##### 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 September 30, 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
    
    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 September 30, 2009 (Unaudited) and
December 31, 2008
    
    3Condensed
Consolidated Statements of Income (Unaudited) Three and nine months
ended September 30, 2009 and 2008
    
    4Condensed
Consolidated Statements of Cash Flows (Unaudited) Nine months ended
September 30, 2009 and 2008
    
    5Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    62.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    173.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    304T.
    
    Controls and Procedures
    
    30PART II - OTHER INFORMATION1.
    
    Legal Proceedings
    
    301A.
    
    Risk Factors
    
    312.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    313.
    
    Defaults Upon Senior Securities
    
    314.
    
    Submission of Matters to a Vote of Security Holders
    
    315.
    
    Other Information
    
    316.
    
    Exhibits
    
    31Signatures
    
    32EX-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
 September 30
    
    December 312009
    
    2008(Unaudited)
    
    (Audited)(In Thousands)AssetsCurrent assetsCash and cash equivalents
    
    $
    10,786
    
    
    $
    5,371Accounts receivable, net
    
    
    14,700
    
    
    
    14,553Inventories, net
    
    
    21,430
    
    
    
    23,856Prepaid expenses and other current assets
    
    
    1,055
    
    
    
    489Deferred income taxes
    
    
    287
    
    
    
    369Total current assets
    
    $
    48,258
    
    
    $
    44,638Property, plant and equipment, net of
accumulated depreciation of $14,594 and
$12,445 at September 30, 2009 and December
31, 2008, respectively.
    
    
    10,370
    
    
    
    10,203Intangible assets, net of accumulated
amortization of $4,805 and $3,557 at
September 30, 2009 and December 31, 2008,
respectively
    
    
    28,499
    
    
    
    27,732Goodwill
    
    
    14,312
    
    
    
    13,413Other assets
    
    
    956
    
    
    
    837Total assets
    
    $
    102,395
    
    
    $
    96,823Liabilities and Shareholders EquityCurrent liabilitiesCurrent maturities of long-term debt
    
    $
    7,266
    
    
    $
    6,500Accounts payable
    
    
    6,319
    
    
    
    7,155Accrued income taxes
    
    
    128
    
    
    
    513Customer deposits
    
    
    839
    
    
    
    1,935Accrued compensation
    
    
    2,012
    
    
    
    2,641Other accrued liabilities
    
    
    2,785
    
    
    
    2,088Total current liabilities
    
    
    19,349
    
    
    
    20,832Long-term debt, less current maturities
    
    
    3,739
    
    
    
    6,110Deferred income taxes
    
    
    9,929
    
    
    
    7,224Accrued pension costs
    
    
    3,646
    
    
    
    3,583Other long-term liabilities
    
    
    1,005
    
    
    
    898Total liabilities
    
    
    37,668
    
    
    
    38,647Commitments and Contingencies
    
    
    
    
    
    
    Shareholders equity:Common stock, $1 par value, 50,000,000
shares authorized, 9,602,029 shares
issued and outstanding at September 30,
2009 and December 31, 2008,
respectively
    
    
    9,602
    
    
    
    9,602Additional paid-in capital
    
    
    25,521
    
    
    
    25,443Retained earnings
    
    
    32,269
    
    
    
    28,635Accumulated other comprehensive loss
    
    
    (2,665
    )
    
    
    (5,504
    )Total shareholders equity
    
    
    64,727
    
    
    
    58,176Total liabilities and shareholders equity
    
    $
    102,395
    
    
    $
    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 Ended
    
    Nine Months EndedSeptember 30
    
    September 302009
    
    2008
    
    2009
    
    2008(Dollars in Thousands, Except Per Share Data)Net sales
    
    $
    24,285
    
    
    $
    29,644
    
    
    $
    72,979
    
    
    $
    84,681Cost of sales
    
    
    15,849
    
    
    
    19,731
    
    
    
    48,674
    
    
    
    57,140Gross profit
    
    
    8,436
    
    
    
    9,913
    
    
    
    24,305
    
    
    
    27,541Selling, general and administrative
    
    
    5,411
    
    
    
    5,872
    
    
    
    16,271
    
    
    
    17,267Amortization expense
    
    
    283
    
    
    
    296
    
    
    
    806
    
    
    
    891Operating income
    
    
    2,742
    
    
    
    3,745
    
    
    
    7,228
    
    
    
    9,383Interest expense
    
    
    64
    
    
    
    205
    
    
    
    217
    
    
    
    640Other expense (income), net
    
    
    37
    
    
    
    44
    
    
    
    (83
    )
    
    
    (77
    )Income before income taxes
    
    
    2,641
    
    
    
    3,496
    
    
    
    7,094
    
    
    
    8,820Provision for income taxes
    
    
    618
    
    
    
    980
    
    
    
    1,732
    
    
    
    2,556Net income
    
    $
    2,023
    
    
    $
    2,516
    
    
    $
    5,362
    
    
    $
    6,264Earnings per shareBasic and diluted
    
    $
    0.21
    
    
    $
    0.26
    
    
    $
    0.56
    
    
    $
    0.65Weighted average shares outstandingBasic and diluted
    
    
    9,602,029
    
    
    
    9,602,029
    
    
    
    9,602,029
    
    
    
    9,601,894Dividends per share
    
    $
    0.06
    
    
    $
    0.06
    
    
    $
    0.18
    
    
    $
    0.18
 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)
 Nine Months EndedSeptember 302009
    
    2008(In Thousands)Operating ActivitiesNet income
    
    $
    5,362
    
    
    $
    6,264Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation expense
    
    
    1,309
    
    
    
    1,367Amortization expense
    
    
    806
    
    
    
    891Provision for doubtful accounts
    
    
    78
    
    
    
    132Deferred income taxes
    
    
    597
    
    
    
    291Pension expense (income)
    
    
    157
    
    
    
    (30
    )Defined benefit pension plan contributions
    
    
    (176
    )
    
    
    (814
    )Loss on disposal of assets
    
    
    2
    
    
    
    48Stock-based compensation expense
    
    
    78
    
    
    
    73Changes in operating assets and liabilities:Accounts receivable
    
    
    672
    
    
    
    (1,739
    )Inventories
    
    
    3,854
    
    
    
    (3,923
    )Prepaid expenses and other current assets
    
    
    (685
    )
    
    
    (851
    )Accounts payable
    
    
    (1,361
    )
    
    
    2,286Income taxes payable
    
    
    (450
    )
    
    
    324Accrued expenses
    
    
    (1,190
    )
    
    
    406Net cash provided by operating activities
    
    
    9,053
    
    
    
    4,725Investing ActivitiesPurchases of property, plant and equipment
    
    
    (718
    )
    
    
    (2,304
    )Proceeds from sale of assets
    
    
    
    
    
    
    12Contingent consideration  business acquisition
    
    
    (96
    )
    
    
    (148
    )Net cash used in investing activities
    
    
    (814
    )
    
    
    (2,440
    )Financing ActivitiesNet increase in working capital facilities
    
    
    800
    
    
    
    3,087Book overdrafts
    
    
    (261
    )
    
    
    (245
    )Principal payments on promissory notes
    
    
    (280
    )
    
    
    (280
    )Proceeds from term loans
    
    
    300
    
    
    
    1,800Principal payments on term loans
    
    
    (2,522
    )
    
    
    (2,731
    )Fees paid to obtain new financing
    
    
    (17
    )
    
    
    (21
    )Issuance of common stock
    
    
    
    
    
    
    2Cash dividends paid to shareholders
    
    
    (1,728
    )
    
    
    (1,728
    )Net cash used in financing activities
    
    
    (3,708
    )
    
    
    (116
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    884
    
    
    
    (327
    )Increase in cash and cash equivalents
    
    
    5,415
    
    
    
    1,842Cash and cash equivalents at beginning of period
    
    
    5,371
    
    
    
    4,273Cash and cash equivalents at end of period
    
    $
    10,786
    
    
    $
    6,115Supplemental Disclosures of Cash Flow InformationCash paid during the period for:Interest
    
    $
    297
    
    
    $
    676Income taxes
    
    $
    1,666
    
    
    $
    2,145
 See Notes to Condensed Consolidated Financial Statements
 5




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##### Table of Contents



Note 1: Organization
  Note 2: Basis of Presentation
  Note 3: Inventories
   September 30
    
    December 312009
    
    2008(In Thousands)Raw materials
    
    $
    8,822
    
    
    $
    10,617Work in process
    
    
    313
    
    
    
    411Finished goods
    
    
    13,087
    
    
    
    13,72722,222
    
    
    
    24,755Less reserve for slow-moving and obsolete inventory
    
    
    792
    
    
    
    899Net inventory
    
    $
    21,430
    
    
    $
    23,856
 6




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##### Table of Contents



Note 4: Long-Term Debt
  September 30
    
    December 312009
    
    2008(In Thousands)National City Bank Credit Facility: (a)Term loan  Kelsan acquisition
    
    $
    3,489
    
    
    $
    4,884Term loan  Vulcan asset acquisition
    
    
    1,250
    
    
    
    1,700Revolving credit facility  United States
    
    
    3,600
    
    
    
    2,800Revolving credit facility  Canada
    
    
    
    
    
    
    United Kingdom loans: (b)Term loan  Coronet Rail acquisition
    
    
    840
    
    
    
    1,131Working capital facility
    
    
    
    
    
    
    Term loans  vehicles
    
    
    6
    
    
    
    15Promissory notes  Salient Systems acquisition (c)
    
    
    
    
    
    
    280Credit facility  Boone County Bank, Inc. (d)
    
    
    1,820
    
    
    
    1,80011,005
    
    
    
    12,610Less current maturities
    
    
    7,266
    
    
    
    6,500$
    3,739
    
    
    $
    6,110
 
 (a)
    
    National City Bank Credit Facility    Term Loan  Kelsan Acquisition:
  7




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##### Table of Contents



Term Loan  Vulcan Asset Acquisition:
  Revolving Credit Facility  United States:
  Revolving Credit Facility  Canada:
  (b) United Kingdom Loans
 Term Loan  Coronet Rail Acquisition:
  Working Capital Facility:
   8




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##### Table of Contents



(c) Salient Systems Promissory Notes
  d) Credit Facility  Boone County Bank, Inc.
   Note 5: Income Taxes
  Nine Months EndedSeptember 302009
    
    
    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
    
    
    116
    
    
    
    Reductions for tax positions of prior years
    
    
    (65
    )
    
    
    (50
    )Settlements
    
    
    31
    
    
    
    Balance at September 30
    
    $
    439
    
    
    $
    339
  9




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##### Table of Contents



Note 6: Retirement Plans
  Three Months Ended
    
    Nine Months EndedSeptember 30
    
    September 302009
    
    2008
    
    2009
    
    2008(In Thousands)Interest cost
    
    $
    144
    
    
    $
    138
    
    
    $
    432
    
    
    $
    414Expected return on plan assets
    
    
    (162
    )
    
    
    (166
    )
    
    
    (486
    )
    
    
    (496
    )Amortization of unrecognized loss
    
    
    26
    
    
    
    18
    
    
    
    76
    
    
    
    53Pension (benefit) cost
    
    $
    8
    
    
    $
    (10
    )
    
    $
    22
    
    
    $
    (29
    )
   Portec Rail PlanThree Months Ended
    
    Nine Months EndedSeptember 30
    
    September 302009
    
    2008
    
    2009
    
    2008(In Thousands)Service cost
    
    $
    
    
    
    $
    10
    
    
    $
    
    
    
    $
    31Interest cost
    
    
    67
    
    
    
    80
    
    
    
    193
    
    
    
    248Expected return on plan assets
    
    
    (49
    )
    
    
    (94
    )
    
    
    (143
    )
    
    
    (290
    )Amortization of transition amount
    
    
    (12
    )
    
    
    (14
    )
    
    
    (35
    )
    
    
    (44
    )Amortization of unrecognized loss
    
    
    31
    
    
    
    20
    
    
    
    91
    
    
    
    63Pension cost
    
    $
    37
    
    
    $
    2
    
    
    $
    106
    
    
    $
    8
 Conveyors PlanThree Months Ended
    
    Nine Months EndedSeptember 30
    
    September 302009
    
    2008
    
    2009
    
    2008(In Thousands)Service cost
    
    $
    
    
    
    $
    1
    
    
    $
    
    
    
    $
    3Interest cost
    
    
    13
    
    
    
    18
    
    
    
    39
    
    
    
    56Expected return on plan assets
    
    
    (8
    )
    
    
    (19
    )
    
    
    (25
    )
    
    
    (59
    )Amortization of transition amount
    
    
    (2
    )
    
    
    (3
    )
    
    
    (7
    )
    
    
    (9
    )Amortization of unrecognized loss
    
    
    8
    
    
    
    
    
    
    
    22
    
    
    
    Pension (benefit)/cost
    
    $
    11
    
    
    $
    (3
    )
    
    $
    29
    
    
    $
    (9
    )
  10




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##### Table of Contents



Note 7: Comprehensive Income
  Three Months Ended
    
    Nine Months EndedSeptember 30
    
    September 302009
    
    2008
    
    2009
    
    2008(In Thousands)Net income
    
    $
    2,023
    
    
    $
    2,516
    
    
    $
    5,362
    
    
    $
    6,264Minimum pension liability adjustment, net of tax
    
    
    36
    
    
    
    94
    
    
    
    (67
    )
    
    
    94Foreign currency translation adjustments, net of tax
    
    
    1,399
    
    
    
    (1,584
    )
    
    
    2,906
    
    
    
    (1,974
    )Comprehensive income
    
    $
    3,458
    
    
    $
    1,026
    
    
    $
    8,201
    
    
    $
    4,384
 Note 8: Earnings Per Share
 Earnings
per Share
   11




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Note 9: Commitments and Contingencies
 Contractual Obligations
  MoreLess
    
    
    1  3
    
    
    3  5
    
    
    than 5Contractual Obligations
    
    Total
    
    
    than 1 year
    
    
    years
    
    
    years
    
    
    years(In Thousands)Term loans
    
    $
    7,405
    
    
    $
    3,666
    
    
    $
    2,864
    
    
    $
    840
    
    
    $
    35Purchase obligations
    
    
    3,497
    
    
    
    2,253
    
    
    
    1,244
    
    
    
    
    
    
    
    Operating leases
    
    
    4,420
    
    
    
    664
    
    
    
    1,981
    
    
    
    853
    
    
    
    922Working capital facilities
    
    
    3,600
    
    
    
    3,600
    
    
    
    
    
    
    
    
    
    
    
    Future interest payments (1)
    
    
    217
    
    
    
    39
    
    
    
    149
    
    
    
    29
    
    
    
    Pension plan contributions (2)
    
    
    3,697
    
    
    
    176
    
    
    
    1,709
    
    
    
    1,381
    
    
    
    431Total contractual obligations (3)
    
    $
    22,836
    
    
    $
    10,398
    
    
    $
    7,947
    
    
    $
    3,103
    
    
    $
    1,388
 
 (1)
    
    Represents future interest payments on long-term debt obligations as of September 30, 2009.
Assumes that the interest rates on our debt obligations at September 30, 2009 (See Note 4,
Long-Term Debt, Page 7) will continue for the life of the agreements.(2)
    
    Pension plan contributions that may be required more than one year from September 30, 2009 will
be dependent upon the performance of plan assets.(3)
    
    As a result of adopting FASB ASC Topic 740, Income Taxes,we recorded an initial liability of
$313,000 related to uncertain tax positions for 2007. During the nine months ended September 30,
2009 and 2008, we recognized $126,000 and $26,000 of additional liability, respectively. See Note
5, Income Taxes, Page 9. A total of $439,000 and $313,000 are included within other long-term
liabilities on the September 30, 2009 and the December 31, 2008 consolidated balance sheets,
respectively. However, because of the high degree of uncertainty regarding the timing of future
cash outflows associated with this FASB ASC 740 liability, we cannot reasonably estimate the
periods of related future payments, and as such, we have excluded the uncertain tax positions
liability from the contractual obligations table. Litigation
  12




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Note 10: Segment Information
  Three Months Ended
    
    Nine Months EndedSeptember 30
    
    September 302009
    
    2008
    
    2009
    
    2008(In Thousands)External SalesRMP
    
    $
    11,556
    
    
    $
    12,352
    
    
    $
    35,394
    
    
    $
    34,929SSD
    
    
    1,293
    
    
    
    2,345
    
    
    
    4,054
    
    
    
    8,287Canada
    
    
    6,511
    
    
    
    7,502
    
    
    
    20,824
    
    
    
    21,457United Kingdom
    
    
    4,925
    
    
    
    7,445
    
    
    
    12,707
    
    
    
    20,008Total
    
    $
    24,285
    
    
    $
    29,644
    
    
    $
    72,979
    
    
    $
    84,681Intersegment SalesRMP
    
    $
    377
    
    
    $
    1,092
    
    
    $
    1,218
    
    
    $
    2,489SSD
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canada
    
    
    2,252
    
    
    
    1,875
    
    
    
    6,107
    
    
    
    5,358United Kingdom
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    Total
    
    $
    2,630
    
    
    $
    2,967
    
    
    $
    7,326
    
    
    $
    7,847Total SalesRMP
    
    $
    11,933
    
    
    $
    13,444
    
    
    $
    36,612
    
    
    $
    37,418SSD
    
    
    1,293
    
    
    
    2,345
    
    
    
    4,054
    
    
    
    8,287Canada
    
    
    8,763
    
    
    
    9,377
    
    
    
    26,931
    
    
    
    26,815United Kingdom
    
    
    4,926
    
    
    
    7,445
    
    
    
    12,708
    
    
    
    20,008Total
    
    $
    26,915
    
    
    $
    32,611
    
    
    $
    80,305
    
    
    $
    92,528Operating Income (Loss)RMP
    
    $
    1,571
    
    
    $
    1,960
    
    
    $
    4,884
    
    
    $
    5,066SSD
    
    
    (6
    )
    
    
    238
    
    
    
    (24
    )
    
    
    1,609Canada
    
    
    1,522
    
    
    
    1,486
    
    
    
    4,510
    
    
    
    3,165United Kingdom
    
    
    517
    
    
    
    872
    
    
    
    508
    
    
    
    2,059Corporate Shared Services
    
    
    (862
    )
    
    
    (811
    )
    
    
    (2,650
    )
    
    
    (2,516
    )Total
    
    
    2,742
    
    
    
    3,745
    
    
    
    7,228
    
    
    
    9,383
 13




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##### Table of Contents



Three Months Ended
    
    Nine Months EndedSeptember 30
    
    September 302009
    
    2008
    
    2009
    
    2008(In Thousands)Interest Expense
    
    
    64
    
    
    
    205
    
    
    
    217
    
    
    
    640Other Expense (Income), net
    
    
    37
    
    
    
    44
    
    
    
    (83
    )
    
    
    (77
    )Income Before Income Taxes
    
    $
    2,641
    
    
    $
    3,496
    
    
    $
    7,094
    
    
    $
    8,820DepreciationRMP
    
    $
    157
    
    
    $
    154
    
    
    $
    498
    
    
    $
    408SSD
    
    
    49
    
    
    
    54
    
    
    
    147
    
    
    
    153Canada
    
    
    170
    
    
    
    199
    
    
    
    469
    
    
    
    597United Kingdom
    
    
    53
    
    
    
    70
    
    
    
    148
    
    
    
    160Corporate Shared Services
    
    
    20
    
    
    
    15
    
    
    
    47
    
    
    
    49Total
    
    $
    449
    
    
    $
    492
    
    
    $
    1,309
    
    
    $
    1,367AmortizationRMP
    
    $
    8
    
    
    $
    6
    
    
    $
    26
    
    
    $
    12SSD
    
    
    53
    
    
    
    55
    
    
    
    160
    
    
    
    163Canada
    
    
    170
    
    
    
    176
    
    
    
    475
    
    
    
    533United Kingdom
    
    
    52
    
    
    
    59
    
    
    
    145
    
    
    
    183Corporate Shared Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    283
    
    
    $
    296
    
    
    $
    806
    
    
    $
    891Capital ExpendituresRMP
    
    $
    
    
    
    $
    157
    
    
    $
    180
    
    
    $
    1,891SSD
    
    
    9
    
    
    
    26
    
    
    
    33
    
    
    
    72Canada
    
    
    136
    
    
    
    24
    
    
    
    371
    
    
    
    117United Kingdom
    
    
    5
    
    
    
    34
    
    
    
    26
    
    
    
    187Corporate Shared Services
    
    
    66
    
    
    
    17
    
    
    
    108
    
    
    
    37Total
    
    $
    216
    
    
    $
    258
    
    
    $
    718
    
    
    $
    2,304
 September 30
    
    December 312009
    
    2008(In Thousands)Total AssetsRMP
    
    $
    37,900
    
    
    $
    40,870SSD
    
    
    7,037
    
    
    
    7,882Canada
    
    
    42,544
    
    
    
    32,990United Kingdom
    
    
    14,709
    
    
    
    14,938Corporate Shared Services
    
    
    205
    
    
    
    143Total
    
    $
    102,395
    
    
    $
    96,823
 Note 11: Fair Value of Financial Instruments
 Fair Value Measurements and Disclosure.
 14




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Level 1
 Level 2
 Level 3
   Note 12: Recent Accounting Pronouncements
 The FASB Accounting Standards Codification
 Subsequent Events,
 Derivative
and Hedging
 Business Combinations
 15




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##### Table of Contents



Note 13: Stock Options
     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
 Note 14: Subsequent Events
  16




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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.
  17




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Overview
     Results of Operations
 Three Months Ended September 30, 2009 compared to Three Months Ended September 30, 2008
 Net Sales.
 Cost of Goods Sold.
 18




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Gross Profit.
 Selling, General and Administrative Expenses.
 Interest Expense.
 Provision for Income Taxes.
 Net Income.
 Nine Months Ended September 30, 2009 compared to Nine Months Ended September 30, 2008
 Net Sales.
 Cost of Goods Sold.
 19




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Gross Profit.
 Selling, General and Administrative Expenses.
 Interest Expense.
 Provision for Income Taxes.
 Net Income.
 20




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##### Table of Contents



Business Segment Review
 Railway Maintenance Products Division  RMP .
 Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 302009
    
    
    2008
    
    
    2009
    
    
    2008(In Thousands)External sales
    
    $
    11,556
    
    
    $
    12,352
    
    
    $
    35,394
    
    
    $
    34,929Intersegment sales
    
    
    377
    
    
    
    1,092
    
    
    
    1,218
    
    
    
    2,489Operating income
    
    
    1,571
    
    
    
    1,960
    
    
    
    4,884
    
    
    
    5,066Sales by product line(1)Track component products
    
    $
    4,650
    
    
    $
    6,791
    
    
    $
    16,355
    
    
    $
    19,469Friction management products and services
    
    
    5,343
    
    
    
    4,668
    
    
    
    14,091
    
    
    
    11,659Wayside data collection and data management systems
    
    
    1,367
    
    
    
    1,039
    
    
    
    3,933
    
    
    
    3,764Other products and services
    
    
    573
    
    
    
    946
    
    
    
    2,233
    
    
    
    2,526Total product and service sales
    
    $
    11,933
    
    
    $
    13,444
    
    
    $
    36,612
    
    
    $
    37,418
 
 (1)
    
    Includes intersegment sales.   21




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Shipping Systems Division  SSD .
 Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 302009
    
    
    2008
    
    
    2009
    
    
    2008(In Thousands)External sales
    
    $
    1,293
    
    
    $
    2,345
    
    
    $
    4,054
    
    
    $
    8,287Intersegment sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating (loss)/income
    
    
    (6
    )
    
    
    238
    
    
    
    (24
    )
    
    
    1,609Sales by product lineAutomotive products
    
    $
    703
    
    
    $
    1,326
    
    
    $
    1,928
    
    
    $
    5,125Chain securement systems
    
    
    469
    
    
    
    730
    
    
    
    1,669
    
    
    
    2,285Strap securement systems
    
    
    22
    
    
    
    113
    
    
    
    142
    
    
    
    260Other load securement systems
    
    
    99
    
    
    
    176
    
    
    
    315
    
    
    
    617Total product and service sales
    
    $
    1,293
    
    
    $
    2,345
    
    
    $
    4,054
    
    
    $
    8,287
 
   22




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Portec Rail Nova Scotia Company  Canada . ® ®
 Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 302009
    
    
    2008
    
    
    2009
    
    
    2008(In Thousands, Except Translation Rate )External sales
    
    $
    6,511
    
    
    $
    7,502
    
    
    $
    20,824
    
    
    $
    21,457Intersegment sales
    
    
    2,252
    
    
    
    1,875
    
    
    
    6,107
    
    
    
    5,358Operating income
    
    
    1,522
    
    
    
    1,486
    
    
    
    4,510
    
    
    
    3,165Average translation rate of Canadian
dollar to United States dollar
    
    
    0.9088
    
    
    
    0.9598
    
    
    
    0.8649
    
    
    
    0.9814Sales by product line(1)Track component products (2)
    
    $
    3,352
    
    
    $
    3,461
    
    
    $
    12,478
    
    
    $
    12,820Friction management products and services
    
    
    5,152
    
    
    
    5,426
    
    
    
    13,366
    
    
    
    12,745Other products and services
    
    
    259
    
    
    
    490
    
    
    
    1,087
    
    
    
    1,250Total product and service sales
    
    $
    8,763
    
    
    $
    9,377
    
    
    $
    26,931
    
    
    $
    26,815
 
 (1)
    
    Includes intersegment sales.(2)
    
    Formerly referred to as Rail anchors and spikes   23




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Portec
Rail Products (UK) Ltd.  United
Kingdom
 Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 302009
    
    
    2008
    
    
    2009
    
    
    2008(In Thousands, Except Translation Rate)External sales
    
    $
    4,925
    
    
    $
    7,445
    
    
    $
    12,707
    
    
    $
    20,008Intersegment sales
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    Operating income
    
    
    517
    
    
    
    872
    
    
    
    508
    
    
    
    2,059Average translation rate of British
pound sterling to United States dollar
    
    
    1.6355
    
    
    
    1.8937
    
    
    
    1.5504
    
    
    
    1.9454Sales by product line (1)Friction management products and services
    
    $
    2,728
    
    
    $
    3,448
    
    
    $
    6,852
    
    
    $
    8,709Material handling products
    
    
    1,001
    
    
    
    2,715
    
    
    
    3,132
    
    
    
    7,060Track component products
    
    
    1,197
    
    
    
    1,282
    
    
    
    2,724
    
    
    
    4,239Total product and service sales
    
    $
    4,926
    
    
    $
    7,445
    
    
    $
    12,708
    
    
    $
    20,008
 
 (1)
    
    Includes intersegment sales.   24




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Liquidity and Capital Resources
  Cash Flow Analysis .
   Financial Condition
    25




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##### Table of Contents



Discussion of Critical Accounting Policies
  Revenue Recognition.
   Allowances for Doubtful Accounts.
  Inventories.
 Goodwill and Other Intangible Assets.
 26




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Intangibles, Goodwill and Other
 Accounting for Impairment or Disposal of Long-Lived Assets.
    27




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Warranty Reserves.
 Retirement Benefit Plans. CompensationRetirement Benefits.
   Income Taxes.
 28




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Income Taxes
 29




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
 ITEM 4T. CONTROLS AND PROCEDURES
  
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  30




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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
 31




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SIGNATURES
  PORTEC RAIL PRODUCTS, INC.Date: November 6, 2009
    By:
    /s/ Richard J. JarosinskiRichard J. Jarosinski, President andChief Executive Officer and Principal
Executive OfficerDate: November 6, 2009
    By:
    /s/ John N. PesarsickJohn N. Pesarsick, Chief Financial Officer andPrincipal Accounting Officer 32




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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
 33