and December 31, 2004, respectively
    
    
    9,602
    
    
    
    9,602Additional paid-in capital
    
    
    25,290
    
    
    
    25,290Retained earnings
    
    
    15,274
    
    
    
    13,521Accumulated other comprehensive loss
    
    
    (1,745
    )
    
    
    (1,369
    )Total shareholders equity
    
    
    48,421
    
    
    
    47,044Total liabilities and shareholders equity
    
    $
    86,570
    
    
    $
    88,625
 See Notes to Condensed Consolidated Financial Statements
 3




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##### 



Portec Rail Products, Inc.
 
 Condensed Consolidated Statements of Income
(Unaudited)
 Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004(Dollars in Thousands, Except Per Share Data)Net sales
    
    $
    24,086
    
    
    $
    18,513
    
    
    $
    44,907
    
    
    $
    33,706Cost of sales
    
    
    16,311
    
    
    
    13,083
    
    
    
    30,610
    
    
    
    24,405Gross profit
    
    
    7,775
    
    
    
    5,430
    
    
    
    14,297
    
    
    
    9,301Selling, general and administrative
    
    
    5,050
    
    
    
    3,281
    
    
    
    9,744
    
    
    
    6,115Amortization expense
    
    
    173
    
    
    
    16
    
    
    
    340
    
    
    
    32Operating income
    
    
    2,552
    
    
    
    2,133
    
    
    
    4,213
    
    
    
    3,154Interest expense
    
    
    209
    
    
    
    25
    
    
    
    472
    
    
    
    71Other expense (income), net
    
    
    36
    
    
    
    (51
    )
    
    
    (35
    )
    
    
    (33
    )Income before income taxes
    
    
    2,307
    
    
    
    2,159
    
    
    
    3,776
    
    
    
    3,116Provision for income taxes
    
    
    599
    
    
    
    695
    
    
    
    1,063
    
    
    
    995Net income
    
    $
    1,708
    
    
    $
    1,464
    
    
    $
    2,713
    
    
    $
    2,121Earnings per shareBasic and diluted
    
    $
    .18
    
    
    $
    .17
    
    
    $
    .28
    
    
    $
    .25Weighted average shares outstandingBasic and diluted
    
    
    9,601,779
    
    
    
    8,602,169
    
    
    
    9,601,779
    
    
    
    8,602,169Dividends per share
    
    $
    .05
    
    
    $
    .05
    
    
    $
    .10
    
    
    $
    .10
 See Notes to Condensed Consolidated Financial Statements
 4




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##### 



Portec Rail Products, Inc.
 
 Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Six Months EndedJune 302005
    
    2004(In Thousands)Operating ActivitiesNet income
    
    $
    2,713
    
    
    $
    2,121Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    1,179
    
    
    
    728Provision for doubtful accounts
    
    
    7
    
    
    
    46Changes in operating assets and liabilities:Accounts receivable
    
    
    (2,872
    )
    
    
    (3,187
    )Inventories
    
    
    (292
    )
    
    
    (204
    )Prepaid expenses and other assets
    
    
    (1,601
    )
    
    
    391Accounts payable
    
    
    473
    
    
    
    257Income taxes payable
    
    
    183
    
    
    
    (10
    )Accrued expenses
    
    
    (171
    )
    
    
    455Net cash (used in) provided by operating activities
    
    
    (381
    )
    
    
    597Investing ActivitiesPurchases of property, plant and equipment
    
    
    (768
    )
    
    
    (309
    )Proceeds from sale of assets
    
    
    
    
    
    
    13Net cash used in investing activities
    
    
    (768
    )
    
    
    (296
    )Financing ActivitiesNet decrease in revolving credit agreements
    
    
    (413
    )
    
    
    (5,834
    )Principal payments on bank term loans
    
    
    (1,832
    )
    
    
    (2,005
    )Principal payments to Boone County Bank, Inc. (related
party)
    
    
    
    
    
    
    (74
    )Principal payments on capital leases
    
    
    (13
    )
    
    
    (5
    )Cash dividends paid to shareholders
    
    
    (960
    )
    
    
    (862
    )Issuance of common stock
    
    
    
    
    
    
    17,972Net cash (used in) provided by financing activities
    
    
    (3,218
    )
    
    
    9,192Effect of exchange rate changes on cash and cash equivalents
    
    
    (44
    )
    
    
    7(Decrease) increase in cash and cash equivalents
    
    
    (4,411
    )
    
    
    9,500Cash and cash equivalents at beginning of period
    
    
    7,749
    
    
    
    418Cash and cash equivalents at end of period
    
    $
    3,338
    
    
    $
    9,918Supplemental Disclosures of Cash Flow InformationCash paid during the period for:Interest
    
    $
    557
    
    
    $
    67Income taxes
    
    $
    1,161
    
    
    $
    1,075Capital lease obligation incurred for equipment
    
    
    
    
    
    $
    16
 See Notes to Condensed Consolidated Financial Statements
 5




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##### 



Portec Rail Products, Inc.
 
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 Note 1: Organization
  Note 2: Basis of Presentation
   Note 3: Inventories
   June 30
    
    December 312005
    
    2004(In Thousands)Raw materials
    
    $
    8,589
    
    
    $
    8,972Work in process
    
    
    421
    
    
    
    357Finished goods
    
    
    10,327
    
    
    
    9,82219,337
    
    
    
    19,151Less reserve for slow-moving and obsolete inventory
    
    
    513
    
    
    
    337Net inventory
    
    $
    18,824
    
    
    $
    18,814
 6




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##### 



Portec Rail Products, Inc.
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 Note 4: Long-Term Debt
  June 30
    
    December 312005
    
    2004(In Thousands)National City Bank Credit Facility: (a)Term loan facility
    
    $
    13,211
    
    
    $
    14,710Revolving credit facility  United States
    
    
    
    
    
    
    Revolving credit facility  Canada
    
    
    
    
    
    
    834United Kingdom loans: (b)Term loan
    
    
    
    
    
    
    211Property loan
    
    
    
    
    
    
    137Quodeck acquisition loan
    
    
    
    
    
    
    320Overdraft credit facility
    
    
    
    
    
    
    Kelsan overdraft credit facility (c)
    
    
    718
    
    
    
    325Salient Systems promissory notes (d)
    
    
    1,120
    
    
    
    1,120Capitalized lease obligations
    
    
    47
    
    
    
    6215,096
    
    
    
    17,719Less current maturities
    
    
    3,079
    
    
    
    3,611$
    12,017
    
    
    $
    14,108
 (a) National City Bank Credit Facility
  National City Bank (Canada) Term Loan Facility
  7




---



##### 



Portec Rail Products, Inc.
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
  (b) United Kingdom Loans
 Term Loan
  Property Loan
  Quodeck Acquisition Loan
  Overdraft Credit Facility
  (c) Kelsan Overdraft Credit Facility
  (d) Salient Systems Promissory Notes
  8




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##### 



Portec Rail Products, Inc.
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 Wall Street Journal
 Note 5: Retirement Plans
 Employers Disclosures about Pensions and
Other Postretirement Benefits
  Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004(In Thousands)Service cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest cost
    
    
    130
    
    
    
    128
    
    
    
    260
    
    
    
    256Expected return on plan assets
    
    
    (170
    )
    
    
    (178
    )
    
    
    (340
    )
    
    
    (356
    )Amortization of unrecognized loss
    
    
    12
    
    
    
    
    
    
    
    24
    
    
    
    Pension (benefit)/cost
    
    $
    (28
    )
    
    $
    (50
    )
    
    $
    (56
    )
    
    $
    (100
    )
   Portec Rail
    
    Conveyors
    
    Portec Rail
    
    ConveyorsPlan
    
    Plan
    
    Plan
    
    Plan2005
    
    2005
    
    2004
    
    2004(In Thousands)Service cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest cost
    
    
    77
    
    
    
    11
    
    
    
    69
    
    
    
    10Expected return on plan assets
    
    
    (73
    )
    
    
    (18
    )
    
    
    (70
    )
    
    
    (17
    )Amortization of transition amount
    
    
    (13
    )
    
    
    (3
    )
    
    
    (13
    )
    
    
    (3
    )Amortization of unrecognized loss (gain)
    
    
    30
    
    
    
    (3
    )
    
    
    19
    
    
    
    (1
    )Pension cost/(benefit)
    
    $
    21
    
    
    $
    (13
    )
    
    $
    5
    
    
    $
    (11
    )
 9




---



##### 



Portec Rail Products, Inc.
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
  Portec Rail
    
    Conveyors
    
    Portec Rail
    
    ConveyorsPlan
    
    Plan
    
    Plan
    
    Plan2005
    
    2005
    
    2004
    
    2004(In Thousands)Service cost
    
    $
    
    
    
    $
    
    
    
    $
    28
    
    
    $
    Interest cost
    
    
    159
    
    
    
    22
    
    
    
    139
    
    
    
    20Expected return on plan assets
    
    
    (150
    )
    
    
    (37
    )
    
    
    (146
    )
    
    
    (34
    )Amortization of transition amount
    
    
    (27
    )
    
    
    (5
    )
    
    
    (27
    )
    
    
    (6
    )Amortization of unrecognized
loss (gain)
    
    
    62
    
    
    
    (6
    )
    
    
    38
    
    
    
    (2
    )Pension cost/(benefit)
    
    $
    44
    
    
    $
    (26
    )
    
    $
    32
    
    
    $
    (22
    )
  Note 6: Comprehensive Income
  Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004(In Thousands)Net income
    
    $
    1,708
    
    
    $
    1,464
    
    
    $
    2,713
    
    
    $
    2,121Minimum pension liability adjustment, net of tax
    
    
    88
    
    
    
    15
    
    
    
    113
    
    
    
    (24
    )Foreign currency translation adjustments, net of tax
    
    
    (373
    )
    
    
    (163
    )
    
    
    (488
    )
    
    
    (56
    )Comprehensive income
    
    $
    1,423
    
    
    $
    1,316
    
    
    $
    2,338
    
    
    $
    2,041
 Note 7: Earnings Per Share
  10




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##### 



Portec Rail Products, Inc.
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 Note 8: 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
    
    $
    14,331
    
    
    $
    1,029
    
    
    $
    4,676
    
    
    $
    4,675
    
    
    $
    3,951Future interest payments for
long-term debt obligations
(1)
    
    
    2,285
    
    
    
    402
    
    
    
    1,096
    
    
    
    611
    
    
    
    176Revolving credit facilities
    
    
    718
    
    
    
    718
    
    
    
    
    
    
    
    
    
    
    
    Capital leases
    
    
    47
    
    
    
    11
    
    
    
    35
    
    
    
    1
    
    
    
    Operating leases
    
    
    4,114
    
    
    
    528
    
    
    
    2,043
    
    
    
    735
    
    
    
    808Total contractual obligations
    
    $
    21,495
    
    
    $
    2,688
    
    
    $
    7,850
    
    
    $
    6,022
    
    
    $
    4,935
 
 (1)
    
    Assumes that the interest rates on our long-term debt agreements at June 30, 2005 (See Note 4
of the consolidated financial statements of Form 10-Q) will continue for the life of the
agreements. Litigation
  Note 9: Segment Information
   11




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##### 



Portec Rail Products, Inc.
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
  Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004(In Thousands)External SalesRMP
    
    $
    11,403
    
    
    $
    8,455
    
    
    $
    20,762
    
    
    $
    16,320SSD
    
    
    1,544
    
    
    
    1,235
    
    
    
    2,877
    
    
    
    1,937Canada
    
    
    8,007
    
    
    
    4,862
    
    
    
    14,697
    
    
    
    8,704United Kingdom
    
    
    3,132
    
    
    
    3,961
    
    
    
    6,571
    
    
    
    6,745Total
    
    $
    24,086
    
    
    $
    18,513
    
    
    $
    44,907
    
    
    $
    33,706Intersegment SalesRMP
    
    $
    519
    
    
    $
    500
    
    
    $
    1,035
    
    
    $
    765SSD
    
    
    3
    
    
    
    
    
    
    
    3
    
    
    
    Canada
    
    
    1,783
    
    
    
    475
    
    
    
    2,424
    
    
    
    896United Kingdom
    
    
    7
    
    
    
    21
    
    
    
    32
    
    
    
    27Total
    
    $
    2,312
    
    
    $
    996
    
    
    $
    3,494
    
    
    $
    1,688Total SalesRMP
    
    $
    11,922
    
    
    $
    8,955
    
    
    $
    21,797
    
    
    $
    17,085SSD
    
    
    1,547
    
    
    
    1,235
    
    
    
    2,880
    
    
    
    1,937Canada
    
    
    9,790
    
    
    
    5,337
    
    
    
    17,121
    
    
    
    9,600United Kingdom
    
    
    3,139
    
    
    
    3,982
    
    
    
    6,603
    
    
    
    6,772Total
    
    $
    26,398
    
    
    $
    19,509
    
    
    $
    48,401
    
    
    $
    35,394
 12




---



##### 



Portec Rail Products, Inc.
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004(In Thousands)Operating Income (Loss)RMP
    
    $
    1,675
    
    
    $
    1,259
    
    
    $
    2,780
    
    
    $
    2,337SSD
    
    
    294
    
    
    
    198
    
    
    
    501
    
    
    
    217Canada
    
    
    1,149
    
    
    
    793
    
    
    
    1,828
    
    
    
    1,217United Kingdom
    
    
    137
    
    
    
    346
    
    
    
    352
    
    
    
    165Corporate
    
    
    (703
    )
    
    
    (463
    )
    
    
    (1,248
    )
    
    
    (782
    )Total
    
    
    2,552
    
    
    
    2,133
    
    
    
    4,213
    
    
    
    3,154Interest Expense
    
    
    209
    
    
    
    25
    
    
    
    472
    
    
    
    71Other Expense (Income), net
    
    
    36
    
    
    
    (51
    )
    
    
    (35
    )
    
    
    (33
    )Income Before Income Taxes
    
    $
    2,307
    
    
    $
    2,159
    
    
    $
    3,776
    
    
    $
    3,116Depreciation and AmortizationRMP
    
    $
    181
    
    
    $
    160
    
    
    $
    359
    
    
    $
    318SSD
    
    
    2
    
    
    
    3
    
    
    
    4
    
    
    
    6Canada
    
    
    286
    
    
    
    80
    
    
    
    565
    
    
    
    161United Kingdom
    
    
    122
    
    
    
    120
    
    
    
    242
    
    
    
    241Corporate
    
    
    7
    
    
    
    1
    
    

    
    9
    
    
    
    2Total
    
    $
    598
    
    
    $
    364
    
    
    $
    1,179
    
    
    $
    728Capital ExpendituresRMP
    
    $
    296
    
    
    $
    84
    
    
    $
    403
    
    
    $
    235SSD
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Canada
    
    
    80
    
    
    
    11
    
    
    
    175
    
    
    
    34United Kingdom
    
    
    45
    
    
    
    44
    
    
    
    106
    
    
    
    54Corporate
    
    
    63
    
    
    
    
    
    
    
    84
    
    
    
    Total
    
    $
    484
    
    
    $
    139
    
    
    $
    768
    
    
    $
    325
 June 30
    
    December 312005
    
    2004(In Thousands)
    
    (In Thousands)Total AssetsRMP
    
    $
    40,108
    
    
    $
    40,060SSD
    
    
    1,851
    
    
    
    1,699Canada
    
    
    32,292
    
    
    
    32,504United Kingdom
    
    
    9,905
    
    
    
    10,532Corporate
    
    
    2,414
    
    
    
    3,830Total
    
    $
    86,570
    
    
    $
    88,625
 13




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##### 



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.
  14




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##### 



Overview
  Results of Operations
 Three Months Ended June 30, 2005 compared to Three Months Ended June 30, 2004
 Net Sales.
 Gross Profit.
 Selling, General and Administrative Expenses.
 15




---



##### 



Amortization Expense.
 Interest Expense.
 Provision for Income Taxes.
 Net Income.
 Six Months Ended June 30, 2005 compared to Six Months Ended June 30, 2004
 Net Sales.
 Gross Profit.
 Selling, General and Administrative Expenses.
 16




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##### 



Amortization Expense.
 Interest Expense.
 Provision for Income Taxes.
 Net Income.
 Business Segment Review
  Railway Maintenance Products Division  RMP.
 17




---



##### 



Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004(In Thousands)External sales
    
    $
    11,403
    (2)
    
    $
    8,455
    
    
    $
    20,762
    (2)
    
    $
    16,320Intersegment sales
    
    
    519
    
    
    
    500
    
    
    
    1,035
    
    
    
    765Operating income
    
    
    1,675
    (2)
    
    
    1,259
    
    
    
    2,780
    (2)
    
    
    2,337Sales by product line(1)Rail joints and related products
    
    $
    6,063
    
    
    $
    4,510
    
    
    $
    11,656
    
    
    $
    9,014Friction management products and services
    
    
    4,739
    
    
    
    4,081
    
    
    
    7,878
    
    
    
    7,415Wayside data collection and data management systems
    
    
    830
    (2)
    
    
    
    (3)
    
    
    1,683
    (2)
    
    
    
    (3)Other products and services
    
    
    290
    
    
    
    364
    
    
    
    580
    
    
    
    656Total product and service sales
    
    $
    11,922
    
    
    $
    8,955
    
    
    $
    21,797
    
    
    $
    17,085
 
 (1)
    
    Includes intersegment sales.(2)
    
    Includes Salient Systems external sales of $794,000 and $1.6 million and operating
income of $78,000 and $122,000 for the three and six months ended June 30, 2005,
respectively.(3)
    
    On an unaudited basis and before pro forma adjustments, Salient Systems net sales were
$529,000 and $864,000, and operating income/(loss) was $20,000 and ($216,000) for the three
and six months ended June 30, 2004, respectively. The amounts listed in this footnote are
not included in the RMP table above.   18




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##### 



Shipping Systems Division  SSD.
 Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004(In Thousands)External sales
    
    $
    1,544
    
    
    $
    1,235
    
    
    $
    2,877
    
    
    $
    1,937Intersegment sales
    
    
    3
    
    
    
    
    
    
    
    3
    
    
    
    Operating income
    
    
    294
    
    
    
    198
    
    
    
    501
    
    
    
    217Sales by product line(1)Auto rack load securement systems
    
    $
    456
    
    
    $
    
    
    
    $
    975
    
    
    $
    1Heavy duty load securement
systems
    
    
    436
    
    
    
    453
    
    
    
    889
    
    
    
    764All other load securement systems
    
    
    655
    
    
    
    782
    
    
    
    1,016
    
    
    
    1,172Total product and service sales
    
    $
    1,547
    
    
    $
    1,235
    
    
    $
    2,880
    
    
    $
    1,937
 
 (1)
    
    Includes intersegment sales.   3094497 Nova Scotia Company  Canada. ® ®
 19




---



##### 



Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004(In Thousands)External sales
    
    $
    8,007
    (2)
    
    $
    4,862
    
    
    $
    14,697
    (2)
    
    $
    8,704Intersegment sales
    
    
    1,783
    (3)
    
    
    475
    
    
    
    2,424
    (3)
    
    
    896Operating income
    
    
    1,149
    (2)
    
    
    793
    
    
    
    1,828
    (2)
    
    
    1,217Average translation rate of Canadian
dollar to United States dollar
    
    
    0.8086
    
    
    
    0.7432
    
    
    
    0.8089
    
    
    
    0.7460Sales by product line(1)Rail anchors and spikes
    
    $
    5,495
    
    
    $
    3,825
    
    
    $
    10,110
    
    
    $
    7,228Friction management products and services
    
    
    3,968
    (2)
    
    
    1,295
    (4)
    
    
    6,490
    (2)
    
    
    2,022
    (4)Other products and services
    
    
    327
    
    
    
    217
    
    
    
    521
    
    
    
    350Total product and service sales
    
    $
    9,790
    
    
    $
    5,337
    
    
    $
    17,121
    
    
    $
    9,600
 
 (1)
    
    Includes intersegment sales.(2)
    
    Includes Kelsan sales of $1.5 million and $3.1 million, and operating income of
$123,000 and $229,000 for the three and six months ended June 30, 2005, respectively.(3)
    
    Includes Kelsan intersegment sales of $330,000 and $426,000 for the three and six
months ended June 30, 2005, respectively.(4)
    
    On an unaudited basis and before pro forma adjustments, Kelsans net sales were $1.7
million and $4.4 million and operating income was $180,000 and $634,000 for the three and
six months ended June 30, 2004, respectively. The amounts listed in this footnote are not
included in the Canada table above.   20




---



##### 



Portec Rail Products (UK) Ltd.  United Kingdom.
 Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004(In Thousands)External sales
    
    $
    3,132
    
    
    $
    3,961
    
    
    $
    6,571
    
    
    $
    6,745Intersegment sales
    
    
    7
    
    
    
    21
    
    
    
    32
    
    
    
    27Operating income
    
    
    137
    
    
    
    346
    
    
    
    352
    
    
    
    165Average translation rate of British
pound sterling to United States dollar
    
    
    1.8517
    
    
    
    1.8187
    
    
    
    1.8687
    
    
    
    1.8279Sales by product line(1)Material handling products
    
    $
    2,164
    
    
    $
    2,719
    
    
    $
    4,415
    
    
    $
    4,667Friction management products and services
    
    
    975
    
    
    
    1,263
    
    
    
    2,188
    
    
    
    2,105Total product and service sales
    
    $
    3,139
    
    
    $
    3,982
    
    
    $
    6,603
    
    
    $
    6,772
 
 (1)
    
    Includes intersegment sales.   Liquidity and Capital Resources
  21




---



##### 



Cash Flow Analysis.
   Financial Condition
    22




---



##### 



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
 ITEM 4. CONTROLS AND PROCEDURES
  23




---



##### 



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 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
  1.
    
    With respect to the election of eleven (11) directors whose terms expire in 2006:
 For
    
    Withheld
    
    Broker Non-VoteMarshall T. Reynolds
    
    
    9,118,187
    
    
    
    195,135
    
    
    
    278,903Carl M. Callaway
    
    
    9,117,356
    
    
    
    195,966
    
    
    
    278,903John S. Cooper
    
    
    9,294,693
    
    
    
    18,629
    
    
    
    278,903Philip E. Cline
    
    
    9,293,873
    
    
    
    19,449
    
    
    
    278,903Daniel P. Harrington
    
    
    9,119,136
    
    
    
    194,186
    
    
    
    278,903A. Michael Perry
    
    
    9,292,693
    
    
    
    20,629
    
    
    
    278,903Douglas V. Reynolds
    
    
    9,293,524
    
    
    
    19,798
    
    
    
    278,903Neal W. Scaggs
    
    
    9,119,136
    
    
    
    194,186
    
    
    
    278,903Robert L. Shell, Jr.
    
    
    9,113,736
    
    
    
    199,586
    
    
    
    278,903Kirby J. Taylor
    
    
    9,294,693
    
    
    
    18,629
    
    
    
    278,903Thomas W. Wright
    
    
    9,294,293
    
    
    
    19,029
    
    
    
    278,903
 24




---



##### 



2.
    
    With respect to the ratification of the appointment of BKD, LLP as the Companys
independent auditors for the year ending December 31, 2005:
 For
    
    Against
    
    Abstained
    
    Broker Non-VoteBKD, LLP
    
    
    9,111,972
    
    
    
    195,043
    
    
    
    6,307
    
    
    
    278,903
 
 ITEM 5. OTHER INFORMATION
  
 ITEM
6. EXHIBITS
  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
 25




---



##### 



SIGNATURES
  PORTEC RAIL PRODUCTS, INC.Date: August 12, 2005
    By:
    /s/ John S. CooperJohn S. Cooper, President and ChiefExecutive Officer Date: August 12, 2005
    By:
    /s/ Michael D. BornakMichael D. Bornak, Vice President ofFinance, Chief Financial Officer and
Chief Accounting Officer 26




---



##### 



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
 27