<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT ON FORM 8-K DATED NOVEMBER 5, 1999
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported):
NOVEMBER 5, 1999
RAILWORKS CORPORATION
(Exact name of registrant as specified in its charter)
COMMISSION FILE NUMBER: 0-24639
<TABLE>
<S> <C>
DELAWARE 58-2382378
(State of incorporation) (IRS Employer
Identification No.)
1104 KENILWORTH DRIVE
SUITE 301
BALTIMORE, MARYLAND 21204
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code:
(410) 512-0500
(Former name or former address, if changed since last report)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
The following audited financial statements of W.T. Byler Co., Inc.
("Byler"), together with a manually signed independent auditor's report thereon,
are included as Exhibit 99.2 and are incorporated into this Item 7(a) by this
reference:
(1) Independent Auditors' Report;
(2) Balance Sheet as of December 31, 1998;
(3) Statement of Income for the year ended December 31, 1998;
(4) Statement of Changes in Stockholder's Equity for the year ended
December 31, 1998;
(5) Statement of Cash Flows for the year ended December 31, 1998; and
(6) Notes to the Financial Statements.
The following unaudited financial statements of Byler are included as
Exhibit 99.3 and are incorporated into this Item 7(a) by this reference:
(1) Balance Sheet as of September 30, 1999 and as of December 31, 1998
(audited);
(2) Statements of Income for the nine months ended September 30, 1999
and 1998;
(3) Statements of Changes in Stockholder's Equity for the nine months
ended September 30, 1999 and 1998; and
(4) Statements of Cash Flows for the nine months ended September 30,
1999 and 1998.
(b) Pro Forma Financial Information.
The unaudited Pro Forma Combined Consolidated Financial Statements of
RailWorks Corporation ("RailWorks") for the year ended December 31, 1998 and as
of and for the nine months ended September 30, 1999, and the notes thereto, are
included as Exhibit 99.4 and are incorporated into this Item 7(b) by this
reference.
(c) Exhibits.
<TABLE>
<C> <C> <S>
2.1* -- Stock Purchase Agreement by and between RailWorks
Corporation, W.T. Byler Co., Inc. and William Troy Byler
dated as of October 1, 1999 The Exhibits and Schedules,
which are referenced in the table of contents and elsewhere
in the Stock Purchase Agreement, have been omitted for
purposes of this filing, but will be furnished to the
Commission supplementally upon request.
99.1* -- Text of Press Release of RailWorks Corporation, dated August
23, 1999.
99.2 -- Audited Financial Statements of W.T. Byler Co., Inc.
99.3 -- Unaudited Interim Financial Statements of W.T. Byler Co.,
Inc.
99.4 -- Unaudited Pro Forma Combined Consolidated Financial
Statements of RailWorks Corporation.
</TABLE>
- ---------------
* previously filed
1
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RAILWORKS CORPORATION
By: /s/ MICHAEL R. AZARELA
------------------------------------
Michael R. Azarela
Executive Vice President
and Chief Financial Officer
Date: December 15, 1999
2
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NO. EXHIBIT NUMBERED PAGE
- ------- ------- -------------
<C> <C> <S> <C>
2.1* -- Stock Purchase Agreement by and between RailWorks
Corporation, W.T. Byler Co., Inc. and William Troy Byler
dated as of October 1, 1999.................................
99.1* -- Text of Press Release of RailWorks Corporation, dated August
23, 1999....................................................
99.2 -- Audited Financial Statements of W.T. Byler Co., Inc. .......
99.3 -- Unaudited Interim Financial Statements of W.T. Byler Co.
Inc. .......................................................
99.4 -- Unaudited Pro Forma Combined Consolidated Financial
Statements of RailWorks Corporation.........................
</TABLE>
- ---------------
* previously filed
3
<PAGE> 1
EXHIBIT 99.2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of
W.T. Byler Co., Inc.:
We have audited the accompanying balance sheet of W.T. Byler Co., Inc. (a
Texas corporation) as of December 31, 1998 and the related statements of income,
changes in stockholder's equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of W.T. Byler Co., Inc. as of
December 31, 1998 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Stamford, Connecticut
November 12, 1999
4
<PAGE> 2
W.T. BYLER CO., INC.
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 66,528
Receivables -- contracts.................................. 11,621,635
Receivables -- other...................................... 163,054
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 3,190,593
Inventory................................................. 452,373
Deposits and prepaids..................................... 95,092
-----------
Total current assets.............................. 15,589,275
PROPERTY AND EQUIPMENT NET OF ACCUMULATED DEPRECIATION...... 11,688,856
-----------
Total assets...................................... $27,278,131
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Line of credit............................................ $ 1,020,013
Long-term debt -- current portion......................... 2,484,998
Trade accounts payable.................................... 5,722,465
Accrued expenses and other liabilities.................... 574,506
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 2,740,591
-----------
Total current liabilities......................... 12,542,573
LONG-TERM DEBT.............................................. 3,272,154
DEFERRED COMPENSATION....................................... 1,100,000
-----------
Total liabilities................................. 16,914,727
-----------
STOCKHOLDER'S EQUITY:
Common stock of $.10 par value; 100,000 shares authorized;
8,280 shares issued and outstanding.................... 828
Additional paid-in capital................................ 40,567
Retained earnings......................................... 10,322,009
-----------
Total stockholder's equity........................ 10,363,404
-----------
Total liabilities and stockholder's equity........ $27,278,131
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 3
W.T. BYLER CO., INC.
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
EARNED REVENUES............................................. $56,174,829
COST OF EARNED REVENUES..................................... 51,090,955
-----------
Gross profit...................................... 5,083,874
GENERAL AND ADMINISTRATIVE EXPENSES......................... 2,400,295
-----------
Operating income.................................. 2,683,579
-----------
OTHER INCOME (EXPENSE):
Interest expense.......................................... (418,582)
Interest income........................................... 4,895
Gain on sale of property and equipment.................... 177,849
Other income.............................................. 107,964
-----------
Total other income (expense)...................... (127,874)
-----------
Net income........................................ $ 2,555,705
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 4
W.T. BYLER CO., INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997........................ $828 $40,567 $ 8,616,304 $ 8,657,699
Net income...................................... -- -- 2,555,705 2,555,705
Distribution to stockholder..................... -- -- (850,000) (850,000)
---- ------- ----------- -----------
BALANCE, DECEMBER 31, 1998........................ $828 $40,567 $10,322,009 $10,363,404
==== ======= =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE> 5
W.T. BYLER CO., INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $2,555,705
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation expense................................. 2,534,402
Gain on sale of property and equipment............... (177,849)
Decrease (increase) in assets:
Receivables....................................... (991,595)
Costs and estimated earnings in excess of billings
on uncompleted contracts.......................... (682,055)
Inventory......................................... (452,373)
Deposits and prepaids............................. 313,218
Increase (decrease) in liabilities:
Trade accounts payable............................ (753,516)
Accrued expenses and other liabilities............ (43,572)
Billings in excess of costs and estimated earnings
on uncompleted contracts.......................... 1,716,906
Deferred compensation............................. 250,000
----------
Total adjustments............................ 1,713,566
----------
NET CASH PROVIDED BY OPERATING ACTIVITIES.............. 4,269,271
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....................... (1,734,463)
Proceeds from sale of property and equipment.............. 506,388
----------
NET CASH USED IN INVESTING ACTIVITIES.................. (1,228,075)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt.............................. (2,151,811)
Distribution to stockholder............................... (850,000)
----------
NET CASH USED IN FINANCING ACTIVITIES.................. (3,001,811)
----------
NET INCREASE IN CASH........................................ 39,385
CASH AT BEGINNING OF YEAR................................... 27,143
----------
CASH AT END OF YEAR......................................... $ 66,528
==========
SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest.................... $ 418,582
Cash paid during the year for state income taxes.......... 20,806
NON-CASH OPERATING, INVESTING AND FINANCIAL ACTIVITIES:
Purchase of property and equipment with long-term debt.... $2,783,053
Prepaid insurance premiums financed with debt............. 331,938
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE> 6
W.T. BYLER CO., INC.
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
W.T. Byler Co., Inc., (the "Company"), operates as a general contractor
performing work in the construction and repair of railroad tracks, grading,
bridge construction, paving, structural concrete work and light rail
construction projects throughout the continental United States. For the year
ended December 31, 1998, two customers accounted for 36.5% of the Company's
revenue.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
Management used estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles. These
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities and the reported revenues
and expenses. Actual results could vary from the estimates that were assumed in
preparing the financial statements.
REVENUE AND COST RECOGNITION
The Company recognizes revenues from fixed-fee contracts using the
percentage-of-completion method, measured by the percentage of cost 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. Because of uncertainties in estimating costs, it is
at least reasonably possible that the estimates used could change within the
near term.
Contract costs include all direct labor and benefits, materials,
subcontract costs, other direct costs and allocations of indirect costs of
construction. Indirect costs of construction are allocated based on direct labor
dollars or equipment usage.
As long-term contracts extend over one or more years, revisions in
estimates of costs and earnings during the course of the work are reflected in
the accounting period in which the facts which require the revisions become
known. At the time a significant loss on a contract becomes known, the entire
amount of the estimated ultimate loss is recognized in the financial statements.
The asset "Costs and estimated earnings in excess of billings on
uncompleted contracts" represents revenues recognized in excess of amounts
billed. The liability "Billings in excess of costs and estimated earnings on
uncompleted contracts" represents billings in excess of revenues recognized.
OPERATING CYCLE
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.
INVENTORY
Inventory is stated at the lower of cost or market. Inventory consists of
rail used for construction projects.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and is depreciated using the
straight-line method over the estimated useful life of the related asset.
Significant renewals and betterments are capitalized and depreciated over the
asset's remaining useful life. The cost of routine maintenance and minor repairs
are charged to
9
<PAGE> 7
W.T. BYLER CO., INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
earnings as incurred. As assets are retired or otherwise disposed of, the cost
and accumulated depreciation are eliminated from the accounts and any gain or
loss is reflected in income.
The ranges of estimated useful lives used in computing depreciation for
financial statement purposes are as follows:
<TABLE>
<S> <C>
Buildings and parking lot................................... 8-25 years
Automobiles and trucks...................................... 3-5 years
Construction equipment...................................... 3-7 years
Furniture and fixtures...................................... 5-8 years
</TABLE>
The components of property and equipment are:
<TABLE>
<S> <C>
Land........................................................ $ 242,857
Buildings and parking lot................................... 191,859
Construction equipment...................................... 17,926,028
Automobiles and trucks...................................... 2,677,542
Furniture and fixtures...................................... 117,651
Less: accumulated depreciation.............................. (9,467,081)
-----------
Net property and equipment........................ $11,688,856
===========
</TABLE>
INCOME TAXES
The Company has elected for tax purposes to be taxed under provisions of
Subchapter S of the Internal Revenue Code. The election allows the stockholder
to include the Company's net earnings in his own income for tax purposes.
Accordingly, the Company generally is not liable for federal income taxes. The
Company may be liable for federal income taxes related to accumulated earnings
and profits, built-in capital gains and recapture of investment tax credits.
Where allowed by state taxing authorities, the Company is also taxed as an "S"
Corporation and is not subject to tax. Any income taxes for states which do not
recognize "S" Corporation status would be included in the income tax provision.
There is no provision for income taxes required at December 31, 1998.
3. ACCOUNTS RECEIVABLE
Accounts receivable consists of the following:
<TABLE>
<S> <C>
Accounts receivable......................................... $ 9,522,335
Retainages.................................................. 2,099,300
-----------
$11,621,635
===========
</TABLE>
Contract retainages have been billed but are not due until contract completion
pursuant to contract provisions.
4. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Information with respect to contracts in progress follows:
<TABLE>
<S> <C>
Costs incurred on uncompleted contracts..................... $49,361,089
Estimated earnings.......................................... 6,331,087
-----------
55,692,176
Less billings............................................... 55,242,174
-----------
$ 450,002
===========
</TABLE>
10
<PAGE> 8
W.T. BYLER CO., INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
Contracts in progress are included in the accompanying balance sheet under
the following captions:
<TABLE>
<S> <C>
Costs and estimated earnings in excess of billings on
uncompleted contracts....................................... $3,190,593
Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... 2,740,591
----------
$ 450,002
==========
</TABLE>
5. LINE OF CREDIT
The Company maintains a line-of-credit in the amount of $1,650,000, which
bears interest at 7% and matures December 1999. The line is secured by accounts
receivable and a personal guaranty of the stockholder. The line-of-credit
agreement contains various affirmative covenants relative to working capital,
current ratios and debt to equity ratios.
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<S> <C>
Notes payable to Case Credit, maturing from May 1999 to
January 2000 payable in monthly installments, secured by
equipment................................................... $ 260,659
Note payable to Cananwill, Inc., Premium Finance maturing
March 1999, payable in monthly installments with interest
at 7.39%, secured by unearned insurance premiums.......... 62,032
Notes payable to Safeco, maturing from January 2002 to March
2002, payable in monthly installments including interest
from 7.5% to 7.85%, secured by equipment.................. 4,019,426
Notes payable to Cat Financial, maturing May 1999 to
December 2002, payable in monthly installments with
interest at .35% to 8.75%, secured by equipment........... 1,149,859
Note payable to Newcourt equipment, maturing November 2000,
payable in monthly installments with interest at 7.5%,
secured by equipment...................................... 146,337
Note payable to KDC Financial, maturing June 2000, payable
in monthly installments with interest at 6.5%, secured by
equipment................................................. 118,839
-----------
5,757,152
Less -- current portion..................................... 2,484,998
-----------
Total............................................. $ 3,272,154
===========
</TABLE>
Aggregate principal payments on long-term debt are as follows:
<TABLE>
<S> <C>
1999........................................................ $2,484,998
2000........................................................ 1,687,869
2001........................................................ 1,365,919
2002........................................................ 218,366
----------
Total............................................. $5,757,152
==========
</TABLE>
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair values of financial instruments is made in
accordance with the requirements of SFAS No. 107, "Disclosures about Fair Value
of Financial Instruments." The estimated fair value amounts have been determined
by the Company using available market information and appropriate valuation
methodologies.
11
<PAGE> 9
W.T. BYLER CO., INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
CASH, ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
The carrying amount of these items are a reasonable estimate of their fair
value due to their short-term nature.
LONG-TERM DEBT
The carrying amount of the line of credit facility approximates fair value
as the interest rates are comparable to market value. The carrying value of
other loans relating to equipment approximates fair value as the interest rates
are comparable to market rates.
8. PROFIT SHARING PLAN
The Company has a 401(k) plan that covers all eligible employees. The plan
is a salary deferral plan covering all full-time employees who are at least 21
years of age with one year of service. Employees may contribute from 1% up to
15% of their pretax annual compensation, as defined in the plan. Company
contributions to the profit sharing plan are at the discretion of the Board of
Directors. During 1998, total contributions to the plan charged to operations
were $30,770.
9. DEFERRED COMPENSATION PLAN
The Company has a deferred compensation arrangement with a key management
employee (the "Deferred Compensation Agreement") which was executed on May 3,
1994. The Deferred Compensation Agreement provides for up to $2.6 million of
additional compensation, which vested on a straight line basis over a 10 1/2
year period of employment. Premature vesting occurs upon the sale of greater
than fifty-one percent of the Company's assets or more than a forty-nine percent
change in ownership. As a result of the Company's acquisition (see below),
premature vesting occurred in 1999.
10. SUBSEQUENT EVENT
On October 22, 1999, the shareholder of the Company sold his stock of the
Company to RailWorks Corporation for cash and other consideration.
12
<PAGE> 1
EXHIBIT 99.3
W.T. BYLER CO., INC.
BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 62,967 $ 66,528
Receivables -- contracts.................................. 14,664,879 11,621,635
Receivables -- other...................................... 138,347 163,054
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 894,913 3,190,593
Inventory................................................. 253,158 452,373
Deposits and prepaid expenses............................. 226,335 95,092
----------- -----------
Total current assets.............................. 16,240,599 15,589,275
PROPERTY AND EQUIPMENT NET OF ACCUMULATED DEPRECIATION...... 11,294,019 11,688,856
----------- -----------
TOTAL.............................. $27,534,618 $27,278,131
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Line of credit............................................ $ 600,000 $ 1,020,013
Long-term debt -- current portion......................... 5,121,869 2,484,998
Accounts payable, trade................................... 5,147,886 5,722,465
Accrued expenses and other liabilities.................... 2,013,431 574,506
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 2,905,684 2,740,591
----------- -----------
Total current liabilities......................... 15,788,870 12,542,573
LONG-TERM DEBT.............................................. 1,832,639 3,272,154
DEFERRED COMPENSATION....................................... -- 1,100,000
----------- -----------
Total liabilities................................. 17,621,509 16,914,727
----------- -----------
STOCKHOLDER'S EQUITY:
Common stock of $.10 par value; 100,000 shares authorized;
8,280 shares issued and outstanding.................... 828 828
Additional paid-in capital................................ 40,567 40,567
Retained earnings......................................... 9,871,714 10,322,009
----------- -----------
Total stockholder's equity........................ 9,913,109 10,363,404
----------- -----------
TOTAL.............................. $27,534,618 $27,278,131
=========== ===========
</TABLE>
13
<PAGE> 2
W.T. BYLER CO., INC.
STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
EARNED REVENUES............................................. $43,690,509 $42,350,579
COST OF EARNED REVENUES..................................... 39,872,785 38,877,332
----------- -----------
Gross Profit...................................... 3,817,724 3,473,247
GENERAL AND ADMINISTRATIVE EXPENSES......................... 1,183,065 925,413
NONRECURRING EXPENSES:
Deferred compensation..................................... 1,500,000 187,500
Bonus salaries and wages.................................. 700,000 --
----------- -----------
Operating income.................................. 434,659 2,360,334
----------- -----------
OTHER INCOME (Expense):
Interest expense.......................................... (297,280) (349,429)
Interest income........................................... 9,880 2,734
Gain on sale of property and equipment.................... 28,827 175,452
Other income.............................................. 73,619 91,422
----------- -----------
Other (expense), net.............................. (184,954) (79,821)
----------- -----------
NET INCOME.................................................. $ 249,705 $ 2,280,513
=========== ===========
</TABLE>
14
<PAGE> 3
W.T. BYLER CO., INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998........................ $828 $40,567 $10,322,009 $10,363,404
NET INCOME...................................... -- -- 249,705 249,705
DISTRIBUTION TO STOCKHOLDER..................... -- -- (700,000) (700,000)
---- ------- ----------- -----------
BALANCE, SEPTEMBER 30, 1999....................... $828 $40,567 $ 9,871,714 $ 9,913,109
==== ======= =========== ===========
</TABLE>
W.T. BYLER CO., INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997........................ $828 $40,567 $ 8,616,304 $ 8,657,699
NET INCOME...................................... -- -- 2,280,513 2,280,513
DISTRIBUTION TO STOCKHOLDER..................... -- -- (360,000) (360,000)
---- ------- ----------- -----------
BALANCE, SEPTEMBER 30, 1998....................... $828 $40,567 $10,536,817 $10,578,212
==== ======= =========== ===========
</TABLE>
15
<PAGE> 4
W.T. BYLER CO., INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 249,705 $ 2,280,513
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation expense................................. 2,123,840 1,863,860
Gain on sale of property and equipment............... (28,827) (175,452)
Decrease (increase) in assets:
Receivables..................................... (3,018,537) 2,275,180
Costs and estimated earnings in excess of
billings on uncompleted contracts........... 2,295,680 (1,712,628)
Inventory....................................... 199,215 --
Deposits and prepaid expenses................... (131,243) (149,770)
Increase (decrease) in liabilities:
Accounts payable, trade......................... (574,579) (2,288,407)
Accrued expenses and other liabilities.......... 1,438,925 (82,281)
Billings in excess of costs and estimated
earnings on uncompleted contracts........... 165,093 1,531,319
Deferred compensation........................... (1,100,000) 187,500
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES.............. 1,619,272 3,729,834
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....................... (1,789,176) (3,414,033)
Proceeds from sale of property and equipment.............. 89,000 269,589
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES.................. (1,700,176) (3,144,444)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayment of line of credit arrangement............... (420,013) (900,000)
Proceeds from issuance of long-term debt.................. 2,600,000 3,657,307
Repayments of long-term debt.............................. (1,402,644) (2,213,169)
Distribution to stockholder............................... (700,000) (360,000)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES.............. 77,343 184,138
----------- -----------
NET (DECREASE) INCREASE IN CASH............................. (3,561) 769,528
CASH AT BEGINNING OF PERIOD................................. 66,528 27,143
----------- -----------
CASH AT END OF PERIOD....................................... $ 62,967 $ 796,671
=========== ===========
CASH PAID DURING THE PERIOD FOR INTEREST.................... $ 297,280 $ 349,429
=========== ===========
</TABLE>
16
<PAGE> 1
EXHIBIT 99.4
PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements for the year ended
December 31, 1998 give effect to the acquisitions by RailWorks of the 14
companies acquired by RailWorks in August 1998, which are referred to as the
Founding Companies, and the 13 companies (including Byler which was acquired on
October 22, 1999) acquired by RailWorks after its initial public offering, or
IPO, in August 1998 and prior to September 30, 1999, which are referred to as
Acquired Companies, as if each had occurred on January 1, 1998. The unaudited
pro forma financial statements for the nine months ended September 30, 1999 give
effect to the acquisitions of the 11 companies acquired by RailWorks during the
nine months ended September 30, 1999, which are referred to as the 1999 Acquired
Companies, as if each had occurred on January 1, 1999. The unaudited pro forma
balance sheet gives effect to the acquisition of the 1999 Acquired Companies as
if each had occurred on September 30, 1999. RailWorks has accounted for all of
these acquisitions under the purchase method of accounting.
The unaudited pro forma statement of operations for the year ended December
31, 1998 includes the results of operations of RailWorks for the year ended
December 31, 1998 combined with the results of operations of (1) the Founding
Companies (other than Comstock Holdings, Inc.) from January 1, 1998 through July
31, 1998, and (2) Armcore Railroad Contractors, Inc. from January 1, 1998
through November 4, 1998, seven of the 1999 Acquired Companies from January 1,
1998 through December 31, 1998, two of the 1999 Acquired Companies from December
1, 1997 through November 30, 1998 and two of the 1999 Acquired Companies from
April 1, 1998 through March 31, 1999 and give effect to the pro forma
adjustments related to these transactions all as if each had occurred on January
1, 1998. The unaudited pro forma statement of operations for the nine months
ended September 30, 1999 includes the results of operations of RailWorks for the
nine months ended September 30, 1999 combined with the results of operations of
(1) FCM Rail, Ltd., F&V Metro Contracting Corp. and affiliates and Gantrex Group
from January 1, 1999 through January 31, 1999, (2) McCord Treated Wood, Inc. and
Birmingham Wood, Inc. from January 1, 1999 through April 12, 1999, (3) M-Track
Enterprises, Inc. from January 1, 1999 through April 30, 1999, (4) PNR
Contractors, Inc. from January 1, 1999 through May 18, 1999, (5) Neosho
Incorporated and affiliates from January 1, 1999 through May 31, 1999, (6) Earl
Campbell Construction Company, Inc. and Wood Waste Energy, Inc. from January 1,
1999 through June 30, 1999 and (7) W. T. Byler Co., Inc. from January 1, 1999
through September 30, 1999 and give effect to the pro forma adjustments related
to these transactions all as if each had occurred on January 1, 1999.
RailWorks has analyzed the savings that it expects to realize from
reductions in salaries, bonuses and certain benefits to the owners of the
Founding Companies and the Acquired Companies. To the extent the owners of the
Founding Companies and the Acquired Companies have contractually agreed to
changes in salaries, bonuses, benefits and lease payments, these changes have
been reflected in the unaudited pro forma statement of operations.
Certain pro forma adjustments are based on preliminary estimates, available
information and certain assumptions that management deems appropriate and may be
revised as additional information becomes available. The pro forma financial
data do not purport to represent what RailWorks combined financial position or
results of operations would actually have been if such transactions had in fact
occurred on those dates and are not necessarily representative of RailWorks'
combined financial position or results of operations for any future period.
Because the acquired entities were not under common control or management prior
to their acquisition by RailWorks, historical combined results may not be
comparable to, or indicative of, future performance.
17
<PAGE> 2
RAILWORKS CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACQUISITION
RAILWORKS OF
CORPORATION W.T. BYLER PRO FORMA
HISTORICAL CO., INC. ADJUSTMENTS PRO FORMA
----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................. $ 5,318 $ 63 $ -- $ 5,381
Accounts receivables............................. 134,359 14,803 -- 149,162
Costs and estimated earnings in excess of
billings on uncompleted contracts.............. 52,662 895 -- 53,557
Inventories...................................... 17,846 253 -- 18,099
Prepaid expenses and other current assets........ 6,708 227 -- 6,935
-------- ------- ------- --------
Total current assets................... 216,893 16,241 -- 233,134
-------- ------- ------- --------
Property, plant and equipment, net............... 66,009 11,294 -- 77,303
-------- ------- ------- --------
OTHER ASSETS:
Excess of cost over acquired net assets, net of
amortization................................... 183,337 -- 16,525(a) 199,862
Other............................................ 15,170 -- -- 15,170
-------- ------- ------- --------
$481,409 $27,535 $16,525 $525,469
======== ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt............. $ 11,784 $ 5,722 $ -- $ 17,506
Accounts payable and accrued liabilities......... 54,252 5,148 -- 59,400
Accrued interest payable......................... 9,707 -- -- 9,707
Accrued payroll and related withholdings......... 3,656 934 -- 4,590
Billings in excess of costs and estimated
earnings on uncompleted contracts.............. 13,434 2,906 -- 16,340
Other current liabilities........................ 14,296 1,079 -- 15,375
-------- ------- ------- --------
Total current liabilities.............. 107,129 15,789 -- 122,918
-------- ------- ------- --------
LONG-TERM LIABILITIES:
Other liabilities................................ 10,003 -- -- 10,003
Excess of acquired net assets over cost, net of
amortization................................... 8,491 -- -- 8,491
Senior subordinated notes........................ 173,938 -- -- 173,938
Long-term debt................................... 55,572 1,833 23,400(a) 80,805
-------- ------- ------- --------
Total long-term liabilities............ 248,004 1,833 23,400 273,237
-------- ------- ------- --------
Total liabilities...................... 355,133 17,622 23,400 396,155
-------- ------- ------- --------
STOCKHOLDERS' EQUITY:
Preferred stock.................................. 14 -- -- 14
Common stock..................................... 139 1 2(a) 142
Additional paid-in capital....................... 123,973 40 2,995(a) 127,008
Accumulated other comprehensive income........... 123 -- -- 123
Retained earnings (deficit)...................... 2,027 9,872 (9,872)(a) 2,027
-------- ------- ------- --------
Total stockholders' equity............. 126,276 9,913 (6,875) 129,314
-------- ------- ------- --------
$481,409 $27,535 $16,525 $525,469
======== ======= ======= ========
</TABLE>
See Notes to Unaudited Pro Forma Balance Sheet.
18
<PAGE> 3
RAILWORKS CORPORATION
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
a. To record goodwill and RailWorks's financing of the acquisition of W.T.
Byler Co., Inc.
The adjustments related to the acquisition of W.T. Byler Co., Inc. are
based on preliminary estimates of the allocation of the purchase price and are
subject to revision.
19
<PAGE> 4
RAILWORKS CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOUNDING PRO FORMA FOR
COMPANIES PRO FORMA FOUNDING
RAILWORKS (THROUGH FOR COMPANIES
CORPORATION JULY 31, PRO FORMA FOUNDING ACQUIRED PRO FORMA AND ACQUIRED
HISTORICAL 1998) ADJUSTMENTS COMPANIES COMPANIES(1) ADJUSTMENTS COMPANIES
----------- --------- ----------- --------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue.............. $212,533 $56,965 $ $269,498 $275,261 $ -- $544,759
Cost of revenue...... 182,817 45,892 (800)(2) 227,052 228,972(2) (4,910)(2) 451,114
(857)(3)
-------- ------- -------- -------- -------- -------- --------
Gross profit......... 29,716 11,073 1,657 42,446 46,289 4,910 93,645
Selling, general and
administrative
expenses........... 17,040 9,033 (2,379)(3) 19,317 30,027 (11,520)(3) 33,035
(785)(4) (603)(2)
(2,000)(2) (4,186)(5)
(1,592)(5)
Non-recurring
expenses........... 19,965 400 (14,470)(6) -- -- -- --
(803)(7)
(5,092)(8)
Transaction fees..... 1,281 -- (1,281)(9) -- -- -- --
Loss guarantee....... -- -- -- -- 1,491 (1,491)(10) --
Depreciation and
amortization....... 2,105 1,595 1,689(11) 5,389 11,731 2,407(11) 19,527
-------- ------- -------- -------- -------- -------- --------
Operating income
(loss)............. (10,675) 45 28,370 17,740 3,040 20,303 41,083
Other income
(expense):
Interest
income/other
expense.......... 1,634 108 -- 1,742 1,840 200(12) 3,782
Interest expense... (2,334) (378) 137(12) (2,575) (4,247) 179(12) (6,643)
-------- ------- -------- -------- -------- -------- --------
(Loss) income before
income taxes....... (11,375) (225) 28,507 16,907 633 20,682 38,222
Provision for income
taxes.............. 1,472 453 6,170(13) 8,095 (492) 7,887(13) 15,490
-------- ------- -------- -------- -------- -------- --------
Net (loss)
income......... $(12,847) $ (678) $ 22,337 $ 8,812 $ 1,125 $ 12,795 $ 22,732
======== ======= ======== ======== ======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations.
20
<PAGE> 5
RAILWORKS CORPORATION
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
1. Excludes results of operations of the two companies acquired by
RailWorks in 1998, which are referred to as the 1998 Acquired Companies, from
November 4, 1998 to December 31, 1998 because they are included in the
Consolidated Financial Statements of RailWorks for the year ended December 31,
1998.
2. To reflect the reduction of insurance and employee benefit costs
realized by RailWorks compared to the combined historical cost incurred by the
Founding Companies and the Acquired Companies.
3. To reduce compensation expense to the level the owners of the Founding
Companies and the Acquired Companies have contractually agreed to receive
subsequent to the acquisition of their companies. The employment agreements are
generally for three years. This amount is net of incremental corporate expenses
of $1.6 million.
4. To reflect the savings realized on a lease renewal by Comstock and a
reduction of compensation expense related to personnel of Comstock's former
parent.
5. To eliminate acquisition-related costs incurred by the Founding
Companies and certain professional and other costs incurred by the Acquired
Companies in anticipation of their acquisition by RailWorks.
6. To record the issuance of 1,205,872 shares of restricted common stock
(with no cash impact to RailWorks) to management, based on the IPO price of
$12.00 per share.
7. To eliminate non-cash compensation expense recorded as a result of the
transfer of common stock from certain operating company managers to other
employees of such operating companies at the price per share in effect on the
date of transfer.
8. To eliminate non-recurring expenses of RailWorks consisting of $2.9
million related to settlement of employee benefit obligations of one of the
operating companies and corporate relocation costs and $2.2 million in estimated
legal and settlement costs in connection with former operations of one of the
operating companies.
9. To eliminate offering expenses incurred in connection with the IPO.
10. To eliminate the loss related to the specific contract performance of
an unrelated venture which was guaranteed by one of the acquired companies.
11. To record goodwill amortization expense using a 40-year estimated life,
other intangible assets amortization using a 10-year estimated life and loan
origination costs amortization using a 3-year estimated life.
12. To adjust interest expense and interest income to reflect debt at the
rates that would have been in effect for RailWorks in 1998.
13. To record the incremental provision for federal and state income taxes
at an assumed 39.0% effective tax rate increased by the effect of goodwill
amortization which is not deductible for income tax purposes.
The adjustments related to the 1999 Acquired Companies are based on
preliminary estimates of the allocation of the purchase price and are subject to
revision.
21
<PAGE> 6
RAILWORKS CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
RAILWORKS 1999 PRO FORMA
CORPORATION ACQUIRED PRO FORMA FOR ACQUIRED
HISTORICAL COMPANIES(1) ADJUSTMENTS COMPANIES
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenue..................................... $325,908 $94,613 $ -- $420,521
Cost of revenue............................. 253,174(2) 83,146 (2,922)(3) 333,398
-------- ------- ------- --------
Gross profit................................ 72,734 11,467 2,922 87,123
Selling, general and administrative
expenses.................................. 31,290 7,141 (2,758)(4) 34,219
(138)(3)
(1,316)(5)
Depreciation and amortization............... 9,241(2) 5,460 895(6) 15,596
-------- ------- ------- --------
Operating (loss) income..................... 32,203 (1,134) 6,239 37,308
Other income (expense):
Interest income/other expense............. 1,713 696 -- 2,409
Interest expense.......................... (12,370) (1,554) -- (13,924)
-------- ------- ------- --------
Income (loss) before income taxes........... 21,546 (1,992) 6,239 25,793
Provision for income taxes.................. 8,080 178 2,371(7) 10,629
-------- ------- ------- --------
Net income (loss)................. $ 13,466 $(2,170) $ 3,868 $ 15,164
======== ======= ======= ========
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations.
22
<PAGE> 7
RAILWORKS CORPORATION
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
1. Excludes results of operations of the 1999 Acquired Companies from their
respective acquisition dates through September 30, 1999 because they are
included in the Consolidated Financial Statements of RailWorks for the nine
months ended September 30, 1999.
2. Depreciation and amortization expense includes $4.9 million of
depreciation and amortization expense included in the cost of revenue.
3. To reflect the reduction of insurance and employee benefit costs
realized by RailWorks compared to the combined historical cost incurred by the
Founding Companies and the Acquired Companies.
4. To reduce compensation expense to the level the owners of the Founding
Companies and the Acquired Companies have contractually agreed to receive
subsequent to the acquisition of their companies. The employment agreements are
generally for three years. This amount is net of incremental corporate expenses
of $100,000.
5. To eliminate acquisition-related costs and certain professional and
other costs incurred by the 1999 Acquired Companies in anticipation of their
acquisition by RailWorks.
6. To record goodwill amortization expense using a 40-year estimated life.
7. To record the incremental provision for federal and state income taxes
at an assumed 39.0% effective tax rate increased by the effect of goodwill
amortization which is not deductible for income tax purposes.
The adjustments related to the 1999 Acquired Companies are based on
preliminary estimates of the allocation of the purchase price and are subject to
revision.
23
