<PAGE>

================================================================================

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                ----------------

                                   FORM 10-K
                       FOR ANNUAL AND TRANSITION REPORTS
                    PURSUANT TO SECTIONS 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

(MARK ONE)
[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         FOR THE TRANSITION PERIOD FROM              TO

                        COMMISSION FILE NUMBER: 0-24639

                             RAILWORKS CORPORATION
             (Exact name of registrant as specified in its charter)

                DELAWARE                                58-2382378
     (State or other jurisdiction of                 (I.R.S. Employer
      incorporation or organization)                 Identification No.)

       6225 SMITH AVENUE, SUITE 200                        21209
            BALTIMORE, MARYLAND                          (Zip code)
 (Address of principal executive offices)

       Registrant's telephone number, including area code: (410) 580-6000

        Securities registered pursuant to Section 12(b) of the Act: NONE

          Securities registered pursuant to Section 12(g) of the Act:

                     COMMON STOCK, PAR VALUE $.01 PER SHARE

         Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

         The aggregate market value of the voting and nonvoting common equity
held by non-affiliates of the Registrant (assuming for these purposes, but
without conceding, that all executive officers and directors are "affiliates"
of the Registrant) as of March 15, 2002 (based on the closing sale price of the
Registrant's Common Stock as reported on The OTC Bulletin Board on such date)
was approximately $1.6 million.

         As of March 15, 2002, the registrant had 14,383,551 shares of Common
Stock outstanding.
<PAGE>

DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the Registrant's Consolidated Financial Statements and
Notes thereto for the fiscal year ended December 31, 2001 are incorporated by
references in Part I, II and IV. The registrant's definitive 2002 Proxy
Statement which will be filed pursuant to Regulation 14A is incorporated by
reference into Items 10, 11, 12 and 13 of Part III of this Annual Report on
Form 10-K.

================================================================================


<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                        page
                                                                                                                        ----
<S>  <C>          <C>                                                                                                   <C>
PART I................................................................................................................    1
     ITEM 1.      BUSINESS............................................................................................    1
     ITEM 2.      PROPERTIES..........................................................................................    7
     ITEM 3.      LEGAL PROCEEDINGS...................................................................................    8
     ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................................................    9

PART II...............................................................................................................    9
     ITEM 5.      MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...............................    9
     ITEM 6.      SELECTED FINANCIAL DATA.............................................................................   10
     ITEM 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...............   12
     ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..........................................   30
     ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.........................................................   30
     ITEM 9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE................   31

PART III..............................................................................................................   31
     ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..................................................   31
     ITEM 11.     EXECUTIVE COMPENSATION..............................................................................   31
     ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......................................   31
     ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................................................   31

PART IV...............................................................................................................   31
     ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K....................................   31
</TABLE>


                                       i

<PAGE>

                                     PART I

ITEM 1.  BUSINESS

         Unless the context otherwise requires, "we," "us," "our" or
"RailWorks" refers to the business of RailWorks Corporation and its
subsidiaries.

                                COMPANY OVERVIEW

         Our company was formed in March 1998. In August 1998, we acquired in
separate concurrent transactions 14 groups of companies engaged principally in
the rail system services and products business and we consummated our initial
public offering, which we refer to as the IPO. We refer to these groups of
companies as the Founding Companies. Since August 1998 through December 31,
2001, we acquired an additional 21 companies or groups of companies. At
December 31, 2000, we streamlined the structure of RailWorks by reducing the
number of individual operating companies through various mergers and
dissolutions.

         We are a leading provider of integrated rail system services and
products to a diverse base of customers throughout North America. We provide a
full range of rail-related services and products on a "turnkey" basis
throughout North America and offer rail system solutions under the "RailWorks"
brand. We provide:

         -        track construction, rehabilitation, repair and maintenance;
         -        installation of electrification, communication and signaling
                  equipment and systems for rail applications; and
         -        related products and services.

         We provide these services to a wide variety of customers, including
Class I, regional and shortline railroads, passenger rail and rail transit
authorities and commercial and industrial companies. We also provide non-rail
products and services such as electrical contracting, bridge and highway
support structures and related concrete products to public agencies,
commercial, power and industrial customers.

         On September 20, 2001 (the "Filing Date"), the Company and twenty-two
of its domestic subsidiaries (collectively, the "Debtors") filed voluntary
petitions for relief under Chapter 11 of the Bankruptcy Code in the United
States Bankruptcy Court for the District of Maryland (Baltimore Division). The
filings have been consolidated for the purpose of joint administration as Case
No. 01-6-4463. Our Canadian subsidiaries were not included in the filings and
continue to operate in the normal course of business outside of bankruptcy.
Under Chapter 11, except for certain statutory exceptions and for relief that
might otherwise be granted by the Bankruptcy Court, claims against the Debtors
in existence prior to the Filing Date (including claims secured by the Debtors'
assets) are stayed while the Debtors continue business operations as
debtors-in-possession. The Bankruptcy Court through March 15, 2002, has
authorized various motions for the payment of prepetition claims totaling
approximately $67.9 million, through various orders, of which $40.5 million has
been paid. Additional claims may arise subsequent to the filing date resulting
from rejection of executory contracts, including leases and construction
contracts, and from the determination by the Bankruptcy Court (or agreed to by
the parties in interest) of allowed claims for contingencies and other disputed
amounts.

         On March 15, 2002, we filed a plan of reorganization in the United
States Bankruptcy Court for the District of Maryland (Baltimore Division) for
the Company and twenty-two of our domestic subsidiaries. See Item 3. "Legal
Proceedings."

                             SERVICES AND PRODUCTS

         We operate in three business lines:

         -        transit services;
         -        rail track services; and
         -        rail products and services.


<PAGE>

         Information with respect to segment operations and segment financial
conditions as of and for the years ended December 31, 1999, 2000 and 2001 is
set forth in Note 19 of our Consolidated Financial Statements, which is
incorporated herein by reference.

Transit Services

         Our transit services business includes all products and services that
we provide to rail-based public transit agencies and authorities in various
U.S. metropolitan markets. We typically contract with these agencies to install:

         -        electric train traction power systems (by means of third rail
                  or overhead catenary wiring),
         -        train control and signal systems,
         -        train, station and control center communications systems,
         -        general electrical installations for lighting and other
                  applications, and
         -        tunnel and station track.

         Projects for new public transit lines generally include the
installation of all of these systems. These projects may also involve track
installation including excavation, grading, paving and drainage improvements as
well as other rehabilitation projects.

         In addition, we leverage our knowledge of transit systems to provide
cost-effective mechanical services, including installation of heating and air
conditioning systems, ventilating and pump rooms, fan chambers, elevators and
escalators. We have experience with rubber tired vehicular people mover
systems, for which we have installed concrete guided trackway, power guide
beams, central guidance rails, walkways and handrails.

         The duration and size of our transit contracts vary greatly depending
on the scope of the project. Contracts for work on large-scale transit projects
can exceed $100 million in value and take four or more years to complete. We
have performed installations for most of the country's major transit
authorities, including those in Atlanta, Boston, Chicago, Los Angeles, New
York, Philadelphia, Portland (Oregon), San Diego, San Francisco, St. Louis and
Washington, D.C. We generally perform our services as either a prime contractor
directly to the transit agencies or as a subcontractor to large civil
engineering companies or equipment manufacturers.

         Contracts with transit authorities are competitively bid and awarded
on a fixed price basis generally to the lowest bidder. As a result, we focus
our business to:

         -        provide accurate bid estimating to both win contracts and
                  ensure a profit, and
         -        monitor costs to ensure that projects are completed on time
                  and within budget.

         As an outgrowth of our transit-related business, we also perform
commercial real estate electrical installation work in the New York City
metropolitan area and industrial electrical installation work throughout the
United States. Contracts for these projects are pursued on an opportunistic
basis; that is, when we have resources available and can realize attractive
returns.

Rail Track Services

         Our rail track services business consists of providing rail design,
construction and maintenance services to Class I, regional and shortline
railroads and industrial companies with on-site rail infrastructure. Rail
design is a highly specialized discipline and only a limited number of
companies provide these services. We utilize our rail design capabilities to
facilitate access to rail track construction and maintenance projects. By
having the ability to provide integrated design-build services, we have been
successful in increasing our project flow.

         Our rail track services primarily involve the construction of main
line segments, passing sidings, rail yards, connector segments between
railroads and industrial sites, turnouts and track and road intersections.
Track maintenance is generally provided under annual and multi-year contracts
with customers. Maintenance contracts provide recurring revenues and give us
access to new track projects from the same customer. Additional rail track
services include the removal of tracks that are no longer in use, switch
grinding, railcar switching and track equipment repair for railroads and rail
transit agencies.


                                       2

<PAGE>

         Rail construction and maintenance are highly complex processes that
usually involve numerous separate parties that design, supply and construct the
different elements of the track. Following the design stage, construction
entails:

         -        site preparation and grading,
         -        the laying of gravel ballast or concrete surfacing to provide
                  a solid track fixation medium,
         -        the positioning of cross ties,
         -        securing rail with high precision using metal plates, spikes
                  and clamps,
         -        installing complex track crossings and turnouts, and
         -        installing other track related systems such as signal,
                  communications and automatic train control and safety
                  devices.

         We believe that our ability to bundle these services on a turnkey
basis gives us a significant competitive advantage.

         We provide our rail services on a nationwide basis through a network
of regional operating centers. In contrast, most of our rail track services
competitors are focused on one geographic region. We believe that this results
in a competitive advantage for us due to our presence in virtually all regional
markets and our ability to direct equipment and labor resources to regions with
higher demand. We also maintain track and track material inventory at most of
our locations. By coordinating information across our network we are able to
maximize inventory utilization and improve supply for projects in different
regions.

Rail Products and Services

         Our rail products and services business consists of specialty wood and
concrete products, rail fastening systems and specialized track maintenance
services. We sell our rail products and services directly to contractors
(including our own subsidiaries) and to Class I, regional and shortline
railroads that perform their own track installation and maintenance. Some of
our products are used in non-rail applications such as highway construction
(precast concrete structures) and decorative landscaping (used wood ties).

         We provide full service handling of specialty wood products used by
railroads. Our wood products, which we manufacture in five of our facilities,
include cross ties and switch and bridge timbers. Our wood treating operations
consist of pressure-treating pre-cut hardwood beams to provide
weather-proofing. Treated cross-ties and timbers are used for securing rail for
tracks or assembled to construct bridge support structures. In addition, we
operate five facilities that prepare used, treated wood products for
disposition utilizing a proprietary technology.

         We manufacture concrete products, which consist primarily of pre-cast
structural components for bridges and other support structures. Our concrete
operations consist of pouring mixed concrete into large molds to create
specialized structural support components.

         We also design and manufacture rail fastening systems, which are
primarily used in overhead and portal crane rail applications.

                           ACQUISITIONS/DISPOSITIONS

         We believe that, through the acquisition program that has been
executed by RailWorks since its formation, we have established RailWorks as one
of the few companies capable of providing its range of products and services
throughout North America. In September 2000, we suspended our active
acquisition program and re-directed our efforts to optimizing the efficiency of
our operations and improving strategic focus. As a result, we have determined
that those operations which do not enhance the opportunity for achievement of
our long-term strategic goals should be sold.


                                       3

<PAGE>

         During 2001, we disposed of the following companies or divisions:

<TABLE>
<CAPTION>
                                                        FISCAL 2000
TRANSACTION                       NAME OF                 REVENUE
DATE                         COMPANY/DIVISION          (in millions)          HEADQUARTERS           BUSINESS LINE
-----------------        -------------------------     -------------          ------------          ---------------
<S>                      <C>                           <C>                    <C>                   <C>
February 1, 2001         FCM Rail, Ltd.                    $  5.6               Detroit, MI         Rail Products
                                                                                                    and Services

June 20, 2001            RailWorks W.T. Byler,             $ 70.9               Houston, TX         Rail Track
                         L.P. Civil and                                                             Services
                         Maintenance Divisions
</TABLE>

                               SOURCES OF SUPPLY

         Our transit services group purchases equipment from a limited number
of suppliers. These suppliers include primarily manufacturers of
communications, electrification, signaling and control equipment and systems
for rail applications. Our rail track services business sources rail and other
track materials (primarily metal components such as plates and spikes) from

         -        the reclamation of existing track that is no longer in use,

         -        track materials brokers and

         -        manufacturers

         We purchase new rail from a limited number of suppliers. New rail is
generally installed only on main lines, where the track may carry high volumes
of heavy traffic at high speeds. Over time, rail is removed, inspected and, if
in the appropriate condition, refurbished for sale as "re-lay" rail. Re-lay
rail is typically installed on secondary (non-main line) tracks, as well as
yard or branch tracks. Total rail life before scrapping may be as long as 60
years. We also purchase a large volume of re-lay rail that is refurbished by
third parties for resale.

         Similarly, we regularly purchase entire sections of track that are
removed and subsequently disassembled at our facilities. We inspect the various
track components -- rail, ties and accessories -- and place items into our
inventory (either in their "as removed" condition or after being refurbished by
third parties) or sell these items for scrap.

         We also process creosote-treated wooden ties. These operations include
the purchase of raw lumber, trimming the lumber to specified sizes, pressurized
impregnation of the lumber with creosote preservative and finishing of the ties
(which could include the pre-drilling of spike holes and the attachment of
plates, as specified by the customer).

         We believe we can purchase materials in sufficient quantities to
permit us to realize purchasing economies and discounts from our suppliers.
Historically, the cost of the lumber used to produce wooden ties, steel used to
produce rail and copper used to produce electrical wiring has fluctuated
significantly due to market and industry conditions. Increasing demand for
these raw materials may result in cost increases. We may not be able to recoup
any such increases by increasing the prices of our products. Further, a
reduction in availability of lumber, steel or copper could have an adverse
effect on our business, financial condition and results of operations.

                              SALES AND MARKETING

         We maintain a targeted national sales program to assist in the
development of the business of each of our operating companies. The focus of
this initiative is on the Class I railroads and other large industrial
companies with facilities in several geographic regions. Prior to their
acquisition by us, our operating companies had been unable to serve such
customers on a comprehensive, nationwide basis. Our expansive geographic
coverage enables customers to use our services and products in multiple
locations rather than dealing with numerous regional or local companies. In
addition, our ability to offer electrical installation services together with
rail construction, rehabilitation, repair and maintenance services and related
products provides us with opportunities to cross-sell our services to large
industrial companies.


                                       4

<PAGE>

                             BIDDING AND CONTRACTS

         Our transit services group derives a substantial portion of its
revenue from contracts entered into through a competitive bidding process.
Public agencies, such as the New York City Transit Authority, which we refer to
as "NYCTA," that solicit bids are generally required to accept the lowest cost
proposal. In some cases, the party that submitted the low bid must first pass a
technical qualification before being awarded a project. Following the
acceptance of a bid, we typically enter into a contract with the customer. The
activities of our rail track services and rail products and services groups
usually do not involve long-term contracts.

         Many projects that are competitively bid require the company that is
awarded the project to post a bond, which varies according to the size of the
project. Each company has a bonding limit, which is based on the company's
working capital, net worth and work in progress. The bond provides the customer
with insurance in the event that the company is unable to complete the project.
Our size, as compared to our operating companies on a stand-alone basis,
facilitates increased bonding limits for each operating company and thereby
improves their ability to bid on and undertake significantly larger projects.
We believe that our bonding capacity permits us to bid on and undertake more
projects than smaller companies in our industry. Our inability to obtain
sufficient bonding in the future may prevent us from bidding on certain
contracts.

                                   CUSTOMERS

         The following table lists our top four customers for 2001 (by revenue
recognized) for each of our lines of business:

<TABLE>
         <S>                                                 <C>
         TRANSIT SERVICES:
         New York City Transit Authority .............       $ 110,188,000
         Dormitory Authority of New York .............          19,226,000
         Alstom Power ................................          14,818,000
         Dick Corporation ............................          12,575,000

         RAIL TRACK SERVICES:
         Minnesota Transit Constructors ..............       $   6,565,000
         Union Pacific Railroad ......................           4,735,000
         Hensel Phelps ...............................           2,987,000
         Flying J. Truck Stop ........................           2,943,000

         RAIL PRODUCTS AND SERVICES:
         Panama Canal Railway ........................       $  20,001,000
         Union Pacific Railroad ......................           7,687,000
         Rail America ................................           6,776,000
         Roche Ltd. ..................................           6,412,000
</TABLE>

         We derived approximately 37.8% of our revenue for the year ended
December 31, 2001 from our top ten customers. Approximately 17.9% of our 2001
revenue was derived from projects undertaken for the NYCTA. These projects were
undertaken under a number of separate contracts. If the NYCTA were to
significantly reduce the amount of business that it does with us or determine
not to do business with us in the future, it would have a material adverse
effect on our business, financial condition and results of operations. No
customer other than NYCTA accounted for more than 3.2% of our revenue for the
year ended December 31, 2001.

                                    BACKLOG

         At December 31, 2001, our total order backlog was approximately $687.0
million, of which 73.3% represents backlog under transit services group
contracts. At December 31, 2000, our total order backlog was approximately
$897.0 million, of which 78.1% represented backlog under transit services group
contracts. Our backlog is not necessarily indicative of total future revenue.


                                       5

<PAGE>

                                  COMPETITION

         The rail system services and products industry is highly competitive,
and projects are often awarded through competitive bidding. We compete with
other rail system services, rehabilitation and maintenance companies,
electrical contractors and suppliers of products. Certain competitors have
significantly greater resources than we do, provide a broad range of services
and products and have sufficient bonding capacity to undertake large projects.
We compete on the basis of our breadth of services and products, ability to
take on large projects and nationwide presence. Any inability to compete
successfully against future competitors would have a material adverse effect on
our business, results of operations and financial condition. Moreover, we may
depend in part upon opportunities for consolidation in the rail system services
and products industry in order to execute effectively our business strategy. If
our customers do not respond favorably to our strategy, they have numerous
alternative sources of services and supply.

                           RISK MANAGEMENT AND SAFETY

         Because our business is labor intensive, workers' compensation is a
significant operating expense for us. We could be exposed to liability for the
acts or negligence of our employees who cause personal injury or damage while
on assignment, as well as claims of misuse of customer proprietary information
or theft of client property. We have adopted policies and procedures intended
to reduce our exposure to these risks.

         We maintain insurance against these risks with policy limits that we
consider sufficient and consistent with industry standards. We have established
a risk management department that is responsible for claims management and the
establishment of appropriate reserves for the deductible portion of claims. We
hold regular meetings with the presidents of our operating companies at which
safety issues are discussed. We also conduct routine safety inspections of
local work sites. Even with these policies and procedures in place, certain
accidents may occur and liabilities may arise which could have a material
adverse impact on the Company.

                                   EQUIPMENT

         We own and maintain specialized equipment used in rail construction,
rehabilitation, repair and maintenance. This equipment may be moved between job
sites and, consequently, we are seeking to increase the sharing of equipment
between our subsidiary operating companies where it is appropriate and cost
effective. For example, during the winter months, our operating companies
located in the Northern United States could relocate their equipment to our
operating companies located in the South. Each of our subsidiary operating
companies generally performs its own equipment maintenance.

                             GOVERNMENT REGULATION

         Overview. In addition to the environmental, safety and other
regulations generally applicable to all businesses, our business is impacted by
regulations that are administered by the Surface Transportation Board (STB),
the successor to the Interstate Commerce Commission (ICC), the Federal Transit
Administration (FTA), the Federal Railroad Administration (FRA) and by
regulatory agencies in the various states in which we and our customers do
business. Since 1980, there has been a significant relaxation in regulations
governing the sale, leasing or other transfer of railroad properties, and this
change has favorably affected the operations of many of our customers. Various
interests in the United States have sought and continue to seek re-imposition
of government controls on the railroad industry in areas deregulated in whole
or in part since 1980, including stricter rate regulation and more onerous
labor protection conditions for rail line transfers.

         Railroad Regulations. The ICC Termination Act, which was enacted on
December 29, 1995, eliminated the ICC as an independent agency and created the
STB, a new agency within the Department of Transportation that began
functioning on January 1, 1996. The ICC Termination Act changed the procedure
and timing for federal approval of railroad projects, including abandonments,
line sales, mergers, rates and tariffs, simplifying and streamlining the
abandonment process. The FRA regulates railroad safety and equipment standards,
including track maintenance and train speed standards, special procedures for
handling hazardous shipments, locomotive and railcar inspection and repair
requirements, operating practices and crew qualifications. The Roadway Worker
Protection Rules, which were promulgated by the FRA, apply to rail contractors
and establish certain safety criteria that must be complied with on rail
projects.


                                       6

<PAGE>

         Transit Regulations. The FTA regulates certain aspects of rail transit
operations and provides significant funding for rail transit construction and
operations. On June 9, 1998, the former President signed the Transportation
Equity Act for the 21st Century ("TEA 21"), a six-year surface transportation
program that represents a significant development in federal funding of rail
transit programs. TEA 21, the largest infrastructure funding bill in U.S.
history, authorizes funding for transit in the amount of $42 billion through
2003. This authorization is over 50% more than the funding under the 1991
Intermodal Surface Transportation Efficiency Act, whose funding has expired.

         State Regulatory Agencies. State regulatory agencies no longer have
authority to engage in economic regulation of railroads that are part of the
interstate network. State and local governments generally retain jurisdiction
over local rail safety matters, such as the installation of grade crossings and
grade crossing warning devices.

                             ENVIRONMENTAL MATTERS

         Our operations and properties are subject to environmental laws and
regulations relating to pollution and protection of the environment and public
and employee health and safety. The principal environmental regulatory
requirements applicable to our operations relate to the use of creosote to
treat lumber, and the generation, storage, transportation, treatment and
disposal of solid and hazardous wastes. We believe that our operations have all
required environmental permits and currently are in compliance, in all material
respects, with applicable regulatory requirements.

         We have had environmental assessments performed for recent
acquisitions. Based on these reports and available information, we are not
aware of any significant environmental exposures or claims against us. However,
the historical and current uses of our facilities may have resulted in spills
or releases of various hazardous materials, which now, or in the future, could
require remediation or special monitoring. We also may be subject to
requirements related to remediation of hazardous materials that have been
released into the environment at properties that we own or operate, or owned or
operated in the past or at properties to which we send, or may have sent,
hazardous materials for treatment or disposal. Such remediation requirements
generally are imposed without regard to fault, and liability for any required
environmental remediation can be substantial.

                                   EMPLOYEES

         As of December 31, 2001, we employed approximately 3,850 employees.
Approximately 29% of our employees are members of labor unions and are employed
pursuant to collective bargaining agreements. Certain of our operating
companies are parties to collective bargaining agreements with the
International Brotherhood of Electrical Workers, Laborers' International Union
of North America, the International Union of Operating Engineers, United
Brotherhood of Carpenters and Joiners of America and the United Brotherhood of
Teamsters. Certain of our customers only hire unionized labor. Our largest
collective bargaining agreement, covering approximately 430 employees, expires
in May 2002. We have not experienced any work stoppages in the past five years.

                         INFORMATION TECHNOLOGY SYSTEMS

         We have installed the basic elements of an integrated information
technology system that is being utilized by each of our operating companies for
a variety of purposes; including monitoring inventory levels, tracking the
progress of construction projects and integrating our financial reporting,
general ledger, payables and receivables functions. In addition, we have
networked our corporate offices to the offices of our operating companies and
are currently working on the upgrade of selected features of the system. We
expect upgrading of our information technology systems to be a continuous
process.

ITEM 2.  PROPERTIES

         Our corporate offices currently consist of approximately 5,000 square
feet of leased space in Baltimore, Maryland. In addition to our corporate
offices, we lease or own numerous facilities throughout the United States and
Canada. These facilities consist of local offices, storage yards, distribution
facilities, warehouses and manufacturing and wood processing plants. We believe
our existing facilities are sufficient to meet the existing demand for our
services and that our facilities are in good condition.


                                       7

<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

         On September 6, 2001, the Company and the former Chairman of the Board
were named as defendants in a class action filed in the United States District
Court for the District of Maryland (Baltimore Division), alleging securities
fraud claims under the Securities Act of 1934, as amended. The plaintiffs are
seeking an undetermined amount of damages. As a result of the bankruptcy
filings on September 20, 2001, the District Court has stayed this action as to
all defendants and administratively closed the case pending further order of
the District Court. The Company believes the suit is without merit and intends
to defend itself vigorously if the action is reopened.

         On September 20, 2001, the Company and twenty-two of its domestic
subsidiaries (collectively, the "Debtors") filed voluntary petitions for relief
under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court
for the District of Maryland (Baltimore Division). The Debtors are currently
operating as a debtors-in-possession under the supervision of the Bankruptcy
Court. The following are certain of the material orders entered by the
Bankruptcy Court since the bankruptcy filing by the Debtors:

         -        On September 21, 2001, the Debtors received approval from the
                  Bankruptcy Court to obtain emergency post-petition financing
                  from debtor-in-possession lenders in amount of up to $10
                  million.

         -        On October 23, 2001 the Bankruptcy Court issued its final
                  approval of the debtor-in-possession financing (collectively,
                  as amended, restated or replaced, the "DIP Facility"),
                  described in the "Liquidity and Capital Resources" section of
                  "Management's Discussion and Analysis of Financial Condition
                  and Results of Operations," thereby authorizing the Company
                  to utilize all commitments related to the Transit Revolver,
                  the Bonding Facility, the Bond Support Facility and the TP&S
                  Revolver (as defined below). The DIP Facility matures on
                  September 30, 2002. On February 1, 2002 and March 5, 2002,
                  respectively, the Bankruptcy Court authorized the amendment
                  and restatement of the Transit Revolver and the replacement
                  of the TP&S Revolver, respectively, as described in the
                  "Liquidity and Capital Resources" section of "Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations." As of March 15, 2002, approximately $45.0
                  million was outstanding under the Transit Revolver,
                  consisting of $30.0 million of borrowings and a $15.0 million
                  letter of credit; $21.3 million was outstanding under the
                  TP&S Revolver, consisting of $15.6 million of borrowings and
                  $5.7 million of letters of credit; and we had approximately
                  $10.6 million of collateral outstanding under the Bonding
                  Facility.

         -        The Bankruptcy Court has also entered orders: (a) authorizing
                  the payment of prepetition employee wages and benefits; (b)
                  authorizing the Company to assume certain construction
                  project contracts that were bonded by Travelers Casualty and
                  Surety Company of America ("Travelers") prior to the Filing
                  Date and to cure certain prepetition obligations of vendors
                  and subcontractors related thereto; and (c) authorizing the
                  Company to make payments to certain critical vendors and
                  subcontractors in respect of prepetition claims upon the
                  creditors' agreement to provide certain trade terms to the
                  Company.

         -        On March 15, 2002, the Debtors filed a plan of reorganization
                  (the "Plan") in the U.S. Bankruptcy Court for the District of
                  Maryland in Baltimore for itself and twenty-two of its
                  domestic debtor subsidiaries. The Plan contemplates full
                  repayment of claims under the DIP Facility, satisfaction of
                  secured claims held by certain of the Debtors' pre-petition
                  secured lenders through the issuance of a new secured note or
                  their reinstatement, and satisfaction of the balance of
                  claims held by the Debtors' pre-petition secured lenders
                  through the conversion of such claims into substantially all
                  of the equity of the reorganized company. The Plan also
                  provides that holders of the Company's 11 1/2% Senior
                  Subordinated Notes due in 2009 and unsecured creditors, whose
                  prepetition claims were not authorized for payment by the
                  Bankruptcy Court, will receive 3% of the stock of the
                  reorganized company and that the interests of the current
                  equity holders of the Company will be eliminated.
                  Confirmation of the Plan, which remains subject to
                  supplementation, modification and amendment, also remains
                  subject to Bankruptcy Court approval and certain other
                  conditions.


                                       8

<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Our Common Stock began trading on the Nasdaq National Market on
July 29, 1998, under the symbol of "RWKS". On September 21, 2001, the Nasdaq
Listing Qualifications Staff halted trading in our Common Stock due to our
filing of voluntary petitions for relief under Chapter 11 of the Bankruptcy
Code. Our Common Stock was delisted from the Nasdaq National Market shortly
thereafter. Since October 17, 2001, our Common Stock has been trading under the
symbol of "RWKSQ.OB" on the OTC Bulletin Board.

         The following table sets forth the range of high and low closing
prices for the Common Stock on the Nasdaq National Market from January 1, 2000
through September 21, 2001 and on the OTC Bulletin Board from October 17, 2001
through December 31, 2001 for the periods indicated:

<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31, 2000
                                                       ---------------------------------------
                                                               HIGH                 LOW
      ----------------------------------------------------------------------------------------
         <S>                                                 <C>                 <C>
         Fourth Quarter                                      $   3.375            $1.5312
         Third Quarter                                           10.50             3.4375
         Second Quarter                                          10.75              8.125
         First Quarter                                         12.3125              9.375

<CAPTION>
                                                            YEAR ENDED DECEMBER 31, 2000
                                                       ---------------------------------------
                                                               HIGH                 LOW
      ----------------------------------------------------------------------------------------
         <S>                                                 <C>                 <C>
         Fourth Quarter (commencing 10/17/01)                   $   0.45            $ 0.01
         Third Quarter (through 9/21/01)                            1.78              0.15
         Second Quarter                                             5.03              1.60
         First Quarter                                            2.8125              1.50
</TABLE>

         As of March 15, 2002, there were 141 holders of record of our Common
Stock.

         We have not paid dividends on our Common Stock since inception. The
payment of dividends in the future, if any, will be determined by the Board of
Directors.


                                       9

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         The following table sets forth selected consolidated financial data
with respect to the Company and is qualified by reference to the Consolidated
Financial Statements and Notes thereto included in Part IV hereof.

<TABLE>
<CAPTION>
                                                                        RAILWORKS                                       PREDECESSOR
                                                                                                                          COMPANY
                                                                              YEAR ENDED DECEMBER 31,
                                              -------------------------------------------------------------------------------------
                                                 2001(5)            2000(4)           1999(3)           1998(2)           1997(1)
                                              -------------------------------------------------------------------------------------
                                                                    (Dollars in Thousands, except per share data)
<S>                                             <C>               <C>               <C>               <C>               <C>
Revenue                                         $ 616,599         $ 614,037         $ 468,105         $ 212,533         $ 153,610
Cost of revenue                                   592,431           500,604           369,083           182,817           136,678
Gross profit                                       24,168           113,433            99,022            29,716            16,932
Selling, general and administrative
  expenses                                         77,476            71,609            50,434            19,145            13,520
Restructuring and other unusual
  charges (6)                                      27,555            63,338                --                --                --
Non-recurring expenses                                 --                --                --            19,965                --
Transaction fees                                       --                --                --             1,281                --
Operating income (loss)                           (80,863)          (21,514)           48,588           (10,675)            3,412
Other income (expense):
  Interest expense                                (32,018)          (37,888)          (20,054)           (2,334)           (1,761)
  Interest and other income, net                     (185)            2,282             2,615             1,634               975
  Loss on sale of subsidiaries                    (14,576)               --                --                --                --
  Other expense, net                              (46,779)          (35,606)          (17,439)             (700)             (786)
Income (loss) before reorganization
  items, income taxes, minority
  interest and extraordinary item                (127,642)          (57,120)           31,149           (11,375)            2,626
Reorganization items (7)                          (10,068)               --                --                --                --
Income (loss) before income taxes,
  minority interest and extraordinary
  item                                           (137,710)          (57,120)           31,149           (11,375)            2,626
Provision for income taxes                          4,075             2,875            11,063             1,472             1,198
Income (loss) before minority
  interest and extraordinary item                (141,785)          (59,995)           20,086           (12,847)            1,428
Minority interest in losses                           548                --                --                --                --
Income (loss) before extraordinary
  item                                           (141,237)          (59,995)           20,086           (12,847)            1,428
Extraordinary gain on
  extinguishment of debt                              537                --                --                --                --
Net income (loss)                                (140,700)          (59,995)           20,086           (12,847)            1,428

Basic earnings (loss) per share                     (9.38)            (4.04)             1.44             (1.67)              .48
Diluted earnings (loss) per share                   (9.38)            (4.04)             1.31             (1.67)              .48
</TABLE>


                                      10

<PAGE>

<TABLE>
<CAPTION>
                                                                        RAILWORKS                                       PREDECESSOR
                                                                                                                          COMPANY
                                                                                 AS OF DECEMBER 31,
                                              -------------------------------------------------------------------------------------
                                                 2001(5)            2000(4)           1999(3)           1998(2)           1997(1)
                                              -------------------------------------------------------------------------------------
                                                                                (Dollars in Thousands)
<S>                                             <C>               <C>               <C>               <C>               <C>
BALANCE SHEET DATA:
Working capital (8)                             $ 141,312         $ 119,980         $ 119,270         $  67,391         $  26,500
Total assets                                      517,853           615,263           571,657           228,636            68,352
Total debt (9)                                    411,087           380,899           294,431            51,504            15,004
Stockholders' equity                              (61,819)           81,422           135,881           110,008             1,438
</TABLE>

(1)      The selected historical consolidated financial data as of and for the
         fiscal year ended December 31, 1997 is derived from the financial
         statements of Comstock Holdings, Inc., and its predecessor, L. K.
         Comstock & Company, Inc., for the respective period. For accounting
         and financial statement purposes, Comstock Holdings, Inc. (one of the
         Founding Companies, as defined below) was identified as the
         "Accounting Acquirer" consistent with the requirements of SAB No. 97
         of the SEC. All other acquisitions have been accounted for as
         purchases in accordance with APB No. 16.

(2)      The selected historical consolidated financial data as of and for the
         year ended December 31, 1998 are derived from our Consolidated
         Financial Statements, which are comprised of financial data of:
         -        Comstock Holdings, Inc., the Accounting Acquirer, for the
                  year ended December 31, 1998;
         -        the 14 groups of companies which are engaged principally in
                  the rail system services and products business and which were
                  acquired in August 1998 in separate concurrent transactions
                  (the "Founding Companies"), other than Comstock Holdings,
                  Inc., for the period from August 1, 1998 through December 31,
                  1998; and
         -        the two companies we acquired in November 1998 (the "1998
                  Acquired Companies") from each of their respective dates of
                  acquisition through December 31, 1998.

(3)      The selected historical consolidated financial data as of and for the
         year ended December 31, 1999 are derived from our Consolidated
         Financial Statements, which are comprised of financial data of all
         companies that we owned as of January 1, 1999 and companies we
         acquired during 1999 from each of their respective dates of
         acquisition through December 31, 1999.

(4)      The selected historical consolidated financial data as of and for the
         year ended December 31, 2000 are derived from our Consolidated
         Financial Statements, which are comprised of financial data of all
         companies that we owned as of January 1, 2000 and companies we
         acquired during 2000 from each of their respective dates of
         acquisition through December 31, 2000.

(5)      The selected historical consolidated financial data as of and for the
         year ended December 31, 2001 are derived from our Consolidated
         Financial Statements, which are comprised of financial data of all
         companies that we owned as of January 1, 2001 and companies we
         disposed of during 2001 from January 1, 2001 through their respective
         dates of disposal.

(6)      During the third and fourth quarters of 2000, the Company's management
         and Board of Directors conducted and completed a strategic review of
         RailWorks' operations. The resulting restructuring plan (the "2000
         Restructuring Plan") contemplated systems integration, rationalization
         of real estate, equipment and inventory and maximization of human
         resource productivity around three lines of business. During the year
         ended December 31, 2000, the Company incurred $63.3 million in
         restructuring and other unusual charges in connection with the 2000
         Restructuring Plan. During the year ended December 31, 2001, the
         Company incurred an additional $27.6 million of restructuring and other
         special charges for the impairment of goodwill and other charges
         related to obtaining amendments to its prepetition Credit Agreement.

(7)      Reorganization items consist primarily of professional and advisory
         fees incurred that are directly associated with the reorganization
         proceedings under the Company's Chapter 11 filings and other costs
         associated with


                                       11

<PAGE>

         the rejection of executory and construction contracts, net of interest
         income earned on accumulated cash resulting from the Chapter 11
         proceedings.

(8)      Working capital is the sum of cash, accounts receivable, costs and
         estimated earnings in excess of billings on uncompleted contracts,
         inventories, net deferred taxes and other current assets, less the sum
         of cash overdrafts, current maturities of long-term debt, accounts
         payable and accrued liabilities, accrued payroll and related
         withholdings, billings in excess of costs and estimated earnings on
         uncompleted contracts and other current liabilities. Working capital as
         of December 31, 2001 does not reflect a reduction for current
         liabilities classified as subject to compromise of approximately $455.1
         million.

(9)      In addition to the DIP facility, total debt as of December 31, 2001
         includes approximately $369.2 million of debt that has been classified
         as liabilities subject to compromise on the balance sheet. This
         includes approximately $173.1 million of senior subordinated notes,
         $97.5 million related to the revolving credit facility, a $94.3 million
         term loan and approximately $4.3 million of fixed asset and other notes
         payable.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

         The following discussion of the financial condition and results of
operations should be read in conjunction with our Consolidated Financial
Statements and the Notes thereto included in Part IV hereof.

                                     GENERAL

         We were formed in March 1998 to become a leading nationwide provider of
rail system services, including construction and rehabilitation, repair and
maintenance and related products. We primarily perform services pursuant to
contracts for the completion of specific projects, some of which take up to five
years to complete. On most projects, we contract directly with rail system
operators, while on other projects we act as a subcontractor.

         In August 1998, we acquired, in separate concurrent transactions,
fourteen companies (the "Founding Companies") engaged principally in the rail
system services and products business and we consummated our initial public
offering ("IPO") of Common Stock. In November 1998, we acquired two companies
(the "1998 Acquired Companies"); in 1999, we acquired fourteen companies or
groups of companies (the "1999 Acquired Companies"); and in 2000, we acquired
five companies or groups of companies (the "2000 Acquired Companies"). Except
for the acquisition of Comstock Holdings, Inc. ("Comstock"), a Founding Company,
all of our acquisitions have been accounted for as purchases in accordance with
APB No. 16. Comstock has been identified as the accounting acquirer for
accounting and financial statement purposes consistent with Staff Accounting
Bulletin No. 97 of the SEC because its owners received the largest portion,
34.6% of the shares of Common Stock issued to the owners of the Founding
Companies at the time of their acquisition.

         During 2001, we sold FCM Rail, Ltd. and certain assets and liabilities
associated with the civil and maintenance divisions of RailWorks W.T. Byler L.P.
(the "2001 Dispositions"). Our consolidated balance sheet as of December 31,
2001 includes all companies that we owned as of December 31, 2001. Our
consolidated statements of operations and cash flows for the year ended December
31, 2001 include the results of operations and cash flows of all companies owned
as of December 31, 2001 and the 2001 Dispositions through their respective dates
of disposal. There were no acquisitions during the year ended December 31, 2001.
Our consolidated balance sheet as of December 31, 2000 includes all companies
that were owned as of December 31, 2000. Our consolidated statements of
operations and cash flows for the year ended December 31, 2000 includes the
results of operations and cash flows of all companies acquired as of December
31, 1999 and the results of operations and cash flows of the 2000 Acquired
Companies from each of their respective dates of acquisition during the period.
Our consolidated statements of operations and cash flows for the year ended
December 31, 1999 include the results of operations and cash flows of all
companies acquired as of December 31, 1998 and the results of operations and
cash flows of the 1999 Acquired Companies from each of their respective dates of
acquisition during the period.

         On September 20, 2001 (the "Filing Date"), RailWorks Corporation and
twenty-two of its domestic subsidiaries (collectively, the "Debtors") filed
voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the
United States Bankruptcy Court for the District of Maryland (Baltimore
Division). The filings have been consolidated for the purpose of joint
administration as case No. 01-6-4463, but the cases have not been deemed


                                       12

<PAGE>

consolidated for Plan purposes by the Bankruptcy Court. Our Canadian
subsidiaries were not included in the filings and continue to operate in the
normal course of business outside of bankruptcy. Under Chapter 11, except for
certain statutory exceptions and for relief that might otherwise be granted by
the Bankruptcy Court, claims against the Debtors in existence prior to the
Filing Date (including claims secured by the Debtors' assets) are stayed while
the Debtors continue business operations as debtors-in-possession. Additional
claims may arise subsequent to the filing date resulting from rejection of
executory contracts, including leases and construction contracts, and from the
determination by the Bankruptcy Court (or agreed to by the parties in interest)
of allowed claims for contingencies and other disputed amounts.

         Our ability to continue as a going concern is contingent upon, among
other things, confirmation of a plan of reorganization, future profitable
operations, the ability to comply with the terms of the DIP facility and the
ability to generate sufficient cash flow from operations and financing
arrangements to meet ongoing operations. There can be no assurance that we will
be able to confirm a plan or comply with the terms of the DIP Facility or the
credit facilities under the proposed Plan. As of March 15, 2002, the amount
outstanding under the Company's Transit Revolver totaled $45 million, the
maximum amount permitted under the facility, of which $30 million relates to
outstanding borrowings and $15 million is a letter of credit supporting the
Company's commercial insurance. No further borrowing capacity presently exists
under the Transit Revolver. The lack of additional availability under the
Transit Revolver will require that the transit services segment internally
generate the cash necessary to fund its operations and its share of the
administrative costs of reorganization, but there is no assurance that it will
be able to do so. Failure to do so coupled with a failure to obtain additional
funding for the transit services segment could result in the discontinuation of
this business segment.

         Since the Filing Date, the Bankruptcy Court has approved, on a final
basis, the Debtors' debtor-in-possession financing arrangements (collectively,
as amended, restated and/or replaced, the "DIP Facility") with Bank of America,
N.A. (BOA), for itself and as agent for a syndicate of lenders, CSFB Global
Opportunities Advisers, LLC (CSFB), for itself and Stonehill Capital Management,
and Travelers Casualty & Surety Company of America ("Travelers"). The DIP
Facility includes an Amended and Restated DIP Transit Revolving Credit Agreement
(the "Transit Revolver") for up to $30 million in borrowings and a $15 million
letter of credit in support of our company wide liability and casualty insurance
(see MD&A) in connection with the Debtors' rail transit division; a DIP Transit
Bonding Facility (the "Bonding Facility") for up to $100 million in bonding
commitment to support our project bonding requirements; a DIP Bond Support
Credit Agreement (the "Bond Support Facility") with CSFB for up to $40 million
of collateral support for the transit services division's project surety bonds
underwritten by Travelers; and a DIP Financing Agreement, as replaced on March
5, 2002 (the "TP&S Revolver") with certain lenders represented by BOA as
administrative agent for up to $35 million of financing and letter of credit
commitments to support the track services and products and services divisions'
operating cash obligations and project bonding requirements. The Debtors intend
to utilize the DIP Facility and existing cash flow to fund ongoing operations
during the Chapter 11 proceedings. As of March 15, 2002 approximately $45.0
million was outstanding under the Transit Revolver, consisting of $30.0 million
of borrowings and a $15 million letter of credit; $21.3 million was outstanding
under the TP&S Revolver, consisting of $15.6 in borrowings and $5.7 million of
letters of credit outstanding; and we had $10.6 million of collateral
outstanding under the Bonding Facility. Refer to the liquidity and capital
resources section below for a more complete discussion of the DIP Facility.

         On March 15, 2002, the Debtors filed a plan of reorganization in the
U.S. Bankruptcy Court for the District of Maryland in Baltimore. The Plan
contemplates full repayment of debtor-in-possession or DIP claims, satisfaction
of secured claims held by certain of the Company's pre-petition secured lenders
through the issuance of a new secured note, and satisfaction of the balance of
claims held by the Company's pre-petition secured lenders through the conversion
of such claims into substantially all of the equity of the reorganized company.
The Plan also provides that holders of the Company's $173.1 million 11 1/2%
senior subordinated notes due in 2009 and unsecured creditors that were not
authorized by the Bankruptcy Court to be paid as critical vendors will receive
3% of the stock of the reorganized company and that the interests of the current
equity holders of the Company will be eliminated. Confirmation of the Plan,
which remains subject to supplementation, modification and amendment, also
remains subject to Bankruptcy Court approval and certain other conditions.

                          CRITICAL ACCOUNTING POLICIES

         Management's Discussion and Analysis of Financial Condition and Results
of Operations discusses RailWorks' consolidated financial statements and results
of operations by segment, which have been prepared in


                                       13

<PAGE>
accordance with accounting principles generally accepted in the United States.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. On an ongoing basis, management evaluates its estimates and
assumptions, including those related to contract revenue, anticipated contract
costs, bad debts, inventories, intangible assets, income taxes, retirement
benefits, and contingencies and litigation. Management bases its estimates and
assumptions on historical experience and on various other factors that are
believed to be reasonable under the circumstances, the results of which form the
basis for making assumptions about the carrying values of assets and liabilities
and the reported amounts of revenues and expenses that are not readily apparent
from other sources. Actual results may differ from these estimates under
different assumptions or conditions. Our significant accounting policies are
more fully described in Note 3 to our consolidated financial statements included
in Part IV hereof; however, management believes the following critical
accounting policies affect its more significant estimates and assumptions used
in the preparation of its financial statements.

REVENUE RECOGNITION

         The recognition of revenues and costs in accordance with the American
Institute of Certified Public Accountants Statement of Position 81-1:
"Accounting for Performance of Construction-Type and Certain Production Type
Contracts" ("SOP 81-1") involves considerable use of estimates and is
complicated by the need to evaluate continually the uncertainties inherent in
the performance of contracts and by the need to rely on estimates of revenues,
costs and the extent of progress toward completion of contracts. Operating in
Chapter 11 bankruptcy and certain related problems with subcontractors and
customers provides even more risk and uncertainty in the estimates. Changes in
these estimates can cause significant volatility in the Company's financial
results.

         We recognize revenue from fixed price contracts using the
percentage-of-completion method in accordance with SOP 81-1, measured by the
percentage of costs incurred to date to management's estimate of total cost for
each contract. This method is used because management considers total cost to be
the best available measure of progress on the contracts. Revenue from
time-and-material contracts is recognized currently as the work is performed.

         Contract revenue recognition inherently involves estimation. Examples
of estimates include the contemplated level of effort to accomplish the tasks
under contract, the costs of the effort, and an ongoing assessment of progress
toward completing the contract. We utilize a number of management processes to
monitor contract performance and revenue estimates, including monthly in-process
reviews that cover, among other matters, outstanding action items, progress
against schedule, effort and staffing, quality, risks and other issues,
subcontractor management, costs, and commitments. From time to time, as part
of the normal management processes, facts develop that require revisions to
estimated total costs or revenues expected. The cumulative effect of any such
revisions is recorded in the period in which the facts requiring revisions
become known. The full amount of anticipated losses on any type of contract are
recognized in the period in which they become known.

         Disputes may arise in the normal course of our business on projects
when we are contesting with customers for collection of funds because of events
such as delays, changes in contract specifications, and questions of cost
allowability or collectibility. Such disputes, whether claims or unapproved
change orders in the process of negotiation, are recorded at the lesser of their
estimated net realizable value or actual cost incurred, and only when
realization is probable and can be reliably estimated (see Note 8).

         With regard to the rail products and services segment, we recognize
revenue when products are delivered to customers pursuant to shipping
agreements. Cost of goods sold includes the raw materials cost, labor and
overhead costs of producing the product.

         The SEC issued SAB No. 101, "Revenue Recognition in Financial
Statements" ("SAB 101") in December 1999. SAB 101 summarizes certain of the SEC
staff's views in applying accounting principles generally accepted in the United
States to revenue recognition in financial statements. The Company adopted SAB
101, as amended, in the fourth quarter of 2000 and determined there was no
material impact on annual revenue and earnings or the timing of revenue and
profit recognition between quarters.

         In accordance with industry practice, the Company classifies as current
all assets and liabilities related to the performance of long-term contracts.
The contracting cycle for certain long-term contracts may extend beyond one year
and, accordingly, collection or payment of amounts related to these contracts
may extend beyond one year.



                                       14

<PAGE>

INVENTORIES

         Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out (FIFO) method. Inventory consists of
stored materials and parts to be used in long-term construction contracts and
raw materials and finished goods produced by the rail products and services
segment. RailWorks writes down its inventory for estimated obsolescence or
unmarketable inventory equal to the difference between the cost of inventory and
the estimated market value based upon assumptions about future demand and market
conditions. If actual future demand or market conditions are less favorable than
those projected by management, additional inventory write-downs may be required.

BANKRUPTCY

         The consolidated financial statements of the Company have been
presented in accordance with the American Institute of Certified Public
Accountants Statement of Position 90-7: "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code" ("SOP 90-7") and have been prepared in
accordance with accounting principles generally accepted in the United States
applicable to a going concern. These principles, except as otherwise disclosed,
assume that assets will be realized and liabilities will be discharged in the
normal course of business. The uncertainty regarding the eventual outcome of the
reorganization cases, the liquidity constraints at the transit services segment,
the financial feasibility of the Plan, related problems with subcontractors and
customers and the effect of other unknown adverse factors could threaten the
Company's existence as a going concern.

         SOP 90-7 states, among other things, that revenues, expenses, realized
gains and losses, and provisions from losses resulting from the reorganization
and the restructuring of the business should be reported separately as
reorganization items in the statement of operations. The balance sheet should
distinguish between prepetition liabilities that are subject to compromise and
those that are not such as fully secured liabilities that are not expected to be
compromised. If there is uncertainty about whether a secured claim is
undersecured, or will be impaired under the reorganization plan, the entire
amount of the claim should be included with liabilities subject to compromise.
See Note 5 to the consolidated financial statements for more information on
liabilities classified as subject to compromise and amounts recorded as
reorganization items.

         Pursuant to SOP 90-7, approval of the Plan by the Bankruptcy Court may
entail adoption by the Debtors of fresh-start accounting. Under fresh-start
accounting, the Debtors must allocate their reorganization value to their
assets in accordance with the rules for purchase accounting set forth in
Accounting Principles Board Opinion No. 16, "Business Combinations" (APB No.
16). Any excess of reorganization value that cannot be allocated to specific
tangible or identified intangible assets must be reported as the intangible
asset "reorganization value in excess of amounts allocable to identifiable
assets". All liabilities existing at the Plan confirmation date, other than
deferred taxes, are required to be stated at present values of amounts to be
paid. The Company is currently assessing this matter and has not yet determined
the effect that the adoption of fresh start accounting might have on the
financial statements.

IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         In June 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 141, "Business Combinations," which requires all business combinations
initiated after June 30, 2001 to be accounted for using the purchase method. We
believe that the impact of this statement will not have a material effect on our
financial statements.

         In June 2001, the FASB issued SFAS No. 142 "Goodwill and Other
Intangible Assets," which states that goodwill is no longer subject to
amortization over its estimated useful life. Rather, goodwill will be subject to
at least an annual assessment for impairment by applying a fair value based
test, with any adjustments thereto resulting in a separate charge to earnings in
the period in which the impairment took place. It also requires that an acquired
intangible asset be separately recognized if the benefit of the intangible asset
is obtained through contractual or other legal rights, or if the intangible
asset can be sold, transferred, licensed, rented or exchanged, regardless of the
acquirer's intent to do so. This standard becomes effective on January 1, 2002
for goodwill and intangible assets existing as of June 30, 2001 and immediately
for goodwill and intangible assets acquired after June 30, 2001. Further, we
will be required under SFAS No. 142 to write off and recognize as the effect of
a change in accounting principle effective January 1, 2002, any excess of
acquired net assets over cost (negative goodwill). As of December 31, 2001, we
had negative goodwill of approximately $5.3 million recorded as a liability in
the consolidated balance sheet. For the year ended December 31, 2001, we
recognized approximately $5.5 million in amortization of goodwill which is
included in selling, general and administrative expenses in the statement of
operations. We estimate that goodwill amortization in 2002 before any impairment
charges would be approximately $5.5 million. We are assessing the effects of
this statement and currently believe that this statement will require a material
impairment charge related to goodwill on our financial statements during 2002,
but we have not determined the amount of the charge.

         In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset
Retirement Obligations." This statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The statement is effective
for financial statements issued


                                       15

<PAGE>

for fiscal years beginning after June 15, 2002. We believe that the impact of
this statement will not have a material effect on our financial statements.

         In June 2001, the FASB issued SFAS No. 144 "Accounting for the
Impairment for Disposal of Long-Lived Assets." This statement addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets. The provisions of this statement are effective for financial statements
issued for fiscal years beginning after December 15, 2001. We believe that the
impact of this statement will not have a material effect on our financial
statements.

                              RESULTS OF OPERATIONS

Year Ended December 31, 2001 Compared to the Year Ended December 31, 2000.

         Revenue. Revenue increased $2.6 million, or 0.4%, from $614.0 million
for the year ended December 31, 2000 to $616.6 million for the year ended
December 31, 2001. Revenue increased $9.6 million for the year ended December
31, 2001 as a result of the inclusion of revenue from the 2000 Acquisitions for
the full year in 2001. Additionally, revenue increased in the transit services
segment due to the addition of several new projects during 2001 as discussed
below. These increases were offset by a decrease in revenue of approximately
$32.6 million related primarily to the 2001 Dispositions and the effects of
bankruptcy.

         Transit services revenue increased $39.2 million, or 13.2%, from $297.3
million for the year ended December 31, 2000 to $336.5 million for the year
ended December 31, 2001. This increase arises primarily from two new power and
electrical related contracts that generated approximately $19.0 million of
revenue. Additional increases were realized from two existing station track
related contracts of approximately $25.0 million, three existing commercial
contracts of approximately $28.0 million, and one existing construction contract
of approximately $8.0 million. These increases were partially offset by
decreased revenues resulting from several projects that were active for the full
year of 2000, but were completed during 2001. In addition, these increases were
partially offset by decreased revenue during the third and fourth quarter of
2001 as a result of project slowdowns and delays caused by liquidity
constraints. Our inability to generate sufficient cash flow had a negative
effect on revenue by preventing material shipments, initiating subcontractor
stoppages, and adversely affecting management of labor.

         Rail track services revenue decreased $21.3 million, or 10.8%, from
$198.0 million for the year ended December 31, 2000 to $176.7 million for the
year ended December 31, 2001. Revenue in the rail track services segment
decreased approximately $27.4 million for the year ended December 31, 2001 as a
result of the sale of the civil and maintenance divisions of RailWorks W.T.
Byler L.P. in June 2001. The remaining increase in revenue is due to growth in
the segment.

         Rail products and services revenue decreased $15.3 million, or 12.9%,
from $118.7 million for the year ended December 31, 2000 to $103.4 million for
the year ended December 31, 2001. Approximately $5.2 million of the decrease in
revenue for the year ended December 31, 2001 was due to the sale of FCM Rail,
Ltd during February 2001 offset by the addition of approximately $8.3 million of
revenue from the inclusion of a full year of revenue in 2001 related to the
acquisition of Hovey Industries, Ltd and certain assets of the Western Tar
Corporation during 2000. The rail products and services segment experienced
additional decreases in revenue as a result of liquidity constraints in 2001
which caused delayed material shipments.

         Gross Profit. Gross profit decreased $89.2 million or 78.7% from $113.4
million for the year ended December 31, 2000 to $24.2 million for the year ended
December 31, 2001. Gross profit decreased in the transit services segment, the
rail products and services segment and the rail track services segment primarily
as a result of liquidity constraints and other financial difficulties as a
consequence of operating in bankruptcy as well as decreased gross profit from
the 2001 Dispositions. The gross profit percentage decreased from 18.5% for the
year ended December 31, 2000 to 3.9% for the year ended December 31, 2001. This
decrease was due primarily to the financial difficulties mentioned above.

         Transit services gross profit decreased $57.2 million from $47.8
million for the year ended December 31, 2000 to a loss of $9.4 million for the
year ended December 31, 2001. Of the overall decrease in gross profit,
approximately $19.0 million was attributable to changes in management's
estimates of cost to complete due to


                                       16

<PAGE>
operational deficiencies in project management, labor productivity, and cost
overruns which were primarily caused by the liquidity constraints that the
company experienced in 2001. An additional decrease in gross profit of
approximately $20.0 million was a result of the establishment of additional
reserves based on revised estimates of the recoverability of accounts
receivable, pending change orders and the settlement of claims. A general
slowdown in revenue recognition, and other consequences of operating in
bankruptcy, such as project delays and difficulties managing our subcontractor
and vendor relationships led to further deterioration of our gross profit. As a
result of the forgoing, the gross profit percentage decreased from 16.1% for the
year ended December 31, 2000 to negative 2.8% for the year ended December 31,
2001.

         Rail track services gross profit decreased $18.0 million, or 47.6%,
from $37.8 million for the year ended December 31, 2000 to $19.8 million for the
year ended December 31, 2001. A portion of the decrease in gross profit for the
year ended December 31, 2001 is primarily due to the decrease in revenue
previously described and liquidity constraints experienced during 2001. The
remaining decrease is due to additional reserves established and charges taken
in the third and fourth quarter of 2001 for inventory and revised estimates of
costs to complete as well as the sale of the civil and maintenance divisions of
RailWorks W.T. Byler L.P. during June 2001. The gross profit percentage
decreased from 19.1% for the year ended December 31, 2000 to 11.2% for the year
ended December 31, 2001. The decrease in gross profit percentage for the rail
track services segment was due primarily to liquidity constraints and additional
reserves mentioned above.

         Rail products and services gross profit decreased $14.0 million, or
50.4%, from $27.8 million for the year ended December 31, 2000 to $13.8 million
for the year ended December 31, 2001. The decrease in gross profit for the year
ended December 31, 2001 was primarily due to the decrease in revenue previously
described and liquidity constraints, which caused delayed material shipments
during 2001. Additionally, gross profit decreased by approximately $4.7 million
as a result of the sale of FCM Rail, Ltd. during February 2001 offset by
additional gross profit from the acquisition of Western Tar Corporation during
2000. The gross profit percentage decreased from 23.4% for the year ended
December 31, 2000 to 13.3% for the year ended December 31, 2001. The decrease in
gross profit percentage for the rail products and services segment is primarily
the result of the decreased gross profit related to liquidity constraints
mentioned above.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $5.9 million or 8.2%, from $71.6 million for
the year ended December 31, 2000 to $77.5 million for the year ended December
31, 2001. The increase in selling, general and administrative expenses for the
year ended December 31, 2001 was primarily due to the growth of the transit
services segment, additional insurance costs and certain charges taken for
accounts receivable in the track services division as discussed below.
Additionally, selling, general and administrative expenses increased as a result
of the inclusion of selling, general and administrative expense of the 2000
Acquired Companies for the full year in 2001 offset by decreased selling,
general and administrative expense from the 2001 Dispositions. As a percentage
of revenue, selling, general and administrative expenses increased from 11.7%
for the year ended December 31, 2000 to 12.6% for the year ended December 31,
2001. This increase was the result of increased selling, general and
administrative expenses on a relatively flat revenue base.

         Transit services selling, general and administrative expenses increased
$5.4 million or 24.0%, from $22.5 million for the year ended December 31, 2000
to $27.9 million for the year ended December 31, 2001. Approximately $2.8
million of the increase in selling, general and administrative expenses for the
year ended December 31, 2001 was due to the addition of a full year of selling,
general and administrative expenses from the two transit services companies
acquired during 2000. The remaining increase is the result of the increased
insurance costs across the division as well as the overall growth of the segment
in 2001. As a percentage of segment revenue, selling, general and administrative
expenses increased from 7.6% for the year ended December 31, 2000 to 8.3% for
the year ended December 31, 2001 as a result of the items mentioned above.

         Rail track services selling, general and administrative expenses
increased $0.8 million, or 3.9%, from $20.3 million for the year ended
December 31, 2000 to $21.1 million for the year ended December 31, 2001. The
increase in selling, general and administrative expenses for the year ended
December 31, 2001 was primarily due to additional charges taken in the third and
fourth quarters of 2001 for accounts receivable offset by decreased selling,
general and administrative expenses resulting from the sale of the civil and
maintenance divisions of RailWorks W.T. Byler L.P. in June 2001. As a percentage
of segment revenue, selling, general and administrative expenses increased from
10.3% for the year ended December 31, 2000 to 11.9% for the year ended
December 31, 2001. This percentage increase was primarily the result of
decreased revenue as discussed above.

         Rail products and services selling, general and administrative expenses
decreased $3.1 million, or 17.9%, from $17.3 million for the year ended December
31, 2000 to $14.2 million for the year ended December 31, 2001. The decrease in
selling, general and administrative expenses for the year ended December 31,
2001 was due primarily to the sale of FCM Rail, Ltd. during February 2001,
decreased selling, general and administrative expenses resulting from winding
down the operations of Neosho Construction, and additional savings related to
the development of a centralized hub for our rail services operations. These
decreases were partially offset by the addition of a full year of selling,
general and administrative expenses from the two rail products and services
companies acquired during 2000 and additional charges taken during the year to
reserve for bad debts. As a percentage of segment revenue, selling, general and
administrative expenses decreased from 14.6% for the year ended December 31,
2000 to 13.7% for the year ended December 31, 2001 as a result of the items
mentioned above.
                                       17
<PAGE>
         Corporate selling, general and administrative expenses increased $2.8
million, or 24.3%, from $11.5 million for the year ended December 31, 2000 to
$14.3 million for the year ended December 31, 2001. The increase in selling,
general and administrative expenses for the year ended December 31, 2001 was
due primarily to increased insurance expenses and the increased level of
professional fees paid during 2001. As a percentage of total revenue, selling,
general and administrative expenses increased from 1.9% for the year ended
December 31, 2000 to 2.3% for the year ended December 31, 2001. This percentage
increase was primarily the result of decreased revenue in the rail track
services and rail products and services segments as discussed above.

         Operating Loss. Operating loss increased $59.4 million, or 276.3%,
from $21.5 million for the year ended December 31, 2000 to $80.9 million for
the year ended December 31, 2001. This increase was mostly a result of the
items mentioned above as well as additional restructuring and other unusual
charges of approximately $27.6 million, which includes approximately $24.4
million for the write off of unamortized goodwill associated with the
acquisitions of Neosho Incorporated, Twigg Corporation and Hovey Industries,
Ltd.

         Interest Expense. Interest expense decreased $5.9 million, or 15.6%,
from $37.9 million for the year ended December 31, 2000 to $32.0 million for the
year ended December 31, 2001. The decrease in interest expense for the year
ended December 31, 2001 was due primarily to the Company discontinuing to accrue
approximately $10.3 million of interest expense after the Filing Date related to
prepetition debt in accordance with SOP 90-7. This decrease was partially offset
by increased interest expense prior to the Filing Date as a result of an
increase in our average total debt outstanding prior to the Filing Date.

         Reorganization Items. Reorganization items of approximately $10.1
million for the year ended December 31, 2001, consist primarily of professional
and advisory fees incurred that are directly associated with the reorganization
proceedings under the Company's Chapter 11 filings and other costs associated
with the rejection of construction contracts, net of interest income earned on
accumulated cash resulting from the Chapter 11 proceedings.

         Taxes. The Company has recorded an income tax provision of $4.1
million for year ended December 31, 2001. This provision reflects revised
estimates of state and foreign income taxes payable after consideration of the
losses incurred in the second quarter as a result of the sale of certain assets
of our RailWorks W.T. Byler L.P. subsidiary and the losses incurred during the
year associated with cash flow constraints and other consequences of operating
in bankruptcy. In addition, due to uncertainty as to the realizability of the
Company's deferred tax asset, an additional valuation allowance of
approximately $2.8 million against the Company's deferred tax asset was
recorded in the current provision during the second quarter of 2001.

         Net Loss. Net loss increased $80.7 million, from a loss of $60.0
million for the year ended December 31, 2000 to a loss of $140.7 million for
the year ended December 31, 2001, primarily as a result of the items mentioned
above, including losses of approximately $14.6 million related to the 2001
Dispositions and an extraordinary gain from the extinguishment of bonds of
approximately $0.5 million.

Year Ended December 31, 2000 Compared to the Year Ended December 31, 1999.

         Revenue. Revenue increased $145.9 million, or 31.2%, from $468.1
million for the year ended December 31, 1999 to $614.0 million for the year
ended December 31, 2000. The increase in revenue for the year ended


                                      18
<PAGE>


December 31, 2000 was due primarily to the 1999 Acquired Companies being
included for the full year in 2000, as well as the addition of revenues from
the 2000 Acquired Companies.

         Transit services revenue increased $52.4 million, or 21.4%, from
$244.9 million for the year ended December 31, 1999 to $297.3 million for the
year ended December 31, 2000. The increase in revenue for the year ended
December 31, 2000 was due primarily to the addition of revenue from the
acquisition of Twigg Corporation, which was acquired in December 0f 1999, and
the acquisitions of HSQ Technology Corporation and Breaking Technologies, Inc
during 2000.

         Rail track services revenue increased $57.4 million, or 40.8%, from
$140.6 million for the year ended December 31, 1999 to $198.0 million for the
year ended December 31, 2000. The increase in revenue for the year ended
December 31, 2000 was due primarily to the addition of a full year of revenue
from W. T. Byler Company, Inc., which was acquired in October of 1999.

         Rail products and services revenue increased $36.1 million, or 43.7%,
from $82.6 million for the year ended December 31, 1999 to $118.7 million for
the year ended December 31, 2000. The increase in revenue for the year ended
December 31, 2000 was due primarily to the addition of revenue from the
acquisition of DuraWood LLC and the Pandrol Jackson switch grinding operation,
which were acquired in December of 1999, the acquisition of Wood Waste Energy,
Inc, which was acquired in August of 1999, as well as the acquisitions of
Western Tar Corporation and Hovey Industries, Ltd. during 2000.

         Gross Profit. Gross profit increased $14.4 million or 14.5% from $99.0
million for the year ended December 31, 1999 to $113.4 million for the year
ended December 31, 2000. The increase in gross profit for the year ended
December 31, 2000 was due primarily to gross profit from the 1999 Acquired
Companies being included for the full year in 2000 as well as additional gross
profit from the 2000 Acquired Companies, offset by the gross profit associated
with a 1999 NYCTA project in the transit services segment. This project
accounted for $5 million of gross profit in 1999. The gross profit percentage
decreased from 21.2% for the year ended December 31, 1999 to 18.5% for the year
ended December 31, 2000. This decrease was due primarily to the referenced
NYCTA project.

         Transit services gross profit increased $6.5 million or 15.7% from
$41.3 million for the year ended December 31, 1999 to $47.8 million for the
year ended December 31, 2000. The increase in gross profit for the year ended
December 31, 2000 was due primarily to the addition of gross profit from the
two transit services companies acquired during 2000 offset by the reduction in
gross profit for the NYCTA project mentioned above. The gross profit percentage
decreased from 16.9% for the year ended December 31, 1999 to 16.1% for the year
ended December 31, 2000, due primarily to the NYCTA project mentioned above.

         Rail track services gross profit increased $1.6 million, or 4.4%, from
$36.2 million for the year ended December 31, 1999 to $37.8 million for the
year ended December 31, 2000. The increase in gross profit for the year ended
December 31, 2000 was due primarily to the addition of gross profit from W. T.
Byler Company, Inc. The gross profit percentage decreased from 25.7% for the
year ended December 31, 1999 to 19.1% for the year ended December 31, 2000.
This decrease was due to an overall increase in competitive pressures resulting
from a general slowing of the Class I Railroad market, as well as adverse
weather conditions during the fourth quarter of 2000.

         Rail products and services gross profit increased $6.3 million, or
29.3%, from $21.5 million for the year ended December 31, 1999 to $27.8 million
for the year ended December 31, 2000. The increase in gross profit for the year
ended December 31, 2000 was due primarily to the addition of gross profit from
the two rail products and services companies acquired during 2000. The gross
profit percentage decreased from 26.0% for the year ended December 31, 1999 to
23.4% for the year ended December 31, 2000. This decrease was the result of the
general slowing of the Class I Railroad market and the overall increase in
competitive pressures that such a slowdown creates.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $21.2 million or 42.1%, from $50.4 million
for the year ended December 31, 1999 to $71.6 million for the year ended
December 31, 2000. The increase in selling, general and administrative expenses
for the year ended December 31, 2000 was due primarily to the selling, general
and administrative expense of the 1999 Acquired Companies being included for
the full year in 2000 as well as the addition of the 2000 Acquired Companies.
As a percentage of revenue, selling, general and administrative expenses
increased from 10.8% for the year ended


                                      19
<PAGE>


December 31, 1999 to 11.7% for the year ended December 31, 2000. This increase
was the result of the addition of the higher selling, general and
administrative cost structures of the 2000 Acquired Companies.

         Transit services selling, general and administrative expenses
increased $4.5 million or 25.0%, from $18.0 million for the year ended December
31, 1999 to $22.5 million for the year ended December 31, 2000. The increase in
selling, general and administrative expenses for the year ended December 31,
2000 was due primarily to the addition of selling, general and administrative
expenses from the two transit services companies acquired during 2000. As a
percentage of segment revenue, selling, general and administrative expenses
increased from 7.3% for the year ended December 31, 1999 to 7.6% for the year
ended December 31, 2000 primarily due to the addition of the higher selling,
general and administrative costs structures of the 2000 Acquired Companies.

         Rail track services selling, general and administrative expenses
increased $7.5 million, or 58.6%, from $12.8 million for the year ended
December 31, 1999 to $20.3 million for the year ended December 31, 2000. The
increase in selling, general and administrative expenses for the year ended
December 31, 2000 was due primarily to the addition of selling, general and
administrative expenses from the acquisition of W.T. Byler Company, Inc.
coupled with the initial development expenses to create a centralized
administration for the geographic regions of the business. As a percentage of
segment revenue, selling, general and administrative expenses increased from
9.1% for the year ended December 31, 1999 to 10.3% for the year ended December
31, 2000. This percentage increase was primarily the result of W. T. Byler
Company, Inc. having a slightly larger selling, general and administrative cost
structure than the existing companies.

         Rail products and services selling, general and administrative
expenses increased $5.2 million, or 43.0%, from $12.1 million for the year
ended December 31, 1999 to $17.3 million for the year ended December 31, 2000.
The increase in selling, general and administrative expenses for the year ended
December 31, 2000 was due primarily to the addition of selling, general and
administrative expenses from the two rail products and services companies
acquired during 2000. As a percentage of segment revenue, selling, general and
administrative expenses remained constant at 14.6%.

         Corporate selling, general and administrative expenses increased $4.0
million, or 53.3%, from $7.5 million for the year ended December 31, 1999 to
$11.5 million for the year ended December 31, 2000. The increase in selling,
general and administrative expenses for the year ended December 31, 2000 was
due primarily to the increased level of overhead to administer the larger
operations in 2000. As a percentage of total revenue, selling, general and
administrative expenses increased from 1.6% for the year ended December 31,
1999 to 1.9% for the year ended December 31, 2000. The increase in percentage
results from the development of a larger overhead structure compared to the
prior year in order to manage the anticipated increased size and complexity of
the Company's operations.

         Operating Income/Loss. Operating income decreased $70.1 million from
$48.6 million for the year ended December 31, 2000 to a loss of $21.5 million
for the year ended December 31, 2001. This decrease was primarily the result of
the items mentioned above as well as the restructuring and other unusual
charges of approximately $63.3 million that were recorded during the year.
These restructuring and other unusual charges included approximately $2.2
million of charges for employee termination benefits and $.7 million of charges
for lease exit costs in accordance with Emerging Issues Task Force No. 94-3
"Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit".. Also included in restructuring and other unusual charges was
approximately $21.2 million of goodwill impairment charges related to the
acquisitions of Neosho Incorporated and FCM Rail, Ltd, $28.3 million of charges
to reflect the anticipated net realizable value of accounts receivable and
costs in excess of billings related to construction claims under revised
settlement scenarios, $4.2 million associated with abandoned acquisition and
other transaction costs and $6.7 million for the settlement of other
non-contract related claims against the company, moving expenses paid,
non-recurring compensation expense and costs associated with the amendment of
the Company's credit agreement.

         Interest Expense. Interest expense increased $17.8 million, or 88.6%,
from $20.1 million for the year ended December 31, 1999 to $37.9 million for
the year ended December 31, 2000. The increase in interest expense for the year
ended December 31, 2000 was due primarily to the increase in average total debt
outstanding of $165.0 million for the year ended December 31, 1999 at an
effective interest rate of 10.31% to $348.7 million for the year ended December
31, 2000 at an effective interest rate of 10.48%. The increase in the effective
rate was the result of


                                      20
<PAGE>


having a full year of high yield debt outstanding in 2000 at an effective rate
of 11.9%. General interest rates have also risen during this period, which
adversely affects our variable rate debt.

         Taxes. Income taxes decreased $8.2 million from a provision of $11.1
million for the year ended December 31, 1999 to a provision of $2.9 million for
the year ended December 31, 2000. The decrease in income taxes is primarily
related to elimination of a federal income tax provision due to losses
generated by the $63.3 million restructuring and other unusual charges
mentioned above. The remaining $2.9 million provision reflects a provision for
state, local and foreign income taxes.

         Net Income. Net income decreased $80.1 million, from a profit of $20.1
million for the year ended December 31, 1999 to a loss of $60.0 million for the
year ended December 31, 2000, as a result of the items mentioned above.

                  FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

         We experience quarterly variations in revenue, operating income
(including operating losses), net income (including net losses) and cash flows
(including operating cash flow deficits) as a result of various factors,
including seasonality, projects commenced and completed during a quarter, the
number of business days in a quarter and the size and scope of projects. A
variation in the number of projects, progress on projects or the timing of the
initiation or completion of projects can cause periods in which certain
operating resources are not generating revenue and can cause significant
variations in operating results between reporting periods. Negative
fluctuations have been and may be particularly pronounced, and net losses have
been and may be incurred, in the first and fourth calendar quarters, generally
due to adverse weather conditions. We expect to continue to experience such
quarterly fluctuations in operating results, including possible net losses.

                        LIQUIDITY AND CAPITAL RESOURCES

         Working Capital. At December 31, 2001, we had $2.8 million in cash and
cash equivalents offset by a cash overdraft of $3.0 million resulting in a
negative net cash position of $0.2 million compared to $7.1 million in cash and
cash equivalents offset by a cash overdraft of $16.8 million resulting in a
negative net cash position of $9.7 million as of December 31, 2000. Net cash
used in operating activities for the year ended December 31, 2001 was
approximately $39.0 million. Net cash provided by investing activities for the
year ended December 31, 2001 was approximately $10.9 million, which consisted
primarily of cash proceeds from the sales of a subsidiary and a division offset
by cash payments for capital expenditures and earnout obligations. Net cash
provided by financing activities for the year ended December 31, 2001 was
approximately $24.6 million, which included borrowings of approximately $55.8
million offset by debt and cash overdraft repayments of approximately $26.6
million and loan fees of $4.6 million.

         We had working capital of $141.3 million as of December 31, 2001,
which does not include liabilities subject to compromise of approximately
$455.1 million which otherwise would be recorded as current. These liabilities
represent claims in existence prior to the Filing Date, which are generally
stayed while the Debtors continue business operations as debtors-in-possession
under Chapter 11 of the Bankruptcy Code. Including such liabilities subject to
compromise as current liabilities, our working capital deficit as of December
31, 2001 would be $313.8 million. Our working capital as of December 31, 2000
was $120.0 million.

         The Debtors have determined that insufficient collateral exists to
cover the interest portion of scheduled payments on their prepetition debt
obligations, including the obligations under the Credit Agreement and the
senior subordinated notes, and therefore have discontinued accruing interest on
these obligations. Contractual interest on these obligations amounts to
approximately $42.3 million for the year ended December 31, 2001. These amounts
exceed the recorded amount of interest expense by approximately $10.3 million
due to the cessation of accruing interest on prepetition debt after the Filing
Date.

         Capital expenditures were $11.0 million, $27.3 million and $15.8
million in fiscal 2001, 2000 and 1999, respectively. Historically, capital
expenditures have been, and future expenditures are anticipated to be,
primarily to support expansion of our operations, including our management
information systems. Our capital expenditures over the next several years, as a
percentage of revenues, are expected to decrease compared to those of the past
two fiscal years.


                                      21
<PAGE>


         In connection with certain acquisitions, we have agreed to pay
additional consideration based on operating results of the acquired entity. The
payment of any such contingent consideration could result in an increase in the
purchase prices of such acquisitions and, as a result, additional goodwill.
Additional consideration recorded as goodwill as of December 31, 2001 relating
to 2000 operating performance amounted to approximately $13.8 million as
adjusted based on finalized earn-out calculations. Through December 31, 2001,
we paid approximately $4.0 million of such additional consideration and $4.6
million was forgiven as partial consideration in the sale of the civil and
maintenance divisions of RailWorks W.T. Byler L.P. leaving the balance of $5.2
million of such consideration payable as of December 31, 2001. Additional
consideration recorded as goodwill as of December 31, 2001 relating to 2001
operating performance amounted to approximately $4.7 million. As a result of
the Chapter 11 filings, all additional consideration payable related to our
domestic subsidiaries has been classified as a liability subject to compromise.

         Indebtedness. As of December 31, 2001, we had a total of $411.1 million
of indebtedness outstanding, which includes approximately $191.8 million
outstanding under our Amended and Restated Credit Agreement (the "Credit
Agreement"), $173.1 million of 11 1/2% Senior Subordinated Notes (the "Notes"),
$36.4 million under the DIP Facility, $5.0 million under our Canadian credit
agreement and $4.8 million of fixed asset and other notes payable.

         Of the $191.8 million of borrowings outstanding under the Credit
Agreement, $94.3 million was borrowed under a term loan payable through 2006
and $97.5 million was borrowed under the revolving credit commitment. In
connection with the Credit Agreement, the Company granted to BOA a security
interest in essentially all of the assets, including receivables, of the
Company.

         On February 13, 2001 we entered into a second amendment (the "Second
Amendment") to the Credit Agreement pursuant to which we were granted approval
to execute the sale for cash of the capital stock of our wholly owned
subsidiary, FCM Rail, Ltd. As a result of this sale the revolving credit
facility was reduced by $4.9 million and the available revolving credit
commitment under the revolving credit facility was reduced by $3.9 million to
$96.1 million by the portion of the sale proceeds applicable to the revolving
credit commitment. Similarly, the term loan facility was reduced by prepayments
totaling $4.5 million, which were applied in inverse order of maturities to the
final scheduled principal repayment of the term loan. The Second Amendment also
revised two leverage ratios and established a new minimum net worth covenant in
order to accommodate the impact on certain financial covenants of the
disposition of FCM Rail, Ltd. There was no interest pricing increase nor were
any fees payable in connection with obtaining the Second Amendment.

         Effective June 18, 2001, we entered into a third amendment to the
Credit Agreement (the "Third Amendment") pursuant to which the available
revolving credit commitment was increased to $111.0 million through September
30, 2001. In connection with the Third Amendment, we agreed to pay an amendment
fee of approximately $0.4 million and to issue to the lenders under the Credit
Agreement (the "Lenders") warrants to purchase our common stock in an amount
equal to two percent (2.0%) of our fully diluted and outstanding equity as of
June 18, 2001 (or 379,359 shares) at an exercise price of $0.01 per share. The
warrants have customary anti-dilution protection for stock splits, dividends
and distributions. The warrants became exercisable in four equal monthly
increments beginning on September 30, 2001 and ending on December 31, 2001, and
will expire on July 18, 2011. We agreed to certain demand and piggyback
registration rights with respect to the common stock issuable upon exercise of
the warrants.

         Under the Third Amendment, all amounts outstanding under the Credit
Agreement bore interest at a per annum rate one-half percent (0.5%) higher than
previously applicable, or 4.0% above the prime rate for the term loan and 3.0%
above the prime rate on the revolving credit commitment. We were not allowed to
enter into any LIBOR contracts during the term of the Third Amendment period,
which expired on September 30, 2001, and were required to continue to have
prime rate-based borrowings during such term. Under the Third Amendment the
Lenders waived our noncompliance with certain of the financial covenants in the
Credit Agreement for the period ended June 30, 2001. Pursuant to the Third
Amendment we were required to achieve minimum earnings before interest, taxes,
depreciation and amortization (EBITDA) of $15.0 million for the quarter ended
June 30, 2001. We failed to achieve such minimum EBITDA for the quarter ended
June 30, 2001. In addition, we had exceeded the permitted borrowing base under
the Credit Agreement.


                                      22
<PAGE>


         As a result of the foregoing, on August 7, 2001, we sought a waiver
from our Lenders for our noncompliance with the EBITDA covenant under the Third
Amendment, our exceeding the permitted borrowing base under the Credit
Agreement and our noncompliance with certain other covenants in the Third
Amendment. Our noncompliance with certain of these covenants under the Third
Amendment and the Credit Agreement provided the Lenders with the right to
accelerate payment of all amounts owed by us under the Credit Agreement and
prohibited us from effecting any further borrowings under the revolving credit
commitment. On August 13, 2001, the Lenders notified us that they had declined
to provide the waivers sought.

         On June 18, 2001, we exchanged 140,326 shares of $0.01 par value
common stock for $1.0 million of the Notes outstanding. In connection with this
transaction, we have recorded an extraordinary gain on the extinguishment of
debt of approximately $0.5 million.

         As a result of our noncompliance with the Credit Agreement and our
inability to generate sufficient working capital to fund operations, on
September 20, 2001 we filed a voluntary petition for protection under Chapter
11 of the bankruptcy code. As a result of the Chapter 11 filings, approximately
$369.2 million of our total debt outstanding has been classified as liabilities
subject to compromise. This includes the $191.8 million of borrowings under the
Credit Agreement and $173.1 million of Senior Subordinated Notes outstanding.
It does not include the debt of our Canadian subsidiaries or the DIP Facility
obtained after the Filing Date, as discussed below. In addition, we have not
made interest payments on our obligations under the Credit Agreement since July
of 2001 and did not make our semi-annual interest payment due October 15, 2001
under the Notes. As a result, approximately $12.4 million of prepetition
accrued interest related to the Credit Agreement and the Notes has been
included in liabilities subject to compromise. We have not accrued any interest
on our prepetition debt obligations since the Filing Date.

         On October 5, 2001 and October 9, 2001 we entered into the DIP
Facility that was subsequently amended and partially replaced, which includes:
1) the Transit Revolver with CSFB for up to $30 million (subsequently increased
to $45 million, as discussed below) of financing supporting the transit
services division's operations; 2) the Bond Support Facility with CSFB for up
to $40 million of collateral supporting the transit services division's project
surety bonds underwritten by Travelers; 3) the Bonding Facility with Travelers
for up to $100 million of surety bond commitment supporting the Debtor's
project bonding requirements; and 4) the TP&S Revolver with certain lenders
represented by BOA as administrative agent for up to $35 million of financing
and letter of credit commitments supporting the track services and products &
services divisions' operating cash obligations and project bonding
requirements.

         Under the Transit Revolver (as amended and restated), we are obligated
to pay: 1) an up-front fee of 3.00% of the aggregate commitments; 2) an unused
commitment fee of 0.50% per annum on the average daily unused portion of the
commitment; and 3) an additional fee of $900,000 (together, with the Additional
Fee for the TP&S Revolver referred to below, the "Additional Fees") if we do
not have a plan of reorganization acceptable to CSFB, BOA and Travelers
confirmed by the Bankruptcy Court by April 30, 2002 and/or consummated by May
15, 2002. Borrowings under the Transit Revolver bear interest at the prime rate
plus 3.00%.

         Under the Bond Support Facility we are obligated to pay: 1) an
up-front fee of 3.00% of the aggregate commitments; 2) an unused commitment fee
of 0.50% per annum on the average daily unused portion of the commitment; and
3) a letter of credit fee of 1.50%; and a fronting and negotiation issuer fee
of 0.125% per annum, both calculated on the average daily maximum amount to be
drawn under the letters of credit from the date of issuance to the date of
expiration.

         Under the Bonding Facility we are obligated to pay: 1) to Travelers
all premiums due for bonds issued within 60 days of issuance; 2) any broker's
fees or commissions for all bond issuances; and 3) to Travelers a monthly
management fee of $10,000. In connection with the issuance of any bond under
the Bonding Facility, and as a necessary condition precedent thereto, we must
obtain collateral or letters of credit in an amount of 40% of the penal sum of
such bond as security for such bond.

         Under the TP&S Revolver, we are obligated to pay: 1) an up-front fee
of 3.00% of the aggregated commitment amount; 2) an administrative fee of
$125,000; 3) a letter of credit fee of 1.50%; and a fronting and negotiation
issuer fee of 0.125% per annum, both calculated on the average daily maximum
amount to be drawn under the letters of credit from the date of issuance to the
date of expiration; 4) a monthly adequate protection payment of $500,000; and
5) an Additional Fee of $750,000 if we do not have a plan of reorganization
acceptable to


                                      23
<PAGE>


CSFB, BOA and Travelers confirmed by the Bankruptcy Court by April 30, 2002
and/or consummated by May 15, 2002. Borrowings under the TP&S Revolver bear
interest at the prime rate plus 3.00%.

         On October 5, 2001, the Bankruptcy Court approved, on an interim
basis, up to $81 million of the DIP Facility, or approximately half of the
commitments related to the Transit Revolver, the Bonding Facility, the Bond
Support Facility and the TP&S Revolver. On October 23, 2001, the Bankruptcy
Court issued its final approval of the DIP Facility, thereby authorizing the
Debtors to utilize all commitments related to the Transit Revolver, the Bonding
Facility, the Bond Support Facility and the TP&S Revolver. The DIP Facility
matures on September 30, 2002.

         On February 1, 2002, the Bankruptcy Court authorized the amendment and
restatement of the Transit Revolver to, among other things, provide for an
increase in the amount of the commitment thereunder from $30 million to $45
million, of which $15 million represents a letter of credit to secure certain
of the Company's insurance obligations. In connection with the amendment, the
Company is obligated to pay a letter of credit issuance fee equal to $225,000,
payable in four equal quarterly installments beginning on March 31, 2002. On
March 5, 2002, the Bankruptcy Court authorized the Debtors to replace the TP&S
Revolver with a substantially identical revolving facility. In connection with
the replacement of the TP&S Revolver, the lenders under both the Transit
Revolver and the TP&S Revolver agreed to extend the triggering deadlines for
the payment of the Additional Fees referred to above to the dates indicated
above. Also, in connection with the replacement of the TP&S Revolver, the
minimum EBITDA covenants for 2001 for the rail track services and the rail
products and services divisions were eliminated. As of March 15, 2002,
approximately $45.0 million was outstanding under the Transit Revolver,
consisting of $30.0 million of borrowings and a $15.0 million letter of credit;
$21.3 million was outstanding under the TP&S Revolver, consisting of $15.6
million of borrowings and $5.7 million of letters of credit; and we had
approximately $10.6 million of collateral outstanding under the Bonding
Facility.

         Our obligations under the DIP Facility are jointly and severally
guaranteed by each of the other Debtors. Generally, pursuant to the DIP Facility
agreements, we have granted to the DIP Facility lenders first priority liens and
security interests (subject to valid, perfected, enforceable and non-avoidable
liens existing as of the Filing Date and other carve-outs and exceptions as
fully described in the DIP Facility and the Bankruptcy Court orders related
thereto) in all of the Debtors' property. The DIP Facility agreements limit,
among other things, our ability to incur additional indebtedness or obligations,
to permit additional liens, to make additional acquisitions, to sell or dispose
of assets, to create or incur liens on assets, and to merge or consolidate with
any other entity. The DIP Facility also limits our ability to file certain
"Material Pleadings" in our Chapter 11 case, unless we first obtain the consent
of BOA, CSFB and Travelers. Pleadings requiring the consent of BOA, CSFB and
Travelers include, among others, a plan of reorganization and disclosure
statement, material asset sale motions, and an employee retention plan motion.
The DIP Facility contains customary representations, warranties and covenants,
including certain financial covenants and DIP Facility usage covenants. The
breach of any such provisions, to the extent not cured or waived within
applicable grace or cure periods, could result in our inability to obtain
further advances under the DIP Facility and the potential exercise of remedies
by the lenders under the DIP Facility, which could materially impair our ability
to reorganize under Chapter 11 and could force us into a liquidation. In a
liquidation, holders of our public and unsecured debt and holders of our equity
would likely receive no value for their respective interests. There can be no
assurance that the funding provided by the DIP Facilities will be sufficient to
satisfy our working capital needs or that we will be able to secure additional
financing if needed. As of December 31, 2001, the Company's track services and
products and services divisions were not in compliance with the minimum EBITDA
covenant established under the original TP&S Revolver. As discussed above, the
TP&S Revolver was subsequently replaced with an identical facility that, among
other things, cured any defaults existing under the previous facility. We are
currently in compliance with the covenants under the DIP Facility.

         Contractual Obligations and Commitments. The following table presents
projected payments and expirations under our contractual obligations and
commercial commitments as of December 31, 2001 (in thousands):

<Table>
<Caption>
                                                                  PAYMENTS DUE AND/OR EXPIRATION BY PERIOD
                                           --------------------------------------------------------------------------------------
                                             TOTAL        LESS THAN 1 YEAR     1-3 YEARS         4-5 YEARS          AFTER 5 YEARS
                                           --------       ----------------     ---------         ---------          -------------
<S>                                         <C>           <C>                  <C>               <C>                <C>
  CONTRACTUAL OBLIGATIONS
Long-term debt(a)                          $269,323          $269,323           $    --           $   --               $   --
Capital lease obligations(b)                  2,851             2,505               346               --                   --
Operating leases(c)                          24,359             8,651            10,956            3,730                1,022
                                           --------          --------           -------           ------               ------
TOTAL CONTRACTUAL CASH OBLIGATIONS         $296,533          $280,479           $11,302           $3,730               $1,022
                                           ========          ========           =======           ======               ======

  OTHER COMMERCIAL COMMITMENTS
Lines of Credit(d)                         $138,913          $138,913           $    --           $   --               $   --
Letters of Credit(e)                          4,069             2,636             1,233              200                   --
                                           --------          --------           -------           ------               ------
TOTAL COMMERCIAL COMMITMENTS               $142,982          $141,549           $ 1,233           $  200               $   --
                                           ========          ========           =======           ======               ======
</Table>

(a) Long-term debt includes approximately $173.1 million of Notes due in 2009,
    $94.3 million under the term loan portion of the Credit Agreement payable
    through 2006 and $2.0 million of seller notes due through 2002 related to
    the purchase of one of our subsidiaries. As a result of the bankruptcy,
    these obligations have been classified as liabilities subject to compromise
    in the consolidated balance sheet as of December 31, 2001 and have been
    included as due in less than one year for purposes of this schedule.

(b) As a result of the bankruptcy, all of our capital lease obligations, with
    the exception the capital lease obligations of our non-debtor Canadian
    subsidiaries, have been classified as liabilities subject to compromise in
    the consolidated balance sheet as of December 31, 2001 and have been
    included as due in less than one year for purposes of this schedule.

(c) We lease various office buildings, machinery, equipment and vehicles under
    operating leases expiring at various dates. Most of the real property leases
    have escalation clauses related to increases in real property taxes. Rent
    expense for all of our operating leases for the years ended December 31,
    2001, 2000, and 1999 was approximately $12.0 million, $7.9 million and $6.5
    million, respectively.

(d) Lines of credit include $97.5 million under the revolving credit portion of
    the Credit Agreement due in 2004, $36.4 million under the DIP facility due
    in 2002 and $5.0 million under our Canadian credit facility which is payable
    on demand with no set final maturity. As a result of the bankruptcy, the
    amount due under the revolving credit portion of the Credit Agreement has
    been classified as a liability subject to compromise in the consolidated
    balance sheet as of December 31, 2001 and has been included as due in less
    than one year for purposes of this schedule.

(e) As of December 31, 2001, we had letters of credit and other collateral
    outstanding of approximately $0.3 million under our Credit Agreement and
    approximately $4.0 million under the DIP Facility.

         Certain of our subsidiaries lease their operating facilities from
former Founding Company owners who remained employees or directors of the
Company. Total rent paid to related parties during 2001, 2000 and 1999 amounted
to $1.9 million, $1.6 million and $1.1 million, respectively. We believe the
rents to be the fair market rental value of the property.

         Certain executives of RailWorks have entered into employment
agreements with the Company. In general, the employment agreements provide
that, in the event of a termination of employment without cause, such employee
will be entitled to receive from us an amount in cash equal to the
employee's then current annual base salary for the remainder of the term.

         The Company's operations are subject to extensive federal, state and
local regulations under environmental laws and regulations concerning, among
other things, emissions to the air, discharges to waters and the generation,
handling, storage, transportation, treatment and disposal of waste, hazardous
substances, underground and aboveground storage tanks and soil and groundwater
contamination. We are also subject to certain federal, state and local
environmental laws and regulations relating to the use of creosote. Creosote is
used in certain of our manufacturing processes to treat wood railroad ties so
that they can withstand exposure to outside elements. Creosote, a coal tar
treated derivative, has been recognized by the environmental regulating
agencies as a hazardous material. We believe that we are in compliance with all
of the various regulations applicable to our business and we have not been
notified of any violations by regulatory agencies.


                                       24

<PAGE>
                                   INFLATION

         We do not believe that inflation has had a material effect on our
results of operations in recent years. However, there can be no assurance that
our business will not be affected by inflation in the future.

                                  RISK FACTORS

         This annual report to our stockholders contains forward-looking
statements within the meaning of the Securities Act of 1933 and the Securities
Exchange Act of 1934. You can find discussions containing forward-looking
statements in the section of this report entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations" as well as in other
sections. We use the words "believes," "anticipates," "expects", "estimates,"
"plans," "intends" and similar expressions so as to identify forward-looking
statements. All forward-looking statements involve substantial risks and
uncertainties. There may be events in the future that we are not accurately
able to predict, or over which we have no control.

         Forward-looking statements include, without limitation, our
expectations and estimates as to development of our services and products and
expansion of our customer base, future financial performance, including growth
in revenues and earnings and the effect on new acquisitions on our financial
position and results of operations, cash flows from operations, acquisitions,
capital expenditures, the availability of funds from credit facilities and the
sale of securities. Consequently, you should regard forward-looking statements
only as our current plans, estimates and beliefs. We do not promise to notify
you if we learn that our assumptions or projections are wrong for any reason.
Additional information concerning the risk and uncertainties listed above, and
other factors that you may wish to consider, are contained in our filings with
the Securities and Exchange Commission. Copies of these filings are available
from us free of charge.

         Some factors that may cause actual results to differ from projected
results are:

         Under the Plan of Reorganization, Holders of Common Stock Will Receive
No Value and Holders of the Publicly-Traded Debt Will Receive Minimal Value.
You are likely lose all or part of your investment in the Company's Common
Stock or debt. The Bankruptcy Code requires that all debts be paid in full
before stockholders


                                      25
<PAGE>


can receive any recovery in our restructuring. We cannot assure you that our
restructuring will ultimately result in any value for our stockholders. In the
event of our liquidation, we believe that our equity would have no value.
Furthermore, we cannot predict the value of any recovery to the holders of our
debt. The holders of our unsecured debt will likely receive substantially less
than the holders of our secured debt. All of our assets and the assets of all
of our subsidiaries are pledged to secure our debt obligations under various
secured debt facilities. Under applicable law, collateral for secured claims
must be used first to satisfy secured claims. Our Plan which we filed with the
Bankruptcy Court on March 15, 2002, provides that the holders of our public and
other unsecured debt will receive 3% of the stock of the reorganized company
and that the holders of equity will be eliminated entirely. Confirmation of the
Plan, which remains subject to supplementation, modification and amendment,
also remains subject to Bankruptcy Court approval and certain other conditions.

         Bankruptcy Cases. Our commencement of Chapter 11 cases in the
Bankruptcy Court, and other factors such as our recurring losses, raise
substantial doubt as to our ability to continue as a going-concern. The
financial statements contained herein have been prepared assuming that we will
continue as a going-concern with the realization of assets and the settlement of
liabilities and commitments in the normal course of business. However, as a
result of the bankruptcy cases and circumstances relating to this event,
including our leveraged financial structure and losses from operations, such
realization of assets and liquidation of liabilities and the ability to complete
our contracts and process them in an efficient manner is subject to significant
uncertainty. In addition, our relationships with our customers and suppliers may
suffer as a result of our bankruptcy. While in Chapter 11, we may sell or
otherwise dispose of assets (subject to provisions of the DIP Facility and
Bankruptcy Court approval), and liquidate or settle liabilities and claims, for
amounts other than those reflected in the financial statements. Further, a plan
of reorganization could materially change the amounts reported in the financial
statements. Additionally, deadlines have been established for the assertion of
pre-Filing Date claims against the Company (commonly referred to as bar dates),
including contingent, unliquidated or disputed claims, which claims could result
in an increase in liabilities subject to compromise as reported in the financial
statements. Our ability to continue as a going-concern is contingent upon, among
other things, confirmation of a plan of reorganization, future profitable
operations, the ability to comply with the terms of the DIP Facility and the
ability to generate sufficient cash flow from operations and financing
arrangements to meet ongoing obligations. There can be no assurance that we will
be able to confirm a plan or comply with the terms of the DIP Facility. On March
15, as discussed previously, the Company filed a plan of reorganization in the
U.S. Bankruptcy Court for the District of Maryland in Baltimore for itself and
twenty-two of its domestic debtor subsidiaries. The Plan is subject to
confirmation and Bankruptcy Court approval and requires the Debtors to have
sufficient funds on hand on the effective date to comply with claim treatments
as proposed in the Plan. There can be no assurance that the Company will in fact
have such sufficient funds or that the Bankruptcy Court will approve the Plan.

         Potential Breach of DIP Financing. The DIP Facility imposes on us
operating and financial restrictions. These restrictions significantly limit or
prohibit, among other things, our ability to incur additional indebtedness or
create liens on our assets, pay dividends, sell assets, engage in mergers or
acquisitions, or make investments. The DIP Facility also imposes certain
financial covenants as well as reporting requirements and other non-financial
covenants. Absent a waiver, failure to comply with any of these restrictions or
covenants could result in a default under the DIP Facility. Following a default,
the lenders under the DIP Facility may be able to accelerate the indebtedness
and exercise certain remedies without further Bankruptcy Court approval. Of the
entire $45.0 million which is outstanding under the Transit Revolver, $30.0
million consists of borrowings and $15.0 million consists of a letter of credit;
$21.3 million was outstanding under the TP&S Revolver; consisting of $15.6
million of borrowings and $5.7 million of letters of credit; and we had
approximately $10.6 million of collateral outstanding under the Bonding
Facility. There can be no assurance that the funding provided by the DIP
Facility will be sufficient to satisfy our working capital needs or that we will
be able to secure additional financing if needed. We may not have the funds to
repay the DIP Facility debt upon acceleration, which would significantly impede
our ability to remain in Chapter 11 and could force us into a liquidation. In a
liquidation, holders of our public and other unsecured debt and holders of our
equity would likely receive no value for their respective interests.

         Our Access to Capital Markets and Timely Financial Reporting May be
Impaired if We Need to Engage a New Independent Public Accounting Firm. On
March 14, 2002, RailWorks' independent public accountant, Arthur Andersen, was
indicted on federal obstruction of justice charges arising from the
government's investigation of Enron. Arthur Andersen has indicated that it
intends to contest vigorously the indictment. The SEC has said that it will
continue accepting financial statements audited by Arthur Andersen, and interim
financial statements reviewed


                                      26
<PAGE>


by it, so long as Arthur Andersen is able to make certain representations to
its clients. RailWorks' access to the capital markets and its ability to make
timely SEC filings could be impaired if the SEC ceases accepting financial
statements audited by Arthur Andersen, if Arthur Andersen becomes unable to
make the required representations to RailWorks or if for any other reason
Arthur Andersen is unable to perform required audit-related services for
RailWorks. In such case, RailWorks would promptly seek to engage a new
independent public accounting firm or take such other actions as may be
necessary to enable RailWorks to maintain access to the capital markets and to
file timely its financial reports. Any such transition between accounting firms
could cause us to incur substantial unforeseen costs, could delay our access to
capital markets and could impair our ability to make timely SEC filings.

         Posting of Bonds. Our transit services group derives a substantial
portion of its revenue from contracts entered into through a competitive bid
process. Many projects that are competitively bid require us to post a bond to
provide the customer with insurance in the event we are unable to complete the
project. Prior to the Filing Date, Travelers furnished almost all of the
bonding for such projects. In May 2001, Travelers indicated that, if it were to
continue furnishing payment and performance bonds in support of our projects,
it would be necessary for Travelers and our lenders to enter into an
Inter-creditor Agreement by August 1, 2001. No inter-creditor agreement was
reached prior to the Filing Date. Under the DIP Facility, Travelers has agreed
to provide up to $100 million in postpetition payment and performance bonds in
support of the Company's projects. The Company's ability to continue to secure
new business will be significantly and adversely affected absent continued
bonding from Travelers or another source because a large percentage of our
business (particularly in the Transit Systems Group) is dependent upon the
ability to furnish such bonds to owners and general contractors.

         Illiquidity of Common Stock. A liquid public market for our Common
Stock does not exist, which may make it difficult for you to sell our Common
Stock. Our Common Stock is traded on the NASD OTC Bulletin Board Market. There
may be very limited demand for our Common Stock.

         Substantial Leverage. We have a substantial amount of debt outstanding
(most of which is subject to compromise), which could adversely affect our
financial health. Our substantial amount of debt could have important
consequences for you. For example, it could:

         -        limit our ability to obtain additional financing, if we need
                  it, for working capital, capital expenditures, acquisitions,
                  debt service requirements or other purposes;

         -        increase our vulnerability to adverse economic and industry
                  conditions;

         -        require us to dedicate a substantial portion of our cash flow
                  from operations to payments on our debt, thereby reducing
                  funds available for operations, future business opportunities
                  or other purposes;

         -        limit our flexibility in planning for, or reacting to,
                  changes in our business and the industry in which we compete;
                  and

         -        place us at a competitive disadvantage compared to our
                  competitors that have less debt.

         Losses. With the exception of the year ended December 31, 1999, we
have reported net losses since our inception in August 1998. Even if the
reorganized company achieves its projected results, we expect to have net
losses until December 31, 2002.

         Lack of Combined Operating History. Our company was founded in March
1998 but conducted no operations and generated no revenue until we completed
the initial public offering, or IPO, of our common stock in August 1998. We
acquired 14 groups of companies concurrently with the completion of our IPO and
have acquired an additional 21 operating companies, or groups of companies,
since the IPO through December 31, 2001. The integration of our operating
companies, while allowing them to retain decentralized operations and
management, is important to our operating and growth strategies and the
achievement of efficiencies in our combined operations. We may not be able to
integrate the operations or the necessary systems and procedures, including
accounting and financial reporting systems and project management systems, to
effectively manage the combined enterprise. Certain members of our management
group have only recently joined our company and there can be no assurance that
the management group will be able to implement our operating strategies. We
cannot assure you that we will be able to establish, maintain or increase the
profitability of the operating companies. Our financial statements include
results of operations for certain operating companies when they were not under
common control or management. As a result, our financial statements may not be
indicative of our future results of operations. Any failure by our management
group to implement our strategies, integrate the operating companies without
substantial costs, delays


                                      27
<PAGE>


or other operational or financial difficulties, dispose of non-strategic
subsidiaries or effectively oversee the combined entity could have a material
adverse effect on our business, financial condition and results of operations.

         Internal Growth. Our ability to grow will be affected by various
factors, including demand for rail system services and products, our success in
bidding on new projects, the success of our cross-selling efforts and our
ability to develop a national accounts program. Our growth may also depend on
increased outsourcing by rail system operators. Many of these factors are
beyond our control. Our strategies may not be successful or we may be unable to
generate cash flow adequate for combined operations and to support internal
growth. The senior managers of the operating companies retain responsibility
for day-to-day operations. If proper business controls are not implemented and
maintained, this decentralized operating strategy could result in inconsistent
operating and financial practices of the operating companies, which could have
a material adverse effect on our business, financial condition and results of
operations.

         Dependence on Certain Customers. We derived approximately 37.8% of our
revenue for the year ended December 31, 2001 from our top ten customers.
Approximately 17.9% of our 2001 revenue was derived from projects undertaken
for the New York City Transit Authority, which we refer to as NYCTA. These
projects were undertaken under a number of separate contracts. If the NYCTA
were to significantly reduce the amount of business that it does with us or
determine not to do business with us in the future, it would have a material
adverse effect on our business, financial condition and results of operations.
In addition, we rely on timely and regular payments from our customers on
ordinary course business terms. The failure of our top ten customers to pay on
ordinary course business terms may have a material adverse effect on our
business, financial condition and results of operations.

         Competition. The rail system services and products industry is highly
competitive. Numerous companies provide services to transit authorities,
construct and repair rail systems or sell related products or supplies, and
some of these companies operate in more than one of these lines of business.
Some of our competitors have greater resources than we have, may also provide a
broad range of services and products, and may have sufficient bonding capacity
and other resources to undertake large projects. Any inability to compete
successfully against our existing and future competitors would have a material
adverse effect on our business, financial condition and results of operations.
Certain of our operating companies also provide electrical contracting services
to non-rail industrial and commercial customers. While we believe that we
currently compete effectively in the non-rail electrical contracting business,
this industry is highly competitive and is served by small, owner-operated
private companies, public companies and several large regional companies.
Additionally, we could face competition in the future from other competitors
entering our markets. The effect of us operating in Chapter 11 could also put
us at a significant competitive disadvantage.

         Public Sector Contracts and Funding. The rail system services and
products business involves contracts that are supported by funding from
federal, state and local governmental agencies, as well as contracts with such
agencies, which we refer to as public sector contracts. Public sector contracts
are subject to detailed regulatory requirements and public policies, as well as
funding priorities. These contracts may be conditioned upon the continuing
availability of public funds; the availability of public funds depends upon
lengthy and complex budgetary procedures. These contracts may also be subject
to significant pricing constraints. Moreover, public sector contracts may
generally be terminated for reasons beyond the control of the contractor,
including when such termination is in the best interests of the governmental
agency. We cannot assure you that these factors or others unique to public
sector contracts will not have a material adverse effect on our business,
financial condition and results of operations.

         Fixed Price Contracts. Fixed price contracts are typically awarded in
the rail system services industry pursuant to a competitive bidding process. In
compiling our bid on a particular project, we must estimate the time it will
take to complete the project, along with the project's labor and supply costs.
These costs may be affected by a variety of factors, some of which may be
beyond our control. If we cannot accurately predict the costs of fixed price
contracts, certain projects could have lower margins than anticipated or we
could suffer losses on the projects. From time to time we may incur
unanticipated additional contract costs for which we seek recovery from
customers. Recovery of such amounts involves various uncertainties and may
require extended periods of negotiation, litigation or other costs. As a result
of these uncertainties, amounts ultimately realized from these contracts may
not be known for a significant period following completion of a contract, and
lower contract margins or losses may result. Lower margins and losses could
have a material adverse effect on our business, financial condition and results
of operations.


                                      28
<PAGE>


         Reliance on Subcontractors and Suppliers. When we perform a contract
for transit signaling and communication systems, it may be as a subcontractor
to the company that designs the systems and manufactures or purchases the
necessary equipment. In other instances, we act as the prime contractor and
subcontract the design of the signal or communication system and necessary
equipment. When we are a prime contractor for such projects, we generally
require subcontractors to post performance bonds. We may not require a
subcontractor to post a performance bond in situations where (1) the
subcontractor has strong experience with a specific type of project and
demonstrates financial stability and (2) the customer does not require bonds
from us as prime contractor. We sometimes depend upon the subcontractor to
perform design and other services and provide equipment. For certain projects
only a limited number of companies can perform the subcontract if the initial
subcontractor defaults. As a result, we depend upon our subcontractors to
perform under the subcontracts. Further, the major components of signaling and
communication systems for transit authorities are manufactured to
specifications and require long lead times for production. If a subcontractor
or supplier defaults, or if a supplier refuses or cannot do business with us,
it could have a material adverse effect on our business, financial condition
and results of operations. While we have obtained authority from the Bankruptcy
Court to pay prepetition claims of certain vendors and subcontractors, we have
not yet paid a significant portion of such claims. The failure or inability to
make these payments likely will have a material adverse effect on the business
and our relationships with subcontractors and suppliers.

         Unionized Workforce. As of December 31, 2001, approximately 29.0% of
our employees were covered under collective bargaining agreements.
Approximately 11.0% of our employees were covered under our largest
collectively bargaining agreement. We cannot assure you that future work
stoppages will not affect us. In addition, labor agreements are generally
negotiated on an industry-wide basis and the terms and conditions of future
labor agreements could be beyond our control. We may be subject to terms and
conditions in future labor agreements that could have a material adverse effect
on our business, financial condition and results of operations.

         Environmental and Other Government Regulation. Our operations are
subject to extensive federal, state and local regulation under environmental
laws and regulations. Among other things, these laws and regulations cover
emissions to the air, discharges to waters and the generation, handling,
storage, transportation, treatment and disposal of waste, underground and
aboveground storage tanks and remediation of soil and groundwater
contamination. Environmental liability can extend to previously owned or
operated properties, leased properties and properties owned by third parties,
as well as to properties currently owned and used by us. Environmental
liabilities may also arise from claims asserted by adjacent landowners or other
third parties in toxic tort litigation. We could incur significant ongoing
costs associated with environmental regulatory compliance. Further, we
sometimes use hazardous materials in connection with our operations. Although
we believe that we materially comply with all of the various environmental
regulations applicable to our business, we cannot assure you that requirements
will not change in the future or that we will not incur significant costs to
comply with such requirements.

         In addition to safety, health and other regulations of general
applicability, our operations may be significantly affected by regulations of
the Surface Transportation Board, the Federal Railroad Administration, the
Occupational Safety and Health Administration, state departments of
transportation and other state and local regulatory agencies. Changes in
regulation of the rail and transit industries through legislative,
administrative, judicial or other action could have a material adverse effect
on our business, financial condition and results of operations.

         Dependence on Key Personnel. Our success depends to a significant
extent upon the efforts and abilities of certain key senior managers at Company
headquarters and at various of the Company's operations. While we have entered
into employment agreements with certain of these senior managers, we cannot be
sure that such individuals will remain with us throughout the terms of their
agreements, or thereafter. The loss of the services of one or more of these key
employees before we are able to attract and retain qualified replacement
personnel could have a material adverse effect on our business, financial
condition and results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We are subject to market risk associated principally with changes in
interest rates. Interest rate exposure has been principally limited to the
$228.2 million of long-term debt under our revolving credit facility, term loan
agreement and DIP Facility outstanding at December 31, 2001. All of that debt
is priced at interest rates that float with the market. A 50 basis point
movement in the interest rate on our floating rate debt could result in an
approximately $1.1 million annualized increase or decrease in interest expense
and cash flows. We will from time to


                                      29
<PAGE>


time enter into interest rate swaps on our debt, when we believe there is a
clear financial advantage for doing so. We do not use derivative financial or
commodity instruments for trading purposes and the use of such instruments is
subject to strict approval levels by senior officers. Typically, the use of
such derivative instruments is limited to interest rate swaps on our
outstanding long-term debt. Our exposure related to such derivative instruments
is, in the aggregate, not material to our financial position, results of
operations and cash flows. There were no swap agreements in effect as of
December 31, 2001.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The Consolidated Financial Statements of our Company and our
subsidiaries, together with the report thereon of Arthur Andersen LLP, dated
March 15, 2002 and all Notes to such Consolidated Financial Statements are
attached hereto as an exhibit and are hereby incorporated herein by reference.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         Not applicable.


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information set forth under the caption "Election of Directors" in
the subsections entitled "What is the Background of This Years Nominees?", "Who
are the Directors Continuing in Office Until 2002?" and "Who are the Directors
Continuing in Office Until 2003?" in our Proxy Statement for the Annual Meeting
of Stockholders to be held in May 2002 is hereby incorporated by reference for
information regarding our directors.

         The information under the caption "Business Experience of Our
Officers" in our Proxy Statement for the Annual Meeting of Stockholders to be
held in May 2002 is hereby incorporated herein by reference.

         The information under the caption "16(a) Beneficial Ownership
Reporting Compliance" in our Proxy Statement for the Annual Meeting of
Stockholders to be held in May 2002 is hereby incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

         The information under (1) the caption "Election of Directors" in the
subsection entitled "How are Directors Compensated?" and (2) the caption
"Executive Compensation" in the subsections entitled "Summary Compensation
Table" and "Employment Agreements" in our Proxy Statement for the Annual
Meeting of Stockholders to be held in May 2002 is hereby incorporated herein by
reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information set forth under the caption "Security Ownership of
Certain Beneficial Owners" in our Proxy Statement for the Annual Meeting of
Stockholders to be held in May 2002 is hereby incorporated herein by reference

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information set forth under the caption "Certain Relationships and
Related Party Transactions" in our Proxy Statement for the Annual Meeting of
Stockholders to be held in May 2002 is hereby incorporated herein by reference.


                                      30
<PAGE>


                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(A)      1.       FINANCIAL STATEMENTS

         The following Consolidated Financial Statements of our company and our
subsidiaries and the Report of the Independent Auditors, are filed as part of
this report:

         Consolidated Balance Sheets as of December 31, 2001 and 2000
         Consolidated Statements of Operations for the Years Ended December
                  31, 2001, 2000 and 1999
         Consolidated Statements of Stockholders' Equity for the Years Ended
                  December 31, 2001, 2000 and 1999
         Consolidated Statements of Cash Flows for the Years Ended December
                  31, 2001, 2000 and 1999
         Report of Independent Public Accountants
         Notes to Consolidated Financial Statements

         2.       FINANCIAL STATEMENT SCHEDULES

                                  SCHEDULE II

                       VALUATION AND QUALIFYING ACCOUNTS
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                     ADDITIONS
                                     BALANCE AT        COSTS        CHARGES TO
                                     BEGINNING          AND            OTHER                         BALANCE AT
DESCRIPTION                           OF YEAR         EXPENSES       ACCOUNTS     DEDUCTIONS(1)     END OF YEAR
-------------------------------      ----------       --------      ----------    -------------     -----------
<S>                                  <C>              <C>           <C>           <C>               <C>
Allowance for doubtful accounts

Year Ended December 31, 2001          $1,581          $13,740          $280         $(1,431)          $14,170
Year Ended December 31, 2000           1,990            3,277             0          (3,685)            1,581
Year Ended December 31, 1999             442            1,566             0             (18)            1,990
</TABLE>

(1)      Deductions represent uncollectible balances of accounts receivable
         written off, net of recoveries.

                  All other schedules are omitted because they are not
         applicable or not required.

         3.       EXHIBITS

                  The list of exhibits to this Report is set forth on the
         accompanying Index to Exhibits to this Annual Report and such list is
         incorporated herein by reference.

(B)      REPORTS ON FORM 8-K

         A current Report on Form 8-K, which included and reported "Other
events" under item 5, was filed on January 22, 2002 and announced the
resignation of Edward M. Cumberledge as a Vice President and the Chief
Financial Officer of the Company and the election of Eric Schless as the acting
Chief Financial Officer of the Company

         A current Report on Form 8-K, which included and reported "Other
events" under item 5, was filed on March 26, 2002 and announced the Company's
filing of a Plan of Reorganization in the United States Bankruptcy Court for
the District of Maryland (Baltimore Division) for itself and twenty-two of its
domestic debtor subsidiaries.

(C)      See Item 14(a)(3) and separate Exhibit Index attached hereto.

(D)      See Item 14(a)(2).


                                      31
<PAGE>


                                   SIGNATURES

         Pursuant to requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.

Dated:   April 12, 2002


                                    RAILWORKS CORPORATION


                                    By:          /s/ John Kennedy
                                       ----------------------------------------
                                                   John Kennedy
                                               Chief Executive Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:


<TABLE>
<CAPTION>
          SIGNATURE                                       TITLE                                      DATE
          ---------                                       -----                                      ----

<S>                                      <C>                                                     <C>
/s/ John Kennedy                         Chief Executive Officer and Director                    April 12, 2002
-----------------------------------      (Principal Executive Officer)
John Kennedy


/s/ Eric H. Schless                      acting Chief Financial Officer and Executive Vice       April 11, 2002
-----------------------------------      President
Eric H. Schless                          (Principal Accounting and Financial Officer)


/s/ Norman Carlson                       Chairman of the Board of Directors                      April 12, 2002
-----------------------------------
Norman Carlson


/s/ Scott D. Brace                       Director                                                April 12, 2002
-----------------------------------
Scott D. Brace



                                         Director
-----------------------------------
Ronald W. Drucker



/s/ Wayne F. Hall                        Director                                                April 12, 2002
-----------------------------------
Wayne F. Hall



/s/ Charles W. Hoppe                     Director                                                April 11, 2002
-----------------------------------
Charles W. Hoppe



                                         Director
-----------------------------------
R.C. Matney



                                         Director
-----------------------------------
Donald P. Traviss
</TABLE>


                                      32
<PAGE>


                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
    EXHIBIT
    NUMBER                                     DESCRIPTION OF EXHIBITS
    -------                                    -----------------------

    <S>          <C>                                                                                           <C>
      3.1        Restated Certificate of Incorporation of the Company (incorporated by reference to            *
                 Exhibit 3.1 to Registration Statement on Form S-1, File No. 333-53483)

      3.2        Bylaws of the Company (incorporated by reference to Exhibit 3.2 to Registration               *
                 Statement on Form S-1, File No. 333-53483)

      3.3        Certificate of Designation of the Series A Convertible Preferred Stock                        *
                 (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on
                 Form 8-K filed on October 14, 1998)

      4.1        Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to                *
                 Registration Statement on Form S-4, File No. 333-53483)

      4.2        Specimen Preferred Stock Certificate (incorporated by reference to Exhibit 4.2 to             *
                 Registration Statement on Form S-4, File No. 333-79649)

      4.3        Indenture dated as of April 7, 1999 among RailWorks Corporation, the Guarantors               *
                 named therein, and First Union National Bank, as Trustee (incorporated by reference
                 to Exhibit 4.5 to Registration Statement on Form S-4, File No. 333-79649)

      4.4        Form of 11 1/2% Senior Subordinated Notes due 2009 (incorporated by reference to              *
                 Exhibit 4.3 to Registration Statement on Form S-4, File No. 333-79649)

     10.1        Uniform Provisions for the Acquisition of Founding Companies
                 (incorporated by * Reference to Exhibit 10.1 to Registration
                 Statement on Form S-1, File No. 333-53483)

     10.2        Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Wildcats Alpha-Keystone Company, Alpha-Keystone Engineering,
                 Inc. and the stockholders named therein (incorporated by reference to Exhibit 10.2
                 to Registration Statement on Form S-1, File No. 333-53483)

     10.3        Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Bulldog Comtrak Company, Comtrak Construction, Inc. and the
                 stockholders named therein (incorporated by reference to Exhibit 10.3 to
                 Registration Statement on Form S-1, File No. 333-53483)

     10.4        Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Cardinal Annex Railroad Builders Company, Annex Railroad
                 Builders, Inc. and the stockholders named therein (incorporated by reference to
                 Exhibit 10.4 to Registration Statement on Form S-1, File No. 333-53483)

     10.5        Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Huskies Condon Brothers Company, Condon Brothers Inc. and
                 the stockholders named therein (incorporated by reference to Exhibit 10.5 to
                 Registration Statement on Form S-1, File No. 333-53483)

     10.6        Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Commodores Concrete Company, CPI
                 Concrete Products, Inc. and the stockholders named therein
                 (incorporated by reference to Exhibit 10.6 to Registration
                 Statement on Form S-1, File No. 333-53483)
</TABLE>


                                      33
<PAGE>


<TABLE>
<CAPTION>
    EXHIBIT
    NUMBER                                     DESCRIPTION OF EXHIBITS
    -------                                    -----------------------

    <S>          <C>                                                                                           <C>
     10.7        Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Nittany Lions McGinley Company, HP
                 McGinley Inc. and the stockholders named therein (incorporated
                 by reference to Exhibit 10.7 to Registration Statement on Form
                 S-1, File No. 333-53483)

     10.8        Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Owls Kennedy Railroad Builders Company, Kennedy Railroad
                 Builders, Inc. and the stockholders named therein (incorporated by reference to
                 Exhibit 10.8 to Registration Statement on Form S-1, File No. 333-53483)

     10.9        Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Red Storm Comstock Company, Inc., L.K. Comstock & Company,
                 Inc. and the stockholders named therein (incorporated by reference to Exhibit 10.9
                 to Registration Statement on Form S-1, File No. 333-53483)

     10.10       Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Sycamores Midwest Construction Company, Midwest Construction
                 Services, Inc. and the stockholders named therein (incorporated by reference to
                 Exhibit 10.10 to Registration Statement on Form S-1, File No. 333-53483)

     10.11       Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Bears Merit Company, Merit Railroad Contractors, Inc. and
                 the stockholders named therein (incorporated by reference to Exhibit 10.11 to
                 Registration Statement on Form S-1, File No. 333-53483)

     10.12       Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Hoosier Mize Company, Mize Construction Company and the
                 stockholders named therein (incorporated by reference to Exhibit 10.12 to
                 Registration Statement on Form S-1, File No. 333-53483)

     10.13       Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Husky New England Railroad Construction Company, New England
                 Railroad Construction Company Inc. and the stockholders named therein (incorporated
                 by reference to Exhibit 10.13 to Registration Statement on Form S-1, File No.
                 333-53483)

     10.14       Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Wolverines Northern Rail Services Company, Northern Rail
                 Service and Supply Company, Inc. and the stockholders named therein (incorporated
                 by reference to Exhibit 10.14 to Registration Statement on Form S-1, File No.
                 333-53483)

     10.15       Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Big Orange Minnesota Company, Minnesota Railroad Service
                 Company and the stockholders named therein (incorporated by reference to Exhibit
                 10.15 to Registration Statement on Form S-1, File No. 333-53483)

     10.16       Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Buckeye Railcorp, Inc., Railcorp Inc. and the stockholders
                 named therein (incorporated by reference to Exhibit 10.16 to Registration Statement
                 on Form S-1, File No. 333-53483)
</TABLE>


                                      34
<PAGE>


<TABLE>
<CAPTION>
    EXHIBIT
    NUMBER                                     DESCRIPTION OF EXHIBITS
    -------                                    -----------------------

    <S>          <C>                                                                                           <C>
     10.17       Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Runnin' Rebels Railroad Service Company, Railroad Service,
                 Inc. and the stockholders named therein (incorporated by reference to Exhibit 10.17
                 to Registration Statement on Form S-1, File No. 333-53483)

     10.18       Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Crusader Railroad Specialties Company, Railroad Specialties,
                 Inc. and the stockholders named therein (incorporated by reference to Exhibit 10.18
                 to Registration Statement on Form S-1, File No. 333-53483)

     10.19       Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Screaming Eagle Wood Preserving Company, Southern Indiana
                 Wood Preserving Company, Inc. and the stockholders named therein (incorporated by
                 reference to Exhibit 10.19 to Registration Statement on Form S-1, File No.
                 333-53483)

     10.20       Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Fighting Irish-US Railway Supply Company, U.S. Railway
                 Supply, Inc. and the stockholders named therein (incorporated by reference to
                 Exhibit 10.20 to Registration Statement on Form S-1, File No. 333-53483)

     10.21       Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Spartans Trackworks Company, U.S. Trackworks, Inc. and the
                 stockholders named therein (incorporated by reference to Exhibit 10.21 to
                 Registration Statement on Form S-1, File No. 333-53483)

     10.22       Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Mustang Smith Construction Company, Wm. A. Smith
                 Construction Co., Inc. and the stockholders named therein (incorporated by
                 reference to Exhibit 10.22 to Registration Statement on Form S-1, File No.
                 333-53483)

     10.23       Agreement and Plan of Reorganization dated as of May 21, 1998 by and between                  *
                 RailWorks Corporation, Longhorn Smith Rerailing Company, Wm. A. Smith Rerailing
                 Services, Inc. and the stockholders named therein (incorporated by reference to
                 Exhibit 10.23 to Registration Statement on Form S-1, File No. 333-53483)

     10.24       Stock Purchase Agreement by and between RailWorks Corporation, W.T. Byler and                 *
                 William Troy Byler dated as of October 1, 1999, incorporated by reference to
                 Exhibit 2.1 to Registrant's Current Report on Form 8-K filed on November 5, 1999.

     10.25       Amended and Restated Employment Agreement between RailWorks Corporation and John G.           *
                 Larkin dated as of August 4, 1998 (incorporated by reference to Exhibit 10.1 to the
                 Registrant's Quarterly Report on Form 10-Q filed on September 11, 1998)

     10.26       Amended and Restated Employment Agreement between RailWorks Corporation and Michael           *
                 R. Azarela dated as of August 4, 1998 (incorporated by reference to Exhibit 10.2 to
                 the Registrant's Quarterly Report on Form 10-Q filed on September 11, 1998)
</TABLE>


                                      35
<PAGE>


<TABLE>
<CAPTION>
    EXHIBIT
    NUMBER                                     DESCRIPTION OF EXHIBITS
    -------                                    -----------------------

    <S>          <C>                                                                                           <C>
     10.27       Amended and Restated Employment Agreement between RailWorks Corporation and John              *
                 Kennedy dated as of August 4, 1998 (incorporated by reference to Exhibit 10.3 to
                 the Registrant's Quarterly Report on Form 10-Q filed on September 11, 1998)

     10.28       Form of Employment Agreement between each Founding Company and Founding Company               *
                 Officer (incorporated by reference to Exhibit 10.28 to Registration Statement on
                 Form S-1, File No. 333-53483)

     10.29       Amended and Restated RailWorks Corporation 1998 Incentive Stock Plan effective                *
                 January 1, 1999 (incorporated by reference to Exhibit 10.5 to the Registrant's
                 Quarterly Report on Form 10-Q filed on November 15, 1999)

     10.30       Indemnity and Cooperation Agreement dated as of April 3, 1997 between Spie                    *
                 Enertrans S.A., Comstock Group, Inc., L.K. Comstock & Company and LKC Acquisition
                 Corp., together with Memorandum of Understanding dated August 20, 1997 between Spie
                 Enertrans S.A., Comstock Group, Inc., L.K. Comstock & Company and LKC Acquisition
                 Corp. (incorporated by reference to Exhibit 10.30 to Registration Statement on Form
                 S-1, File No. 333-53483)

     10.31       Stock Purchase Agreement dated April 3, 1997 between Comstock Group, Inc. and LKC             *
                 Acquisition Corp., as amended (incorporated by reference to Exhibit 10.31 to
                 Registration Statement on Form S-1, File No. 333-53483)

     10.32       Contingent Promissory Note dated April 3, 1997 made by L.K. Comstock & Company,               *
                 Inc. to the order of Spie Enertrans S.A. (incorporated by reference to Exhibit
                 10.32 to Registration Statement on Form S-1, File No. 333-53483)

     10.33       Amended and Restated Credit Agreement dated as of August 5, 1999 among RailWorks              *
                 Corporation, as Borrower, Certain Subsidiaries, as Guarantors, the Lenders named
                 therein, Bank of America, N.A., as Domestic Administrative Agent, Bank of America,
                 N.A., as Canadian Administrative Agent and First Union National Bank, as
                 Documentation Agent (incorporated by reference to Exhibit 10.1 to the Registrant's
                 Quarterly Report on Form 10-Q filed on November 15, 1999.

     10.34       Amendment No. 1 to the Amended and Restated Credit Agreement dated September 29,              *
                 1999 among RailWorks Corporation, as Borrower, Certain Subsidiaries, as Guarantors,
                 the Lenders named therein, Bank of America, N.A., as Domestic Administrative Agent
                 and Bank of America, N.A., as Canadian Administrative Agent (incorporated by
                 reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q filed
                 on November 15, 1999)

     10.35       Amendment No. 2 to the Amended and Restated Credit Agreement dated November 5, 1999           *
                 among RailWorks Corporation, as Borrower, Certain Subsidiaries, as Guarantors, the
                 Lenders named therein, Bank of America, N.A., as Domestic Administrative Agent and
                 Bank of America, N.A., as Canadian Administrative Agent (incorporated by reference
                 to Exhibit 10.36 to Registration Statement on Form S-4/A (File No. 333-90071)

     10.36       Amendment No. 3 to the Amended and Restated Credit Agreement dated January 25, 2000           *
                 among RailWorks Corporation, as Borrower, Certain Subsidiaries, as Guarantors, the
                 Lenders named therein, Bank of America Canada, as Canadian Administrative Agent and
                 Bank of America, N.A., as Domestic Administrative Agent (incorporated by reference
                 to Exhibit 10.36 to the Registrant's Annual Report on Form 10-K filed on February
                 29, 2000)
</TABLE>


                                      36
<PAGE>


<TABLE>
<CAPTION>
    EXHIBIT
    NUMBER                                     DESCRIPTION OF EXHIBITS

    <S>          <C>                                                                                           <C>
     10.37       Term Loan Agreement dated as of November 5, 1999 among RailWorks Corporation, as              *
                 Borrower, Certain Subsidiaries of the Borrower, as Guarantors, the Lenders named
                 herein, First Union National Bank, as Documentation Agent and Bank of America,
                 N.A., as Administrative Agent (incorporated by reference to Exhibit 10.37 to
                 Registration Statement on Form S-4/A (File No. 333-90071)

     10.38       Employment Agreement between RailWorks Corporation and Kenneth R. Burk dated as of            *
                 May 10, 1999 (incorporated by reference to Exhibit 10.1 to the Registrant's
                 Quarterly Report on Form 10-Q filed on May 14, 1999)

     10.39       Amendment dated August 4, 1999 to the Employment Agreement dated as of August 4,              *
                 1998 between RailWorks Corporation and Michael R. Azarela (incorporated by
                 reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q filed
                 on November 15, 1999)

     10.40       Amendment dated August 4, 1999 to the Employment Agreement dated as of August 4,              *
                 1998 between RailWorks Corporation and John G. Larkin (incorporated by reference to
                 Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q filed on November
                 15, 1999)

     10.41       Amendment No. 4 to the Amended and Restated Credit Agreement dated March 30, 2000             *
                 among RailWorks Corporation, as Borrower, Certain Subsidiaries, as Guarantors, the
                 Lenders named therein, Bank of America, N.A., as Domestic Administrative Agent and
                 Bank of America, N. A., as Canadian Administrative Agent (incorporated by reference
                 to Exhibit 10.41 to Registrant's Quarterly Report on Form 10-Q filed on May 12,
                 2000).

     10.42       Amended and Restated Credit Agreement dated April 28, 2000 among RailWorks                    *
                 Corporation, as Borrower, Certain Subsidiaries, as Guarantors, the Lenders named
                 therein, First Union National Bank, as Documentation Agent, and Bank of America, N.
                 A., as Administrative Agent (incorporated by reference to Exhibit 10.42 to
                 Registrant's Quarterly Report on Form 10-Q filed on May 12, 2000).

     10.43       Amended and Restated Security Agreement dated April 28, 2000 among the persons                *
                 identified thereinas Grantors and Bank of America, N. A., as Collateral Agent for
                 the Lenders (incorporated by reference to Exhibit 10.43 to Registrant's Quarterly
                 Report on Form 10-Q filed on May 12, 2000).

     10.44       Amended and Restated Pledge Agreement dated April 28, 2000 among the persons                  *
                 identified therein as Pledgors and Bank of America, N. A., as Collateral Agent for
                 the Lenders (incorporated by reference to Exhibit 10.44 to Registrant's Quarterly
                 Report on Form 10-Q filed on May 12, 2000).

     10.45       Amended and Restated Employment Agreement, dated January 1, 2000 between RailWorks            *
                 Corporation and Michael R. Azarela (incorporated by reference to Exhibit 10.45 to
                 Registrant's Quarterly Report on Form 10-Q filed on May 12, 2000).

     10.46       Amended and restated Employment Agreement, dated January 1, 2000 between RailWorks            *
                 Corporation and John Larkin (incorporated by reference to Exhibit 10.46 to
                 Registrant's Quarterly Report on Form 10-Q filed on May 12, 2000).
</TABLE>


                                      37
<PAGE>


<TABLE>
<CAPTION>
    EXHIBIT
    NUMBER                                     DESCRIPTION OF EXHIBITS
    -------                                    -----------------------

    <S>          <C>                                                                                           <C>
     10.47       First Amendment dated December 13, 2000, to the Amended and Restated Credit                   *
                 Agreement dated April 28, 2000 among RailWorks Corporation, as Borrower, Certain
                 Subsidiaries, as Guarantors, the Lenders named therein, First Union National Bank,
                 as Documentation Agent, and Bank of America, N. A., as Administrative Agent
                 (incorporated by reference to Exhibit 10.47 to Registrant's Annual Report on Form
                 10-K filed on March 27, 2001).

     10.48       Second Amendment dated February, 2000, to the Amended and Restated Credit Agreement           *
                 dated April 28, 2000 among RailWorks Corporation, as Borrower, Certain
                 Subsidiaries, as Guarantors, the Lenders named therein, First Union National Bank,
                 as Documentation Agent, and Bank of America, N. A., as Administrative Agent
                 (incorporated by reference to Exhibit 10.48 to Registrant's Annual Report on Form
                 10-K filed on March 27, 2001).

     10.49       Amended and Restated Employment Agreement, dated March 1, 2001 between RailWorks              *
                 Corporation and Michael R. Azarela (incorporated by reference to Exhibit 10.49 to
                 Registrant's Quarterly Report on Form 10-Q filed on May 15, 2001).

     10.50       Amended and restated Employment Agreement, dated March 1, 2001 between RailWorks              *
                 Corporation and John Larkin (incorporated by reference to Exhibit 10.50 to
                 Registrant's Quarterly Report on Form 10-Q filed on May 15, 2001).

     10.51       Amendment No. 2, dated February 22, 2001, to the Amended and Restated Credit                  *
                 Agreement dated April 28, 2000 among RailWorks Corporation, as Borrower, Certain
                 Subsidiaries, as Guarantors, the Lenders named therein, First Union National Bank,
                 as Documentation Agent, and Bank of America, N.A., as Administrative Agent
                 (incorporated by reference to Exhibit 10.51 to Registrant's Quarterly Report on
                 Form 10-Q filed on May 15, 2001).

     10.52       Asset Purchase Agreement between W. T. Byler Co., LP, RailWorks W. T. Byler, LP,              *
                 RailWorks Corporation, William Troy Byler and William Troy Byler, Jr., dated June
                 20, 2001 (incorporated by reference to Exhibit 10.52 to Registrant's Quarterly
                 Report on Form 10-Q filed on August 20, 2001).

     10.53       Separation Agreement between the Company and John G. Larkin, dated August 17, 2001            *
                 (incorporated by reference to Exhibit 10.53 to Registrant's Quarterly Report on
                 Form 10-Q filed on November 19, 2001).

     10.54       Separation Agreement between the Company and Michael R. Azarela, dated August 17,             *
                 2001 (incorporated by reference to Exhibit 10.54 to Registrant's Quarterly Report
                 on Form 10-Q filed on November 19, 2001).

     10.55       Debtor in Possession Financing Agreement, dated October 9, 2001, among the Company,           *
                 as Borrower, Certain Subsidiaries of the Borrower, as Guarantors, the Lenders party
                 thereto and Bank of America, N. A., as Administrative Agent (incorporated by
                 reference to Exhibit 10.55 to Registrant's Quarterly Report on Form 10-Q filed on
                 November 19, 2001).

     10.56       Debtor in Possession Transit Revolving Credit Agreement, dated October 5, 2001,               *
                 among the Company, as Borrower, Certain Subsidiaries of the Borrower, as
                 Guarantors, the Lenders party thereto and CSFB, as Administrative Agent
                 (incorporated by reference to Exhibit 10.56 to Registrant's Quarterly Report on
                 Form 10-Q filed on November 19, 2001).
</TABLE>


                                      38
<PAGE>


<TABLE>
<CAPTION>
    EXHIBIT
    NUMBER                                     DESCRIPTION OF EXHIBITS

    <S>          <C>                                                                                           <C>
     10.57       Transit Debtor in Possession Bond Facility, dated October 5, 2001, among the                  *
                 Company, as Borrower and Indemnitor, Certain Subsidiaries of the Borrower, as
                 Indemnitors, and Travelers Casualty & Surety Company of America (incorporated by
                 reference to Exhibit 10.57 to Registrant's Quarterly Report on Form 10-Q filed on
                 November 19, 2001).

     10.58       Debtor in Possession Bond Support Credit Agreement, dated October 5, 2001, among              *
                 the Company, as Borrower, Certain Subsidiaries of the Borrower, as Guarantors, the
                 Lenders party thereto, any Issuer party thereto and CSFB, as Administrative Agent
                 (incorporated by reference to Exhibit 10.58 to Registrant's Quarterly Report on
                 Form 10-Q filed on November 19, 2001).

     10.59       Debtor-in-Possession Transit Revolving Credit Agreement, dated as of October 5,               +
                 2001 and Amended and Restated as of March 8, 2002, among the Company, as Borrower,
                 Certain Subsidiaries of the Borrower, as Guarantors, the Lenders and Issuer party
                 thereto and CSFB Global Opportunities Advisers, LLC, as Administrative Agent.

     10.60       Debtor-in-Possession Financing Agreement, dated as of March 5, 2002, among the                +
                 Company, as Borrower, Certain Subsidiaries of the Borrower, as Guarantors, the
                 Lenders Party thereto, and Bank of America, N.A., as Administrative Agent.

     12.1        Statement of Computation of Ratios                                                            +

     21.1        List of Subsidiaries                                                                          +

     23.1        Consent of Independent Public Accountant                                                      +

     99.1        Stock Exchange Agreement dated October 8, 1998 between the Registrant and BT Alex.            *
                 Brown Incorporated (incorporated by reference to Exhibit 99.1
                 to the Registrant's Current Report on Form 8-K filed on
                 October 14, 1998)

     99.2        Consolidated Financial Statements of Registrant, together with the report thereon             +
                 of Arthur Andersen LLP, dated March 15, 2002 and all Notes to such Consolidated
                 Financial Statements.

     99.3        Letter to the Securities and Exchange Commission regarding representations made by            +
                 Arthur Andersen related to the audit.
</TABLE>

         *        Previously filed; incorporated herein by reference.
         +        Filed herewith


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