UNITED STATES SECURITIES AND
                               EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

           [X] Quarterly report pursuant to Section 13 or 15(d) of the
         Securities Exchange Act of 1934 for the quarterly period ended
                                 March 31, 1999


                                       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 34-022552


                                  RAILTEX, INC.
           ----------------------------------------------------------
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                     TEXAS                              74-1948121
       ------------------------------             ----------------------
      (State or other jurisdiction of                (I.R.S. Employer
      incorporation or organization)              Identification Number)

       4040 BROADWAY, SUITE 200
            SAN ANTONIO, TEXAS                            78209
----------------------------------------          ----------------------
(Address of principal executive offices)                (Zip Code)


    Registrant's telephone number,
         including area code:                       (210) 841-7600
                                                  ----------------------

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.

                 [X]   YES                    [ ]  NO

Indicate the number of shares outstanding of the Registrant's  Common Stock as
of April 30, 1999: 9,286,126.
<PAGE>
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


                        RAILTEX INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF INCOME
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                 (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                            FOR THE THREE MONTHS
                                                                                                               ENDED MARCH 31,
                                                                                                        ---------------------------
                                                                                                           1999            1998 (1)
                                                                                                        ----------       ----------
<S>                                                                                                     <C>              <C>       
OPERATING REVENUES ...............................................................................      $   45,405       $   38,412

OPERATING EXPENSES:
   Transportation ................................................................................          15,442           13,895
   General and administrative ....................................................................           8,020            5,500
   Equipment .....................................................................................           5,387            4,414
   Maintenance of way ............................................................................           4,650            4,580
   Depreciation and amortization .................................................................           4,140            3,263
                                                                                                        ----------       ----------
      Total operating expenses ...................................................................          37,639           31,652
                                                                                                        ----------       ----------

OPERATING INCOME .................................................................................           7,766            6,760

INTEREST EXPENSE .................................................................................          (2,673)          (2,688)

OTHER INCOME .....................................................................................             633              345
                                                                                                        ----------       ----------

INCOME BEFORE INCOME TAXES AND
   CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE .........................................           5,726            4,417

INCOME TAXES .....................................................................................          (2,347)          (1,779)
                                                                                                        ----------       ----------

NET INCOME BEFORE CUMULATIVE EFFECT OF
   A CHANGE IN ACCOUNTING PRINCIPLE ..............................................................      $    3,379       $    2,638
                                                                                                        ==========       ==========

CUMULATIVE EFFECT OF A CHANGE IN
   ACCOUNTING PRINCIPLE (NET OF INCOME TAXES) ....................................................            --             (1,703)

NET INCOME .......................................................................................      $    3,379       $      935
                                                                                                        ==========       ==========
BASIC EARNINGS PER SHARE:

   BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE ..................................      $     0.36       $     0.29
                                                                                                        ==========       ==========
   CUMULATIVE EFFECT OF A CHANGE IN
      ACCOUNTING PRINCIPLE (NET OF INCOME TAXES) .................................................      $     --         $    (0.19)
                                                                                                        ==========       ==========
   TOTAL .........................................................................................      $     0.36       $     0.10
                                                                                                        ==========       ==========
WEIGHTED AVERAGE NUMBER OF BASIC COMMON SHARES OUTSTANDING .......................................           9,274            9,171

DILUTED EARNINGS PER SHARE:

   BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE ..................................      $     0.36       $     0.28
                                                                                                        ==========       ==========
   CUMULATIVE EFFECT OF A CHANGE IN
      ACCOUNTING PRINCIPLE (NET OF INCOME TAXES) .................................................      $     --         $    (0.18)
                                                                                                        ==========       ==========
   TOTAL .........................................................................................      $     0.36       $     0.10
                                                                                                        ==========       ==========

WEIGHTED AVERAGE NUMBER OF DILUTED COMMON SHARES OUTSTANDING .....................................           9,323            9,231
</TABLE>
(1) Restated to reflect adoption of SOP 98-05 as of January 1, 1998.

                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                       2
<PAGE>
                         RAILTEX, INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                                          MARCH 31,     DECEMBER 31,
                                                                                                           1999             1998
                                                                                                         ----------      ----------
                                 ASSETS                                                                  (UNAUDITED)      (AUDITED)
<S>                                                                                                      <C>             <C>       
CURRENT ASSETS:
   Cash and cash equivalents .......................................................................     $    2,234      $    1,243
   Accounts receivable, less doubtful receivables of $732; $844 in 1998 ............................         34,887          33,866
   Prepaid expenses and other current assets .......................................................          3,098           4,848
   Deferred tax assets, net ........................................................................          1,906           1,906
                                                                                                         ----------      ----------
      Total current assets .........................................................................         42,125          41,863
                                                                                                         ----------      ----------

PROPERTY AND EQUIPMENT, NET ........................................................................        292,325         291,779
                                                                                                         ----------      ----------

OTHER ASSETS:
   Investments in Brazilian railroad companies .....................................................         19,994          19,994
   Other, net ......................................................................................         13,928           8,709
                                                                                                         ----------      ----------
      Total other assets ...........................................................................         33,922          28,703
                                                                                                         ----------      ----------

      Total assets .................................................................................     $  368,372      $  362,345
                                                                                                         ==========      ==========
                LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Short-term notes payable ........................................................................     $      108      $      215
   Current portion of long-term debt ...............................................................         10,573           8,568
   Accounts payable ................................................................................         25,990          20,574
   Accrued liabilities .............................................................................         14,844          17,729
                                                                                                         ----------      ----------
      Total current liabilities ....................................................................         51,515          47,086

DEFERRED INCOME TAXES, NET .........................................................................         28,929          30,294

LONG-TERM DEBT, LESS CURRENT PORTION ...............................................................        120,877         122,982

OTHER LIABILITIES ..................................................................................          8,287           6,835
                                                                                                         ----------      ----------
      Total liabilities ............................................................................        209,608         207,197
                                                                                                         ----------      ----------
COMMITMENTS AND CONTINGENCIES

MINORITY INTEREST IN BRAZILIAN INVESTMENT ..........................................................         11,000          11,000
                                                                                                         ----------      ----------
SHAREHOLDERS' EQUITY:
    Preferred stock; $1.00 par value; 10 million shares authorized;
      no shares  issued or outstanding .............................................................           --              --
    Common stock; $.10 par value; 30 million shares authorized; issued and
      outstanding 9,286,126; 9,273,963 in 1998 .....................................................            929             927
    Paid-in capital ................................................................................         85,196          85,115
    Retained earnings ..............................................................................         63,357          59,976
    Deferred compensation ..........................................................................           (893)           (948)
    Accumulated other comprehensive income .........................................................           (825)           (922)
                                                                                                         ----------      ----------
      Total shareholders' equity ...................................................................        147,764         144,148
                                                                                                         ----------      ----------
      Total liabilities and shareholders' equity ...................................................     $  368,372      $  362,345
                                                                                                         ==========      ==========
</TABLE>
                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                       3
<PAGE>
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                 (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                             FOR THE THREE MONTHS
                                                                                                                ENDED MARCH 31,
                                                                                                           ------------------------
                                                                                                              1999         1998 (1)
                                                                                                           ----------    ----------
<S>                                                                                                        <C>           <C>       
OPERATING ACTIVITIES:
   Net income ..........................................................................................   $    3,379    $      935
   Adjustments to reconcile net income to net cash provided by operating activities:
      Depreciation and amortization ....................................................................        4,140         3,263
      Deferred income taxes ............................................................................       (1,401)         (414)
      Amortization of deferred financing costs .........................................................           97            97
      Provision for losses on accounts receivable ......................................................           41           103
      Gain on sale of assets ...........................................................................       (1,238)         (243)
      Cumulative effect of a change in accounting principle ............................................         --           2,747
      Changes in working capital:
         Accounts receivable ...........................................................................         (212)        2,169
         Prepaid expenses ..............................................................................        1,284          (311)
         Accounts payable and accrued liabilities ......................................................       (1,014)       (6,281)
                                                                                                           ----------    ----------
      Net cash provided by operating activities ........................................................        5,076         2,065
                                                                                                           ----------    ----------

INVESTING ACTIVITIES:
   Purchase of property and equipment ..................................................................       (3,781)       (6,567)
   Proceeds from sale of property and equipment ........................................................          414           279
   Increase in other long-term assets ..................................................................         (366)         (177)
                                                                                                           ----------    ----------
      Net cash used in investing activities ............................................................       (3,733)       (6,465)
                                                                                                           ----------    ----------

FINANCING ACTIVITIES:
   Payments of short-term notes payable, net ...........................................................         (107)         (342)
   Proceeds from long-term debt ........................................................................         --           3,000
   Principal payments on long-term debt ................................................................       (2,324)         (669)
   Net increase in working capital facility ............................................................        2,000         3,000
   Sale of common stock pursuant to stock options ......................................................           82           199
   Other ...............................................................................................         --              (1)
                                                                                                           ----------    ----------
      Net cash provided (used) by financing activities .................................................         (349)        5,187
                                                                                                           ----------    ----------

EFFECT OF EXCHANGE RATE CHANGES ON CASH ................................................................           (3)           (3)
                                                                                                           ----------    ----------

NET CHANGE IN CASH AND CASH EQUIVALENTS ................................................................          991           784

CASH AND CASH EQUIVALENTS, beginning of period .........................................................        1,243           570
                                                                                                           ----------    ----------

CASH AND CASH EQUIVALENTS, end of period ...............................................................   $    2,234    $    1,354
                                                                                                           ==========    ==========
</TABLE>
                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                       4
<PAGE>
1.   PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

      The interim consolidated financial statements presented herein include the
accounts of RailTex, Inc. and its wholly-owned subsidiaries. References to
"RailTex" or the "Company" mean RailTex, Inc. and, unless the context indicates
otherwise, its consolidated subsidiaries. All significant intercompany
transactions and accounts have been eliminated in consolidation. These interim
consolidated financial statements have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"). All adjustments have been made to the accompanying interim
consolidated financial statements which are, in the opinion of the Company's
management, necessary for a fair presentation of the Company's operating
results. All adjustments are of a normal recurring nature. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. It is recommended that these
interim consolidated financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998. The
results of operations for any interim period are not necessarily indicative of
the results of operations for the entire year. Certain reclassifications have
been made in the prior period financial statements to conform with the current
period presentation.

2.   RECENTLY ISSUED PRONOUNCEMENTS

      In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires that an entity recognizes all derivatives as either assets or
liabilities in the statement of financial position and measures those
instruments at fair value. This statement is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. Initial application of this
statement should be as of the beginning of an entity's fiscal quarter. Earlier
application of this statement is encouraged, but it is permitted only as of the
beginning of any fiscal quarter that begins after the issuance of this
statement. The Company believes the adoption of this statement will not have a
material impact on the financial condition or results of operations of the
Company.

      In April 1998, the Accounting Standards Executive Committee issued SOP
98-5. SOP 98-5 requires costs associated with start-up activities to be expensed
as incurred. SOP 98-5 is effective for financial statements for fiscal years
beginning after December 15, 1998, although earlier application is encouraged.
The Company adopted SOP 98-5 for the year ended December 31, 1998. This adoption
resulted in the recognition of a non-recurring charge of approximately
$1,703,000 (net of income taxes) entitled, "Cumulative effect of a change in
accounting principle (net of income taxes)" in the accompanying consolidated
financial statements. Prior to the adoption of SOP 98-5, the Company capitalized
the costs associated with start-up activities, including the acquisition of new
railroad properties, and amortized those costs over five years. Prospectively,
the Company's results of operations will reflect higher costs associated with
the acquisition of new railroad properties in the period of acquisition.

                                       5
<PAGE>
3.   EARNINGS PER SHARE

      The following is a reconciliation of the numerators and the denominators
of the basic and diluted earnings per share computations (in thousands, except
per share amounts).

<TABLE>
<CAPTION>
                                                                                                             FOR THE THREE MONTHS
                                                                                                                ENDED MARCH 31,
                                                                                                           ------------------------
                                                                                                              1999          1998
                                                                                                           ----------    ----------
<S>                                                                                                        <C>           <C>       
NUMERATOR:
   Net income before cumulative effect of a change in accounting principle ............................    $    3,379    $    2,638

   Cumulative effect of a change in accounting principle (net of income taxes) ........................          --          (1,703)
                                                                                                           ----------    ----------
   Net income .........................................................................................    $    3,379    $      935
                                                                                                           ==========    ==========
DENOMINATOR:
   Weighted average number of basic share of common stock outstanding .................................         9,274         9,171

   Effect of dilutive stock options ...................................................................            49            60
                                                                                                           ----------    ----------
   Weighted average number of diluted shares of common stock outstanding ..............................         9,323         9,231
                                                                                                           ==========    ==========
BASIC EARNINGS PER SHARE:
   Before cumulative effect of a change in accounting principle .......................................    $     0.36    $     0.29

   Cumulative effect of a change in accounting principle (net of income taxes) ........................          --           (0.19)
                                                                                                           ----------    ----------
   Total ..............................................................................................    $     0.36    $     0.10
                                                                                                           ==========    ==========
DILUTED EARNINGS PER SHARE:
   Before cumulative effect of a change in accounting principle .......................................    $     0.36    $     0.28

   Cumulative effect of a change in accounting principle (net of income taxes) ........................          --           (0.18)
                                                                                                           ----------    ----------
   Total ..............................................................................................    $     0.36    $     0.10
                                                                                                           ==========    ==========
</TABLE>
4.  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
                                                                                                             FOR THE THREE MONTHS
                                                                                                                ENDED MARCH 31,
                                                                                                          --------------------------
                                                                                                             1999            1998
                                                                                                          ----------      ----------
<S>                                                                                                       <C>             <C>       
Cash paid during the period for:
   Interest ........................................................................................      $    4,318      $    4,551
   Income taxes ....................................................................................             344             590
Non-cash investing and financing activities:
   Capital leases ..................................................................................              31             554
   Grants ..........................................................................................           5,185             107
   Tax benefit from exercise of non-qualified stock options ........................................              37              76
</TABLE>
                                       6
<PAGE>
5.   DERIVATIVE ACCOUNTING PRINCIPLES

      The Company historically has hedged certain anticipated transactions.
Interest rate swaps and diesel fuel price collar contracts with third parties
are used to hedge interest rates and diesel fuel costs. Hedges of anticipated
transactions are accounted for under the deferral method with gains and losses
on these transactions recognized in interest expense and operating expenses when
the hedged transaction occurs. The Company does not currently hold or issue
financial instruments for trading purposes.

      The Company is exposed to fluctuations in diesel fuel prices, as an
increase in the price of diesel fuel would result in lower earnings and
increased cash outflows. The Company had entered into several commodity collar
transactions to hedge market risks of diesel fuel prices. The first collar was
effective April 1, 1998 and terminated March 31, 1999 and represented notional
amounts totaling 225,000 gallons per month with a cap price of $0.5600 per
gallon and a floor price of $0.4375 per gallon. This transaction hedges
approximately 16% of the Company's estimated monthly diesel fuel consumption.
The second collar is effective July 1, 1998 and terminates June 30, 1999 and
represents notional amounts totaling 225,000 gallons per month with a cap price
of $0.5600 per gallon and a floor price of $0.4490 per gallon. This transaction
hedges approximately 16% of the Company's estimated monthly diesel fuel
consumption.

      In February 1999, the Company entered into two additional contracts to
hedge its market risk from diesel fuel prices. The first consists of three
monthly swap agreements which fix the price of 725,000 gallons of diesel fuel in
April, May and June 1999 at $0.3215, $0.3280 and $0.3375 per gallon,
respectively. The second is a cap which fixes the price of 725,000 gallons of
diesel fuel per month for the period July 1999 to June 2000 at $0.4500 per
gallon. The cost of the cap was approximately $209,000, which will be amortized
over the period covered by the cap. These transactions hedge approximately 57%
of the Company's estimated monthly diesel fuel consumption.

6.   RESTRICTED STOCK AWARDS

      In 1998, the Company, under the 1993 Stock Plan, as amended ("Plan"),
granted 80,000 restricted shares in the form of the Company's common stock to
several key executives. The restricted shares vest ratably over three to five
years or immediately in the event of a change in control, death, disability or
termination, other than for cause. The unvested portion of the restricted shares
forfeit if the key executives are terminated for cause during the restriction
period. The awards were recorded at the fair market value of the Company's
common stock on the date of grant as deferred compensation and will be amortized
over the restriction period. For the three months ended March 31, 1999, the
Company recorded compensation expense of $55,704.

7.   COMMITMENTS AND CONTINGENCIES

      The Company has added railroad properties to its portfolio through the
purchase of track and roadbed, lease of such assets and contracts to operate
such assets under management agreements. These arrangements typically relate
only to the physical assets of the railroad property and, except for the
purchases of Central Properties, Inc. ("CPI") and Indiana & Ohio Rail Corp.
("IORC"), which were structured as acquisitions of stock, the Company typically
does not contractually assume any of the operations or liabilities of the
divesting carriers.

      Rail properties operated by the Company under management agreements
typically have initial ten year terms followed by either a purchase option or
one or more renewal terms at the Company's option. These operating contracts
typically require that the Company assume all operating and financial
responsibilities for freight operations on the property, including maintenance,
payment of property taxes and regulatory compliance. Payments by the Company for
the right to conduct rail operations on these properties are typically
calculated as a percentage of revenues from the respective properties.

                                       7
<PAGE>
      In August 1995, the Company entered into a ten year Information Technology
Services Agreement ("ITS Agreement") with Electronic Data Systems Corporation
("EDS"). Under the ITS Agreement, EDS is responsible for the management
information systems of the Company, including developing, obtaining licenses for
and maintaining new software for the Company, coordinating the acquisition and
maintenance of computers and related equipment and coordinating the maintenance
of the Company's existing software. The Company currently pays EDS $2.0 million
annually which is subject to annual escalation based on the Consumer Price
Index. The ITS Agreement is subject to earlier termination under certain limited
conditions.

      In October 1998, the Utah Transit Authority ("UTA") asserted a claim for
contribution against one of the Company's railroads under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") relating to
certain pollution existing at one of UTA's rail yards over which the Company has
an operating easement. The Company believes it is not a potentially responsible
party under CERCLA and believes it is contractually indemnified against such
claim. The amount of contribution being sought by the UTA is unknown at this
time.

      Under certain limited circumstances, two of the Company's railroads may be
repurchased by the selling carrier for their original purchase prices. It is
management's opinion that the likelihood of these properties being repurchased
is remote.

      In December 1996, a corporation filed a construction lien against one of
the Company's railroads in the amount of approximately $600,000. The alleged
basis for the construction lien is the provision by the plaintiff of labor and
materials to the Company's railroad in connection with a train derailment in
August 1996, which derailment the Company believes was caused primarily by the
plaintiff. In March 1997, the Company filed a complaint in Federal Court for
approximately $700,000 incurred by the Company in connection with such
derailment and the plaintiff's State claim was combined in the Federal
litigation. The Company is vigorously pursuing its claim and defending the
plaintiff's claim. Trial was originally scheduled for December 1998, but was
rescheduled to July 1999. The Company is unable to predict the outcome of the
trial; however, the Company believes it is adequately reserved to cover any
losses it may incur in connection with this matter. In addition, any loss in
excess of $600,000 will be covered by its insurance.

      The Company is currently subject to a number of claims and legal actions
that arose in the ordinary course of business, including Federal Employers'
Liability Act claims by its employees and personal injury claims (including
wrongful death claims) by third parties. The Company believes these claims,
taking into account reserves and applicable insurance, will not have a material
adverse effect on the Company. However, adverse judgments in these claims,
individually or in the aggregate, in excess of related reserves and applicable
insurance, could have a materially adverse effect on the Company's financial
condition and results of its operations.

8.   COMPREHENSIVE INCOME

      The Company has chosen to disclose comprehensive income in the
Consolidated Statements of Shareholders' Equity. For purposes of SFAS 130, the
Company's other comprehensive income or loss was comprised of net currency
translation adjustments. Paragraph 9(f) of Statement 109 "prohibits recognition
of a deferred tax liability or asset for differences related to assets and
liabilities that under FASB Statement No. 52, `Foreign Currency Translation,'
are remeasured from the local currency into the functional currency using
historical rates". Therefore, other comprehensive income is not being shown net
of tax.

                                       8
<PAGE>
9.   SEGMENT INFORMATION

   The following table presents information about the Company by geographic area
(in thousands).
<TABLE>
<CAPTION>
                                                                                                          FOR THE THREE MONTHS
                                                                                                             ENDED MARCH 31,
                                                                                                     -------------------------------
                                                                                                        1999                 1998
                                                                                                     ----------           ----------
<S>                                                                                                  <C>                  <C>       
Total Revenues:
      United States ......................................................................           $   40,170           $   34,699
      Canada .............................................................................                4,982                3,629
      Other foreign ......................................................................                  253                   84
                                                                                                     ----------           ----------
           Total .........................................................................           $   45,405           $   38,412
                                                                                                     ==========           ==========
Operating Income:
      United States ......................................................................           $    6,485           $    5,533
      Canada .............................................................................                1,037                1,176
      Other foreign ......................................................................                  244                   51
                                                                                                     ----------           ----------
           Total .........................................................................           $    7,766           $    6,760
                                                                                                     ==========           ==========
Assets:
      United States ......................................................................           $  286,167           $  245,675
      Canada .............................................................................               19,311               19,447
      Other foreign ......................................................................               19,994               17,976
                                                                                                     ----------           ----------
           Total .........................................................................           $  325,472           $  283,098
                                                                                                     ==========           ==========
</TABLE>
10.     SUBSEQUENT EVENTS

      In April 1999, the Company completed the refinancing and expansion of its
senior revolving credit facility to $175 million. The three year agreement
consists of a syndicate of ten banks, led by Chase Bank of Texas, N.A., who
serves as administrative agent. The facility allows for an equivalent of U.S.
$20 million to be allocated for use in Canada. The facility will be used to
finance acquisitions, capital expenditures, working capital and other general
corporate purposes. Interest payment periods range from one month to six months
depending on the type of loan. Interest rates also vary depending on the type of
loan. All borrowings become due and payable in April 2002. The unused portion of
the Refinanced Senior Bank Facility is subject to a 0.30% to 0.50% commitment
fee based on certain ratios.

      In April 1999, the Company transferred the operations of the Northeast
Kansas & Missouri Railroad ("NEKM") to Union Pacific ("UP"). The Company also
transferred the operations of the New Orleans Lower Coast Railroad ("NOLR") to
the New Orleans & Gulf Coast Railway Company.

                                       9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

      THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE
IN THIS QUARTERLY REPORT ON FORM 10-Q.

      This Form 10-Q contains certain "forward-looking" statements within the
meaning of The Private Securities Litigation Reform Act of 1995 and information
relating to RailTex, Inc. and its subsidiaries that are based on the beliefs of
the Company's management and that involve known and unknown risks and
uncertainties. When used in this report, the words "anticipate," "believe,"
"estimate," "expect" and "intend" and words or phrases of similar import, as
they relate to the Company or its subsidiaries or Company management, are
intended to identify forward-looking statements. Such statements reflect the
current risks, uncertainties and assumptions related to certain factors
including, without limitation, currency risks, competitive factors, general
economic conditions, customer relations, relationships with vendors, fuel costs,
the interest rate environment, governmental regulation and supervision,
seasonality, technological change, changes in industry practices, one-time
events and other factors described herein and in other filings made by the
Company with the Securities and Exchange Commission. Based upon changing
conditions, should any one or more of these risks or uncertainties materialize,
or should any underlying assumptions prove incorrect, actual results may vary
materially from those described herein as anticipated, believed, estimated,
expected or intended. The Company undertakes no obligation to update, and the
Company does not have a policy of updating or revising, these forward-looking
statements.

GENERAL

      The Company has added railroad properties to its portfolio primarily
through purchase of track and roadbed, lease of such assets, contracts to
operate such assets under management agreements and purchase of railroad company
common stock, depending upon the economic and strategic considerations of the
divesting carriers. These arrangements typically relate only to the physical
assets of the railroad property; the Company typically does not contractually
assume any of the operations or liabilities of the divesting carriers. After
acquiring the right to operate a railroad property, the Company must arrange for
the purchase or lease of operating equipment and hire the workforce necessary to
operate the railroad. Accordingly, for any railroad property, the historical
results of operations of the railroad property as previously operated are not
necessarily indicative of the results of operations for the property following
commencement of operations by the Company.

      Because of variations in the structure, timing and size of portfolio
additions and differences in economics among the Company's portfolio railroads
resulting from the unique terms, rates and other provisions for each railroad's
operation established through negotiation between RailTex and each divesting
carrier, the Company's results of operations in any reporting period may not be
directly comparable to (i) its results of operations in other reporting periods
or (ii) the results of operations of other railroad companies. Therefore, care
should be taken when using traditional measurements of railroad operating
performance, such as freight revenues per carload, operating ratio and labor
ratio, in assessing or comparing the Company's operating results.

      "Comparable Railroad Properties" for each period are railroad properties
which the Company operated throughout both the full current year and the full
prior year, including any additions to those properties made during the year.
"New Railroad Properties" for each period are railroad properties which the
Company began operating after the start of the prior year.

      For the quarter ended March 31, 1999 compared to the quarter ended March
31, 1998, New Railroad Properties include the Central Railroad of Indianapolis
("CERA") and the Central Railroad of Indiana ("CIND").

                                       10
<PAGE>
RECENT DEVELOPMENTS

      In April 1999, the Company successfully completed the refinancing and
expansion of its senior revolving credit facility to $175 million. The three
year agreement consists of a syndicate of ten banks, led by Chase Bank of Texas,
N.A., who serves as administrative agent. The facility allows for an equivalent
of U.S. $20 million to be allocated for use in Canada. The unused portion of the
Refinanced Senior Bank Facility is subject to a 0.30% to 0.50% commitment fee
based on certain ratios.

      In April 1999, the Company completed the divestiture of the Northeast
Kansas & Missouri Railroad ("NEKM") to Union Pacific ("UP"), for approximately
$3.2 million. The Company also completed the divestiture of the assets of the
New Orleans Lower Coast Railroad ("NOLR") to the New Orleans & Gulf Coast
Railway Company for approximately $5.2 million.

      In February 1999, Ronald A. Rittenmeyer was elected Chairman of the
Company's Board of Directors. Mr. Rittenmeyer joined the Company in August 1998
as President and Chief Executive Officer and replaces Bruce M. Flohr, who has
assumed the new title of Founder and Chairman Emeritus.

      In January 1999, a wholly-owned subsidiary of the Company, the Dallas,
Garland and Northeastern Railroad ("DGNO") commenced operations on 89 miles of
rail line north of Dallas, Texas ("North Dallas Lines") under a lease
arrangement with Union Pacific Railroad. The North Dallas Lines connect to and
will be operated as a part of the DGNO.

      The Company, through its wholly-owned subsidiary, RailTex International
Holdings ("RIHI"), currently owns equity interests in the Ferrovia Centro
Atlantica, S.A. ("FCA") and the Ferrovia Sul Atlantico, S.A. ("FSA"), which
operate railroads in Brazil. The continuing economic uncertainty existing in
Brazil has impacted the ability of FCA and FSA to finance short-term capital
needs. As a result, during the first quarter of 1999 the Board of Directors of
FSA implemented a call for additional capital contributions from existing
shareholders. The Company did not participate in the capital call and, as a
result, its equity percentage in FSA will be diluted. The respective Boards of
Directors of FCA and FSA may implement additional capital contribution calls
from existing shareholders in the future. The Company may or may not choose to
participate in such capital calls. In the event that the Company does not
participate, its equity percentage could be further diluted.

      On December 31, 1998, RIHI closed the sale of 49.5% interest in its
Brazilian railroad investments to Global Environment Fund ("GEF"), a Washington,
D.C. based investment fund, for $11 million. RIHI retained the remaining 50.5%
interest; however, under a related agreement RIHI can be required to repurchase
GEF's interest (i) after five years at a price equal to the lower of 95% of the
appraised fair market value or certain collar amounts provided for in the
related agreement or (ii) at any time in the event RIHI and GEF disagree on any
matter requiring a unanimous decision, GEF offers to purchase RIHI's interest
and RIHI does not want to sell, in which case RIHI must purchase GEF's interest
at the same price GEF offered to purchase RIHI's interest.

      As a result of the acquisition of Consolidated Rail Corporation
("Conrail") by CSX Transportation, Inc. ("CSX") and Norfolk Southern Railway
Company ("NS"), Conrail's rail lines will be divided between CSX and NS which
may cause revenue to be diverted from the New England Central Railroad, Inc.
("NECR") and the Indiana Southern Railroad, Inc. ("ISRR"), wholly-owned
subsidiaries of RailTex. In addition, the Indiana and Ohio Rail Corp. ("INOH"),
a wholly owned subsidiary of RailTex, believes the division of rail lines
between CSX and NS will cause operating inefficiencies for INOH. The Company
believes the effect on revenues and operating efficiencies will be immaterial.

                                       11
<PAGE>
RESULTS OF OPERATIONS

      THREE MONTHS  ENDED MARCH 31, 1999  COMPARED TO THREE MONTHS ENDED MARCH
31, 1998

      The Company's net income for the three months ended March 31, 1999
increased by approximately $2.4 million to $3.4 million from $0.9 million in the
prior year period and basic and diluted earnings per share increased to $0.36
per share from $0.10 per share in the prior year period.

      OPERATING REVENUES. Operating revenues for the three months ended March
31, 1999 increased by $7.0 million, or 18%, to $45.4 million from $38.4 million
in the prior year period. Carloads transported increased by 28,608 carloads, or
23%, to 155,401 carloads from 126,793 carloads in the prior year period.

      Freight revenues for the three months ended March 31, 1999 increased by
$4.9 million, or 14.9%, to $38.1 million from $33.2 million in the prior year
period. The following table compares freight revenues, traffic volume (in
carloads) and average freight revenues per carload by commodity group for the
three months ended March 31, 1999 and 1998.

         FREIGHT REVENUES AND CARLOADS COMPARISON BY COMMODITY GROUP
              (DOLLARS IN THOUSANDS, EXCEPT PER CARLOAD AMOUNTS)

<TABLE>
<CAPTION>
                                                                                                                    AVERAGE FREIGHT
                                                                                                                     REVENUES PER
                                          FREIGHT REVENUES                              CARLOADS                       CARLOAD(1)
                               --------------------------------------    --------------------------------------    -----------------
                                      1999                1998                 1999                 1998             1999      1998
                               -----------------    -----------------    -----------------    -----------------    --------  -------
COMMODITY GROUP                           %  OF                %  OF                %  OF                %  OF
---------------                DOLLARS    TOTAL     DOLLARS    TOTAL      NUMBER    TOTAL      NUMBER    TOTAL
                               --------  -------    --------  -------    --------  -------    --------  -------
<S>                            <C>          <C>     <C>          <C>       <C>        <C>       <C>        <C>     <C>       <C>    
Lumber and forest products ..  $  6,780     17.8%   $  6,648     20.0%     17,135     11.0%     16,847     13.3%   $    396  $   395
Chemicals ...................     4,875     12.8       4,069     12.3      15,035      9.7      12,716     10.0         324      320
Coal ........................     4,634     12.2       4,503     13.6      26,301     16.9      25,861     20.4         176      174
Farm products ...............     3,544      9.3       2,758      8.3      15,387      9.9      10,864      8.6         230      254
Scrap paper & paper products.     3,171      8.3       2,907      8.8      10,012      6.4       8,809      6.9         317      330
Scrap metal & metal products.     3,027      7.9       3,022      9.1      10,805      7.0      10,590      8.4         280      285
Railroad equipment ..........     2,938      7.7       1,060      3.2      22,514     14.5       7,001      5.5         131      151
Autos and auto parts ........     1,946      5.1       1,406      4.2      10,012      6.4       7,914      6.2         194      178
Food products ...............     1,739      4.6       1,676      5.1       6,461      4.2       6,237      4.9         269      269
Non-metallic ores ...........     1,731      4.5       1,527      4.6       9,641      6.2       8,029      6.3         180      190
Minerals & stone ............     1,547      4.1       1,232      3.7       4,808      3.1       3,596      2.8         322      343
Petroleum products ..........     1,101      2.9       1,311      4.0       3,242      2.1       3,569      2.8         340      367
Other .......................     1,080      2.8       1,065      3.1       4,048      2.6       4,760      3.9         267      224
                               --------  -------    --------  -------    --------  -------    --------  -------  
     Total ..................  $ 38,113    100.0%   $ 33,184    100.0%    155,401    100.0%    126,793    100.0%   $    245  $   262
                               ========  =======    ========  =======    ========  =======    ========  =======  
</TABLE>
-------------------
(1) Calculated as freight revenues divided by carloads.

      The increase in freight revenues and carloadings is primarily due to
increases in railroad equipment, farm products, chemicals and autos and auto
parts primarily as a result of increases in business for existing customers and
the acquisition of CERA and CIND.

      Non-freight revenues for the three months ended March 31, 1999 increased
by approximately $2.1 million, or 39.5%, to $7.3 million from $5.2 million in
the prior year period. Non-freight revenues include joint facilities, switching,
demurrage, car hire and car repair services performed for third parties and
lease income. These non-freight revenues contributed 16.1% and 13.6% of
operating revenues in the three months ended March 31, 1999 and 1998,
respectively. The increase in non-freight revenues is primarily due to a gain on
sale of operating assets and increases in demurrage and car repair.

      OPERATING EXPENSES. Operating expenses for the three months ended March
31, 1999 increased by $6.0 million, or 19%, to $37.6 million from $31.7 million
in the prior year period. The Company's operating ratio (operating expenses
divided by operating revenues) increased for the period to 82.9% from 82.4% in
the prior year period, primarily a result of increases in purchased services and
casualties and insurance.

                                       12
<PAGE>
      The following table sets forth a comparison of the Company's operating
expenses during the three month periods ended March 31, 1999 and 1998, in
dollars and as a percentage of operating revenues:

                        OPERATING EXPENSES COMPARISON
                             (dollars in thousands)
<TABLE>
<CAPTION>
                                                                                  1999                             1998
                                                                        --------------------------       --------------------------
                                                                                          % OF                             % OF
                                                                                        OPERATING                        OPERATING
                                                                         DOLLARS         REVENUES         DOLLARS         REVENUES
                                                                        ----------      ----------       ----------      ----------
<S>                                                                     <C>                   <C>        <C>                   <C>  
Labor and benefits ...............................................      $   13,770            30.3%      $   11,841            30.8%
Equipment rents ..................................................           5,141            11.3            4,300            11.2
Depreciation and amortization ....................................           4,140             9.1            3,263             8.5
Diesel fuel ......................................................           2,519             5.6            2,651             6.9
Purchased services ...............................................           3,257             7.2            2,256             5.9
Casualties and insurance .........................................           2,226             4.9            1,520             4.0
Materials ........................................................           1,535             3.4            1,396             3.6
Joint facilities .................................................           1,240             2.7            1,263             3.3
Other ............................................................           3,811             8.4            3,162             8.2
                                                                        ----------      ----------       ----------      ----------
   Total .........................................................      $   37,639            82.9%      $   31,652            82.4%
                                                                        ==========      ==========       ==========      ==========
</TABLE>
      Labor and benefits for the three months ended March 31, 1999 increased by
$1.9 million, or 16%, to $13.7 million from $11.8 million in the prior year
period. The increase in labor and benefits is primarily a result of increased
business on existing properties and the acquisition of new properties.

      Equipment rents for the three months ended March 31, 1999 increased by
approximately $841,000, or 20%, to $5.1 million from $4.3 million in the prior
year period. The increase in equipment rents is primarily attributable to an
increase in locomotive leases and an increase in car hire expense at several of
the Company's properties.

      Depreciation and amortization for the three months ended March 31, 1999
increased by approximately $877,000, or 27%, to $4.1 million from $3.3 million
in the prior year period. The increase in depreciation and amortization is
primarily a result of capital asset additions in 1998 and first quarter 1999.

      Diesel fuel expense for the three months ended March 31, 1999 decreased by
approximately $132,000, or 5%, to $2.5 million from $2.6 million in the prior
year period. The decrease in diesel fuel expense is primarily a result of a
$0.10 per gallon decrease in average fuel prices as compared to the prior year
period.

      Purchased services for the three months ended March 31, 1999 increased by
approximately $1.0 million, or 44%, to $3.3 million from $2.3 million in the
prior year period. The increase in purchased services is primarily a result of
increased legal expenses and expenses related to information technology.

      Casualties and insurance expense for the three months ended March 31, 1999
increased by approximately $706,000, or 46%, to $2.2 million from $1.5 million
in the prior year period. The increase in casualties and insurance expense is a
result of increased derailment costs.

      Materials expense for the three months ended March 31, 1999 increased by
approximately $139,000, or 10%, to $1.5 million from $1.4 million in the prior
year period. The increase in materials expense is primarily due to an increase
in locomotive materials.

                                       13
<PAGE>
      Joint facilities expense for the three months ended March 31, 1999
decreased by approximately $23,000 or 2%, due primarily to purchasing certain
track that trackage rights were being paid on in the first quarter of 1998.

      Other expenses for the three months ended March 31, 1999 increased
approximately $649,000, or 21%, to $3.8 million from $3.2 million in the prior
year period. The increase in other expenses is primarily attributable to
increases in property taxes and crew transportation expenses.

      INTEREST EXPENSE. Interest expense for the three months ended March 31,
1999 compared to the three months ended March 31, 1998 remained relatively flat,
decreasing approximately $14,000.

      OTHER INCOME. For the three months ended March 31, 1999 other income was
approximately $633,000 as compared to approximately $345,000 in the prior year
period primarily as a result of interest income owed to the Company from a Class
I railroad and a net gain from the sale of non-operating assets for the three
months ended March 31, 1999.

LIQUIDITY AND CAPITAL RESOURCES

      The Company has historically relied primarily on cash generated from
operations to fund working capital and capital expenditure needs relating to
ongoing operations while relying on contributed capital and borrowed funds to
finance its acquisitions.

      During the three months ended March 31, 1999, the Company generated cash
from operations of $5.1 million which was primarily used to fund capital
expenditures as follows (in thousands):

            Track.......................................... $1,919
            Locomotives....................................  1,621
            Technology.....................................    138
            Other..........................................    103
                                                            ------ 
                                                            $3,781
                                                            ======

      At March 31, 1999, the Company had long-term senior debt, capital leases
and senior subordinated debt outstanding totaling, in U.S. Dollars, $131.5
million, which constituted 47.1% of its total capitalization. Comparable figures
at December 31, 1998 were $131.6 million and 47.7%, respectively.

      At March 31, 1999, availability under the Company's $75.0 million U.S.
acquisition facility, $10.0 million U.S. working capital facility, CDN $25.0
million Canadian acquisition agreement, and CDN $5.0 million Canadian working
capital facility was, in U.S. dollars, $58.4 million, $6.0 million, $16.6
million and $1.3 million, respectively. The unused portion of all of the
Company's senior bank credit facilities are subject to a 0.25% commitment fee.

      The Company currently anticipates that its maintenance capital expenditure
requirements in 1999 for track, locomotives and equipment will be approximately
$20.0 million. Additionally, computer hardware, software and related capital
expenditures are currently expected to be approximately $2.0 million.

      Covenants contained in the agreements evidencing the Company's senior
bank, senior unsecured and senior subordinated debt prohibit the Company from
paying dividends on its capital stock and limit its ability to incur additional
indebtedness, create liens on its assets, make capital expenditures and
repurchase shares of its capital stock or any outstanding options or other
rights to acquire stock of the Company. The Company is also limited in its
ability to make loans, investments or guarantees. Additionally, the Company is
required to maintain a minimum tangible net worth and certain ratios of leverage
and cash flow to debt service. At March 31, 1999, the Company was in compliance 
with all such covenants.

   The Company believes its cash flow from operations together with the amounts
available under its Refinanced 

                                       14
<PAGE>
Senior Bank Facility will allow it to meet its liquidity and capital expenditure
requirements for railroads it currently operates through the expiration of the
facility in April 2002.

INFLATION

      In recent years, inflation has not had a significant impact on the
Company's operations. The Company's contracts with connecting carriers typically
include clauses that adjust the Company's per car fees based on the Surface
Transportation Board's ("STB") cost or inflation indices.

SEASONALITY

      Except for revenue from shipment of farm products, which represent less
than 10.0% of revenues, the Company's operating revenues from existing
operations have not historically been subject to significant seasonal changes.

ACCOUNTING MATTERS

      In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires that an entity recognizes all derivatives as either assets or
liabilities in the statement of financial position and measures those
instruments at fair value. This statement is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. Initial application of this
statement should be as of the beginning of an entity's fiscal quarter. Earlier
application of this statement is encouraged, but it is permitted only as of the
beginning of any fiscal quarter that begins after the issuance of this
statement. The Company believes the adoption of this statement will not have a
material impact on the financial condition or results of operations of the
Company.

      In April 1998, the Accounting Standards Executive Committee issued SOP
98-5. SOP 98-5 requires costs associated with start-up activities to be expensed
as incurred. SOP 98-5 is effective for financial statements for fiscal years
beginning after December 15, 1998, although earlier application is encouraged.
The Company adopted SOP 98-5 for the year ended December 31, 1998. This adoption
resulted in the recognition of a non-recurring charge of approximately
$1,703,000 (net of income taxes) entitled, "Cumulative effect of a change in
accounting principle (net of income taxes)" in the accompanying consolidated
financial statements. Prior to the adoption of SOP 98-5, the Company capitalized
the costs associated with start-up activities, including the acquisition of new
railroad properties, and amortized those costs over five years. Prospectively,
the Company's results of operations will reflect higher costs associated with
the acquisition of new railroad properties in the period of acquisition.

YEAR 2000 COMPLIANCE

      The Company has completed its assessment of its Year 2000 compliance. This
assessment included a review of all of the Company's information technology
systems. The Company currently believes that its largest information technology
applications are Year 2000 compliant. However, the Company will continue to
conduct testing on certain of those systems through July 1999. The Company has
determined that certain components of its information technology infrastructure
are not Year 2000 compliant. These components include servers, components of its
wide area network and certain personal computer software packages. The Company
plans to upgrade all of these non-compliant components to make them Year 2000
compliant by November 1999. The total estimated external cost associated with
these upgrades are approximately $300,000, of which approximately $175,000 has
already been incurred. Internal costs associated with these upgrades primarily
consist of payroll and related costs for Company employees and the portion of
the EDS information technology outsourcing fees allocated to Year 2000
remediation. Such costs total approximately $650,000, of which about two-thirds
has not yet been incurred.

      The Company has also evaluated its non-information technology systems that
use micro controllers, such as locomotives, railroad crossing signals, telephone
systems, dispatching systems and other railroad equipment, that 

                                       15
<PAGE>
may be subject to Year 2000 risk. The Company believes that its locomotives,
railroad crossing signals and the majority of its telephone systems, dispatching
systems and other railroad equipment are Year 2000 compliant. However, the
Company has determined that certain telephone systems, dispatching systems and
other railroad equipment are not Year 2000 compliant. The Company plans to
replace the non-compliant telephone systems, dispatching systems and other
railroad equipment by July 1999 at a total estimated external cost of $275,000,
none of which has yet been incurred. Internal costs associated with these
upgrades are not expected to be significant.

      All affected systems of the Company are scheduled to be Year 2000
compliant, tested and verified by November 30, 1999; however, the Company cannot
guarantee that none of its systems will malfunction. As a precaution against
railroad crossing signals that may malfunction as a result of the Year 2000
problem, the first train through all railroad crossings on RailTex tracks after
12/31/99 will operate under a "Stop and Flag" order. This order requires the
train to stop at each railroad crossing, determine if the railroad crossing
signal is working and in the event that it is not working, have a person control
traffic through the crossing with the use of flags. Any malfunctioning railroad
crossing signals that are discovered as a result of this process will be
replaced by the Company.

      As an additional part of its assessment, the Company has been
investigating the Year 2000 compliance status of its vendors and customers. The
Company has completed its assessment of the status of its product vendors and
the results of that compliance are included in the above disclosures. The
Company has not been able to determine the compliance status of the majority of
its service vendors due to unresponsiveness from the vendors. Should any of its
significant vendors fail to become Year 2000 compliant, the Company plans to
switch to vendors that are Year 2000 compliant. The Company has determined that
approximately 59% of its customers are or expect to become Year 2000 compliant.
The Company has been unable to determine the status of the remaining 41% of its
customers, again due to unresponsiveness. However, the Company is continuing to
contact the unresponsive service vendors and customers in order to determine
their Year 2000 compliance status. If any of the Company's significant vendors
or customers fail to successfully and timely achieve Year 2000 compliance, the
Company's business or operations may be adversely affected.

      The Company is a member of the American Association of Railroad's Rail
Industry Year 2000 Coordination Task Force, which was formed to share Year 2000
issues related to the railroad industry, to help test for Year 2000 compliance
and to help implement Year 2000 compliance changes. The Company, and the
railroad industry as a whole, are susceptible to increased risks, including
significant business interruption, should any of the Class I railroads fail to
timely achieve Year 2000 compliance.

      The above disclosure concerning the Company's Year 2000 compliance, and
that of its vendors and customers, contains "forward-looking" statements that
are based upon the beliefs of the Company's management and are subject to all of
the qualifications set forth at the beginning of Management's Discussion and
Analysis of Financial Condition and Results of Operations.

                                       16
<PAGE>
PART II.    OTHER INFORMATION

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

(A).  EXHIBITS

   EXHIBIT
   NUMBER   DESCRIPTION OF DOCUMENT
   -------  -----------------------
    10.57   Loan Agreement, dated as of April 30, 1999, among RailTex, Inc.
            and Chase Bank of Texas.

     27.1   Financial Data Schedule.

(B).  REPORTS ON FORM 8-K:

      None.

                                       17
<PAGE>
                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of 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, in San Antonio,
Texas.

                                          RAILTEX, INC.


Date: May 13, 1999                        By:/s/ JOSEPH P. JAHNKE
                                          Name:  JOSEPH P. JAHNKE
                                          Title: Vice President, Finance and
                                                 Chief Financial Officer

                                       18