FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549



            [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934

              For the quarterly period ended September 30, 2000

                                       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 1-4717


                    KANSAS CITY SOUTHERN INDUSTRIES, INC.
             (Exact name of Company as specified in its charter)


                    Delaware                             44-0663509
         (State or other jurisdiction of              (I.R.S. Employer
         incorporation or organization)              Identification No.)


     114 West 11th Street, Kansas City, Missouri                   64105
      (Address of principal executive offices)                  (Zip Code)


                               (816) 983-1303
              (Company's telephone number, including area code)


                                   No Changes
         (Former name, former address and former fiscal year,if changed
                               since last report.)

Indicate by check mark whether the Company (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  Company  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                          Yes [X]              No [ ]

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

          Class                                Outstanding at November 10, 2000
- -------------------------------------------------------------------------------

Common Stock, $.01 per share par value                        58,139,002 Shares
- -------------------------------------------------------------------------------





                    KANSAS CITY SOUTHERN INDUSTRIES, INC.

                                    FORM 10-Q

                               SEPTEMBER 30, 2000

                                      INDEX

                                                                         Page
                                                                         ----
PART I - FINANCIAL INFORMATION


Item 1.     Financial Statements

Introductory Comments                                                       2


Consolidated Condensed Balance Sheets -
   September 30, 2000 and December 31, 1999                                 3


Consolidated Condensed Statements of Income -
   Three and Nine Months Ended September 30, 2000 and 1999                  4


Computation of Basic and Diluted Earnings per Common Share                  4


Consolidated Condensed Statements of Cash Flows -
   Nine Months Ended September 30, 2000 and 1999                            5


Consolidated Condensed Statements of Changes in Stockholders' Equity -
   Year Ended December 31, 1999 and Nine Months Ended September 30, 2000    6


Notes to Consolidated Condensed Financial Statements                        7



Item 2.     Management's Discussion and Analysis of Financial
            Condition and Results of Operations                            19


Item 3.     Qualitative and Quantitative Disclosures About Market Risk     37


PART II - OTHER INFORMATION


Item 1.     Legal Proceedings                                              38



Item 6.     Exhibits and Reports on Form 8-K                               38


SIGNATURES                                                                 39
- ----------






                    KANSAS CITY SOUTHERN INDUSTRIES, INC.

                                    FORM 10-Q

                               SEPTEMBER 30, 2000


PART I - FINANCIAL INFORMATION


Item 1.  Financial Statements


INTRODUCTORY COMMENTS

The  Consolidated  Condensed  Financial  Statements  included  herein  have been
prepared by Kansas City Southern Industries, Inc. ("Company" or "KCSI"), without
audit,  pursuant to the rules and  regulations  of the  Securities  and Exchange
Commission.  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,  although the Company believes that the disclosures are adequate to
enable  a  reasonable   understanding  of  the  information   presented.   These
Consolidated  Condensed Financial  Statements should be read in conjunction with
the  financial  statements  and the  notes  thereto,  as  well  as  Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations,
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1999, and  Management's  Discussion and Analysis of Financial  Condition and
Results of Operations included in this Form 10-Q. Results for the three and nine
months ended  September 30, 2000 are not  necessarily  indicative of the results
expected for the full year 2000.

On June 14, 2000 KCSI's  Board of  Directors  approved  the spin-off of Stilwell
Financial  Inc.  ("Stilwell"),  the Company's  wholly-owned  financial  services
subsidiary.  Stilwell is comprised of Janus Capital Corporation,  an approximate
82.3% owned subsidiary;  Berger LLC, an approximate 88% owned subsidiary; Nelson
Money  Managers  Plc, an 80% owned  subsidiary;  DST  Systems,  Inc.,  an equity
investment  in  which   Stilwell  holds  an   approximate   32%  interest;   and
miscellaneous other financial services subsidiaries and equity investments.

On July 12, 2000,  KCSI  completed  its  spin-off of Stilwell  through a special
dividend of Stilwell  common stock  distributed to KCSI common  stockholders  of
record on June 28, 2000  ("Spin-off").  The Spin-off occurred after the close of
business  of the New York  Stock  Exchange  on July  12,  2000,  and  each  KCSI
stockholder  received  two shares of the common  stock of Stilwell for every one
share of KCSI  common  stock  owned on the  record  date.  The  total  number of
Stilwell shares distributed was 222,999,786.

Also on July 12, 2000,  KCSI  completed a reverse  stock split whereby every two
shares of KCSI common stock was  converted  into one share of KCSI common stock.
All periods  presented  in the  accompanying  consolidated  condensed  financial
statements  reflect this one-for-two  reverse stock split,  which had previously
been approved by KCSI common stockholders.

As a result of the Spin-off,  the accompanying  Consolidated Condensed Financial
Statements  for the three and nine months ended  September  30, 2000 reflect the
results of  operations  and cash flows of  Stilwell as  discontinued  operations
through the date of the Spin-off  (July 12, 2000).  Effective with the Spin-off,
the net assets of  Stilwell  have been  removed  from the  consolidated  balance
sheets for periods  subsequent to July 12, 2000. The  accompanying  Consolidated
Condensed  Financial  Statements  for each of the prior year  periods  presented
reflect the financial position, results of operations and cash flows of Stilwell
as discontinued operations.



                                     Page 2







                    KANSAS CITY SOUTHERN INDUSTRIES, INC.
                    CONSOLIDATED CONDENSED BALANCE SHEETS
                              (Dollars in Millions)
                                   (Unaudited)

                                                              


                                                 September 30, December 31,
                                                     2000          1999
                                                 ------------  ------------
ASSETS

Current Assets:
   Cash and equivalents                            $   30.2      $    11.9
   Accounts receivable, net                           119.8          132.2
   Inventories                                         34.2           40.6
   Other current assets                                20.8           23.8
                                                   --------      ---------
      Total current assets                            205.0          208.5

Investments held for operating purposes               361.1          337.1

Properties (net of $614.0 and $578.0 accumulated
   depreciation and amortization, respectively)     1,311.3        1,277.4

Other Assets                                           49.6           34.4

Net Assets of Discontinued Operations
(Stilwell Financial Inc.)                               -            814.6
                                                    -------         ------

   Total assets                                    $1,927.0      $ 2,672.0
                                                   ========      =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Debt due within one year                        $   13.7      $    10.9
   Accounts and wages payable                          36.3           74.8
   Accrued liabilities                                151.1          168.5
                                                   --------      ---------
      Total current liabilities                       201.1          254.2
                                                   --------      ---------

Other Liabilities:
   Long-term debt                                     671.7          750.0
   Deferred income taxes                              320.2          297.4
   Other deferred credits                              94.5           87.3
                                                   --------      ---------
      Total other liabilities                       1,086.4        1,134.7
                                                   --------      ---------

Stockholders' Equity:
   Preferred stock                                      6.1            6.1
   Common stock                                         0.6            1.1
   Retained earnings                                  632.8        1,167.0
   Accumulated other comprehensive income               -            108.9
                                                   --------      ---------
      Total stockholders' equity                      639.5        1,283.1
                                                   --------      ---------

   Total liabilities and stockholders' equity      $1,927.0      $ 2,672.0
                                                   ========      =========









   See accompanying notes to consolidated condensed financial statements.

                                     Page 3

                    KANSAS CITY SOUTHERN INDUSTRIES, INC.
                    -------------------------------------
                CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                (Dollars in Millions, Except per Share Data)
                                   (Unaudited)

                                                            
                                         Three Months         Nine Months
                                      Ended September 30, Ended September 30,
                                      ------------------  -------------------
                                        2000      1999       2000      1999
                                      -------   --------  ---------  --------
Revenues                              $ 144.1   $  149.1    $ 437.4  $  449.7

Costs and expenses                      111.6      120.2      339.9     348.0
Depreciation and amortization            13.8       14.3       42.4      43.0
                                      -------   --------    -------  --------
   Operating Income                      18.7       14.6       55.1      58.7
Equity in net earnings of unconsolidated affiliates:
   Grupo Transportacion Ferroviaria
     Mexicana, S.A. de C.V. ("Grupo TFM") 2.6        3.8       18.8       4.8
   Other                                  1.5        1.3        3.3       3.5
Interest expense                        (22.5)     (14.7)     (58.4)    (43.3)
Other, net                                1.2        1.3        4.8       3.2
                                      -------   --------    -------  --------
   Income from continuing operations
     before income taxes                  1.5        6.3       23.6      26.9
Income tax provision (benefit)           (1.1)       1.7        1.8       9.5
                                      --------  --------    -------  --------
Income from continuing operations         2.6        4.6       21.8      17.4
Income from discontinued operations
   (Note 3)                              23.4       82.7      363.8     214.6
                                      -------    -------     ------    -------
Income before extraordinary item         26.0       87.3      385.6     232.0
Extraordinary items, net of income taxes
   Debt retirement costs - KCSI          (1.1)       -         (7.0)      -
   Debt retirement costs - Grupo TFM     (1.7)       -         (1.7)      -
                                      -------   --------    -------   -------
Net income                               23.2       87.3      376.9     232.0
Other comprehensive income (loss),
   net of tax:                            -        (15.6)       2.2       0.3
                                      -------   --------    -------   -------
Comprehensive income                  $  23.2   $   71.7    $ 379.1  $  232.3
                                      =======   ========    =======  ========
Per Share Data (i)
Basic Earnings per Common share
  Continuing operations               $  0.05   $   0.08    $  0.38   $  0.31
  Discontinued operations                0.40       1.50       6.46      3.90
                                      -------   --------    -------   -------
   Basic Earnings per Common share
     before extraordinary item           0.45       1.58       6.84      4.21
  Extraordinary item, net of income
      taxes                             (0.05)      -         (0.15)      -
                                      -------    -------    -------   -------
   Total Basic Earnings per
     Common share                     $  0.40   $   1.58    $  6.69   $  4.21
                                      =======   ========    =======   =======
Diluted Earnings per Common share
  Continuing operations               $  0.05   $   0.08    $  0.37   $  0.30
  Discontinued operations                0.39       1.43       6.17      3.71
                                      -------   --------    -------   -------
   Diluted Earnings per Common share
     before extraordinary item           0.44       1.51       6.54      4.01
  Extraordinary item, net of income
     taxes                              (0.05)       -        (0.15)      -
                                      -------    -------    -------    ------
    Total Diluted Earnings per
     Common share                     $  0.39   $   1.51    $  6.39   $  4.01
                                     ========   ========    =======   =======
Weighted Average Common Shares Outstanding (in thousands)
   Basic                               57,478     55,242     56,353    55,102
   Potential dilutive common shares     1,380      1,805      1,751     1,887
                                      -------    -------     ------   -------
     Diluted                           58,858     57,047     58,104    56,989
                                      =======    =======     ======   =======
Dividends Per Share:
   Per Preferred share                $   .25   $    .25     $  .75   $   .75
   Per Common share                         -        .08          -       .24

(i)On July 12, 2000,  KCSI  completed a reverse stock split of its common shares
   whereby every two shares of KCSI common stock was converted into one share of
   KCSI common  stock.  The Per Share Data herein  reflects  this reverse  stock
   split for all periods presented.

   See accompanying notes to consolidated condensed financial statements.

                                     Page 4



                    KANSAS CITY SOUTHERN INDUSTRIES, INC.
               CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                              (Dollars in Millions)
                                   (Unaudited)

                                                       

                                                    Nine Months
                                                Ended September 30,
                                                -------------------
                                                  2000       1999
                                                --------   --------
CASH FLOWS PROVIDED BY (USED FOR):

OPERATING ACTIVITIES:
  Net income                                    $  376.9    $ 232.0
  Adjustments to reconcile net income to net
   cash from continuing operations
   Income from discontinued operations            (363.8)    (214.6)
   Depreciation and amortization                    42.4       43.0
   Deferred income taxes                            23.4       19.7
   Equity in undistributed earnings of
      unconsolidated affiliates                    (22.1)      (8.3)
   Transfer from Stilwell                            -         56.6
   Gain on sale of assets                           (3.4)      (0.4)
   Extraordinary items, net of tax                   7.5
   Tax benefit realized upon exercise of stock
      options                                        9.0       12.1
  Changes in working capital items:
   Accounts receivable                              12.4        3.4
   Inventories                                       6.3        2.4
   Other current assets                              2.3        5.3
   Accounts and wages payable                      (32.9)      (7.9)
   Accrued liabilities                             (12.7)      30.9
  Other, net                                         7.0       (3.0)
                                                --------    -------
   Net cash provided by operating activities
      of continuing operations                      52.3      171.2
                                                --------    -------


INVESTING ACTIVITIES:
  Property acquisitions                            (79.0)     (65.6)
  Proceeds from disposal of property                 6.6        0.9
  Investment in and loans with affiliates           (3.8)      15.3
  Other, net                                         1.7       (4.7)
                                                --------    --------
   Net cash used for investing activities of
      continuing operations                        (74.5)     (54.1)
                                                --------    -------


FINANCING ACTIVITIES:
  Proceeds from issuance of long-term debt       1,017.0       31.8
  Repayment of long-term debt                     (969.6)     (76.7)
  Proceeds from stock plans                         17.8       26.4
  Stock repurchased                                  -        (24.6)
  Debt issuance costs                              (16.9)       -
  Cash dividends paid                               (4.8)     (17.8)
  Other, net                                        (3.0)        6.6
                                                --------    -------
   Net cash provided by (used for) financing
      activities of continuing operations           40.5      (54.3)
                                                --------    --------


CASH AND EQUIVALENTS:
  Net increase in cash provided by
     continuing operations                          18.3       62.8
  At beginning of year                              11.9        5.6
                                                --------    -------
  At end of period                              $   30.2    $  68.4
                                                ========    =======





   See accompanying notes to consolidated condensed financial statements.

                                     Page 5



                    KANSAS CITY SOUTHERN INDUSTRIES, INC.
    CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                 (Dollars in millions, except share amounts)
                                   (Unaudited)

                                                                

                                       $1 Par                        Accumulated
                              $25 Par  Series B  $.01 Par             other
                             Preferred Preferred  Common Retained   comprehensive
                               stock     stock     stock Earnings     income       Total
                               -----     -----     ----- --------    -------      ------
Balance at December 31, 1998  $  6.1        --    $  1.1  $ 849.1     $  74.9    $ 931.2

Comprehensive income:
   Net income.......                                        323.3
   Net unrealized gain on                                                39.3
     investments........
    Less: Reclassification
     adjustment for gains
     included in net                                                     (4.4)
     income...............
   Foreign currency
     translation adjustment                                              (0.9)
Comprehensive income....                                                           357.3
Dividends...............                                    (17.9)                 (17.9)
Stock repurchased.......                                    (24.6)                 (24.6)
Options exercised and
stock subscribed........           -          -        -     37.1           -       37.1
                              ------     ------    -----  -------      ------    -------
Balance at December 31, 1999     6.1         --      1.1  1,167.0       108.9    1,283.1
Comprehensive income:
   Net income ..........                                    376.9
   Net unrealized gain on
     investments .........                                                5.9
    Less: Reclassification
     adjustment for gains
     included in net income                                              (1.1)
  Foreign currency
     translation adjustment                                              (2.6)
Comprehensive income........                                                       379.1
Spin-off of Stilwell
   Financial  Inc.                                         (954.1)     (111.1)  (1,065.2)
1-for-2 reverse stock split                        (0.5)      0.5
Dividends ..............                                     (0.2)                  (0.2)
Stock plan shares issued
   from  treasury ........                                    6.3                    6.3
Options exercised and stock
   subscribed .............
                                   -          -       -      36.4           -       36.4
                              ------      -----   -----   -------       -----    -------
Balance at September 30,2000   $ 6.1      $  --  $  0.6   $ 632.8       $  --    $ 639.5
                              ======      =====  ======   =======       =====    =======











   See accompanying notes to consolidated condensed financial statements.








                                     Page 6



                    KANSAS CITY SOUTHERN INDUSTRIES, INC.
                    -------------------------------------

            NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


1. In the opinion of the  management  of Kansas City Southern  Industries,  Inc.
("Company"  or  "KCSI"),  the  accompanying   unaudited  consolidated  condensed
financial  statements  contain all  adjustments  (consisting  of normal  closing
procedures)  necessary to present  fairly the financial  position of the Company
and its subsidiary companies as of September 30, 2000 and December 31, 1999, the
results of operations for the three and nine months ended September 30, 2000 and
1999, and cash flows for the nine months ended September 30, 2000 and 1999.


2. The  accompanying  consolidated  condensed  financial  statements  have  been
prepared  consistently  with  accounting  policies  described  in  Note 2 to the
consolidated  financial  statements  included in the Company's  Annual Report on
Form 10-K for the year ended  December 31, 1999.  The results of operations  for
the  three  and  nine  months  ended  September  30,  2000  are not  necessarily
indicative  of the results to be expected  for the full year 2000.  Certain 1999
information has been reclassified to conform to the current period presentation.


3. On June 14, 2000 KCSI's Board of Directors  approved the spin-off of Stilwell
Financial  Inc.  ("Stilwell"),  the Company's  wholly-owned  financial  services
subsidiary.  Stilwell is comprised of Janus Capital Corporation,  an approximate
82.3% owned subsidiary;  Berger LLC, an approximate 88% owned subsidiary; Nelson
Money  Managers  Plc, an 80% owned  subsidiary;  DST  Systems,  Inc.,  an equity
investment  in  which   Stilwell  holds  an   approximate   32%  interest;   and
miscellaneous other financial services subsidiaries and equity investments.

On July 12, 2000,  KCSI  completed  its  spin-off of Stilwell  through a special
dividend of Stilwell  common stock  distributed to KCSI common  stockholders  of
record on June 28, 2000  ("Spin-off").  The Spin-off occurred after the close of
business  of the New York  Stock  Exchange  on July  12,  2000,  and  each  KCSI
stockholder  received  two shares of the common  stock of Stilwell for every one
share of KCSI  common  stock  owned on the  record  date.  The  total  number of
Stilwell shares distributed was 222,999,786.

As previously  disclosed,  on July 9, 1999,  KCSI received a tax ruling from the
Internal  Revenue  Service  ("IRS") which states that for United States  federal
income tax  purposes the Spin-off  qualifies  as a tax-free  distribution  under
Section 355 of the Internal Revenue Code of 1986, as amended.  Additionally,  in
February 2000, the Company  received a favorable  supplementary  tax ruling from
the IRS to the effect that the  assumption of $125 million of KCSI  indebtedness
by Stilwell would have no effect on the previously issued tax ruling.

Also on July 12, 2000,  KCSI  completed a reverse  stock split whereby every two
shares of KCSI common stock was  converted  into one share of KCSI common stock.
All periods  presented  in the  accompanying  consolidated  condensed  financial
statements  reflect this one-for-two  reverse stock split,  which had previously
been  approved  by KCSI  common  stockholders.  The total  number of KSCI shares
immediately following this reverse split was 55,749,947

As a result of the Spin-off,  the accompanying  consolidated condensed financial
statements for the three and nine-month periods ended September 30, 2000 reflect
the results of operations and cash flows of Stilwell as discontinued  operations
through the date of the Spin-off (July 12, 2000).  Additionally,  effective with
the Spin-off, the net assets of Stilwell have been removed from the consolidated
balance  sheets  for  periods  subsequent  to July 12,  2000.  The  accompanying
consolidated  condensed financial  statements for each of the prior year periods
presented reflect the financial  position,  results of operations and cash flows
of Stilwell as discontinued operations.

                                     Page 7


The following  provides a summary of the financial  information  of Stilwell for
the periods  indicated.  As indicated  above,  the information for the three and
nine month periods ended  September 30, 2000 reflect only the operating  results
of Stilwell through July 12, 2000 - the date of the Spin-off. These amounts were
determined  based  on a  pro-rata  allocation  of each of the  income  statement
components  for the month of July based on the  percentage  obtained by dividing
the  number of days in July (31) by the  number  of days  prior to the  Spin-off
(12).  Additionally,  because the net assets of Stilwell  were  removed from the
consolidated  balance  sheets for  periods  subsequent  to July 12,  2000,  only
balance sheet information for December 31, 1999 is presented.


                                                             

                               7/1/00-      7/1/99-       1/1/00-      1/1/99-
                               7/12/00      9/30/99       7/12/00      9/30/99
                               -------      -------       -------      -------

Revenues                      $   79.8    $  311.2      $ 1,187.9     $  826.7
Operating expenses                38.8       178.4          646.2        481.2
                              --------       -----       --------        -----

Operating income                  41.0       132.8          541.7        345.5
Equity in earnings of
   unconsolidated affiliates       2.4        11.6           37.0         34.1
Gain on litigation settlement      -           -             44.2          -
Gain on sale of Janus common
   stock                           -           -             15.1          -
Interest expense and other, net    1.0         8.6           18.6         16.1
                                   ---         ---           ----         ----
Pretax income                     44.4       153.0          656.6        395.7
Income tax provision              16.6        55.6          233.3        142.5
Minority interest in consolidated
   earnings                        4.4        14.7           59.5         38.6
                                  ----        ----           ----         ----
Income from discontinued
   operations, net of income
   taxes                       $  23.4     $  82.7        $ 363.8      $ 214.6
                               -------     -------        -------      -------



                                              

                                          December 31, 1999
                                          -----------------
Current assets                                      $525.0
Total assets                                       1,231.5
Current liabilities                                  162.5
Total liabilities                                    359.6
Minority interest                                     57.3
Net assets of discontinued operations               $814.6



The  following  discusses  certain  agreements  between  KCSI and certain  Janus
stockholders.   Subsequent  to  the  Spin-off,   these  agreements  and  related
provisions  apply to Stilwell  through  assignment  or through the  agreement of
Stilwell to meet KCSI's obligations under the agreements.

A stock purchase  agreement with Thomas H. Bailey,  the Chairman,  President and
Chief  Executive  Officer of Janus Capital  Corporation  ("Janus"),  and another
Janus stockholder (the "Janus Stock Purchase Agreement") and certain restriction
agreements  with  other  Janus  minority  stockholders   contain,   among  other
provisions,  mandatory put rights whereby under certain circumstances,  Stilwell
would be required to purchase  the  minority  interests  of such Janus  minority
stockholders  at a fair market value  purchase  price equal to fifteen times the
net  after-tax  earnings  of Janus over the  period  indicated  in the  relevant
agreement or in some  circumstances  as determined by an independent  appraisal.
Under the Janus Stock Purchase Agreement, termination of Mr. Bailey's employment
could  require a purchase  and sale of the Janus  common  stock held by him.  If
other minority holders terminated their employment,  some or all of their shares
also could be subject to mandatory  purchase and sale provisions.  Certain other
minority  holders who continue  their  employment  also could exercise puts. The
Janus Stock  Purchase  Agreement,  and certain  stock


                                     Page 8


purchase agreements and restriction  agreements with other minority stockholders
that have not been assigned to Stilwell,  also contain  provisions  whereby upon
the occurrence of a Change in Ownership (as defined in such  agreements) of KCSI
(or Stilwell with respect to the Janus Stock  Purchase  Agreement),  KCSI may be
required to purchase such holders' Janus stock.  The fair market value price for
such  purchase  would be equal to fifteen  times the net  after-tax  earnings of
Janus  over  the  period  indicated  in  the  relevant   agreement  or  in  some
circumstances as determined by Janus' Stock Option Committee or as determined by
an independent appraisal.

The Janus Stock  Purchase  Agreement  has been assigned to Stilwell and Stilwell
has assumed and agreed to discharge  KCSI's  obligations  under that  agreement.
However,  KCSI is obligated as a guarantor of Stilwell's  obligations under that
agreement.  With  respect  to  other  restriction  agreements  not  assigned  to
Stilwell,  Stilwell has agreed to perform all of KCSI's  obligations under these
agreements  and KCSI has agreed to transfer all of its benefits and assets under
these agreements to Stilwell. In addition, Stilwell has agreed to indemnify KCSI
for any and all  losses  incurred  with  respect  to the  Janus  Stock  Purchase
Agreement  and all other Janus  minority  stockholder  agreements.  However,  if
Stilwell were unable to meet its obligations  with respect to these  agreements,
KCSI would be obligated to make the payments under these agreements.

If all of the mandatory  purchase and sale provisions and all the puts under all
Janus minority  stockholder  agreements had been  implemented as of December 31,
1999,  and Stilwell had been  obligated to purchase such shares,  Stilwell would
have been  required to pay  approximately  $789 million as of December 31, 1999,
and  approximately  $821 million  (unaudited) as of September 30, 2000 (of which
KCSI could have been  ultimately  responsible  for  approximately  $640  million
(unaudited)  at September 30, 2000, in the event Stilwell was unable to meet its
obligations).  In the future these  amounts may be higher or lower  depending on
Janus' earnings,  fair market value and the timing of the exercise.  Payment for
the purchase of the respective  minority interests is to be made under the Janus
Stock  Purchase  Agreement  within  120 days  after  receiving  notification  of
exercise of the put rights. Under the restriction  agreements with certain other
Janus minority stockholders, payment for the purchase of the respective minority
interests  is to be made 30 days  after  the  later to  occur  of (i)  receiving
notification of exercise of the put rights or (ii) determination of the purchase
price through the independent appraisal process.

If Stilwell had been required to purchase the holders'  Janus common stock after
a Change in  Ownership  as of December  31, 1999 and  September  30,  2000,  the
purchase  price would have been  approximately  $899 million and $1,512  million
(unaudited)  respectively (of which KCSI could have been ultimately  responsible
for approximately $1,230 million (unaudited) at September 30, 2000, in the event
Stilwell was unable to meet its obligations).


4.    Debt Refinancing

o  During the third  quarter  of 2000,  the  Company  completed  a $200  million
   private offering of debt securities through its wholly owned subsidiary,  The
   Kansas City  Southern  Railway  Company  ("KCSR").  The  offering,  completed
   pursuant to Rule 144A under the  Securities  Act of 1933 in the United States
   and  Regulation  S outside  the United  States,  consisted  of 8-year  Senior
   Unsecured  Notes. The Notes bear a fixed annual interest rate of 9.5% and are
   due on October 1, 2008. These Notes contain certain covenants typical of this
   type of debt  instrument.  Net proceeds  from the offering of $196.5  million
   were used to refinance existing bank term debt, which was scheduled to mature
   on January 11, 2001 (see below). Costs related to the issuance of these notes
   of approximately  $4.1 million were deferred and are being amortized over the
   eight-year term of the Notes.

   In connection with this  refinancing,  the Company  reported an extraordinary
   loss on the  extinguishment  of the bank term debt due January 11, 2001.  The
   extraordinary loss was $1.1 million (net of income taxes of $0.7 million).


                                     Page 9


o    Also during the third quarter of 2000, Grupo TFM accomplished a
     refinancing of approximately $285 million of its Senior Secured Credit
     Facility through the issuance of a U.S. Commercial Paper ("USCP")
     program backed by a letter of credit.  The USCP is a 2-year program
     for up to a face value of $310 million.  The average discount rate for
     the first issuance was 6.54%.  This refinancing provides the ability
     for Grupo TFM to pay dividends to both the Company and Transportacion
     Maritima Mexicana, S.A. de C.V. ("TMM").

     As a result of this  refinancing,  Grupo TFM  recorded  approximately  $9.2
     million in pretax  extraordinary  debt retirement  costs.  During the third
     quarter of 2000,  KCSI  reported  $1.7 million (net of income taxes of $0.1
     million)  as its  proportionate  share of these  costs as an  extraordinary
     item.


o    In  preparation  for the  Spin-off,  the  Company  re-capitalized  its debt
     structure in January 2000 through a series of transactions as follows:

     Bond Tender and Other Debt  Repayment.  On December 6, 1999, KCSI commenced
     offers to purchase and consent solicitations with respect to any and all of
     the Company's  outstanding  7.875% Notes due July 1, 2002, 6.625% Notes due
     March 1, 2005,  8.8%  Debentures  due July 1, 2022,  and 7% Debentures  due
     December  15,  2025   (collectively   "Debt   Securities"   or  "notes  and
     debentures").

     Approximately   $398.4  million  of  the  $400  million   outstanding  Debt
     Securities  were  validly  tendered  and  accepted  by the  Company.  Total
     consideration  paid for the  repurchase  of  these  outstanding  notes  and
     debentures  was $401.2  million.  Funding for the  repurchase of these Debt
     Securities  and for the  repayment  of $264  million  of  borrowings  under
     then-existing  revolving credit facilities was obtained from two new credit
     facilities (the "KCS Credit Facility" and the "Stilwell  Credit  Facility",
     or collectively "New Credit Facilities"), each of which was entered into on
     January 11, 2000. These New Credit Facilities,  as described further below,
     provided for total commitments of $950 million.

     In the first quarter of 2000, the Company reported an extraordinary loss on
     the  extinguishment  of the Company's  notes and debentures of $5.9 million
     (net of income taxes of $3.2 million).

     KCS  Credit  Facility.  The  KCS  Credit  Facility  provides  for  a  total
     commitment of $750 million, comprised of three separate term loans totaling
     $600 million and a revolving  credit  facility  available until January 11,
     2006 ("KCS Revolver").  The term loans are comprised of the following: $200
     million,  which was due  January  11,  2001 prior to its  refinancing  (see
     discussion above),  $150 million due December 30, 2005 and $250 million due
     December 30, 2006. The availability  under the KCS Revolver is $150 million
     and will be reduced to $100  million on January 2, 2001.  Letters of credit
     are also  available  under the KCS  Revolver up to a limit of $90  million.
     Borrowings under the KCS Credit Facility are secured by  substantially  all
     of KCSI's remaining assets.

     On January 11, 2000,  KCSR  borrowed the full amount ($600  million) of the
     term loans and used the proceeds to repurchase the Debt Securities,  retire
     other debt  obligations  and pay related fees and  expenses.  No funds were
     initially  borrowed under the KCS Revolver.  Proceeds of future  borrowings
     under the KCS  Revolver  are to be used for  working  capital and for other
     general  corporate  purposes.  The letters of credit under the KCS Revolver
     may be used for general corporate purposes.

     Interest  on the  outstanding  loans  under the KCS Credit  Facility  shall
     accrue at a rate per  annum  based on the  London  interbank  offered  rate
     ("LIBOR")  or the  prime  rate,  as the


                                    Page 10

     Company  shall  select.  Following completion of the  refinancing  of the
     January 11, 2001 term loan  discussed above,  each  remaining   loan under
     the KCS Credit  Facility  shall  accrue interest at the selected rate plus
     an  applicable  margin.  The  applicable margin is determined by the type
     of loan and the Company's  leverage  ratio  (defined as the ratio of the
     Company's total debt to consolidated  earnings  before interest,  taxes,
     depreciation and amortization  excluding  the equity  earnings of
     unconsolidated affiliates ("Consolidated EBITDA") for the prior four fiscal
     quarters).  Based on the Company's current leverage ratio, the term loan
     maturing  in 2005 and all loans under the KCS  Revolver  have an applicable
     margin of 2.50% per annum for LIBOR  priced loans and 1.50% per annum  for
     prime rate priced loans. The term loan maturing in 2006 currently has an
     applicable  margin of 2.75% per  annum for LIBOR  priced  loans and 1.75%
     per annum for prime rate based loans.

     The KCS  Credit  Facility  also  requires  the  payment  to the  banks of a
     commitment  fee of 0.50% per annum on the average  daily,  unused amount of
     the KCS  Revolver.  Additionally  a fee equal to a per annum  rate equal to
     0.25% plus the applicable  margin for LIBOR priced  revolving loans will be
     paid on any letter of credit issued under the KCS Credit Facility.

     The KCS Credit  Facility  contains  certain  covenants,  among  others,  as
     follows: i) restricts the payment of cash dividends to common stockholders;
     ii) limits annual capital  expenditures;  iii) requires hedging instruments
     with  respect to at least 50% of the  outstanding  balances  of each of the
     term  loans  maturing  in 2005  and 2006 to  mitigate  interest  rate  risk
     associated with the new variable rate debt; and iv) provides leverage ratio
     and  interest  coverage  ratio  requirements  typical  of this type of debt
     instrument.  These covenants,  along with other provisions,  could restrict
     maximum  utilization  of the facility.  The Company was in compliance  with
     these  various  provisions,   including  the  financial  covenants,  as  of
     September 30, 2000.

     In  accordance  with the  provision  requiring  the  Company  to manage its
     interest  rate risk through  hedging  activity,  in first  quarter 2000 the
     Company  entered into five  separate  interest rate cap  agreements  for an
     aggregate  notional  amount of $200  million  expiring on various  dates in
     2002.  The  interest  rate caps are  linked to LIBOR.  $100  million of the
     aggregate  notional amount provides a cap on the Company's interest rate of
     7.25% plus the  applicable  spread,  while $100 million limits the interest
     rate to 7% plus the applicable spread.  Counterparties to the interest rate
     cap agreements are major financial institutions who also participate in the
     New  Credit  Facilities.   The  Company  believes  that  credit  loss  from
     counterparty non-performance is remote.

     Issue costs  relating to the KCS Credit  Facility  of  approximately  $17.6
     million were deferred and are being amortized on a straight-line basis (the
     difference  between  the  straight-line   method  and  interest  method  of
     amortization  is not material)  over the respective  term of the loans.  In
     conjunction  with the third  quarter 2000  refinancing  of the $200 million
     term loan  previously due January 11, 2001,  approximately  $1.8 million of
     these deferred costs were immediately  recognized.  After  consideration of
     normal amortization and this $1.8 million write-off,  the remaining balance
     of these  deferred costs was  approximately  $11.8 million at September 30,
     2000.

     Stilwell  Credit  Facility.  On January 11, 2000,  KCSI also arranged a new
     $200 million 364-day senior unsecured competitive  Advance/Revolving Credit
     Facility  ("Stilwell  Credit  Facility").  KCSI borrowed $125 million under
     this facility and used the proceeds to retire debt obligations as discussed
     above.  Stilwell assumed this credit  facility,  including the $125 million
     borrowed thereunder, and upon completion of the Spin-off, KCSI was released
     from all obligations thereunder.  Stilwell repaid the $125 million in March
     2000.
                                    Page 11


As a result of the debt refinancing transactions discussed above,  extraordinary
items for the three and nine months  ended  September  30, 2000 totaled $2.8 and
$8.7 million,  respectively (net of  income  taxes  of $0.8  and  $4.0  million,
respectively).


5. The  effect of stock  options  to  employees  represent  the only  difference
between  the  weighted  average  shares  used for the basic  earnings  per share
computation  compared to the diluted earnings per share  computation.  The total
incremental  shares from assumed  conversion  of stock  options  included in the
computation  of  diluted  earnings  per  share  were  1,380,139  and  1,750,801,
respectively, for the three and nine-month periods ended September 30, 2000, and
1,804,453 and  1,886,757,  respectively,  for the three and  nine-month  periods
ended  September 30, 1999. For the three and nine-month  periods ended September
30, 2000, the weighted  average of options to purchase  60,000 and 24,276 shares
of  KCSI  common  stock,   respectively,   were  excluded  from  the  respective
computation of diluted  earnings per share because the exercise  prices exceeded
the average market prices of the common  shares.  There were options to purchase
77,750  and  40,834  shares  excluded  from  the  diluted   earnings  per  share
calculations  for the three and  nine-month  periods  ended  September 30, 1999,
respectively,  because the exercise prices exceeded the average market prices of
the common shares.

The only  adjustments  that  currently  affect the  numerator  of the  Company's
diluted  earnings  per  share  computation   include  preferred   dividends  and
potentially  dilutive  securities at certain Stilwell  related  subsidiaries and
affiliates.  Because the Spin-off occurred on July 12, 2000 adjustments  related
to potentially dilutive securities for the three months ended September 30, 2000
were  determined  by  taking  a 12 day  pro  rata  percentage  of the  dilutable
securities for the month of July 2000. These adjustments  totaled  approximately
$0.3 million and $5.4 million for the three and nine months ended  September 30,
2000  and  approximately  $1.3  million  and  $3.1  million  for the  three  and
nine-month  periods ended September 30, 1999,  respectively.  These  adjustments
only  affect  the  diluted  earnings  per  share  from  discontinued  operations
computation  in  the  periods  presented.   Preferred  dividends  are  the  only
adjustments  that affect the  numerator  of the diluted  earnings per share from
continuing  operations  computation.  Adjustments related to preferred dividends
were not material for the periods presented.

Stock Compensation
In March 2000,  the FASB  issued FASB  Interpretation  No. 44,  "Accounting  for
Certain  Transactions  involving Stock  Compensation,  an  Interpretation of APB
Opinion No. 25" ("FIN 44"). FIN 44 was issued to clarify, among other issues: i)
the definition of employee for purposes of applying APB 25; ii) the criteria for
determining  whether  a plan  qualifies  as a  non-compensatory  plan;  iii) the
accounting  consequence  of various  modifications  to the terms of a previously
fixed  stock  option  grant;  and iv) the  accounting  for an  exchange of stock
compensation  awards  in a  business  combination.  FIN 44  also  addresses  the
treatment of stock options in the case of spin-off transactions and other equity
restructuring.  The adoption of FIN 44 during the third  quarter of 2000 did not
have a  material  impact  on the  Company's  results  of  operations,  financial
position  or cash  flows.  See  discussion  below  regarding  the  impact of the
Spin-off on the Company's accounting for stock transactions.

Effect of Spin-off on Existing Stock Options
As discussed  above, FIN 44 addresses the treatment of stock options in the case
of spin-off  transactions.  FIN 44 indicates  that changes to fixed stock option
grants made to restore the option  holder's  economic  position as a result of a
spin-off do not result in additional  compensation  expense if certain  criteria
are met: i) the aggregate  intrinsic value (difference  between the market value
per share and exercise price) of the options immediately after the change is not
greater than the aggregate intrinsic value of the options immediately before the
change;  ii) the ratio of the exercise  price per option to the market value per
share is not reduced;  and iii) the vesting  provisions and option period of the
original option grant remain the same.


                                    Page 12


As part of the Spin-off, generally holders of an option to purchase one share of
KCSI common stock  received  options to purchase  two shares of Stilwell  common
stock.  The option  exercise  price for the KCSI and Stilwell  stock options was
prorated  based on the market  value for KCSI and  Stilwell  common stock on the
date of the  Spin-off.  The changes  made to the  Company's  fixed stock  option
grants as a result of the Spin-off resulted in the option holder having the same
economic  position  both before and after the Spin-off.  In accordance  with the
provisions  of FIN  44,  the  Company,  therefore,  did  not  record  additional
compensation expense.

New Compensation Program
In connection with the Spin-off,  KCSI adopted a new  compensation  program (the
"Compensation Program") under which (1) certain senior management employees were
granted  performance  based KCSI stock options and (2) all management  employees
and  those  directors of  KCSI  who are not employees (the "Outside  Directors")
became  eligible to purchase a specified  number of KCSI  restricted  shares and
were granted a specified  number of KCSI stock options for each restricted share
purchased.  The  performance  stock options have an exercise  price of $5.75 per
share,  which was the mean  trading  price of KCSI Common  stock on the New York
Stock Exchange (the "NYSE") on July 13, 2000. These options expire at the end of
10 years,  subject to certain early termination events.  These options will vest
and become  exercisable  in equal  installments  as KCSI's stock price  achieves
certain  thresholds.  One third of these options become exercisable upon meeting
each threshold. Three years from the date of grant, options not then exercisable
become immediately  exercisable and expire thirty days thereafter.  Vesting will
accelerate  in the event of a KCSI  board-approved  change in  control  of KCSI,
death or disability.

The purchase price of the restricted shares, and the exercise price of the stock
options granted in connection with the purchase of restricted  shares,  is based
on the  mean  trading  price  of KCSI  Common  stock on the NYSE on the date the
employee or Outside Director purchased  restricted shares under the Compensation
Program. Each eligible employee and Outside Director was allowed to purchase the
restricted  shares offered under the  Compensation  Program on one date out of a
selection of dates offered. With respect to management employees,  the number of
shares  available  for purchase and the number of options  granted in connection
with shares  purchased  were based on the  compensation  level of the employees.
Each Outside  Director was granted the right to purchase up to 3,000  restricted
shares of KCSI,  with two KCSI stock  options  granted in  connection  with each
restricted  share  purchased.  Shares purchased are restricted from sale and the
options are not  exercisable  for a period of three years for senior  management
and the Outside  Directors and two years for other  management  employees.  KCSI
provided senior  management and the Outside Directors with the option of using a
sixty-day  interest-bearing  full  recourse  note to purchase  these  restricted
shares.  These  loans  accrued  interest  at 6.49%  per annum and were all fully
repaid by September 11, 2000.

Management employees purchased 475,597 shares of KCSI restricted stock under the
Compensation  Program and 910,697 stock options were granted in connection  with
the purchase of those restricted shares.  Outside Directors purchased a total of
9,000 shares of KCSI restricted stock under the Compensation  Program and 18,000
KCSI stock options were granted in connection with the purchase of those shares.


6.    The Company's inventories primarily consist of materials and supplies
related to rail transportation.


7.  Investments  in  unconsolidated  affiliates  and certain  other  investments
accounted  for under the equity method  generally  include all entities in which
the Company or its subsidiaries  have significant  influence,  but not more than
50% voting control.  Investments in  unconsolidated  affiliates at September 30,
2000 include, among others, equity interests in Grupo Transportacion


                                    Page 13

Ferroviaria Mexicana,  S.A. de C.V. ("Grupo TFM"), Southern Capital Corporation,
LLC ("Southern Capital"), Mexrail, Inc. ("Mexrail") and the Panama Canal Railway
Company.

The Company is party to certain  agreements  with TMM covering the Grupo TFM and
Mexrail   ventures.   TMM  (together  with  certain  of  its  affiliates)   owns
approximately  38.4% of Grupo TFM and 51% of Mexrail.  These agreements  contain
"change in control"  provisions,  provisions  intended to preserve the Company's
and TMM's proportionate ownership of the ventures, and super majority provisions
with respect to voting on certain significant transactions. Such agreements also
provide a right of first  refusal in the event that  either  party  initiates  a
divestiture  of its  equity  interest  in Grupo TFM or  Mexrail.  Under  certain
circumstances,  such agreements could affect the Company's ownership  percentage
and  rights in these  equity  affiliates.

Condensed financial  information of certain  unconsolidated  affiliates is shown
below.  Financial information of immaterial  unconsolidated  affiliates has been
omitted:



Financial Condition (dollars in millions):

                                                                 

                          September 30, 2000                 December 31, 1999
                   -----------------------------        ---------------------------
                                             Southern                             Southern
                     Mexrail    Grupo TFM (a)  Capital     Mexrail  Grupo TFM (a)  Capital

Current assets       $  27.5   $   187.8      $    0.2    $  23.9     $  134.4      $  0.1
Non-current assets      42.9     1,872.3         265.0       43.6      1,905.7       274.6
                     -------   ---------      --------    -------     --------     -------
     Assets          $  70.4   $ 2,060.1      $  265.2    $  67.5     $2,040.1      $274.7
                     =======   =========      ========    =======     ========      ======

Current liabilities  $  32.4   $   366.3      $    0.3    $  33.3     $  255.9      $  -
Non-current liabilities  7.0       522.1         206.4        5.7        672.9       218.5
Minority interest        -         356.2            -         -          343.9         -
Equity of stockholders
   and partners         31.0       815.5          58.5       28.5        767.4        56.2
                     -------    --------      ---------   -------     --------      ------
  Liabilities and
      equity            70.4     2,060.1         265.2    $  67.5     $2,040.1      $274.7
                     =======   =========      ========    =======     ========      ======

 KCSI's investment   $  14.7    $  303.3      $   29.2    $  13.7     $  286.5      $ 28.1
                     =======    ========      ========    =======     ========      ======





Operating Results (dollars in millions):

                                                           
                                  Three Months                Nine Months
                               Ended September 30,          Ended September 30,
                           --------------------------    ------------------------
                                 2000        1999           2000        1999
                               -------      ------        -------     -------
Revenues:
   Mexrail                    $   16.0     $  13.2       $   42.9     $  36.8
   Grupo TFM (a)                 165.2       132.2          475.2       383.9
   Southern Capital                7.6         6.5           23.1        20.9

  Operating costs and expenses:
   Mexrail                    $   13.7     $  12.5       $   39.8     $  35.2
   Grupo TFM (a)                 121.8       104.5          338.8       293.2
   Southern Capital                7.0         5.5           20.9        17.8

  Net income:
   Mexrail                    $    2.3     $   1.3       $    2.4     $   1.7
   Grupo TFM (a)                   0.3        19.2           39.4        21.8
   Southern Capital                0.7         1.1            2.3         5.9


(a)   Grupo TFM is presented on a U.S. GAAP basis.


                                    Page 14



8.    Noncash Investing and Financing Activities:

In January 2000,  KCSI borrowed $125 million under the Stilwell  Credit Facility
to retire debt  obligations as discussed in Note 4. Stilwell assumed this credit
facility and repaid the $125 million in March 2000. Upon such  assumption,  KCSI
was released from all obligations,  and Stilwell became the sole obligor,  under
the Stilwell Credit Facility.  The Company's  indebtedness decreased as a result
of the assumption of this indebtedness by Stilwell.

In first quarter 2000, the Company issued  approximately  183,117 shares of KCSI
common stock under the Eleventh  Offering of the Employee  Stock  Purchase  Plan
("ESPP"). These shares, totaling a purchase price of approximately $6.3 million,
were subscribed and paid for through employee payroll  deductions in 1999. There
were no shares of KCSI common  stock issued under an offering of the ESPP during
the nine months ended September 30, 1999.

The Company's Board of Directors  declared a quarterly  dividend of $4.6 million
in December 1999,  which was paid to common  stockholders  in January 2000. Upon
declaration,  the Company reduced retained earnings and recorded a liability for
the required  payment.  During the first quarter of 2000, the Company's Board of
Directors  announced that, based upon a review of the Company's dividend policy,
it decided to suspend  common stock  dividends  of KCSI under the  then-existing
structure of the Company.  This action  complies with the terms and covenants of
the KCS  Credit  Facility.  It is not  anticipated  that KCSI will make any cash
dividend payments to its common stockholders for the foreseeable future.


9. The following accounting  pronouncements are not yet effective,  but may have
an impact on the Company's  consolidated  condensed  financial  statements  upon
adoption.

Derivative  Instruments  and Hedging  Activities.  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  financial  instruments,  including  certain  derivative  instruments
embedded in other contracts, and for hedging activities. It requires recognition
of all  derivatives  as either  assets or  liabilities  measured  at fair value.
Initially, the effective date of SFAS 133 was for all fiscal quarters for fiscal
years  beginning  after June 15, 1999.  In June 1999,  however,  the FASB issued
Statement of Financial  Accounting  Standards No. 137 "Accounting for Derivative
Instruments  and Hedging  Activities  - Deferral of the  Effective  Date of FASB
Statement No. 133 - an amendment of FASB Statement No. 133",  which deferred the
effective  date of SFAS  133 for one year so that it will be  effective  for all
fiscal  quarters of all fiscal years  beginning after June 15, 2000. The Company
is reviewing  the  provisions  of SFAS 133 and expects  adoption by the required
date. The Company is also in the process of determining  the impact,  if any, of
SFAS 133 on the equity earnings  reported from  unconsolidated  affiliates.  The
adoption of SFAS 133 with respect to existing hedge transactions is not expected
to have a material  impact on the  Company's  results of  operations,  financial
position or cash flows.

The Company  currently has a program to hedge against  fluctuations in the price
of diesel  fuel,  and also enters into fuel  purchase  commitments  from time to
time.  During 2000 the Company  was party in two diesel fuel cap  transactions.
Each diesel fuel transaction hedged three million gallons of fuel at a cap price
of $0.60 per  gallon.  These  hedging  instruments  expired on June 30, 2000 and
March 31, 2000,  respectively.  The Company received  approximately $0.8 million
during 2000  related to these  diesel fuel cap  transactions  and  recorded  the
proceeds as a reduction of diesel fuel expense.

Additionally,  in  accordance  with the  provision  of the KCS  Credit  Facility
requiring the Company to manage its interest rate risk through hedging activity,
in first quarter 2000 the Company  entered into five separate  interest rate cap
agreements for an aggregate  notional amount of $200 million


                                    Page 15

expiring on various  dates in 2002.  The interest rate caps are linked to LIBOR.
$100 million of the aggregate  notional  amount  provides a cap on the Company's
interest rate of 7.25% plus the applicable spread, while $100 million limits the
interest rate to 7% plus the applicable  spread.  Counterparties to the interest
rate cap agreements are major financial institutions who also participate in the
New Credit  Facilities.  The Company believes that credit loss from counterparty
non-performance is remote.

Further,  the  Company  continues  to  evaluate  alternatives  with  respect  to
utilizing foreign currency  instruments to hedge its U.S. dollar  investments in
Grupo TFM as market  conditions  change or exchange rates fluctuate.  Currently,
the Company has no outstanding foreign currency derivatives.

Transfers and Servicing of Financial Assets and  Extinguishments of Liabilities.
In September 2000, the FASB issued Statement of Financial  Accounting  Standards
No. 140,  "Accounting  for  Transfers  and  Servicing  of  Financial  Assets and
Extinguishments of Liabilities"  ("SFAS 140"), which replaces FASB Statement No.
125,   "Accounting   for  Transfers  and  Servicing  of  Financial   Assets  and
Extinguishments of Liabilities" ("SFAS 125"). SFAS 140 revises the standards for
accounting  for  securitizations  and other  transfers of  financial  assets and
collateral  and  requires  certain  disclosures,  but it  maintains  most of the
provisions  of SFAS  125  without  reconsideration.  SFAS 140 is  effective  for
transfers and servicing of financial assets and  extinguishments  of liabilities
occurring   after  March  31,  2001.  It  is  effective  for   recognition   and
reclassification  of collateral and for disclosures  relating to  securitization
transactions and collateral for fiscal years ending after December 15, 2000. The
Company is currently  reviewing  the  provisions of SFAS 140 and adoption is not
expected  to have a material  impact on the  Company's  results  of  operations,
financial position or cash flows.


10. Cash Flow  presentation  of Income Tax  Benefit  Realized  upon  Exercise of
Nonqualified  Stock  Options.  In July 2000,  the EITF released Issue No. 00-15,
"Classification  in the  Statement  of Cash  Flows  of the  Income  Tax  Benefit
Realized by a Company upon  Employee  Exercise of a  Nonqualified  Stock Option"
("EITF  00-15").  Companies  receive an income tax deduction for the  difference
between the exercise price and the market price of a  nonqualified  stock option
upon exercise by the employee.  There is diversity in practice as some companies
classify  this tax benefit as an  operating  cash flow in the  statement of cash
flows,  while other  companies  classify it as a  financing  activity.  KCSI has
historically  classified  this  tax  benefit  as a  financing  activity  in  the
statement of cash flows. The consensus  reached by EITF 00-15 indicates that the
income tax benefit realized upon employee exercise of nonqualified stock options
should be classified  in the  operating  section of the statement of cash flows.
This  consensus  is  effective  for  quarters  ending  after  July 20,  2000 and
comparative  cash flow statements must be restated.  The Company has adopted the
consensus outlined in EITF 00-15 which resulted in a reclassification of related
cash flows provided by financing  activities to cash flows provided by operating
activities for each period presented.


11. The Company has had no significant changes in its outstanding  litigation or
other contingencies from that previously reported in the Company's Annual Report
on Form 10-K for the year ended  December  31,  1999  other  than that  reported
below.

Duncan Case. In 1998, a jury in Beauregard Parish,  Louisiana returned a verdict
against  KCSR in the  amount of $16.3  million.  This case arose from a railroad
crossing accident that occurred at Oretta, Louisiana on  September 11, 1994, in
which three individuals were injured. Of the three, one was injured fatally, one
was rendered quadriplegic and the third suffered less serious injuries.

Subsequent  to the  verdict,  the  trial  court  held that the  plaintiffs  were
entitled to interest on the judgment from the date the suit was filed, dismissed
the verdict  against one defendant and


                                    Page 16

reallocated  the  amount  of  that  verdict  to the  remaining  defendants.  The
resulting total judgment against KCSR, together with interest, was approximately
$28.0 million as of September 30, 2000.

On November 3, 1999,  the Third Circuit  Court of Appeals in Louisiana  affirmed
the judgment.  Subsequently  KCSR sought and obtained  review of the case in the
Supreme Court of  Louisiana.  On October 30, 2000 the Supreme Court of Louisiana
entered its order affirming in part and reversing in part the judgment.  The net
effect of the  Louisiana  Supreme  Court action was to reduce the  allocation of
negligence to KCSR and reduce the  judgment,  with  interest,  against KCSR from
approximately  $28 million to approximately  $14.2 million  (approximately  $9.7
million  damages  and $4.5  million of  interest),  which is in excess of KCSR's
insurance  coverage  of $10  million  for this case.  The  Company  has filed an
application for rehearing in the Supreme Court of Louisiana  seeking reversal of
the judgment on the basis that the Court's decision is contrary to existing law.
If no relief is  obtained,  the Company may seek relief in the Supreme  Court of
the United States.

The Company had previously  recorded a long-term liability of approximately $3.0
million for this case, which is the amount of the deductible for the $10 million
insurance  coverage.  Although  management of KCSR  believes it has  meritorious
defenses and will continue to seek relief from the judgment, it believes, based
on the Supreme Court of  Louisiana's  decision,  that it is prudent to record an
additional  liability  of $4.2  million,  the amount in excess of the  insurance
coverage.  This  amount was  recorded as  interest  expense in the  accompanying
Consolidated Condensed Financial Statements. In addition, the Company recorded a
long-term  receivable and long-term  liability for $7 million  representing  the
amount of the judgment that will be covered by insurance proceeds.

Bogalusa Cases.  In July 1996, KCSR was named as one of twenty-seven  defendants
in various lawsuits in Louisiana and Mississippi arising from the explosion of a
rail car loaded with chemicals in Bogalusa,  Louisiana on October 23, 1995. As a
result of the explosion,  nitrogen  dioxide and oxides of nitrogen were released
into the  atmosphere  over parts of that town and the  surrounding  area causing
evacuations  and  injuries.  Approximately  25,000  residents of  Louisiana  and
Mississippi have asserted claims to recover damages allegedly caused by exposure
to the chemicals.

KCSR neither  owned nor leased the rail car or the rails on which it was located
at the time of the explosion in Bogalusa.  KCSR did, however,  move the rail car
from Jackson to Vicksburg,  Mississippi, where it was loaded with chemicals, and
back to Jackson where the car was tendered to the Illinois  Central  Corporation
("IC").  The  explosion  occurred  more  than 15 days  after  the  Company  last
transported  the rail car. The car was loaded in excess of its standard  weight,
but  under  the  car's  capacity,  when it was  transported  by the  Company  to
interchange with the IC.

The trial of a group of twenty  plaintiffs in the Mississippi  lawsuits  arising
from the  chemical  release  resulted in a jury verdict and judgment in favor of
KCSR in June  1999.  The jury  found  that KCSR was not  negligent  and that the
plaintiffs  had  failed  to prove  that  they  were  damaged.  The  trial of the
Louisiana class action is scheduled to commence on June 11, 2001. The trial of a
second group of Mississippi plaintiffs is scheduled for January of 2002.

KCSR believes  that its exposure to liability in these cases is remote.  If KCSR
were to be found  liable for punitive  damages in these  cases,  such a judgment
could have a material  adverse  effect on the Company's  results of  operations,
financial position and cash flows.

Houston Cases.  In August 2000, KCSR and certain of its affiliates were added as
defendants in lawsuits  pending in Jefferson and Harris Counties,  Texas.  These
lawsuits  allege  damage to  approximately  4,000  plaintiffs  as a result of an
alleged toxic chemical  release from a tank car in Houston,  Texas on August 21,
1998.  Litigation  involving  the  shipper and the  delivering  carrier has been
pending for some time, but KCSR,  which handled the car during the course of its
transport,


                                    Page 17

was not previously a defendant. On information currently available,  the Company
believes that the  likelihood of its being exposed to material  damages in these
cases is remote.

Jaroslawicz  Class  Action.  On October 3, 2000,  a lawsuit was filed in the New
York  state  Supreme  Court  purporting  to be a class  action  on behalf of the
Company's preferred shareholders, and naming the Company, its Board of Directors
and Stilwell Financial Inc. as defendants. This lawsuit seeks a declaration that
the  Company's  Spin-off  was a  defacto  liquidation  of the  Company,  alleges
violation of Directors' fiduciary duties to the preferred  shareholders and also
seeks a declaration that the preferred  shareholders are entitled to receive the
par value of their shares and other relief.

The Company and its counsel  believe the suit to be  groundless  and will defend
the matter vigorously.









                                    page 18


Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

OVERVIEW

The  discussion  set forth below,  as well as other  portions of this Form 10-Q,
contains comments not based upon historical fact. Such forward-looking  comments
are based upon  information  currently  available to management and management's
perception  thereof as of the date of this Form 10-Q. Readers can identify these
forward-looking  comments  by the use of such  verbs  as  expects,  anticipates,
believes or similar verbs or conjugations  of such verbs.  The actual results of
operations of Kansas City Southern  Industries,  Inc.  ("KCSI" or the "Company")
could materially differ from those indicated in  forward-looking  comments.  The
differences  could be caused by a number of  factors or  combination  of factors
including, but not limited to, those factors identified in the Company's Current
Report  on Form  8-K/A  dated  June 3,  1997,  which  is on file  with  the U.S.
Securities and Exchange  Commission (File No. 1-4717) and is hereby incorporated
by reference herein.  Readers are strongly  encouraged to consider these factors
when evaluating any  forward-looking  comments.  The Company will not update any
forward-looking comments set forth in this Form 10-Q.

The discussion  herein is intended to clarify and focus on the Company's results
of operations,  certain changes in its financial  position,  liquidity,  capital
structure and business  developments for the periods covered by the consolidated
condensed  financial  statements  included under Item 1 of this Form 10-Q.  This
discussion  should be read in  conjunction  with  these  consolidated  condensed
financial  statements  and  the  related  notes  thereto,  and is  qualified  by
reference thereto.

KCSI, a Delaware Corporation organized in 1962, is a diversified holding company
with  principal  operations  in rail  transportation.  As  discussed  in "Recent
Developments",  on July  12,  2000  KCSI  completed  its  spin-off  of  Stilwell
Financial  Inc.  ("Stilwell"),  the Company's  formerly  wholly-owned  financial
services subsidiary.

The Company  supplies its various  subsidiaries  with  managerial,  legal,  tax,
financial and accounting services,  in addition to managing certain investments.
Kansas City Southern Lines, Inc. ("KCSL"), a wholly-owned subsidiary of KCSI, is
the holding company for all of the  subsidiaries  comprising the  Transportation
operations. KCSL's principal subsidiaries and affiliates include, among others:

o     The Kansas City Southern Railway Company ("KCSR"), a wholly-owned
   subsidiary of KCSL;
o     Gateway Western Railway Company ("Gateway Western"), a wholly-owned
   subsidiary of KCSR;
o     Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. ("Grupo
   TFM"), an approximate 37% owned unconsolidated affiliate of KCSR.   Grupo
   TFM owns 80% of the common stock of TFM, S.A. de C.V. ("TFM");
o     Mexrail, Inc. ("Mexrail"), a 49% owned unconsolidated affiliate of
   KCSR.  Mexrail wholly owns the Texas Mexican Railway Company ("Tex Mex");
o     Southern Capital Corporation, LLC ("Southern Capital"), a 50% owned
   unconsolidated affiliate of KCSR; and
o     Panama Canal Railway Company ("PCRC"), an unconsolidated affiliate of
   which the Company owns 50% of the common stock.

These  businesses  primarily  comprise a railroad system that provides  shippers
with rail freight service in key commercial and industrial markets of the United
States and Mexico.



                                    Page 19

RECENT DEVELOPMENTS

Spin-off of Stilwell  Financial  Inc. On June 14, 2000 KCSI's Board of Directors
approved the spin-off of Stilwell,  the Company's  then  wholly-owned  financial
services  subsidiary.  Stilwell is comprised of Janus  Capital  Corporation,  an
approximate  82.3%  owned  subsidiary;  Berger  LLC,  an  approximate  88% owned
subsidiary;  Nelson Money  Managers Plc, an 80% owned  subsidiary;  DST Systems,
Inc., an equity  investment in which Stilwell holds an approximate 32% interest;
and miscellaneous other financial services subsidiaries and equity investments.

On July 12, 2000,  KCSI  completed  its  spin-off of Stilwell  through a special
dividend of Stilwell  common stock  distributed to KCSI common  stockholders  of
record on June 28, 2000  ("Spin-off").  The Spin-off occurred after the close of
business  of the New York  Stock  Exchange  on July  12,  2000,  and  each  KCSI
stockholder  received  two shares of the common  stock of Stilwell for every one
share of KCSI  common  stock  owned on the  record  date.  The  total  number of
Stilwell shares distributed was 222,999,786.

As previously  disclosed,  on July 9, 1999,  KCSI received a tax ruling from the
Internal  Revenue  Service  ("IRS") which states that for United States  federal
income tax  purposes the Spin-off  qualifies  as a tax-free  distribution  under
Section 355 of the Internal Revenue Code of 1986, as amended.  Additionally,  in
February 2000, the Company  received a favorable  supplementary  tax ruling from
the IRS to the effect that the  assumption of $125 million of KCSI  indebtedness
by Stilwell would have no effect on the previously issued tax ruling.


KCSI Reverse Stock Split.  Also on July 12, 2000, KCSI completed a reverse stock
split  whereby  every two shares of KCSI common  stock were  converted  into one
share of KCSI common  stock.  Earnings  per share  computations  for each period
discussed  herein  reflect this  one-for-two  reverse  stock split.  KCSI common
stockholders approved this reverse stock split in 1998.


KCSI Adds New Director.  On August 17, 2000, Byron G. Thompson was named as
a director of KCSI.  Mr. Thompson has served as Chairman of the Board of
Country Club Bank, n.a., Kansas City since February 1985.  Prior to that
time, Mr. Thompson served as Vice Chairman of Investment Banking at United
Missouri Bank of Kansas City and as a member of the Board of United
Missouri Bancshares, Inc.

Duncan Case Update.  In 1998, a jury in Beauregard  Parish,Louisiana  returned a
verdict  against  KCSR in the  amount of $16.3  million.  This case arose from a
railroad crossing  accident that occurred at Oretta,  Louisiana on September 11,
1994, in which three  individuals  were injured.  Of the three,  one was injured
fatally,  one was  rendered  quadriplegic  and the third  suffere  less  serious
injuries.

Subsequent  to the  verdict,  the  trial  court  held that the  plaintiffs  were
entitled to interest on the judgment from the date the suit was filed, dismissed
the verdict  against one defendant and reallocated the amount of that verdict to
the remaining  defendants.  The resulting total judgment against KCSR,  together
with interest, was approximately $28.0 million as of September 30, 2000.

On November 3, 1999,  the Third Circuit  Court of Appeals in Louisiana  affirmed
the judgment.  Subsequently  KCSR sought and obtained  review of the case in the
Supreme Court of  Louisiana.  On October 30, 2000 the Supreme Court of Louisiana
entered its order affirming in part and reversing in part the judgment.  The net
effect of the  Louisiana Supreme  Court action was to reduce the  allocation  of
negligence to KCSR and reduce the  judgment,  with  interest,  against KCSR from
approximately  $28 million to approximately  $14.2 million  (approximately  $9.7
million of damages and $4.5 million of  interest),  which is in excess of KCSR's
insurance  coverage  of $10  million  for this case.  The  Company  has filed an
application for rehearing in the Supreme Court of


                                    Page 20

Louisiana  seeking  reversal  of the  judgment  on the  basis  that the  Court's
decision is contrary to existing law. If no relief is obtained,  the Company may
seek relief in the Supreme Court of the United States.

The Company had previously  recorded a long-term liability of approximately $3.0
million for this case, which is the amount of the deductible for the $10 million
insurance  coverage.  Although  management of KCSR  believes it has  meritorious
defenses and will continue to seek relief from the judgment, it believes,  based
on the Supreme Court of  Louisiana's  decision,  that it is prudent to record an
additional  liability  of $4.2  million,  the amount in excess of the  insurance
coverage.  This  amount was  recorded as  interest  expense in the  accompanying
Consolidated Condensed Financial Statements. In addition, the Company recorded a
long-term  receivable and long-term  liability for $7 million  representing  the
amount of the judgment that will be covered by insurance proceeds.


Debt Refinancing and Re-capitalization of the Company's Debt Structure.

o  During the third quarter of 2000,  the Company  announced the completion of a
   $200 million  private  offering of debt  securities  through its wholly owned
   subsidiary,  KCSR.  The offering,  completed  pursuant to Rule 144A under the
   Securities  Act of 1933 in the United  States and  Regulation  S outside  the
   United States,  consisted of 8-year Senior  Unsecured Notes. The Notes bear a
   fixed  annual  interest  rate of 9.5% and are due on October  1, 2008.  These
   Notes contain certain covenants typical of this type of debt instrument.  Net
   proceeds from the offering of $196.5 million were used to refinance  existing
   bank term  debt,  which was  scheduled  to mature on  January  11,  2001 (see
   below).  Costs related to the issuance of these notes of  approximately  $4.1
   million were deferred and are being amortized over the eight-year term of the
   Notes.

   In connection with this  refinancing,  the Company  reported an extraordinary
   loss on the  extinguishment  of the bank term debt due January 11, 2001.  The
   extraordinary loss was $1.1 million (net of income taxes of $0.7 million).

o  Also during the third quarter of 2000,  Grupo TFM  accomplished a refinancing
   of  approximately  $285 million of its Senior Secured Credit Facility through
   the issuance of a U.S.  Commercial  Paper ("USCP") program backed by a letter
   of  credit.  The  USCP is a  2-year  program  for up to a face  value of $310
   million.  The average  discount rate for the first  issuance was 6.54%.  This
   refinancing  provides the ability for Grupo TFM to pay  dividends to both the
   Company and Transportacion Maritima Mexicana, S.A. de C.V. ("TMM").

   As a result  of this  refinancing,  Grupo  TFM  recorded  approximately  $9.2
   million  in pretax  extraordinary  debt  retirement  costs.  During the third
   quarter of 2000,  KCSI  reported  $1.7  million  (net of income taxes of $0.1
   million) as its proportionate share of these costs as an extraordinary item.

o  In  preparation  for  the  Spin-off,  the  Company  re-capitalized  its  debt
   structure in January 2000 through a series of transactions as follows:

     Bond Tender and Other Debt  Repayment.  On December 6, 1999, KCSI commenced
     offers to purchase and consent solicitations with respect to any and all of
     the Company's  outstanding  7.875% Notes due July 1, 2002, 6.625% Notes due
     March 1, 2005,  8.8%  Debentures  due July 1, 2022,  and 7% Debentures  due
     December  15,  2025   (collectively   "Debt   Securities"   or  "notes  and
     debentures").

     Approximately   $398.4  million  of  the  $400  million   outstanding  Debt
     Securities  were  validly  tendered  and  accepted  by the  Company.  Total
     consideration  paid for the  repurchase  of  these  outstanding  notes  and
     debentures  was $401.2  million.  Funding for the  repurchase of these Debt
     Securities  and for the  repayment  of $264  million  of  borrowings  under
     then-existing

                                    Page 21

     revolving  credit  facilities  was obtained from two new credit  facilities
     (the  "KCS  Credit  Facility"  and  the  "Stilwell  Credit  Facility",   or
     collectively  "New Credit  Facilities"),  each of which was entered into on
     January 11, 2000. These New Credit Facilities,  as described further below,
     provided for total commitments of $950 million.

     In first quarter 2000, the Company  reported an  extraordinary  loss on the
     extinguishment of the Company's notes and debentures of approximately  $5.9
     million (net of income taxes of approximately $3.2 million).

     KCS  Credit  Facility.  The  KCS  Credit  Facility  provides  for  a  total
     commitment of $750 million, comprised of three separate term loans totaling
     $600 million and a revolving  credit  facility  available until January 11,
     2006 ("KCS Revolver").  The term loans are comprised of the following: $200
     million,  which was due  January  11,  2001 prior to its  refinancing  (see
     discussion above),  $150 million due December 30, 2005 and $250 million due
     December 30, 2006. The availability  under the KCS Revolver is $150 million
     and will be reduced to $100  million on January 2, 2001.  Letters of credit
     are also  available  under the KCS  Revolver up to a limit of $90  million.
     Borrowings under the KCS Credit Facility are secured by  substantially  all
     of KCSI's remaining assets.

     On January 11, 2000,  KCSR  borrowed the full amount ($600  million) of the
     term loans and used the proceeds to repurchase the Debt Securities,  retire
     other debt  obligations  and pay related fees and  expenses.  No funds were
     initially  borrowed under the KCS Revolver.  Proceeds of future  borrowings
     under the KCS  Revolver  are to be used for  working  capital and for other
     general  corporate  purposes.  The letters of credit under the KCS Revolver
     may be used for general corporate purposes.

     Interest  on the  outstanding  loans  under the KCS Credit  Facility  shall
     accrue at a rate per  annum  based on the  London  interbank  offered  rate
     ("LIBOR")  or the  prime  rate,  as the  Company  shall  select.  Following
     completion of the  refinancing  of the January 11, 2001 term loan discussed
     above,  each  remaining  loan under the KCS Credit  Facility  shall  accrue
     interest at the selected rate plus an  applicable  margin.  The  applicable
     margin is determined by the type of loan and the Company's  leverage  ratio
     (defined as the ratio of the Company's total debt to consolidated  earnings
     before interest,  taxes, depreciation and amortization excluding the equity
     earnings of unconsolidated affiliates ("Consolidated EBITDA") for the prior
     four fiscal  quarters).  Based on the Company's current leverage ratio, the
     term loan  maturing  in 2005 and all loans under the KCS  Revolver  have an
     applicable  margin of 2.50% per annum for LIBOR  priced loans and 1.50% per
     annum for prime rate priced loans. The term loan maturing in 2006 currently
     has an  applicable  margin of 2.75% per  annum for LIBOR  priced  loans and
     1.75% per annum for prime rate based loans.

     The KCS  Credit  Facility  also  requires  the  payment  to the  banks of a
     commitment  fee of 0.50% per annum on the average  daily,  unused amount of
     the KCS  Revolver.  Additionally  a fee equal to a per annum  rate equal to
     0.25% plus the applicable  margin for LIBOR priced  revolving loans will be
     paid on any letter of credit issued under the KCS Credit Facility.

     The KCS Credit  Facility  contains  certain  covenants,  among  others,  as
     follows: i) restricts the payment of cash dividends to common stockholders;
     ii) limits annual capital  expenditures;  iii) requires hedging instruments
     with  respect to at least 50% of the  outstanding  balances  of each of the
     term  loans  maturing  in 2005  and 2006 to  mitigate  interest  rate  risk
     associated with the new variable rate debt; and iv) provides leverage ratio
     and  interest  coverage  ratio  requirements  typical  of this type of debt
     instrument.  These covenants,  along with other provisions,  could restrict
     maximum  utilization  of the facility.  The Company was in compliance  with
     these  various  provisions,   including  the  financial  covenants,  as  of
     September 30, 2000.

                                    Page 22

     In  accordance  with the  provision  requiring  the  Company  to manage its
     interest  rate risk through  hedging  activity,  in first  quarter 2000 the
     Company  entered into five  separate  interest rate cap  agreements  for an
     aggregate  notional  amount of $200  million  expiring on various  dates in
     2002.  The  interest  rate caps are  linked to LIBOR.  $100  million of the
     aggregate  notional amount provides a cap on the Company's interest rate of
     7.25% plus the  applicable  spread,  while $100 million limits the interest
     rate to 7% plus the applicable spread.  Counterparties to the interest rate
     cap agreements are major financial institutions who also participate in the
     New  Credit  Facilities.   The  Company  believes  that  credit  loss  from
     counterparty non-performance is remote.

     Issue costs  relating to the KCS Credit  Facility  of  approximately  $17.6
     million were deferred and are being amortized on a straight-line basis (the
     difference  between  the  straight-line   method  and  interest  method  of
     amortization  is not material)  over the respective  term of the loans.  In
     conjunction  with the third  quarter 2000  refinancing  of the $200 million
     term loan  previously due January 11, 2001,  approximately  $1.8 million of
     these deferred costs were immediately  recognized.  After  consideration of
     amortization  and this $1.8 million  write-off,  the  remaining  balance of
     these deferred costs was approximately $11.8 million at September 30, 2000.

     Stilwell  Credit  Facility.  On January 11, 2000,  KCSI also arranged a new
     $200 million 364-day senior unsecured competitive  Advance/Revolving Credit
     Facility  ("Stilwell  Credit  Facility").  KCSI borrowed $125 million under
     this facility and used the proceeds to retire debt obligations as discussed
     above.  Stilwell assumed this credit  facility,  including the $125 million
     borrowed thereunder, and upon completion of the Spin-off, KCSI was released
     from all obligations thereunder.  Stilwell repaid the $125 million in March
     2000.

As a result of the debt refinancing transactions discussed above,  extraordinary
items for the three and nine months  ended  September  30, 2000 totaled $2.8 and
$8.7  million,  respectively  (net of  income  taxes of $0.8  and $4.0  million,
respectively).


Dividends Suspended for KCSI Common Stock. During the first quarter of 2000, the
Company's  Board  of  Directors  announced  that,  based  upon a  review  of the
Company's  dividend  policy  in  conjunction  with  the  New  Credit  Facilities
discussed above and in light of the anticipated  Spin-off, it decided to suspend
common stock dividends of KCSI under the existing structure of the Company. This
action complies with the terms and covenants of the New Credit Facilities. It is
not  anticipated  that KCSI will make any cash  dividend  payments to its common
stockholders for the foreseeable future.


Expiration of the Capital Call Related to TFM. In conjunction with the financing
of TFM in 1997,  the  Company  entered  into a  Capital  Contribution  Agreement
("Agreement")  with Grupo TFM, TMM and the financing  institutions  of TFM. This
Agreement  extended  for a three year period  through June 30, 2000 and outlined
the terms whereby the Company could be responsible for approximately $74 million
of a capital call if certain  performance  benchmarks  outlined in the Agreement
were not met by TFM. In accordance with its terms, the Agreement has terminated.


New Compensation  Program.  In connection with the Spin-off,  KCSI adopted a new
compensation program (the "Compensation Program") under which (1) certain senior
management  employees were granted  performance based KCSI stock options and (2)
all management  employees and those directors of KCSI who are not employees (the
"Outside  Directors")  became  eligible to  purchase a specified  number of KCSI
restricted  shares and were granted a specified number of KCSI stock options for
each restricted share purchased.  The performance stock options have an exercise
price of $5.75 per share,  which was the mean trading price of KCSI Common stock
on the New York Stock  Exchange  (the  "NYSE") on July 13, 2000.  These  options
expire at the end of 10 years,


                                    Page 23

subject to certain early termination events.  These options will vest and become
exercisable  in equal  installments  as  KCSI's  stock  price  achieves  certain
thresholds.  One third of these  options  become  exercisable  upon meeting each
threshold.  Three  years  from the date of grant  options  not then  exercisable
become immediately  exercisable and expire thirty days thereafter.  Vesting will
accelerate  in the event of a KCSI  board-approved  change in  control  of KCSI,
death or disability.

The purchase price of the restricted shares, and the exercise price of the stock
options granted in connection with the purchase of restricted  shares,  is based
on the  mean  trading  price  of KCSI  Common  stock on the NYSE on the date the
employee or Outside Director purchased  restricted shares under the Compensation
Program. Each eligible employee and Outside Director was allowed to purchase the
restricted  shares offered under the  Compensation  Program on one date out of a
selection of dates offered. With respect to management employees,  the number of
shares  available  for purchase and the number of options  granted in connection
with shares  purchased  were based on the  compensation  level of the employees.
Each Outside  Director was granted the right to purchase up to 3,000  restricted
shares of KCSI,  with two KCSI stock  options  granted in  connection  with each
restricted  share  purchased.  Shares purchased are restricted from sale and the
options are not  exercisable  for a period of three years for senior  management
and the Outside  Directors and two years for other  management  employees.  KCSI
provided senior  management and the Outside Directors with the option of using a
sixty-day  interest-bearing  full  recourse  note to purchase  these  restricted
shares.  These  loans  accrued  interest  at 6.49%  per annum and were all fully
repaid on September 11, 2000.

Management employees purchased 475,597 shares of KCSI restricted stock under the
Compensation  Program and 910,697 stock options were granted in connection  with
the purchase of those restricted shares.  Outside Directors purchased a total of
9,000 shares of KCSI restricted stock under the Compensation  Program and 18,000
KCSI stock options were granted in connection with the purchase of those shares.


Burlington  Northern Santa Fe Railway and Canadian  National Railway Merger.  In
December 1999, BNSF and CN announced their intention to combine the two railroad
companies.  In March 2000,  however,  this  combination was delayed when the STB
issued a 15-month  moratorium  on railroad  mergers  until the STB can adopt new
rules governing merger activities. In July 2000, the STB's moratorium was upheld
by the United  States Court of Appeals for the District of Columbia.  Subsequent
to the court's decision, BNSF and CN announced the termination of their proposed
merger.


Norfolk Southern Haulage and Marketing Agreement.  In May 2000, KCSR and Norfolk
Southern  entered into an agreement under which KCSR provides  haulage  services
for intermodal  traffic  between  Meridian and Dallas and receives fees for such
services from Norfolk Southern. Under this agreement, Norfolk Southern may quote
rates  and  enter  into  transportation  service  contracts  with  shippers  and
receivers covering this haulage traffic.



RESULTS OF OPERATIONS

The Company  reported  third quarter 2000 income from  continuing  operations of
$2.6 million ($.05 per diluted share) compared to $4.6 million ($.08 per diluted
share)  in the  third  quarter  of 1999.  This $2.0  million  decrease  resulted
primarily  from  higher  U. S.  operating  income  of $4.1  million  (28%) and a
decrease in the income tax  provision of $2.8 million (due  primarily to certain
non-taxable  items in third  quarter  2000)  partially  offset by a $1.2 million
decrease in equity earnings of Grupo TFM and an increase in interest  expense of
$7.8 million.  The Company  reported income from  discontinued  operations (i.e.
Stilwell) of $23.4  million  ($0.39 per diluted  share) in the third  quarter of
2000,  which was  derived  through a  pro-rata  allocation  of the net income of
Stilwell for


                                    Page 24

the 12 days of  operations  in July 2000 prior to the  Spin-off.  This  pro-rata
allocation was determined by dividing the net income for July 2000 by the number
of days in July  (31) and then  multiplying  that  product  by 12.  Income  from
discontinued  operations  was $82.7 million  ($1.43 per diluted  share) in third
quarter 1999. The Company reported  extraordinary  items of $2.8 million (($.05)
per diluted share) in third quarter 2000 as described further below.  There were
no  extraordinary  items reported  during the third quarter of 1999. The Company
reported  net income of $23.2  million  ($.39 per  diluted  share) for the third
quarter of 2000 versus  $87.3  million  ($1.51 per  diluted  share) in the third
quarter of 1999.

For the nine months ended September 30, 2000, income from continuing  operations
increased  $4.4 million,  or 25%, to $21.8 million ($.37 per diluted share) from
$17.4 million ($.30 per diluted  share) for the nine months ended  September 30,
1999. A $14.0  million year to date  increase in equity  earnings from Grupo TFM
was partially  offset by a decline in U.S.  operating income of $3.6 million and
an increase in interest  expense of $15.1  million  during the nine months ended
September 30, 2000 compared to the same 1999 period.  Also  contributing  to the
increase was an improvement in income tax expense of $7.7 million year over year
due to certain third quarter 2000 non-taxable items as well as a lower effective
tax rate related to the Company's  equity  earnings from Grupo TFM.  Income from
discontinued  operations  was $363.8  million  ($6.17 per diluted share) for the
nine months  ended  September  30, 2000  compared to $214.6  million  ($3.71 per
diluted  share) in the same 1999 period  primarily due to higher  average assets
under  management  coupled with  improving  operating  margins period to period.
Income from discontinued operations for the nine months ended September 30, 2000
includes  only 12 days of  operating  results  for the third  quarter of 2000 as
determined  through the allocation  method outlined above.  The Company reported
extraordinary  items of $8.7 million  (($.15) per diluted share) during the nine
months  ended  September  30, 2000 as  described  further  below.  There were no
extraordinary  items reported  during 1999. Net income of the Company was $376.9
million ($6.39 per diluted  share) for the nine months ended  September 30, 2000
compared to $232.0  million  ($4.01 per diluted share) for the nine months ended
September 30, 1999.


Extraordinary items
During the third quarter of 2000,  the Company  refinanced  $200 million of bank
debt due January 11, 2001 with a $200 million private  offering of 8-year Senior
Unsecured   Notes.   In  connection   with  this   refinancing,   KCSI  recorded
extraordinary debt retirement costs of approximately $1.1 million (net of income
taxes of $0.7 million).  Additionally,  during the third quarter of 2000,  Grupo
TFM refinanced $300 million of bank debt with a U.S.  Commercial  Paper program.
KCSI   recorded  its  $1.7  million  (net  of  income  taxes  of  $0.1  million)
proportionate  share of  extraordinary  debt  retirement  costs  related to this
refinancing by Grupo TFM.

In anticipation of the Spin-off,  the Company  re-capitalized its debt structure
during January 2000 whereby KCSI retired approximately $398 million in long-term
indebtedness  prior to their scheduled  maturities.  Accordingly,  KCSI recorded
extraordinary debt retirement costs of approximately $5.9 million (net of income
taxes of $3.2 million), or (10 cents) per diluted share, in first quarter 2000.

Extraordinary  items for the nine months ended  September  30, 2000 totaled $8.7
million (net of income taxes of $4 million) or (15 cents) per diluted share.


                                    Page 25

Continuing Operations

The  discussion  that  follows  addresses  the  results  of  operations  of  the
continuing  operations  of the  Company.  The revenue  and  expense  information
presented herein for the combined  KCSR/Gateway  Western reflects the results of
KCSR/Gateway  Western operating companies on a stand-alone basis. The results of
KCSR or Gateway Western subsidiaries and affiliates are excluded.

The following tables summarize the income statement components of the continuing
operations of the Company,  provide a detailed analysis of KCSR/Gateway  Western
revenues and carloads and provide a detailed  analysis of  KCSR/Gateway  Western
expenses,  as applicable,  for the three and nine-month  periods ended September
30, 2000 and September 30, 1999, respectively (in millions):


                                                       
                                      Three Months            Nine Months
                                    Ended September 30,   Ended September 30,
                                    -------------------     -------------------
                                     2000        1999         2000       1999
                                   -------      -------     -------    -------

Revenues                           $ 144.1       $ 149.1    $ 437.4    $ 449.7
Costs and expenses                   111.6         120.2      339.9      348.0
Depreciation and amortization         13.8          14.3       42.4       43.0
                                   -------        ------    -------    -------

Operating income                      18.7          14.6       55.1       58.7
Equity in net earnings of
  unconsolidated affiliates:
   Grupo TFM                           2.6           3.8       18.8        4.8
   Other                               1.5           1.3        3.3        3.5
Interest expense                     (22.5)        (14.7)     (58.4)     (43.3)
Other, net                             1.2           1.3        4.8        3.2
                                   -------       -------    -------    -------
   Income from continuing operations
     before income taxes               1.5           6.3       23.6       26.9
Income tax provision (benefit)        (1.1)          1.7        1.8        9.5
                                   -------       -------    -------    -------


   Income from continuing operations  $2.6          $4.6      $21.8      $17.4
                                   =======       =======    =======    =======




                                                                 

                                                                          Carloads and
                                     Revenues                           Intermodal Units
                                   (in millions)                         (in thousands)
                            Three months        Nine months       Three months     Nine months
                           ended Sept. 30,    ended Sept. 30,    ended Sept. 30,  ended Sept. 30,
                            2000     1999     2000       1999     2000    1999    2000      1999
                           ------   ------    ------    ------   ------  ------  ------    ------
General commodities:
   Chemical and petroleum  $ 31.8   $ 33.4   $  96.3    $100.8     39.3    41.7    117.5    126.3
   Paper and forest          26.9     26.5      80.4      78.4     39.7    42.5    121.9    126.1
   Agricultural and mineral  30.0     30.1      92.5      93.5     41.1    44.1    127.3    133.6
                          -------  -------   -------   -------  -------  ------  -------  -------
Total general commodities    88.7     90.0     269.2     272.7    120.1   128.3    366.7    386.0
Intermodal and automotive    15.9     15.7      47.0      43.0     73.4    64.3    194.7    171.9
Coal                         27.0     30.2      82.3      86.5     49.3    52.4    143.8    150.8
                          -------  -------   -------   -------  -------  ------  -------  -------
Carloads and related
  revenues                  131.6    135.9     398.5     402.2    242.8   245.0    705.2    708.7
 Other rail-related revenues 10.9     11.0      32.3      35.9
                          -------  -------   -------   -------  -------  ------   ------  -------
  Total KCSR/Gateway
      Western revenues
      and carloads          142.5    146.9     430.8     438.1    242.8   245.0    705.2    708.7
   Other revenues             1.6      2.2       6.6      11.6
                          -------  -------   -------   -------  ------- -------  -------  -------
Total KCSI Revenues       $ 144.1  $ 149.1   $ 437.4   $ 449.7
                          =======  =======   =======   =======



                                    Page 26


                                                  

                                 Three Months        Nine Months
                              Ended September 30,   Ended September 30,
                              -------------------  --------------------
                                2000       1999      2000       1999
                              --------   -------   --------   -------

Salaries, wages and benefits  $  48.8    $ 50.5    $ 144.9    $ 147.5
Fuel                             12.2       8.6       35.3       24.4
Materials and supplies            7.5       8.7       23.6       26.5
Car Hire                          4.1       5.8       11.1       16.4
Purchased services               11.1      12.7       35.9       35.8
Casualties and insurance          7.6       8.9       20.3       21.3
Operating leases                 13.9      12.9       42.5       38.3
Depreciation and amortization    13.0      13.1       39.4       39.5
Other                             5.8       7.9       18.2       23.1
                              -------    ------    -------     ------
   Total KCSR/Gateway Western
     expenses                   124.0     129.1      371.2      372.8
   Other expenses                 1.4       5.4       11.1       18.2
                              -------    ------    -------     ------
     Total KCSI expenses      $ 125.4    $134.5    $ 382.3    $ 391.0
                              =======    ======    =======    =======


Three Months Ended September 30, 2000 Compared With The Three
Months Ended September 30, 1999

      Income  from  Continuing  Operations.  The  Company  reported  income from
continuing  operations of $2.6 million for the three months ended  September 30,
2000 compared  with $4.6 million for the three months ended  September 30, 1999.
This $2.0 million decrease resulted primarily from higher U. S. operating income
of $4.1 million (28%) and a decrease in the income tax provision of $2.8 million
(due  primarily to certain  non-taxable  items in third quarter 2000)  partially
offset  by a $1.2  million  decrease  in  equity  earnings  of Grupo  TFM and an
increase in interest expense of $7.8.

      Revenues.  Revenues for the third quarter of 2000 totaled  $144.1  million
versus $149.1 million in the third quarter of 1999.  This $5.0 million  decrease
resulted  primarily  from  lower  combined   KCSR/Gateway  Western  revenues  of
approximately  $4.4  million due to  competitive  pricing  pressures  and demand
driven  traffic   declines.   Although  the  congestion   issues  that  affected
KCSR/Gateway  Western  revenues  during  the  third  quarter  of 1999  have been
eliminated,   third  quarter  2000  KCSR/Gateway  Western  revenues  were  lower
primarily  due to weakness in coal and chemical and petroleum  product  traffic.
Lower unit coal revenues resulted from a reduction in tons delivered and changes
in the length of haul.  Miscellaneous chemical revenues were lower due to demand
driven traffic declines while soda ash revenues declined because of a new export
terminal on the origin railroad, which led to volume reductions.  These declines
were  partially  offset by growth in paper and forest product  revenues  arising
primarily from higher revenues per carload delivered.

      Operating Expenses.  Third quarter operating expenses were reduced by $9.1
million,  to $125.4  million for the three months ended  September 30, 2000 from
$134.5 million for the three months ended  September 30, 1999.  Contributing  to
this decline was a $3.0 million  revision to the estimate of the  allowance  for
doubtful  accounts  based on  collection  of  approximately  $1.8  million  of a
receivable and agreement for payment on the remaining amount.  Additionally,  in
spite of diesel fuel  costs,  which rose  approximately  42% quarter to quarter,
third  quarter  2000  operating  costs  declined  primarily  due to  operational
efficiencies  and the  easing  of  congestion  at  KCSR/Gateway  Western.  These
operational  improvements  led to a quarter over  quarter  decrease in


                                    Page 27

salaries, wages and fringe benefits, car hire, purchased services and casualties
and  insurance  expenses.  In  addition  to higher  fuel  costs,  these  expense
reductions were partially offset by higher lease expense  associated with 50 new
locomotives  leased in fourth  quarter 1999. The combined  KCSR/Gateway  Western
operating ratio for the third quarter of 2000 was 87.0% compared to 87.8% in the
same 1999 period.

      Interest  Expense.  Interest  expense for the three months ended September
30,  2000  increased  $7.8  million,   or  53%  from  the  prior  year  quarter.
Approximately  $3.6  million  of this  increase  was due to lower  overall  debt
balances offset by higher interest rates and amortization of debt issuance costs
associated with the debt  re-capitalization  in January 2000. The remaining $4.2
million  increase  relates to  non-recurring  interest costs associated with the
judgment in the Duncan Case discussed in "Recent Developments".

      Unconsolidated  Affiliates.  The Company  recorded equity earnings of $4.1
million from unconsolidated  affiliates for the three months ended September 30,
2000  compared to $5.1 million for the three months  ended  September  30, 1999.
This decline is attributed  primarily to equity  earnings from Grupo TFM,  which
fell $1.2 million quarter to quarter  (excluding the impact of the extraordinary
item discussed above).  Grupo TFM's continued operating  improvements during the
third  quarter of 2000 were  impacted by an increase in other  expenses  related
mostly to losses on the sale of certain  property and  inventory.  Additionally,
third  quarter  1999  results  included a $10.7  million  deferred  tax  benefit
(calculated under U.S. generally accepted  accounting  principles - "U.S. GAAP")
caused by a then weakening peso. For the third quarter of 2000, the deferred tax
benefit  under  U.S.  GAAP  was  $0.1  million  (excluding  the  impact  of  the
extraordinary item). Grupo TFM's revenues increased 25% quarter to quarter while
operating  costs rose due  primarily  to higher  fuel costs (87%) and higher car
hire costs (123%) due to increased traffic volumes and congestion related issues
at the U.S. Mexican border. As a result of higher operating income,  Grupo TFM's
operating  ratio  improved to 76.9% in the third quarter of 2000 versus 79.1% in
the third quarter of 1999.  Results of Grupo TFM are reported  herein on an U.S.
GAAP basis.


Combined  KCSR/Gateway  Western  Operating  Results.  The  following  provides a
comparative  analysis  of the revenue and  expense  components  of  KCSR/Gateway
Western operating  companies for the quarter ended September 30, 2000 versus the
quarter ended September 30, 1999:

Revenues

      Combined  KCSR/Gateway  Western  revenues  decreased   approximately  $4.4
million  quarter to quarter as declines in coal and chemicals and petroleum were
offset by increases in paper and forest  products and  intermodal and automotive
revenues.

      Coal. Coal revenues declined $3.2 million,  or 10.6%, for the three months
ended  September  30, 2000  compared  with the three months ended  September 30,
1999.  Lower coal revenues were  attributable  to an approximate  10% decline in
tons  delivered  coupled with a decline in revenue per carload due to changes in
length of haul.  Partially  offsetting  these traffic declines was the easing of
the congestion, which affected third quarter 1999 coal revenues.

      Chemical and petroleum products.  For the three months ended September 30,
2000,  chemical and petroleum product revenues decreased $1.6 million,  or 4.8%,
compared  with  the same  1999  period.  Miscellaneous  chemical  revenues  were
approximately  5% lower due to demand  driven  traffic  declines  while soda ash
revenues


                                    Page 28

declined approximately $1.1 million, or 71%, due to a merger within the chemical
industry and a new dedicated soda ash terminal opening on a competing  railroad,
which  diverted  soda ash  movements  from  KCSR.  Management  expects  soda ash
revenues to remain weak during the remainder of 2000 and into 2001.

      Paper and forest  products.  Paper and forest product  revenues  increased
$0.4 million,  or 1.5%, quarter to quarter primarily due to increased demand for
pulp/paper and lumber  products.  Management  believes that the market for paper
and forest  products  will  continue  to improve  during the  remainder  of 2000
compared to the weak market  demand  experienced  in 1999.  Further,  management
believes there is potential for an increase in shipments to Mexico due to higher
demand for woodpulp and scrap paper, and a potential market for lumber and panel
products as frame and panel construction  methods become more widely accepted in
Mexico.

      Agricultural  and  mineral  products.  Agricultural  and  mineral  product
revenues for the third  quarter of 2000 were $30.0  million  compared with $30.1
million for the third  quarter of 1999.  Increases  in  domestic  grain and food
product  revenues  arising  from  higher  demand and  changes in product mix and
length of haul were offset by declines in export grain revenues, metal/scrap and
military/other  revenues.  Export  grain  movements  continue  to be impacted by
competitive pricing issues and a weakness in the export market.

      Intermodal and automotive.  Intermodal and automotive  revenues were $15.9
million for the three months ended  September 30, 2000 compared to $15.7 million
for the three months ended  September 30, 1999.  This $0.2 million  increase was
comprised of an increase in automotive revenues of $1.3 million partially offset
by lower intermodal revenues of $1.1 million. Lower intermodal revenues resulted
primarily from the fourth quarter 1999 closure of two intermodal facilities that
were not meeting  expectations  and were not  profitable.  These  closures  have
resulted in lower  revenues,  but also have improved  operating  efficiency  and
profitability of this business sector.  Additionally,  during the second quarter
of 2000,  the  Company  entered  into a  marketing  agreement  with the  Norfolk
Southern  Corporation  ("NS") whereby the Company has agreed to perform  haulage
services for NS from Meridian,  Mississippi to Dallas,  Texas for an agreed upon
haulage  fee.  Currently  there  are  two  trains  operating  per day  with  the
expectation  that this will  increase in the future.  A portion of this  haulage
traffic has replaced previous carload intermodal traffic and some of the traffic
is  incremental  to the  Company.  A portion  of the third  quarter  decline  in
intermodal  revenues results from the NS haulage traffic that replaced  existing
intermodal revenues as KCSR is now receiving a smaller per unit haulage fee than
the share of  revenue  it  received  as part of the  intermodal  movement.  This
traffic,  however, is more profitable to KCSR as certain costs such as fuel, car
hire are borne by NS. In the long term,  intermodal  revenues  are  expected  to
increase as a result of incremental business gained from this haulage agreement.
Automotive  traffic has  increased  due, in part,  to an agreement  reached with
General Motors for automobile parts traffic  originating in the upper midwest of
the United States and terminating in Mexico.  Also  contributing to the increase
in automotive  revenues was additional  traffic  handled by Gateway Western from
Mexico, Missouri to Kansas City originating from the NS. Management expects that
both  intermodal and automotive  revenues will increase  during the remainder of
2000, primarily related to the relationships with NS and CN/IC.


                                    Page 29

Costs and Expenses

      For the three  months  ended  September  30,  2000,  KCSR/Gateway  Western
operating  expenses  decreased  $5.1 million from the same three month period in
1999, largely due to lower salaries and wages, car hire, materials and supplies,
and purchased  services expense,  partially offset by an increase in fuel costs,
as well as higher locomotive lease and maintenance costs.

      Salaries, Wages and Benefits. Salaries, wages and benefits expense for the
three months ended  September 30, 2000 decreased $1.7 million,  or 3.4%,  versus
the comparable 1999 period. Wage increases to certain classes of union employees
were more than offset by reduced employee counts,  lower overall overtime costs,
and the use of fewer relief crews. Improvements in operating efficiencies during
third quarter 2000,  as well as the absence of  congestion  related  issues that
existed  during third quarter 1999,  contributed  to the decline in overtime and
relief crew costs.

      Fuel.  For the  three  months  ended  September  30,  2000,  fuel  expense
increased $3.6 million,  or 41.9%,  compared to the three months ended September
30,  1999,  as a result of a 77%  increase in the average fuel price per gallon,
partially  offset  by a 25%  decrease  in fuel  usage.  Fuel  costs  represented
approximately 9.8% of total KCSR/Gateway  Western operating expenses compared to
6.7% in 1999.  While higher market prices have  significantly  impacted  overall
fuel costs,  improved fuel  efficiency  was achieved as a result of the lease of
the 50 new  locomotives  by  KCSR in late  1999  as well as an  aggressive  fuel
conservation program initiated in mid-1999.

      Car Hire.  For the third  quarter  of 2000,  car hire  expense,  (car hire
payable, net of receivables),  declined $1.7 million, or 29.3%,  compared to the
third  quarter of 1999.  Net car hire costs  declined  as a result of lower rail
cars on-line  primarily due to improved  operations and the easing of congestion
compared to third quarter 1999.

      Casualties and Insurance.  For the three months ended  September 30, 2000,
casualties and insurance  expense decreased $1.3 million compared with the three
months  ended  September  30,  1999,  reflecting  lower  derailment  costs  (two
significant  derailments  in third  quarter  1999)  partially  offset  by higher
personal injury-related costs incurred during the third quarter of 2000.

      Operating  Leases.  For the quarter ending  September 30, 2000,  operating
lease expense increased $1.0 million,  or 7.8%, compared to the third quarter of
1999, as a result of the 50 new GE 4400 AC locomotives  leased during the fourth
quarter of 1999.

      Depreciation and Amortization.  Depreciation and amortization  expense was
$13.0 for the three months ended  September  30, 2000  compared to $13.1 million
for the three months ended September 30, 1999 due to increases in the asset base
offset by property retirements and lower STB approved depreciation rates.

      Operating  Income  and  Operating  Ratio.  Operating  income for the three
months ended September 30, 2000 increased $0.7 million, or 3.9%, compared to the
same  three-month  period in 1999. This improvement in operating income resulted
from a 3.0% decrease in revenues offset by a 3.9% decline in operating expenses.
These factors also resulted in a combined  KCSR/Gateway  Western operating ratio
of 87.0% in the third  quarter of 2000 compared to 87.8% in the third quarter of
1999.

                                    Page 30

Nine Months Ended September 30, 2000 Compared With The Nine Months
Ended September 30, 1999

      Income  from  Continuing  Operations.  The  Company  reported  income from
continuing  operations of $21.8 million for the nine months ended  September 30,
2000 compared  with $17.4 million for the nine months ended  September 30, 1999.
This $4.4 million period over period  increase  resulted  primarily from a $14.0
million year to date increase in equity earnings from Grupo TFM partially offset
by a  decline  in U.S.  operating  income of $3.6  million  and an  increase  in
interest  expense of $15.1  million.  Also  contributing  to the increase was an
improvement  in income tax expense of $7.7 million due to certain  third quarter
2000  non-taxable  items as well as a lower  effective  tax rate  related to the
Company's equity earnings from Grupo TFM.

      Revenues.  Revenues  totaled  $437.4  million for the first nine months of
2000 versus $449.7 million in the comparable period in 1999. This $12.3 million,
or 2.7%, decrease resulted from lower combined  KCSR/Gateway Western revenues of
approximately  $7.3  million,  as well as  lower  revenues  at  several  smaller
transportation  companies  due to demand driven  declines.  Similar to the third
quarter of 2000, combined  KCSR/Gateway Western revenues decreased primarily due
to competitive  pricing pressures and demand driven traffic declines in coal and
chemical and petroleum  products  partially offset by increased paper and forest
product and automotive traffic.

      Operating  Expenses.  Operating  expenses decreased $8.7 million period to
period in spite of diesel fuel costs, which increased $10.9 million,  or 45%, in
the first nine months of 2000  compared to the same period in 1999.  Operational
efficiencies  at KCSR/ Gateway  Western led to a decrease in salaries and wages,
car hire, materials/supplies and other expense. Also contributing to the decline
in  operating  expenses  was a $3.0  million  revision  to the  estimate  of the
allowance  for doubtful  accounts as discussed  in the third  quarter  analysis.
These  declines  were  offset by higher  fuel  costs and  higher  lease  expense
associated with 50 new locomotives leased in fourth quarter 1999.

      Interest  Expense.  Interest expense for year to date 2000 increased $15.1
million, or 35%, from the prior year period. Approximately $10.9 million of this
increase was due to lower overall debt balances  offset by higher interest rates
and   amortization   of  debt   issuance   costs   associated   with   the  debt
re-capitalization  in January 2000. The remaining $4.2 million  increase relates
to non-recurring  interest costs associated with the judgment in the Duncan Case
discussed in "Recent Developments".

      Unconsolidated  Affiliates.  The Company recorded equity earnings of $22.1
million from  unconsolidated  affiliates for the nine months ended September 30,
2000 compared to $8.3 million for the nine months ended  September 30, 1999. The
increase is attributed  primarily to equity earnings from Grupo TFM,  reflecting
continued   operating   improvements   and  the  tax  impact  of  inflation  and
fluctuations  in the valuation of the peso versus the U.S.  dollar.  Grupo TFM's
operating  ratio  improved to 72.4% for year to date 2000  versus  76.4% for the
comparable 1999 period as revenues increased approximately 24% year over year.


Combined  KCSR/Gateway  Western  Operating  Results.  The  following  provides a
comparative  analysis  of the revenue and  expense  components  of  KCSR/Gateway
Western operating  companies for the nine months ended September 30, 2000 versus
the nine months ended September 30, 1999:

                                    Page 31

Revenues

      Combined  KCSR/Gateway  Western  revenues  decreased   approximately  $7.3
million  period  to  period  as a  result  of  declines  in coal,  chemical  and
petroleum,  agriculture and mineral and haulage  revenues offset by increases in
paper and forest product and intermodal and automotive revenues.

      Coal.  Coal revenues  declined $4.2 million,  or 4.9%, for the nine months
ended September 30, 2000 compared with the nine months ended September 30, 1999.
Lower unit coal traffic resulted from the same factors as those discussed in the
third  quarter  analysis.  Coal  accounted  for 20.7% and 21.5% of total carload
revenues for the nine months ended September 30, 2000 and 1999, respectively.

      Chemical and petroleum  products.  For the nine months ended September 30,
2000,  chemical and petroleum product revenues decreased $4.5 million,  or 4.5%,
compared with the same 1999 period.  This decrease  results  primarily from soda
ash revenues, which declined due to a new facility opened on a competitor's rail
line as discussed in the third quarter analysis. Chemical and petroleum products
accounted  for  24.2% of  total  carload  revenues  for the  nine  months  ended
September 30, 2000 versus 25.1% for the nine months ended September 30, 1999.

      Paper and forest  products.  Paper and forest product  revenues  increased
$2.0 million,  or 2.6%,  period to period as a result of an increased demand for
paper/pulp products and lumber products.  This increased demand results from the
expansion  of several  paper mills that are directly  served by KCSR.  Paper and
forest products  accounted for 20.2% and 19.5% of total carload revenues for the
nine months ended September 30, 2000 and 1999, respectively.

      Agricultural  and  mineral  products.  Agricultural  and  mineral  product
revenues  decreased $1.0 million,  or 1.1%, for the nine months ended  September
30, 2000 compared with the nine months ended September 30, 1999. This decline is
comprised of lower export grain  revenues due to competitive  pricing  pressures
and  weakness in the export  market and  military/other  revenues  due to a 1999
National Guard move from Camp Shelby,  Mississippi  to Fort Irving,  California.
These declines were partially offset by higher metal/scrap  revenues relating to
an increase in domestic oil  exploration,  which uses steel, one of the products
that KCSR/Gateway Western transports,  in its process.  Agricultural and mineral
products  accounted  for 23.2% of total  carload  revenues  for each of the nine
months ended September 30, 2000 and 1999.

      Intermodal and Automotive.  Intermodal and automotive  revenues  increased
$4.0  million,  or 9.3%,  for year to date 2000  compared  to year to date 1999.
Similar to third  quarter,  this  improvement  is  comprised  of an  increase in
automotive revenues,  which more than doubled period to period, partially offset
by  a  decline  in  intermodal  revenues.  Intermodal  and  automotive  revenues
accounted  for 11.8% and 10.7% of total  carload  revenues  for the nine  months
ended September 30, 2000 and 1999, respectively.

Costs and Expenses

      For the  nine  months  ended  September  30,  2000,  KCSR/Gateway  Western
operating  expenses  decreased $1.6 million from the same  nine-month  period in
1999.  Declines in salaries and wages, car hire and  materials/supplies  expense
(arising  primarily  from improved  operations  and easing of  congestion)  were
partially  offset by higher fuel costs and lease  expenses as  discussed  in the
third quarter analysis.

                                    Page 32

      Salaries, Wages and Benefits. Salaries, wages and benefits expense for the
nine  months  ended  September  30,  2000  decreased  $2.6  million  versus  the
comparable  1999 period.  Similar to third  quarter,  wage  increases to certain
classes of union employees were offset by reduced employee counts, lower overall
overtime  costs,  and the use of fewer relief crews.  Improvements  in operating
efficiencies  during the first nine  months of 2000,  as well as the  absence of
congestion-related  issues  that  existed  during  the  third  quarter  of  1999
contributed to the decline in overtime and relief crew costs.

      Fuel. For the nine months ended September 30, 2000, fuel expense increased
approximately  44.7%  compared  to the nine months  ended  September  30,  1999.
Similar to third  quarter,  an increase in the average  fuel price per gallon of
approximately  64% was offset by a decrease in fuel usage of approximately  12%.
Improved  fuel  efficiency  was  achieved as a result of the lease of the 50 new
fuel-efficient  locomotives  by KCSR in late 1999 as well as an aggressive  fuel
conservation program initiated in mid-1999. Fuel costs represented approximately
9.5% of total KCSR/Gateway Western operating expenses compared to 6.5% in 1999.

      Car Hire.  For the nine months ended  September 30, 2000, car hire expense
declined $5.3 million, or 32.3%, compared to the same nine-month period in 1999.
This improvement was driven by improved operations and the easing of congestion.
During 1999,  KCSR/Gateway  Western experienced  significant  congestion-related
issues.

      Casualties  and Insurance.  For the nine months ended  September 30, 2000,
casualties and insurance  expense  decreased $1.0 million compared with the nine
months ended September 30, 1999,  reflecting  lower  derailment  costs partially
offset by higher personal injury-related costs.

      Operating Leases. For the nine months ended September 30, 2000,  operating
lease  expense  increased  $4.2 million,  or 11.0%,  compared to the nine months
ended  September  30,  1999  primarily  as a  result  of the 50 new GE  4400  AC
locomotives leased during the fourth quarter of 1999.

      Depreciation and Amortization.  Depreciation and amortization  expense was
$39.4  million for the nine months ended  September  30, 2000  compared to $39.5
million  for  the  nine  months  ended   September  30,  1999  due  to  property
acquisitions offset by property retirements and lower STB approved  depreciation
rates.

      Operating Income and Operating Ratio. Operating income for the nine months
ended  September 30, 2000  decreased  $5.7 million,  or 8.7%, to $59.6  million,
resulting from a $7.3 million  decrease in revenues and a $1.6 million  decrease
in operating  expenses.  These factors also resulted in a combined  KCSR/Gateway
Western operating ratio of 86.0% for year to date 2000 compared to 84.9% for the
same 1999 period.



TRENDS AND OUTLOOK

The  Company's  third  quarter and year to date 2000 diluted  earnings per share
from  continuing  operations  ($.05 and $.37,  respectively)  decreased  38% and
increased  23%,  respectively,  compared  to the same  periods in 1999 ($.08 and
$.30,  respectively).  KCSI's 2000 results have been  favorably  affected by the
ongoing results of the investment in Grupo TFM as well as KCSR/Gateway Western's
success in maintaining  an effective  operating  cost  structure.  Domestically,
however,  the Company's  results continue to be affected by competitive  revenue
pressures,  higher fuel costs and higher interest costs.  Combined  KCSR/Gateway
Western  revenues  declined  approximately  3% during the third  quarter of 2000
compared  to the third  quarter  of 1999 while  year to date  revenues


                                    Page 33

declined  approximately 2% period to period.  These revenue declines continue to
reflect  competitive  pricing issues, as well as demand driven traffic declines.
Interest  expense rose  approximately  53% and 35% for the three and  nine-month
periods ended September 30, 2000, respectively,  compared to the same prior year
periods.  Higher interest rates and the  amortization  of debt costs  associated
with the  re-capitalization  offset  lower debt  balances.  Additionally,  third
quarter and year to date results included $4.2 million of non-recurring interest
costs  associated  with the Duncan  Case.  Operationally,  KCSR and  Gateway are
operating more efficiently than in 1999 as evidenced by lower operating expenses
and certain improved operating measures,  such as increased train speeds, faster
coal cycle times, lower terminal dwell times, reduced overtime hours and the use
of fewer relief  crews.  Despite  significantly  higher diesel fuel costs (which
rose approximately 42% and 45% for the three and nine months ended September 30,
2000,  respectively),  the  Company  was able to reduce  operating  expenses  by
approximately  6.8% and  2.2%  for the  third  quarter  and  year to date  2000,
respectively. These reduced operating expenses were primarily due to operational
improvements  and the easing of  congestion  at KCSR and Gateway  Western.  Also
contributing to this decline in operating  expenses was a $3.0 million  revision
to the estimate of the  allowance for doubtful  accounts  based on collection of
approximately  $1.8 million of a  receivable  and  agreement  for payment on the
remaining  amount.  Grupo TFM operating  income  improved for both the three and
nine-month  periods ended September 30, 2000 due primarily to revenue growth and
cost containment.

A current  outlook for the Company's  businesses for the remainder of 2000 is as
follows  (refer to the first  paragraph  of  "Overview"  section of this Item 2,
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations, regarding forward-looking comments):

   Management  expects  that  general  commodities,  intermodal  and  automotive
   traffic  will  continue to be largely  dependent  on economic  trends  within
   certain   industries  in  the  geographic  region  served  by  the  railroads
   comprising the NAFTA Railway.  Based on anticipated  traffic levels,  revenue
   for general  freight and  intermodal/automotive  traffic for the remainder of
   2000 is not  expected  to  fluctuate  significantly  compared  to 1999.  Coal
   revenue,  however,  is expected to decline in fourth quarter 2000 compared to
   fourth  quarter  1999  due to a coal  customer  reducing  excess  stockpiles.
   Variable costs and expenses are expected to be at levels  proportionate  with
   revenue  activity,  except for fuel  expenses,  which are  expected to mirror
   market conditions.

   The 1999 congestion issues adversely affected service quality.  Customers are
   reacting positively to the service reliability now being provided as a result
   of  management's  focused  efforts.  In the  short-term,  lower coal traffic,
   competitive  pricing  issues and weak export  markets for grain and chemicals
   will present  revenue  challenges  to the rail  operations.  However,  in the
   longer term,  management  believes that, with the effective cost controls and
   utilization  improvements  noted,  the NAFTA Railway  continues to provide an
   attractive  service for shippers and is  well-positioned to take advantage of
   the continued growth potential of NAFTA traffic.

   The Company  expects to continue to participate in the  earnings/losses  from
   its equity investments in Grupo TFM, Southern Capital and Mexrail. Management
   does not make any  assurances  as to the impact that a change in the value of
   the peso or a change in Mexican  inflation  will have on the results of Grupo
   TFM.

LIQUIDITY AND CAPITAL RESOURCES

Unless otherwise indicated,  the discussion that follows addresses the liquidity
and capital of the continuing operations of the Company.

                                    Page 34



Summary  cash flow  data for the  continuing  operations  of the  Company  is as
follows (in millions):


                                                        
                                                    Nine Months
                                                 Ended September 30,
                                                   2000       1999
Cash flows provided by (used for):
   Operating activities                         $  52.3     $ 171.2
   Investing activities                           (74.5)      (54.1)
   Financing activities                            40.5       (54.3)
                                                -------     --------
   Cash and equivalents:
    Net increase                                   18.3        62.8
    At beginning of year                           11.9         5.6
                                                -------     -------
    At end of period                            $  30.2     $  68.4
                                                =======     =======

During the nine months ended September 30, 2000, the Company's consolidated cash
position  increased $18.3 million from December 31, 1999. This increase resulted
primarily from income from continuing operations, net proceeds from the issuance
of long-term  debt and the issuance of common stock under  employee stock plans,
partially offset by changes in working capital balances,  property  acquisitions
and debt  issuance  costs.  Net  operating  cash inflows were $52.3  million and
$171.2  million  for  the  nine  months  ended  September  30,  2000  and  1999,
respectively.  This $118.9  million  decline in operating  cash flows was mostly
attributable to the 1999 receipt of a $56.6 million transfer from Stilwell. Also
contributing  to the  decline was the  payment  during 2000 of certain  accounts
payable and accrued  liabilities,  including  accrued  interest of approximately
$11.4  million  related  to  KCSI  indebtedness,  as well  as a  decline  in the
contribution of domestic operations to income from continuing operations.

Net investing cash outflows were $74.5 million and $54.1 million during the nine
months  ended  September  30, 2000 and 1999,  respectively.  This $20.4  million
difference results primarily from higher year to date 2000 capital  expenditures
and higher  investments in affiliates,  partially offset by an increase in funds
received from property dispositions.  Additionally, during the nine months ended
September 30, 1999,  Stilwell repaid $16.6 million of  intercompany  debt to the
Company.

During  the  first  nine  months  of 2000,  financing  cash  outflows  were used
primarily for the repayment of debt,  debt  issuance  costs and cash  dividends.
Financing  cash inflows were  generated from proceeds from issuance of long-term
debt and proceeds from the issuance of common stock under stock plans.

Net  financing  cash  inflows  were  $40.5  million  for the nine  months  ended
September 30, 2000  compared  with net financing  cash outflows of $54.3 million
during the comparable  1999 period.  This  difference was primarily due to $47.4
million of net long-term borrowings year to date 2000 compared to net repayments
of $44.9  million  during the same 1999  period.  Additionally,  during the nine
months ended September 30, 1999, the Company repurchased $24.6 million of common
stock compared to no repurchases  during 2000.  Also,  dividends paid during the
nine months ended September 30, 2000 were $4.8 million compared to $17.8 million
in the same  1999  period.  Partially  offsetting  these net  increases  in cash
inflows was an $8.6 million  period to period  decline in the proceeds  received
from the issuance of common stock under stock plans, as well as costs associated
with the debt transactions in 2000.

Cash flows from  operations are expected to be positive  during the remainder of
2000 arising from operating income, which has historically  resulted in positive
operating  cash flows.  Investing  activities  will continue to use  significant
amounts of cash. Future roadway improvement projects will be funded by operating
cash flows or through borrowings under existing lines of credit.

In addition to operating cash flows, the Company has financing available through
its various  lines of credit  with a maximum  borrowing  amount of $150  million
(until  January  2001 at which  time  the  line of  credit  is  reduced  to $100
million). As of September 30, 2000, $145 million was available under these lines
of credit.  These credit agreements  contain,  among other  provisions,  various


                                    Page 35

financial   covenants.   The  Company  was  in  compliance  with  these  various
provisions, including the financial covenants, as of September 30, 2000. Because
of certain  financial  covenants  contained in the credit  agreements,  however,
maximum   utilization  of  the  Company's  available  lines  of  credit  may  be
restricted.

The Company also has a Universal  Shelf  Registration  Statement  ("Registration
Statement")  filed in September  1993, as amended in April 1996 for the offering
of up to $500 million in aggregate  amount of  securities.  The  Securities  and
Exchange Commission  declared the Registration  Statement effective on April 22,
1996;  however,  no securities have been issued.  The Company has not engaged an
underwriter  for these  securities and has no current plans to issue  securities
under this  Registration  Statement.  Subject to any restrictions  under the KCS
Credit  Facility,  management  expects  that any net  proceeds  from the sale of
securities under the Registration  Statement would be added to the general funds
of the Company and used principally for general  corporate  purposes,  including
working  capital,  capital  expenditures,  and acquisitions of or investments in
businesses and assets.

As discussed in "Recent Developments", the Company has a net long term liability
of $7.2 million  relating to the judgment from the Supreme Court of Louisiana in
the Duncan Case. If the Company does not receive relief through its  application
for rehearing with the Supreme Court of Louisiana, the Company will consider the
options of satisfying the judgment or seeking relief in the Supreme Court of the
United  States.  Should the  Company  elect to satisfy  the  judgment,  the $7.2
million would be reclassified to a current liability. Through its available cash
balances  and credit  facilities,  the  Company  believes  it has the  necessary
liquidity to meet this obligation.

As discussed in "Recent Developments",  in the third quarter of 2000 the Company
refinanced  a $200  million  term loan due January 11, 2001 with $200 million of
8-year Senior  Unsecured  Notes.  The Notes bear a fixed annual interest rate of
9.5% and are due on October 1, 2008.

In January 2000,  KCSI borrowed $125 million under the Stilwell  Credit Facility
to retire other debt obligations as discussed in "Recent Developments". Stilwell
assumed this credit  facility  and repaid the $125  million in March 2000.  Upon
such assumption, KCSI was released from all obligations, and Stilwell became the
sole obligor,  under the Stilwell Credit  Facility.  The Company's  indebtedness
decreased as a result of the assumption of this indebtedness by Stilwell.

As discussed  previously,  in  preparation  for the Spin-off,  KCSI  completed a
re-capitalization  of its  debt  structure  in  January  2000.  As  part  of the
re-capitalization,  the  Company  refinanced  public debt and  revolving  credit
facilities.  The Company believes this capital structure  provides the necessary
liquidity to meet anticipated  operating,  capital and debt service requirements
and other commitments for the remainder of 2000 and 2001.

Assuming  the Spin-off  had  occurred as of December  31,  1999,  the  Company's
consolidated  ratio of debt to total  capitalization  was 51.7% at September 30,
2000 compared to 61.9% at December 31, 1999.  The Company's  debt declined $75.5
million  from  December 31, 1999 to $685.4  million at  September  30, 2000 as a
result of net repayments in connection with the  re-capitalization  discussed in
"Recent   Developments".   Excluding  the  equity  of  Stilwell,  the  Company's
stockholders'  equity  increased $171.0 million from December 31, 1999 to $639.5
million at September  30, 2000.  This  increase was due primarily to income from
continuing  operations,  the issuance of common  stock under the Employee  Stock
Purchase  Plan and other  plans,  as well as the $125 million of debt assumed by
Stilwell. This increase in equity, coupled with the decline in debt, resulted in
a lower ratio of debt to total  capitalization at September 30, 2000 compared to
December 31, 1999.

Management  anticipates  that the  ratio of debt to  total  capitalization  will
remain flat during the remainder of 2000.

                                    Page 36

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

The Company has had no significant  changes in its  Quantitative and Qualitative
Disclosures  About Market Risk from that  previously  reported in the  Company's
Annual Report on Form 10-K for the year ended December 31, 1999.




                                    Page 37

PART II - OTHER INFORMATION


Item 1.     Legal Proceedings

Part I, Item 1.  Financial  Statements,  Note 11 to the  Consolidated  Condensed
Financial  Statements  of  this  Form  10-Q is  hereby  incorporated  herein  by
reference.


Item 6.     Exhibits and Reports on Form 8-K

a)     Exhibits


       Exhibit 27.1 -  Financial Data Schedule


b) Reports on Form 8-K

       The  Company  filed a Current  Report on Form 8-K/A  dated July 12,  2000
       under  Item  2,  reporting  the  tax-free  distribution  of  all  of  the
       outstanding   shares  of  common   stock  of  Stilwell   Financial   Inc.
       ("Stilwell")  to the common  stockholders  of KCSI.  Pro forma  financial
       statements  reflecting  the  departure  of Stilwell  businesses  from the
       Company's  consolidation  are  included  with this  Current  Report.  The
       Company  also  reported  that  under  Item  5,  KCSI's   Certificate   of
       Incorporation was amended to effect a one-for-two  reverse stock split of
       KCSI Common stock.

       The Company filed a Current  Report on Form 8-K dated  September 11, 2000
       under Item 5, reporting the Company's announcement of the commencement of
       a private  offering  of $200  million of 8-year  Senior  Unsecured  Notes
       pursuant to Rule 144A and Regulation S.

       The Company filed a Current  Report on Form 8-K dated  September 27, 2000
       under Item 5, reporting the  completion of the previously  announced $200
       million debt securities offering.

       The  Company  filed a Current  Report on Form 8-K dated  October 31, 2000
       under Item 9,  furnishing a press release of the Company's  third quarter
       and year to date 2000  operating  results  and  certain  other  financial
       information. These items (including exhibits furnished under Item 7) were
       furnished  under Item 9 of this  Current  Report on Form 8-K  pursuant to
       Regulation FD and are not deemed to be filed.











                                    Page 38




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly  caused  this  report  to be signed  on its  behalf by the  undersigned
thereunto duly authorized and in the capacities indicated on November 17, 2000.


Kansas City Southern Industries, Inc.


                              /s/ Robert H. Berry
- --------------------------------------------------------
                                Robert H. Berry
              Senior Vice President and Chief Financial Officer
                         (Principal Financial Officer)



                             /s/ Louis G. Van Horn
- --------------------------------------------------------
                               Louis G. Van Horn
                        Vice President and Comptroller
                          (Principal Accounting Officer)



                                    Page 39