##### 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 June 30, 2010
 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(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
 o þ




---



##### 



PORTEC RAIL PRODUCTS, INC.
 INDEX TO FORM 10-Q
 ItemNumber
    
    Page NumberPART I  FINANCIAL INFORMATION1. Financial Statements:Condensed Consolidated Balance Sheets
June 30, 2010 (Unaudited) and December 31, 2009
    
    
    3Condensed Consolidated Statements of Income (Unaudited)
Three and six months ended June 30, 2010 and 2009
    
    
    4Condensed Consolidated Statements of Cash Flows (Unaudited)
Six months ended June 30, 2010 and 2009
    
    
    5Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    62. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    193. Quantitative and Qualitative Disclosures About Market Risk
    
    
    324T. Controls and Procedures
    
    
    32PART II  OTHER INFORMATION1. Legal Proceedings
    
    
    321A. Risk Factors
    
    
    352. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    353. Defaults Upon Senior Securities
    
    
    354. Removed & Reserved
    
    
    355. Exhibits
    
    
    35Signatures
    
    
    36EX-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
 June 30
    
    
    December 312010
    
    
    2009(Unaudited)
    
    
    (Audited)(In Thousands)AssetsCurrent assetsCash and cash equivalents
    
    $
    14,003
    
    
    $
    14,279Accounts receivable, net
    
    
    18,437
    
    
    
    10,667Inventories, net
    
    
    20,062
    
    
    
    21,538Prepaid expenses and other current assets
    
    
    1,793
    
    
    
    1,623Deferred income taxes
    
    
    79
    
    
    
    160Total current assets
    
    $
    54,374
    
    
    $
    48,267Property, plant and equipment, net of accumulated
depreciation of $14,533 and $13,938 at June 30, 2010 and
December 31, 2009, respectively.
    
    
    9,608
    
    
    
    10,260Intangible assets, net of accumulated amortization of
$5,657 and $5,171 at June 30, 2010 and December 31,
2009, respectively
    
    
    27,740
    
    
    
    28,507Goodwill
    
    
    14,188
    
    
    
    14,463Other assets
    
    
    716
    
    
    
    1,045Total assets
    
    $
    106,626
    
    
    $
    102,542Liabilities and Shareholders EquityCurrent liabilitiesCurrent maturities of long-term debt
    
    $
    9,757
    
    
    $
    8,086Accounts payable
    
    
    8,000
    
    
    
    4,940Accrued income taxes
    
    
    588
    
    
    
    618Customer deposits
    
    
    1,508
    
    
    
    873Accrued compensation
    
    
    1,860
    
    
    
    2,424Other accrued liabilities
    
    
    3,722
    
    
    
    2,216Total current liabilities
    
    
    25,435
    
    
    
    19,157Long-term debt, less current maturities
    
    
    1,285
    
    
    
    2,667Deferred income taxes
    
    
    9,641
    
    
    
    10,070Accrued pension costs
    
    
    3,702
    
    
    
    3,809Other long-term liabilities
    
    
    1,183
    
    
    
    1,091Total liabilities
    
    
    41,246
    
    
    
    36,794Commitments and Contingencies
    
    
    
    
    
    
    Shareholders equity:Common stock, $1 par value, 50,000,000 shares
authorized, 9,603,179 and 9,602,029 shares issued
and outstanding at
June 30, 2010 and December 31, 2009, respectively
    
    
    9,603
    
    
    
    9,602Additional paid-in capital
    
    
    25,609
    
    
    
    25,547Retained earnings
    
    
    33,305
    
    
    
    33,136Accumulated other comprehensive loss
    
    
    (3,137
    )
    
    
    (2,537
    )Total shareholders equity
    
    
    65,380
    
    
    
    65,748Total liabilities and shareholders equity
    
    $
    106,626
    
    
    $
    102,542
 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
    
    
    Six Months EndedJune 30
    
    
    June 302010
    
    
    2009
    
    
    2010
    
    
    2009(Dollars in Thousands, Except Per Share Data)Net sales
    
    $
    32,430
    
    
    $
    26,530
    
    
    $
    55,757
    
    
    $
    48,694Cost of sales
    
    
    22,102
    
    
    
    17,934
    
    
    
    36,930
    
    
    
    32,825Gross profit
    
    
    10,328
    
    
    
    8,596
    
    
    
    18,827
    
    
    
    15,869Selling, general and administrative
    
    
    8,075
    
    
    
    5,480
    
    
    
    14,984
    
    
    
    10,860Amortization expense
    
    
    306
    
    
    
    270
    
    
    
    616
    
    
    
    523Operating income
    
    
    1,947
    
    
    
    2,846
    
    
    
    3,227
    
    
    
    4,486Interest expense
    
    
    59
    
    
    
    79
    
    
    
    123
    
    
    
    153Other (income)/loss, net
    
    
    (202
    )
    
    
    (135
    )
    
    
    271
    
    
    
    (120
    )Income before income taxes
    
    
    2,090
    
    
    
    2,902
    
    
    
    2,833
    
    
    
    4,453Provision for income taxes
    
    
    1,226
    
    
    
    699
    
    
    
    1,512
    
    
    
    1,114Net income
    
    $
    864
    
    
    $
    2,203
    
    
    $
    1,321
    
    
    $
    3,339Earnings per shareBasic and diluted
    
    $
    0.09
    
    
    $
    0.23
    
    
    $
    0.14
    
    
    $
    0.35Weighted average shares outstandingBasic
    
    
    9,602,421
    
    
    
    9,602,029
    
    
    
    9,602,417
    
    
    
    9,602,029Diluted
    
    
    9,613,305
    
    
    
    9,602,029
    
    
    
    9,612,042
    
    
    
    9,602,029Dividends per share
    
    $
    0.06
    
    
    $
    0.06
    
    
    $
    0.12
    
    
    $
    0.12
 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)
 Six Months EndedJune 302010
    
    
    2009(In Thousands)Operating ActivitiesNet income
    
    $
    1,321
    
    
    $
    3,339Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation expense
    
    
    870
    
    
    
    860Amortization expense
    
    
    616
    
    
    
    523Provision for doubtful accounts
    
    
    34
    
    
    
    71Deferred income taxes
    
    
    133
    
    
    
    182Pension expense
    
    
    139
    
    
    
    103Defined benefit pension plan contributions
    
    
    (168
    )
    
    
    (102
    )Loss on disposal of assets
    
    
    9
    
    
    
    1Stock-based compensation expense
    
    
    52
    
    
    
    52Changes in operating assets and liabilities:Accounts receivable
    
    
    (8,101
    )
    
    
    (264
    )Inventories
    
    
    1,127
    
    
    
    1,610Prepaid expenses and other current assets
    
    
    (352
    )
    
    
    (603
    )Accounts payable
    
    
    3,206
    
    
    
    (1,175
    )Income taxes payable
    
    
    299
    
    
    
    (488
    )Accrued expenses
    
    
    1,807
    
    
    
    (1,779
    )Net cash provided by operating activities
    
    
    992
    
    
    
    2,330Investing ActivitiesPurchases of property, plant and equipment
    
    
    (367
    )
    
    
    (502
    )Proceeds from sale of assets
    
    
    30
    
    
    
    Contingent consideration  business acquisition
    
    
    
    
    
    
    (60
    )Net cash used in investing activities
    
    
    (337
    )
    
    
    (562
    )Financing ActivitiesNet increase in working capital facilities
    
    
    2,214
    
    
    
    2,761Book overdrafts
    
    
    (34
    )
    
    
    (205
    )Principal payments on promissory notes
    
    
    
    
    
    
    (280
    )Proceeds from term loans
    
    
    
    
    
    
    300Principal payments on term loans
    
    
    (1,896
    )
    
    
    (1,602
    )Issuance of common stock
    
    
    11
    
    
    
    Cash dividends paid to shareholders
    
    
    (1,152
    )
    
    
    (1,152
    )Net cash used in financing activities
    
    
    (857
    )
    
    
    (178
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (74
    )
    
    
    238Increase (decrease) in cash and cash equivalents
    
    
    (276
    )
    
    
    1,828Cash and cash equivalents at beginning of period
    
    
    14,279
    
    
    
    5,371Cash and cash equivalents at end of period
    
    $
    14,003
    
    
    $
    7,199Supplemental Disclosures of Cash Flow InformationCash paid during the period for:Interest
    
    $
    118
    
    
    $
    170Income taxes
    
    $
    774
    
    
    $
    1,414
 See Notes to Condensed Consolidated Financial Statements
 5




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##### Table of Contents



Note 1: Organization
  Note 2: Basis of Presentation
  6




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##### Table of Contents



Note 3: Inventories
   June 30
    
    
    December 312010
    
    
    2009(In Thousands)Raw materials
    
    $
    6,556
    
    
    $
    9,903Work in process
    
    
    334
    
    
    
    279Finished goods
    
    
    13,790
    
    
    
    11,93120,680
    
    
    
    22,113Less reserve for slow-moving and obsolete inventory
    
    
    618
    
    
    
    575Net inventory
    
    $
    20,062
    
    
    $
    21,538
 Note 4: Long-Term Debt
  June 30
    
    
    December 312010
    
    
    2009(In Thousands)PNC Financial Credit Facility: (a)Term loan  Kelsan acquisition
    
    $
    1,919
    
    
    $
    2,966Term loan  Vulcan asset acquisition
    
    
    800
    
    
    
    1,100Revolving credit facility  United States
    
    
    6,715
    
    
    
    4,500Revolving credit facility  Canada
    
    
    
    
    
    
    United Kingdom loans: (b)Term loan  Coronet Rail acquisition
    
    
    103
    
    
    
    471Working capital facility
    
    
    
    
    
    
    Term loans  vehicles
    
    
    
    
    
    
    1Term Loan  Boone County Bank, Inc. (c)
    
    
    1,505
    
    
    
    1,71511,042
    
    
    
    10,753Less current maturities
    
    
    9,757
    
    
    
    8,086$
    1,285
    
    
    $
    2,667
 
 (a) PNC Financial Credit Facility
  7




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##### Table of Contents



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




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##### Table of Contents



Working Capital Facility:
    c) Term Loan  Boone County Bank, Inc.
   Note 5: Income Taxes
  Six Months EndedJune 302010
    
    2009(In Thousands)Balance at January 1
    
    $
    436
    
    
    $
    313Additions based on tax positions related to the current year
    
    
    50
    
    
    
    44Additions for tax positions of prior years
    
    
    87
    
    
    
    83Reductions for tax positions of prior years
    
    
    (59
    )
    
    
    (65
    )Settlements
    
    
    (23
    )
    
    
    31Balance at June 30
    
    $
    491
    
    
    $
    406
  9




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##### Table of Contents



Note 6: Retirement Plans
  Three Months Ended
    
    Six Months EndedJune 30
    
    June 302010
    
    2009
    
    2010
    
    2009(In Thousands)Interest cost
    
    $
    137
    
    
    $
    144
    
    
    $
    274
    
    
    $
    288Expected return on plan assets
    
    
    (161
    )
    
    
    (162
    )
    
    
    (323
    )
    
    
    (324
    )Amortization of unrecognized loss
    
    
    48
    
    
    
    25
    
    
    
    96
    
    
    
    50Pension expense
    
    $
    24
    
    
    $
    7
    
    
    $
    47
    
    
    $
    14
   Portec Rail PlanThree Months Ended
    
    Six Months EndedJune 30
    
    June 302010
    
    2009
    
    2010
    
    2009(In Thousands)Interest cost
    
    $
    62
    
    
    $
    67
    
    
    $
    128
    
    
    $
    127Expected return on plan assets
    
    
    (49
    )
    
    
    (50
    )
    
    
    (101
    )
    
    
    (94
    )Amortization of transition amount
    
    
    (11
    )
    
    
    (12
    )
    
    
    (23
    )
    
    
    (23
    )Amortization of unrecognized loss
    
    
    35
    
    
    
    32
    
    
    
    72
    
    
    
    60Pension expense
    
    $
    37
    
    
    $
    37
    
    
    $
    76
    
    
    $
    70
 10




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##### Table of Contents



Conveyors PlanThree Months Ended
    
    Six Months EndedJune 30
    
    June 302010
    
    2009
    
    2010
    
    2009(In Thousands)Interest cost
    
    $
    12
    
    
    $
    13
    
    
    $
    25
    
    
    $
    25Expected return on plan assets
    
    
    (10
    )
    
    
    (9
    )
    
    
    (20
    )
    
    
    (17
    )Amortization of transition amount
    
    
    (2
    )
    
    
    (2
    )
    
    
    (4
    )
    
    
    (4
    )Amortization of unrecognized loss
    
    
    7
    
    
    
    8
    
    
    
    15
    
    
    
    15Pension expense
    
    $
    7
    
    
    $
    10
    
    
    $
    16
    
    
    $
    19
  Note 7: Comprehensive Income
  Three Months Ended
    
    Six Months EndedJune 30
    
    June 302010
    
    2009
    
    2010
    
    2009(In Thousands)Net income
    
    $
    864
    
    
    $
    2,203
    
    
    $
    1,321
    
    
    $
    3,339Minimum pension liability adjustment, net of tax
    
    
    22
    
    
    
    (162
    )
    
    
    100
    
    
    
    (103
    )Foreign currency translation adjustments, net of tax
    
    
    (1,346
    )
    
    
    2,249
    
    
    
    (700
    )
    
    
    1,507Comprehensive income/(loss)
    
    $
    (460
    )
    
    $
    4,290
    
    
    $
    721
    
    
    $
    4,743
 Note 8: Earnings Per Share
 Earnings
per share
  11




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##### Table of Contents



Note 9: Commitments and Contingencies
 Contractual Obligations
  Less
    
    
    
    
    
    
    
    
    
    
    Morethan
    
    
    1  3
    
    
    3  5
    
    
    than 5Contractual Obligations
    
    Total
    
    
    1 year
    
    
    years
    
    
    years
    
    
    years(In Thousands)Long-term debt obligations
    
    $
    4,327
    
    
    $
    3,042
    
    
    $
    830
    
    
    $
    455
    
    
    $
    Working capital facilities
    
    
    6,715
    
    
    
    6,715
    
    
    
    
    
    
    
    
    
    
    
    Operating leases (1)
    
    
    4,132
    
    
    
    696
    
    
    
    1,731
    
    
    
    907
    
    
    
    798Pension contributions (2)
    
    
    3,967
    
    
    
    419
    
    
    
    1,540
    
    
    
    960
    
    
    
    1,048Purchase obligations
    
    
    3,978
    
    
    
    3,978
    
    
    
    
    
    
    
    
    
    
    
    Future interest payments (3)
    
    
    112
    
    
    
    42
    
    
    
    62
    
    
    
    8
    
    
    
    Total contractual obligations (4)
    
    $
    23,231
    
    
    $
    14,892
    
    
    $
    4,163
    
    
    $
    2,330
    
    
    $
    1,846
 
 (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 June 30, 2010 will be
dependent upon the performance of plan assets.(3)
    
    Represents future interest payments on long-term debt obligations as of June 30, 2010. Assumes
that the interest rates on our long-term debt agreements at June 30, 2010 (See Note 4: Long-Term
Debt, Page 7) will continue for the life of the agreements.(4)
    
    As a result of adopting FASB ASC Topic 740, Income Taxesas it relates to uncertain tax
positions, we recorded an initial liability of $313,000 related to uncertain tax positions in 2007.
During the six months ended June 30, 2010 and 2009, we recognized $55,000 and $93,000,
respectively, of additional liability. See Note 5: Income Taxes, Page 9. The total amount of
$491,000 and $375,000 are included within other long-term liabilities on the June 30, 2010 and
December 31, 2009 consolidated balance sheets. However, because of the high degree of uncertainty
regarding the timing of future cash outflows associated with uncertain tax positions, we cannot
reasonably estimate the periods of related future payments, and as such, we have excluded the
uncertain tax liability from the contractual obligations table. Contingencies
  Litigation
  12




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##### Table of Contents



Date Filed
    
    Court
    
    Plaintiff
    
    Defendants2/19/2010
    
    Circuit Court of
Kanawha County,
West Virginia
    
    Barbara Petkus,
individually and on
behalf of all
others similarly
situated.
    
    Portec Rail
Products, Inc.,
Richard J.
Jarosinski,
Marshall T.
Reynolds, John S.
Cooper, Louis J.
Akers, Philip E.
Cline, Daniel P.
Harrington, A.
Michael Perry,
Douglas V.
Reynolds, Neal W.
Scaggs, Philip Todd
Shell, Kirby J.
Taylor, and Thomas
W. Wright
 13




---



##### Table of Contents



Date Filed
    
    Court
    
    Plaintiff
    
    Defendants2/24/2010
    
    Court of Common
Pleas, Allegheny
County,
Pennsylvania
    
    Everett Harper, on
behalf of himself
and others
similarly situated.
    
    Marshall T.
Reynolds, John S.
Cooper, Louis J.
Akers, Philip E.
Cline, Daniel P.
Harrington, A.
Michael Perry,
Douglas V.
Reynolds, Neal W.
Scaggs, Philip Todd
Shell, Kirby J.
Taylor, Thomas W.
Wright, Portec Rail
Products, Inc.,
L.B. Foster
Company, and Foster
Thomas Company2/24/2010
    
    Court of Common
Pleas, Allegheny
County,
Pennsylvania
    
    Richard S. Gesoff
    
    Marshall T.
Reynolds, John S.
Cooper, Louis J.
Akers, Philip E.
Cline, Daniel P.
Harrington, A.
Michael Perry,
Douglas V.
Reynolds, Neal W.
Scaggs, Philip Todd
Shell, Kirby J.
Taylor, Thomas W.
Wright, Portec Rail
Products, Inc.,
L.B. Foster
Company, and Foster
Thomas Company3/02/2010
    
    Court of Common
Pleas, Allegheny
County,
Pennsylvania
    
    Scott Phillips,
individually and on
behalf of all
others similarly
situated.
    
    L.B. Foster
Company, Marshall
T. Reynolds, John
S. Cooper, Louis J.
Akers, Philip E.
Cline, Daniel P.
Harrington, A.
Michael Perry,
Douglas V.
Reynolds, Neal W.
Scaggs, Philip Todd
Shell, Kirby J.
Taylor, Thomas W.
Wright, Portec Rail
Products, Inc., and
Foster Thomas
Company3/03/2010
    
    Circuit Court of
Cabell County, West
Virginia
    
    John Furman,
individually and on
behalf of all
others similarly
situated.
    
    Marshall T.
Reynolds, John S.
Cooper, Louis J.
Akers, Philip E.
Cline, Daniel P.
Harrington, A.
Michael Perry,
Douglas V.
Reynolds, Neal W.
Scaggs, Philip Todd
Shell, Kirby J.
Taylor, Thomas W.
Wright, Portec Rail
Products, Inc.,
L.B. Foster
Company, and Foster
Thomas Company
  In re Portec Rail Products, Inc. Shareholders Litigation,
 14




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##### Table of Contents



In Re Portec Rail Products, Inc.
Shareholders Litigation
   Note 10: Segment Information
  Three Months Ended
    
    Six Months EndedJune 30
    
    June 302010
    
    2009
    
    2010
    
    2009(In Thousands)External SalesRMP
    
    $
    13,158
    
    
    $
    13,181
    
    
    $
    23,766
    
    
    $
    23,838SSD
    
    
    2,844
    
    
    
    1,498
    
    
    
    4,754
    
    
    
    2,761Canada
    
    
    11,695
    
    
    
    8,476
    
    
    
    18,493
    
    
    
    14,313United Kingdom
    
    
    4,733
    
    
    
    3,375
    
    
    
    8,744
    
    
    
    7,782Total
    
    $
    32,430
    
    
    $
    26,530
    
    
    $
    55,757
    
    
    $
    48,694
 Three Months Ended
    
    Six Months EndedJune 30
    
    June 302010
    
    2009
    
    2010
    
    2009(In Thousands)Intersegment SalesRMP
    
    $
    235
    
    
    $
    325
    
    
    $
    628
    
    
    $
    841SSD
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canada
    
    
    1,669
    
    
    
    2,307
    
    
    
    3,839
    
    
    
    3,855United Kingdom
    
    
    44
    
    
    
    
    
    
    
    53
    
    
    
    Total
    
    $
    1,948
    
    
    $
    2,632
    
    
    $
    4,520
    
    
    $
    4,696Total SalesRMP
    
    $
    13,393
    
    
    $
    13,506
    
    
    $
    24,394
    
    
    $
    24,679SSD
    
    
    2,844
    
    
    
    1,498
    
    
    
    4,754
    
    
    
    2,761Canada
    
    
    13,364
    
    
    
    10,783
    
    
    
    22,332
    
    
    
    18,168United Kingdom
    
    
    4,777
    
    
    
    3,375
    
    
    
    8,797
    
    
    
    7,782Total
    
    $
    34,378
    
    
    $
    29,162
    
    
    $
    60,277
    
    
    $
    53,390
 15




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##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30
    
    June 302010
    
    2009
    
    2010
    
    2009(In Thousands)Operating Income (Loss)RMP
    
    $
    2,050
    
    
    $
    2,070
    
    
    $
    3,356
    
    
    $
    3,313SSD
    
    
    480
    
    
    
    150
    
    
    
    721
    
    
    
    (18
    )Canada
    
    
    2,022
    
    
    
    1,681
    
    
    
    3,452
    
    
    
    2,988United Kingdom
    
    
    415
    
    
    
    (228
    )
    
    
    678
    
    
    
    (9
    )Corporate Shared Services
    
    
    (3,020
    )
    
    
    (827
    )
    
    
    (4,980
    )
    
    
    (1,788
    )Total
    
    
    1,947
    
    
    
    2,846
    
    
    
    3,227
    
    
    
    4,486Interest Expense
    
    
    59
    
    
    
    79
    
    
    
    123
    
    
    
    153Other (Income)/Expense, net
    
    
    (202
    )
    
    
    (135
    )
    
    
    271
    
    
    
    (120
    )Income Before Income Taxes
    
    $
    2,090
    
    
    $
    2,902
    
    
    $
    2,833
    
    
    $
    4,453DepreciationRMP
    
    $
    157
    
    
    $
    161
    
    
    $
    316
    
    
    $
    341SSD
    
    
    43
    
    
    
    50
    
    
    
    87
    
    
    
    98Canada
    
    
    166
    
    
    
    151
    
    
    
    332
    
    
    
    299United Kingdom
    
    
    42
    
    
    
    49
    
    
    
    87
    
    
    
    95Corporate Shared Services
    
    
    25
    
    
    
    14
    
    
    
    48
    
    
    
    27Total
    
    $
    433
    
    
    $
    425
    
    
    $
    870
    
    
    $
    860AmortizationRMP
    
    $
    16
    
    
    $
    9
    
    
    $
    30
    
    
    $
    18SSD
    
    
    50
    
    
    
    54
    
    
    
    108
    
    
    
    107Canada
    
    
    187
    
    
    
    159
    
    
    
    369
    
    
    
    305United Kingdom
    
    
    53
    
    
    
    48
    
    
    
    109
    
    
    
    93Corporate Shared Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    306
    
    
    $
    270
    
    
    $
    616
    
    
    $
    523Capital ExpendituresRMP
    
    $
    69
    
    
    $
    141
    
    
    $
    131
    
    
    $
    180SSD
    
    
    
    
    
    
    1
    
    
    
    16
    
    
    
    24Canada
    
    
    98
    
    
    
    86
    
    
    
    165
    
    
    
    235United Kingdom
    
    
    39
    
    
    
    3
    
    
    
    51
    
    
    
    21Corporate Shared Services
    
    
    4
    
    
    
    37
    
    
    
    4
    
    
    
    42Total
    
    $
    210
    
    
    $
    268
    
    
    $
    367
    
    
    $
    502
 June 30
    
    
    December 312010
    
    
    2009(In Thousands)Total AssetsRMP
    
    $
    38,453
    
    
    $
    37,520SSD
    
    
    7,379
    
    
    
    7,029Canada
    
    
    45,060
    
    
    
    43,514United Kingdom
    
    
    15,537
    
    
    
    14,242Corporate Shared Services
    
    
    197
    
    
    
    237Total
    
    $
    106,626
    
    
    $
    102,542
 16




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##### Table of Contents



Note 11: Fair Value of Financial Instruments
 Fair Value Measurements and
Disclosure
 Level 1
 Level 2 
 Level 3 
   Note 12: Recent Accounting Pronouncements
 The FASB Accounting Standards Codification
 17




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##### Table of Contents



Note 13: Stock Options
   Compensation 
Stock Compensation
  Stock
    
    Exercise# of
    
    Fair
    
    Price on
    
    Price per
    
    Annual
    
    
    
    
    
    
    
    
    
    ExpectedGrant
    
    Shares
    
    Value
    
    Grant
    
    Stock
    
    Dividend
    
    Risk-free
    
    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: Merger with L.B. Foster Company
  18




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##### Table of Contents



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




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##### Table of Contents



Overview
      Results of Operations
 Three Months Ended June 30, 2010 compared to Three Months Ended June 30, 2009
 Net Sales.
 20




---



##### Table of Contents



Cost of Goods Sold.
 Gross Profit.
 Selling, General and Administrative Expenses.
 Interest Expense.
 Other Income.
 Provision for Income Taxes.
 Net Income.
 21




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##### Table of Contents



Six Months Ended June 30, 2010 compared to Six Months Ended June 30, 2009
 Net Sales.
 Cost of Goods Sold.
 Gross Profit.
 Selling, General and Administrative Expenses.
 Interest Expense.
 Other Expense.
 22




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##### Table of Contents



Provision for Income Taxes.
 Net Income.
 23




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##### Table of Contents



Business Segment Review
 Railway Maintenance Products Division  RMP .
 Three Months Ended
    
    
    Six Months EndedJune 30
    
    
    June 302010
    
    
    2009
    
    
    2010
    
    
    2009(In Thousands)External sales
    
    $
    13,158
    
    
    $
    13,181
    
    
    $
    23,766
    
    
    $
    23,838Intersegment sales
    
    
    235
    
    
    
    325
    
    
    
    628
    
    
    
    841Operating income
    
    
    2,050
    
    
    
    2,070
    
    
    
    3,356
    
    
    
    3,313Sales by product line (1)Track component products
    
    $
    7,436
    
    
    $
    5,924
    
    
    $
    13,256
    
    
    $
    11,706Friction management products and services
    
    
    4,030
    
    
    
    5,324
    
    
    
    7,457
    
    
    
    8,749Wayside data collection and data management systems
    
    
    1,281
    
    
    
    1,131
    
    
    
    2,402
    
    
    
    2,564Other products and services
    
    
    646
    
    
    
    1,127
    
    
    
    1,279
    
    
    
    1,660Total product and service sales
    
    $
    13,393
    
    
    $
    13,506
    
    
    $
    24,394
    
    
    $
    24,679
 
 (1)
    
    Includes intersegment sales.   24




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##### Table of Contents



Shipping Systems Division  SSD .
 Three Months Ended
    
    
    Six Months EndedJune 30
    
    
    June 302010
    
    
    2009
    
    
    2010
    
    
    2009(In Thousands)External sales
    
    $
    2,844
    
    
    $
    1,498
    
    
    $
    4,754
    
    
    $
    2,761Intersegment sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income/(loss)
    
    
    480
    
    
    
    150
    
    
    
    721
    
    
    
    (18
    )Sales by product lineAutomotive products.
    
    $
    1,266
    
    
    $
    599
    
    
    $
    1,905
    
    
    $
    1,225Chain securement systems
    
    
    1,440
    
    
    
    674
    
    
    
    2,623
    
    
    
    1,201Strap securement systems
    
    
    30
    
    
    
    67
    
    
    
    58
    
    
    
    120Other load securement systems
    
    
    108
    
    
    
    158
    
    
    
    168
    
    
    
    215Total product and service sales
    
    $
    2,844
    
    
    $
    1,498
    
    
    $
    4,754
    
    
    $
    2,761
   25




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##### Table of Contents



Portec Rail Nova Scotia Company  Canada . ® ®
 Three Months Ended
    
    
    Six Months EndedJune 30
    
    
    June 302010
    
    
    2009
    
    
    2010
    
    
    2009(In Thousands, Except Translation Rate )External sales
    
    $
    11,695
    
    
    $
    8,476
    
    
    $
    18,493
    
    
    $
    14,313Intersegment sales
    
    
    1,669
    
    
    
    2,307
    
    
    
    3,839
    
    
    
    3,855Operating income
    
    
    2,022
    
    
    
    1,681
    
    
    
    3,452
    
    
    
    2,988Average translation rate of Canadian dollar to
United States dollar
    
    
    0.9648
    
    
    
    0.8518
    
    
    
    0.9574
    
    
    
    0.8348Sales by product line (1)Track component products
    
    $
    6,679
    
    
    $
    5,862
    
    
    $
    9,940
    
    
    $
    9,549Friction management products and services
    
    
    6,372
    
    
    
    4,657
    
    
    
    11,922
    
    
    
    7,955Other products and services
    
    
    313
    
    
    
    264
    
    
    
    470
    
    
    
    664Total product and service sales
    
    $
    13,364
    
    
    $
    10,783
    
    
    $
    22,332
    
    
    $
    18,168
 
 (1)
    
    Includes intersegment sales.   26




---



##### Table of Contents



Portec Rail Products (UK) Ltd.  United Kingdom" .
 Three Months Ended
    
    
    Six Months EndedJune 30
    
    
    June 302010
    
    
    2009
    
    
    2010
    
    
    2009(In Thousands, Except Translation Rate)External sales
    
    $
    4,733
    
    
    $
    3,375
    
    
    $
    8,744
    
    
    $
    7,782Intersegment sales
    
    
    44
    
    
    
    
    
    
    
    53
    
    
    
    Operating income/(loss)
    
    
    415
    
    
    
    (228
    )
    
    
    678
    
    
    
    (9
    )Average translation rate of
British pound sterling to
United States dollar
    
    
    1.4968
    
    
    
    1.5440
    
    
    
    1.5184
    
    
    
    1.5095Sales by product line (1)Friction management products
and services
    
    $
    1,965
    
    
    $
    1,884
    
    
    $
    3,702
    
    
    $
    4,125Material handling products
    
    
    1,665
    
    
    
    619
    
    
    
    2,918
    
    
    
    2,130Track component products
    
    
    1,147
    
    
    
    872
    
    
    
    2,177
    
    
    
    1,527Total product and service sales.
    
    $
    4,777
    
    
    $
    3,375
    
    
    $
    8,797
    
    
    $
    7,782
 
 (1)
    
    Includes intersegment sales.   27




---



##### Table of Contents



Liquidity and Capital Resources
    Cash Flow Analysis .
   Financial Condition
  28




---



##### Table of Contents



Discussion of Critical Accounting Policies
  Revenue Recognition.
   Allowances for Doubtful Accounts.
  29




---



##### Table of Contents



Inventories.
 Goodwill and Other Intangible Assets. Intangible, Goodwill and Other.
 Accounting for Impairment or Disposal of Long-Lived Assets.
  Warranty Reserves.
 Retirement Benefit Plans. Compensation  Retirement Benefits.
 30




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##### Table of Contents



Income Taxes.
  Income Taxes
 31




---



##### Table of Contents



ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
 ITEM 4T.
    
    CONTROLS AND PROCEDURES
  
 PART II  OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
   32




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##### Table of Contents



Date Filed
    
    Court
    
    Plaintiff
    
    Defendants2/19/2010
    
    Circuit Court of Kanawha County, West Virginia
    
    Barbara Petkus, individually and on behalf of all others similarly situated.
    
    Portec Rail
Products, Inc.,
Richard J.
Jarosinski,
Marshall T.
Reynolds, John S.
Cooper, Louis J.
Akers, Philip E.
Cline, Daniel P.
Harrington, A.
Michael Perry,
Douglas V.
Reynolds, Neal W.
Scaggs, Philip Todd
Shell, Kirby J.
Taylor, and Thomas
W. Wright2/24/2010
    
    Court of Common Pleas, Allegheny County, Pennsylvania
    
    Everett Harper, on behalf of himself and others similarly situated.
    
    Marshall T.
Reynolds, John S.
Cooper, Louis J.
Akers, Philip E.
Cline, Daniel P.
Harrington, A.
Michael Perry,
Douglas V.
Reynolds, Neal W.
Scaggs, Philip Todd
Shell, Kirby J.
Taylor, Thomas W.
Wright, Portec Rail
Products, Inc.,
L.B. Foster
Company, and Foster
Thomas Company
 33




---



##### Table of Contents



Date Filed
    
    Court
    
    Plaintiff
    
    Defendants2/24/2010
    
    Court of Common Pleas, Allegheny County, Pennsylvania
    
    Richard S. Gesoff
    
    Marshall T.
Reynolds, John S.
Cooper, Louis J.
Akers, Philip E.
Cline, Daniel P.
Harrington, A.
Michael Perry,
Douglas V.
Reynolds, Neal W.
Scaggs, Philip Todd
Shell, Kirby J.
Taylor, Thomas W.
Wright, Portec Rail
Products, Inc.,
L.B. Foster
Company, and Foster
Thomas Company3/02/2010
    
    Court of Common Pleas, Allegheny County, Pennsylvania
    
    Scott Phillips, individually and on behalf of all others similarly situated.
    
    L.B. Foster
Company, Marshall
T. Reynolds, John
S. Cooper, Louis J.
Akers, Philip E.
Cline, Daniel P.
Harrington, A.
Michael Perry,
Douglas V.
Reynolds, Neal W.
Scaggs, Philip Todd
Shell, Kirby J.
Taylor, Thomas W.
Wright, Portec Rail
Products, Inc., and
Foster Thomas
Company3/03/2010
    
    Circuit Court of Cabell County, West Virginia
    
    John Furman, individually and on behalf of all others similarly situated.
    
    Marshall T.
Reynolds, John S.
Cooper, Louis J.
Akers, Philip E.
Cline, Daniel P.
Harrington, A.
Michael Perry,
Douglas V.
Reynolds, Neal W.
Scaggs, Philip Todd
Shell, Kirby J.
Taylor, Thomas W.
Wright, Portec Rail
Products, Inc.,
L.B. Foster
Company, and Foster
Thomas Company
      34




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##### Table of Contents



ITEM 1A.
    
    RISK FACTORS
  
 ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4.
    
    REMOVED & RESERVED
  
 ITEM 5.
    
    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
 35




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##### Table of Contents



SIGNATURES
  PORTEC RAIL PRODUCTS, INC.Date: August 6, 2010
    By:
    /s/ Richard J. JarosinskiRichard J. Jarosinski, 
President andChief Executive Officer and Principal
Executive OfficerDate: August 6, 2010
    By:
    /s/ John N. PesarsickJohn N. Pesarsick, 
Chief FinancialOfficer and Principal Accounting Officer 36




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##### Table of Contents



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