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 March 31, 1999

                                    OR

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

                     for the transition period from to

                       Commission File Number 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 May 6, 1999

Common Stock, $.01 per share par value                        110,333,717 Shares
- --------------------------------------------------------------------------------

1

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

                                   FORM 10-Q

                                MARCH 31, 1999

                                     INDEX


PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

Introductory Comments                                                         2

Consolidated Condensed Balance Sheets -
     March 31, 1999 and December 31, 1998                                     3

Consolidated Condensed Statements of Income -
     Three Months Ended March 31, 1999 and 1998                               4

Computation of Basic and Diluted Earnings per Common Share                    4

Consolidated Condensed Statements of Cash Flows -
     Three Months Ended March 31, 1999 and 1998                               5

Notes to Consolidated Condensed Financial Statements                          6

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations                               11

Item 3.  Qualitative and Quantitative Disclosures About Market Risk          25


PART II - OTHER INFORMATION

Item 1.  Legal Proceedings                                                   26

Item 4.  Submission of Matters to a Vote of Security Holders                 26

Item 6.  Exhibits and Reports on Form 8-K                                    27


SIGNATURES                                                                   28



2



                    KANSAS CITY SOUTHERN INDUSTRIES, INC.

                                  FORM 10-Q

                               MARCH 31, 1999


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, 1998 and  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations  included in this Form 10-Q.  Results for the three months
ended March 31, 1999 are not necessarily  indicative of the results expected for
the full year 1999.


3



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


                                                            March 31,          December 31,
                                                                1999                1998    
ASSETS

                                                                          
Current Assets:
    Cash and equivalents                                   $       42.5         $       27.2
    Investments in advised funds                                  169.8                149.1
    Accounts receivable, net                                      244.9                208.4
    Inventories                                                    50.5                 47.0
    Other current assets                                           29.4                 37.8
                                                            -----------          -----------
        Total current assets                                      537.1                469.5

Investments held for operating purposes                           717.7                707.1

Properties (net of $581.8 and $567.1 accumulated
    depreciation and amortization, respectively)                1,273.1              1,266.7

Intangibles and Other Assets, net                                 181.3                176.4
                                                            -----------          -----------

    Total assets                                           $    2,709.2         $    2,619.7
                                                           ============         ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
    Debt due within one year                               $       10.9         $       10.7
    Accounts and wages payable                                    124.7                125.8
    Accrued liabilities                                           191.4                159.7
                                                            -----------          -----------
        Total current liabilities                                 327.0                296.2
                                                            -----------          -----------

Other Liabilities:
    Long-term debt                                                829.0                825.6
    Deferred income taxes                                         417.4                403.6
    Other deferred credits                                        123.6                128.8
                                                            -----------          -----------
        Total other liabilities                                 1,370.0              1,358.0
                                                            -----------          -----------

Minority Interest in consolidated subsidiaries                     27.5                 34.3
                                                            -----------          -----------

Stockholders' Equity:
    Preferred stock                                                 6.1                  6.1
    Common stock                                                    1.1                  1.1
    Retained earnings                                             903.7                849.1
    Accumulated other comprehensive income                         73.8                 74.9
                                                            -----------          -----------
        Total stockholders' equity                                984.7                931.2
                                                            -----------          -----------

    Total liabilities and stockholders' equity             $    2,709.2         $    2,619.7
                                                           ============         ============


     See accompanying notes to consolidated condensed financial statements.

4


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

                                                                        Three Months
                                                                       Ended March 31,    
                                                                   1999             1998  
                                                                          
Revenues                                                        $   385.2       $    295.7

Costs and expenses                                                  242.5            188.5
Depreciation and amortization                                        21.1             16.8
                                                                ---------       ----------
     Operating Income                                               121.6             90.4

Equity in net earnings (losses) of unconsolidated affiliates:
     DST Systems, Inc.                                               10.7              7.5
     Grupo Transportacion Ferroviaria
       Mexicana, S.A. de C.V.                                         0.5             (3.1)
     Other                                                            1.1              0.4
Interest expense                                                    (15.0)           (17.4)
Other, net                                                            5.8              6.6
                                                                ---------       ----------
     Pretax Income                                                  124.7             84.4

Income tax provision                                                 44.9             31.5
Minority interest in
  consolidated earnings                                              11.2              6.7
                                                                ---------       ----------

Net Income                                                           68.6             46.2

Other Comprehensive Income (Loss), net of tax:
     Unrealized gain (loss) on securities                            (0.1)            29.9
     Cumulative translation adjustment                               (1.0)             -  
                                                                ---------       ----------

Comprehensive Income                                            $    67.5       $     76.1
                                                                =========       ==========


Computation of Basic and Diluted Earnings per Common Share

Basic Earnings per Common Share                                 $    0.62       $     0.43
                                                                =========       ==========

Diluted Earnings per Common Share                               $    0.60       $     0.41
                                                                =========       ==========

Weighted Average Common
  Shares Outstanding (in thousands)                               109,843          108,573
                                                                ----------      ----------

Diluted Common Shares
     Outstanding (in thousands)                                   113,675          112,353
                                                                ----------      ----------

Cash Dividends Paid:
     Per Preferred share                                        $     .25       $      .25
     Per Common share                                           $     .04       $      .04


       See accompanying notes to consolidated condensed financial statements.

5



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

                                                                    Three Months
                                                                   Ended March 31,      
                                                               1999              1998   
                                                                      
CASH FLOWS PROVIDED BY (USED FOR):

OPERATING ACTIVITIES:
   Net income                                               $    68.6       $     46.2
   Adjustments to net income:
     Depreciation and amortization                               21.1             16.8
     Deferred income taxes                                       15.0             11.3
     Equity in undistributed net earnings                       (12.3)            (4.8)
     Distributions from equity investments                        0.1              5.2
     Minority interest in consolidated earnings                  (8.4)           (13.5)
     Employee deferred compensation expenses                     (2.4)            (4.0)
   Changes in working capital items:
     Accounts receivable                                        (36.6)           (17.1)
     Inventories                                                 (3.5)             0.1
     Other current assets                                         7.7            (11.7)
     Accounts and wages payable                                  (1.7)            (5.3)
     Accrued liabilities                                         35.6            (21.0)
   Other, net                                                    (8.7)            (2.9)
                                                            ---------       ----------
     Net                                                         74.5             (0.7)
                                                            ---------       ----------

INVESTING ACTIVITIES:
   Property acquisitions                                        (23.9)           (15.1)
   Proceeds from disposal of property                             0.2              1.9
   Investment in and loans with affiliates                       (1.0)             -
   Net (purchases) sales of investments in advised funds        (18.5)            12.6
   Other, net                                                    (1.3)             5.3
                                                            ---------       ----------
     Net                                                        (44.5)             4.7
                                                            ---------       ----------

FINANCING ACTIVITIES:
   Proceeds from issuance of long-term debt                      31.8             24.2
   Repayment of long-term debt                                  (28.2)           (50.6)
   Proceeds from stock plans                                     13.4             15.8
   Stock repurchased                                            (22.3)            (0.6)
   Cash dividends paid                                           (8.9)            (8.9)
   Other, net                                                    (0.5)             2.3
                                                            ---------       ----------
     Net                                                        (14.7)           (17.8)
                                                            ---------       ----------

CASH AND EQUIVALENTS:
   Net increase (decrease)                                       15.3            (13.8)
   At beginning of year                                          27.2             33.5
                                                            ---------       ----------
   At end of period                                         $    42.5       $     19.7
                                                            =========       ==========


     See accompanying notes to consolidated condensed financial statements.

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"; "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 March 31, 1999 and December 31, 1998, and the results
of operations and cash flows for the three months ended March 31, 1999 and 1998.

2. The results of  operations  for the three months ended March 31, 1999 are not
necessarily indicative of the results to be expected for the full year 1999.

3. The  accompanying  consolidated  condensed  financial  statements  have  been
prepared  consistently  with  accounting  policies  described  in  Note 1 to the
consolidated  financial  statements  included in the Company's  Annual Report on
Form 10-K for the year ended December 31, 1998.

4. As previously disclosed,  the Company announced its intention to separate the
Transportation  and Financial  Services  segments through a proposed dividend of
the stock of a new holding  company for its Financial  Services  businesses (the
"Separation"). In January 1999, the Company resubmitted a filing to the Internal
Revenue  Service  ("IRS")  requesting  a  favorable  tax ruling on the  proposed
Separation.  Subject  to  receipt  of  a  favorable  ruling  from  the  IRS  and
consideration of other relevant factors,  management  anticipates  completion of
the Separation to occur before the end of 1999.

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.  For the
three months ended March 31, 1999 and 1998,  the total  incremental  shares from
assumed  conversion of stock options was 3,832,025 and 3,780,000,  respectively,
and these  incremental  shares  were  included  in the  computation  of  diluted
earnings per share.  However,  options to purchase 2,000 shares were excluded in
the first  quarter 1998  computation  because the exercise  prices  exceeded the
average  market  price of the common  shares.  There were no options to purchase
shares excluded in the first quarter 1999 computation.

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  subsidiaries   and  affiliates.   These
adjustments  were not  material  for the three  months  ended March 31, 1999 and
1998, respectively.

6. The Company's  inventories ($50.5 million at March 31, 1999 and $47.0 million
at December 31, 1998) primarily consist of material and supplies related to rail
transportation. Other components of inventories are not material.

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 March 31, 1999
include,  among others,  equity interests in DST Systems,  Inc.  ("DST"),  Grupo
Transportacion  Ferroviaria  Mexicana,  S.A.  de C.V.  ("Grupo  TFM"),  Southern
Capital Corporation, LLC ("Southern Capital"), Mexrail, Inc. ("Mexrail") and the
Panama Canal Railway Company.

DST has a Stockholders'  Rights Agreement,  which includes provisions  providing
that under  certain  circumstances  following a "change in control" of KCSI,  as
defined in DST's  Stockholders'  Rights Agreement,  substantial  dilution of the
Company's  interest in DST could result.  Additionally,  the Company is party to
certain agreements with Transportacion  Maritima Mexicana,  S.A. de C.V. ("TMM")
covering the Grupo TFM and Mexrail ventures. TMM (including its affiliates) owns
approximately 38.4% of Grupo TFM and 51% of


7

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.



Combined condensed financial  information of unconsolidated  affiliates is shown
below:


Financial Condition (dollars in millions):

                                          March 31, 1999                               December 31, 1998       
                              DST (a)      Grupo TFM (b)      Other        DST (a)      Grupo TFM (b)      Other

                                                                                      
  Current assets            $    393.6    $      118.8     $   34.5       $    375.8    $     109.9     $   33.1
  Non-current assets           1,504.3         1,970.0        283.6          1,521.2        1,974.7        277.0
                            ----------    ------------     --------       ----------    -----------     --------

       Assets               $  1,897.9    $    2,088.8     $  318.1       $  1,897.0    $   2,084.6     $  310.1
                            ==========    ============     ========       ==========    ===========     ========

  Current liabilities       $    222.2    $      254.2     $   48.6       $    268.6    $     233.9     $   48.6
  Non-current liabilities        478.2           726.6        197.9            462.2          745.0        191.7
  Minority interest                -             343.3          -                -            342.4          -
  Equity of stockholders
    and partners               1,197.5           764.7         71.6          1,166.2          763.3         69.8
                            ----------    ------------     --------       ----------    -----------     --------

       Liabilities and
         equity             $  1,897.9    $    2,088.8     $  318.1       $  1,897.0    $   2,084.6     $  310.1
                            ==========    ============     ========       ==========    ===========     ========

  KCSI's investment         $    385.0    $      285.6     $   39.4       $    376.0    $     285.1     $   38.6
                            ==========    ============     ========       ==========    ===========     ========






Operating Results (dollars in millions):
                                                               Three Months
                                                              Ended March 31,     
                                                          1999              1998  
                                                                  
   Revenues:
     DST (a)                                          $    292.8        $    266.0
     Grupo TFM (b)                                         112.5             100.0
     All others                                             24.7              26.1
                                                      ----------        ----------

       Total revenues                                 $    430.0        $    392.1
                                                      ==========        ==========

   Operating costs and expenses:
     DST (a)                                          $    242.9        $    225.6
     Grupo TFM  (b)                                         88.7              90.7
     All others                                             23.0              24.9
                                                      ----------        ----------
       Total operating costs
         and expenses                                 $    354.6        $    341.2
                                                      ==========        ==========

   Net income (loss):
     DST (a)                                          $     33.6        $     24.1
     Grupo TFM  (b)                                          1.4              (4.1)
     All others                                              2.2               0.4
                                                      ----------        ----------

       Total net income                               $     37.2        $     20.4
                                                      ==========        ==========
<FN>

(a)  The financial condition and operating results for DST reflect the merger of
     a wholly-owned  DST subsidiary with USCS  International,  Inc.  ("USCS") on
     December  21,  1998.  Information  for prior  periods has been  restated to
     combine the  historical  results of DST and USCS.  The merger was accounted
     for by DST as a pooling of interests.

(b) Grupo TFM is presented on a U.S. GAAP basis.
</FN>



8

8. For  purposes of the  Statement  of Cash Flows,  the  Company  considers  all
short-term liquid  investments with a maturity of generally three months or less
to be cash equivalents.




   Supplemental Cash Flow Information (in millions):

                                  Three Months
                                 Ended March 31,      
                               1999           1998     

                                      
    Interest paid           $    17.3       $   23.1
    Income taxes paid             6.0            6.6



Noncash Investing and Financing Activities:

In first quarter 1998, the Company issued  approximately  227,000 shares of KCSI
common  stock  under the Tenth  Offering of the  Employee  Stock  Purchase  Plan
("ESPP"). These shares, totaling a purchase price of approximately $3.0 million,
were subscribed and paid for through employee payroll  deductions in 1997. There
were no shares of KCSI common  stock issued under an offering of the ESPP during
the first quarter of 1999.

Company subsidiaries and affiliates hold various investments which are accounted
for as  "available  for sale"  securities  as defined by  Statement of Financial
Accounting  Standards No. 115  "Accounting  for Certain  Investments in Debt and
Equity  Securities".   The  Company  records  its  proportionate  share  of  any
unrealized gains or losses related to these investments,  net of deferred taxes,
in stockholders' equity as accumulated other comprehensive income. For the three
months ended March 31, 1999, the Company recorded its proportionate share of the
decline in market value of these investments of $0.2 million ($0.1 million,  net
of deferred  income  taxes) from  December 31, 1998.  For the three months ended
March 31, 1998, the Company's proportionate share of these investments increased
$48.6 million ($29.9 million, net of deferred income taxes).

9. In 1998,  the Company  adopted  the  provisions  of  Statement  of  Financial
Accounting  Standards No. 131,  "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS 131"). SFAS 131 establishes standards for the manner
in which public business enterprises report information about operating segments
in annual financial  statements and requires disclosure of selected  information
about operating  segments in interim  financial  reports issued to shareholders.
SFAS 131 also establishes  standards for related  disclosures about products and
services, geographic areas and major customers. The adoption of SFAS 131 did not
have a material impact on the disclosures of the Company.  Pursuant to SFAS 131,
the  following   provides  selected  interim   financial   information  for  the
Transportation and Financial Services segments (in millions):




                                             Three Months
                                            Ended March 31,    
                                         1999           1998   

                                              
   Revenues:
     Transportation                  $     151.9    $     152.5
     Financial Services                    233.3          143.2
                                     -----------    -----------

     KCSI Consolidated               $     385.2    $     295.7
                                     ===========    ===========

   Net Income:
     Transportation                  $       7.6    $       9.2
     Financial Services                     61.0           37.0
                                     -----------    -----------

     KCSI Consolidated               $      68.6    $      46.2
                                     ===========    ===========
9


                                      March 31,     December 31,
                                         1999           1998   
   Total Assets:
     Transportation                  $   1,810.5    $   1,796.8
     Financial Services                    898.7          822.9
                                     -----------    -----------

     KCSI Consolidated               $   2,709.2    $   2,619.7
                                     ===========    ===========



Sales  between  segments  were not material for the three months ended March 31,
1999 and 1998, respectively.

10. In June 1998, the 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. SFAS 133 is
effective for all fiscal  quarters of fiscal years beginning after June 15, 1999
and should not be retroactively applied to financial statements of periods prior
to adoption.

The Company  currently has a program to hedge against  fluctuations in the price
of diesel fuel purchases,  and also enters into fuel purchase  commitments  from
time to time. In addition,  the Company continues to evaluate  alternatives with
respect to  utilizing  foreign  currency  instruments  to hedge its U.S.  dollar
investments  in Grupo TFM and  Nelson as market  conditions  change or  exchange
rates  fluctuate.  Currently,  the Company has no outstanding  foreign  currency
hedges. The Company is reviewing the provisions of SFAS 133 and expects adoption
by the required  date.  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.

11. As previously  disclosed in the Company's Annual Report on Form 10-K for the
year ended  December 31, 1998,  prior to January 1, 1999,  Mexico's  economy was
classified  as  "highly  inflationary"  as  defined in  Statement  of  Financial
Accounting  Standards  No.  52  "Foreign  Currency   Translation"  ("SFAS  52").
Accordingly,  the U.S. dollar was assumed to be Grupo TFM's functional currency,
and any gains or losses from translating  Grupo TFM's financial  statements into
U.S. dollars were included in the determination of its net income (loss). Equity
earnings (losses) from Grupo TFM included in the Company's results of operations
reflected the Company's share of such translation gains and losses.

Effective January 1, 1999, the Securities and Exchange Commission staff declared
that  Mexico  should no  longer be  considered  a highly  inflationary  economy.
Accordingly,  the Company performed an analysis under the guidance of SFAS 52 to
determine  whether  the U.S.  dollar or the  Mexican  peso should be used as the
functional currency for financial  accounting and reporting purposes for periods
subsequent  to  December  31,  1998.  Based  on the  results  of  the  analysis,
management believes that the U.S. dollar is the appropriate  functional currency
to use for the  Company's  investment  in Grupo TFM;  therefore,  the  financial
accounting  and  reporting  of the  operating  results of Grupo TFM will  remain
consistent with prior periods.

12. 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, 1998 other than as noted below. The
following provides an update concerning the Bogalusa Cases.

Bogalusa Cases
In July 1996,  the Kansas  City  Railway  Company  ("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 allegedly causing

10

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 the rail car
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 Railroad Company ("IC").  The explosion occurred more than 15 days after
KCSR last  transported the rail car. The car was loaded by the shipper in excess
of its standard weight, but under the car's capacity, when it was transported by
KCSR to interchange with the IC.

The  Mississippi  lawsuit  from the chemical  release  began in the last week of
March,  1999. Since  commencement of the trial,  there have been no developments
that would require a change in the Company's assessment of the case.

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 financial condition of the Company.

13. See the Recent Developments  section of Item 2, Management's  Discussion and
Analysis of  Financial  Condition  and Results of  Operations,  for  significant
transactions and events that will have an impact on the Company's future results
of operations, financial position and cash flows.



11


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


OVERVIEW

The  discussion  set forth below and other  portions  of this Form 10-Q  contain
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 their 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. ("Company" or "KCSI") 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 dated November 12, 1996, and its Amendment,  Form 8-K/A dated
June 3,  1997,  which  have been filed  with the U.S.  Securities  and  Exchange
Commission  (File  No.1-4717) and are hereby  incorporated by reference  herein.
Readers are strongly  encouraged to consider  these factors when  evaluating any
such 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  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 and financial asset management.
The Company  supplies its various  subsidiaries  with  managerial,  legal,  tax,
financial and accounting services, in addition to managing other "non-operating"
and more passive investments.

The Company's business  activities by industry segment and principal  subsidiary
companies are:

Transportation    -    The    Transportation    segment    consists    of    all
transportation-related subsidiaries and investments, including:

o The Kansas City Southern Railway Company ("KCSR"),  a wholly-owned  subsidiary
of the Company, operating a Class I Common Carrier railroad system;
o Gateway Western Railway Company ("Gateway Western"),  an indirect wholly-owned
subsidiary of the Company, operating a regional railroad system;
o Southern  Group,  Inc.,  a  wholly-owned  subsidiary  of KCSR,  owning 100% of
Carland,  Inc. and managing the loan portfolio for Southern Capital  Corporation
LLC ("Southern  Capital"),  a 50% owned joint venture (see "Recent Developments"
for discussion of sale of loan portfolio);
o Equity  investments  in  Southern  Capital,  Grupo  Tranportacion  Ferroviaria
Mexicana  S.A.  de  C.V.  ("Grupo  TFM") a 37%  owned  affiliate,  Mexrail  Inc.
("Mexrail"),  a 49% owned affiliate along with its wholly-owned subsidiary,  the
Texas Mexican Railway Company ("Tex Mex"); and Panama Canal Railway  Company,  a
50% joint venture;
o Kansas City Southern Lines, Inc.  ("KCSL"),  a wholly-owned  subsidiary of the
Company, serving as a holding company for Transportation-related entities; and
o Various other consolidated subsidiaries.

12

Financial Services - The Financial Services segment consists of all subsidiaries
engaged in the  management of  investments  for mutual funds,  private and other
accounts, as well as any Financial Services-related investments. Included are:

o  Janus Capital Corporation ("Janus"), an 82% owned subsidiary, diluted;
o  Berger Associates, Inc. ("Berger"), a 100% owned subsidiary;
o  Nelson Money Managers plc ("Nelson"), an 80% owned subsidiary;
o  DST Systems, Inc. ("DST"), an approximate 32% owned equity investment;
o  FAM Holdings, Inc.("FAM Holdings"), a wholly-owned subsidiary of the Company,
   formed on January 23,  1998 for the  purpose of  becoming a holding  company
   for financial services-related subsidiaries and affiliates; and
o  Various other consolidated subsidiaries.



RECENT DEVELOPMENTS

KSU Stock  added to the S&P 500 Index.  On March 26,  1999,  Standard  and Poors
(S&P) Financial  Information  Services  announced that it was adding Kansas City
Southern  Industries,  Inc. to its S&P 500 index.  KCSI was added to the S&P 500
Railroads Industry group after the close of trading on April 1, 1999. Management
believes  that the  Company's  addition to this index of leading U.S.  companies
will  have a  positive  impact  on KCSI  stock  and  help  build  the  Company's
shareholder base.


Approval of CN/IC merger.  At a voting  conference  held on March 25, 1999,  the
Surface Transportation Board ("STB") unanimously approved the merger of Canadian
National Railway ("CN") and Illinois Central Corp.  ("IC").  The STB is expected
to issue its written  approval on May 25, 1999,  with an effective  date of June
24, 1999,  at which time the CN will be permitted to exercise  control over IC's
operations  and  assets.  As part  of this  approval,  the STB  imposed  certain
restrictions on the merger including a condition  requiring that the CN/IC grant
KCSR access to three additional  shippers in the Geismar,  Louisiana  industrial
area:  Rubicon,  Uniroyal and Vulcan.  This is in addition to the three  Geismar
shippers  (BASF,  Borden and Shell) that KCSR will have access to as a result of
its alliance agreement with CN/IC, as previously disclosed.  Management believes
the access to these Geismar  shippers  will provide the Company with  additional
revenue  opportunities.  The STB also  denied a  filing  by the CN,  IC and KCSR
seeking  trackage  rights for the Gateway  Western over several  miles of UP and
Norfolk Southern track in Springfield, Illinois.


Foreign Exchange Matters. As previously disclosed in the Company's Annual Report
on Form 10-K for the year ended  December  31,  1998,  prior to January 1, 1999,
Mexico's economy was classified as "highly inflationary" as defined in Statement
of Financial Accounting  Standards No. 52 "Foreign Currency  Translation" ("SFAS
52").  Accordingly,  the U.S.  dollar was assumed to be Grupo  TFM's  functional
currency,  and any  gains or  losses  from  translating  Grupo  TFM's  financial
statements  into U.S.  dollars  were  included in the  determination  of its net
income (loss). Equity earnings (losses) from Grupo TFM included in the Company's
results of operations  reflected the Company's share of such  translation  gains
and losses.

Effective January 1, 1999, the Securities and Exchange  Commission ("SEC") staff
declared  that  Mexico  should  no longer be  considered  a highly  inflationary
economy.  Accordingly,  the Company  performed an analysis under the guidance of
SFAS 52 to determine  whether the U.S. dollar or the Mexican peso should be used
as the functional  currency for financial  accounting and reporting purposes for
periods  subsequent to December 31, 1998.  Based on the results of the analysis,
management believes that the U.S. dollar is the appropriate  

13

functional currency to use for the Company's investment in Grupo TFM; therefore,
the financial  accounting  and  reporting of the operating  results of Grupo TFM
will remain consistent with prior periods.


Sale of loan portfolio by Southern Capital.  On March 31, 1999, Southern Capital
signed  an  agreement  to sell its  portfolio  of  non-rail  assets  to  Textron
Financial Corporation.  The purchase price for these assets (comprised primarily
of finance receivables in the amusement and non-rail transportation  industries)
is approximately $52.8 million.  The purchase is expected to close in the second
quarter of 1999 and is not expected to have a material  impact on the  Company's
results of operations.


Repurchase of stock.  As previously  disclosed in the Current Report on Form 8-K
dated  February 25, 1999, the Company  repurchased  460,000 shares of its common
stock from The DST Systems,  Inc. Employee Stock Ownership Plan (the "DST ESOP")
in a private transaction.  The DST ESOP has previously sold to the Company other
shares of KCSI stock  which  were part of the DST  ESOP's  assets as a result of
DST's  participation  in the Company's  employee  stock  ownership plan prior to
DST's initial public offering in 1995.

The shares were  purchased  at a price  equal to the closing  price per share of
KCSI's  common stock on the New York Stock  Exchange on February  24, 1999.  The
shares are held in treasury for use in  connection  with the  Company's  various
employee benefit plans.

These  repurchases are part of the 9,000,000 share  repurchase  program that the
Company's Board of Directors authorized in 1996. Including this transaction, the
Company has  repurchased a total of  approximately  4,100,000  shares under this
program.


Option to Purchase Mexican Government's  Ownership Interest in TFM, S.A. de C.V.
("TFM"). On January 28, 1999, the Company,  along with other direct and indirect
owners of TFM, entered into a preliminary  agreement with the Mexican Government
("Government"). As part of that agreement, an option was granted to the Company,
Transportacion Maritima Mexicana, S.A. de C.V. ("TMM") and Grupo Servia, S.A. de
C.V.  ("Grupo  Servia") to  purchase  all or a portion of the  Government's  20%
ownership interest in TFM at a discount. The option to purchase all or a portion
of the Government's interest expires on November 30, 1999. If the purchase of at
least 35% of the Government's stock is not completed by May 31, 1999, the entire
option will expire on that date. If the option is fully exercised, the Company's
additional  cash  investment  is not expected to exceed $88 million.  As part of
this  agreement  and as a condition to exercise  this  option,  the parties have
agreed to settle the  outstanding  claims  against  the  Government  regarding a
refund of Mexican Value Added Tax (VAT) payments. TFM has also agreed to sell to
the  Government a small  section of redundant  trackage for inclusion in another
railroad  concession.  In  addition,  under  the  terms  of the  agreement,  the
Government  would be released  from its capital call  obligations  at the moment
that the option is exercised in whole or in part.  Furthermore,  TFM, TMM, Grupo
Servia and the Company have agreed to sell,  in a public  offering,  a direct or
indirect  participation in at least the same percentage currently represented by
the shares  exercised  in this option,  by October 31,  2003,  subject to market
conditions. The option and the other described agreements are conditioned on the
parties  entering  into a final  written  agreement  and obtaining all necessary
consents and authorizations.


14


Planned  Separation of the Company Business Segments.  As previously  disclosed,
the Company announced its intention to separate the Transportation and Financial
Services  segments  through a proposed  dividend  of the stock of a new  holding
company for its Financial  Services  businesses (the  "Separation").  In January
1999, the Company  resubmitted a filing to the Internal  Revenue Service ("IRS")
requesting a favorable tax ruling on the proposed Separation. Subject to receipt
of a favorable ruling from the IRS and  consideration of other relevant factors,
management  anticipates  completion of the Separation to occur before the end of
1999.



RESULTS OF OPERATIONS

The Company's revenues,  operating income and net income by industry segment are
as follows (dollars in millions):



                                        Three Months
                                        Ended March 31,      
                                    1999              1998
                                                
Revenues:
   Transportation                $   151.9         $    152.5
   Financial Services                233.3              143.2
                                 ---------         ----------
       Total                     $   385.2         $    295.7
                                 =========         ==========

Operating Income:
   Transportation                $    24.4         $     32.0
   Financial Services                 97.2               58.4
                                 ---------         ----------
       Total                     $   121.6         $     90.4
                                 =========         ==========

Net Income:
   Transportation                $     7.6         $      9.2
   Financial Services                 61.0               37.0
                                 ---------         ----------
       Total                     $    68.6         $     46.2
                                 =========         ==========




The Company reported first quarter 1999  consolidated  earnings of $68.6 million
($0.60 per diluted share) compared to $46.2 million ($0.41 per diluted share) in
first quarter 1998.  Consolidated first quarter 1999 revenues rose 30% to $385.2
million  compared  to first  quarter  1998,  fueled  by higher  revenues  in the
Financial  Services  segment.  Operating  expenses  increased  approximately 29%
quarter to quarter  primarily  arising from increases in the Financial  Services
segment.  First quarter 1999 depreciation and amortization increased nearly 26%,
chiefly because of higher depreciation in the Financial Services segment arising
from 1998  infrastructure  development.  Operating  income for the three  months
ended March 31, 1999 increased to $121.6 million,  more than 34% higher than the
comparable  1998  period,   primarily  due  to  the  revenue  growth  and  lower
proportionate growth in operating expenses compared to revenues in the Financial
Services  segment.  Equity earnings in unconsolidated  affiliates  improved $7.5
million, or 156%, due to higher contributions from DST and Grupo TFM. DST equity
earnings increased $3.2 million, while earnings from Grupo TFM were $0.5 million
compared  to equity  losses of $3.1  million  in first  quarter  1998.  Interest
expense  declined  $2.4 million  (14%) for the three months ended March 31, 1999
versus the  comparable  1998 period due to lower average debt  balances  coupled
with lower average interest rates on variable rate debt.


15




TRANSPORTATION
                                              THREE MONTHS                                    THREE MONTHS
                                           ENDED MARCH 31, 1999                           ENDED MARCH 31, 1998
                                           --------------------                           --------------------
                                                                       (in millions)

                                                             Consolidated                                   Consolidated
                                      KCSR         Other    Transportation          KCSR         Other    Transportation

                                                                                          
Revenues                            $  135.3     $   16.6     $   151.9           $  135.7     $   16.8     $   152.5
Costs and expenses                      96.5         16.7         113.2               93.9         12.6         106.5
Depreciation and amortization           12.6          1.7          14.3               12.6          1.4          14.0
                                    --------     --------     ---------           --------     --------     ---------
    Operating income (loss)             26.2         (1.8)         24.4               29.2          2.8          32.0
Equity in net earnings (losses)
    of unconsolidated affiliates
       Grupo TFM                         -            0.5           0.5                -           (3.1)         (3.1)
       Other                             0.6          -             0.6                0.5         (0.4)          0.1
Interest expense                        (8.5)        (5.5)        (14.0)              (9.1)        (5.9)        (15.0)
Other, net                               0.9          -             0.9                1.6          1.6           3.2
                                    --------     ---------    ---------           --------     --------     ---------
    Pretax income (loss)                19.2         (6.8)         12.4               22.2         (5.0)         17.2
Income tax provision (benefit)           7.5         (2.7)          4.8                8.7         (0.7)          8.0
                                    --------     --------     ---------           --------     --------     ---------
    Net income (loss)               $   11.7     $   (4.1)    $     7.6           $   13.5     $   (4.3)    $     9.2
                                    ========     ========     =========           ========     ========     =========



The  Transportation  segment  contributed  $7.6 million to the  Company's  first
quarter 1999  consolidated  earnings,  a $1.6 million decrease compared to first
quarter  1998.  The  decrease was  attributable  to higher  operating  expenses,
essentially  flat revenues and certain  non-recurring  gains in 1998,  partially
offset by an increase in equity earnings related to Grupo TFM and lower interest
expense.

Transportation  revenues  for first  quarter  1999 of $151.9  million  decreased
slightly compared to first quarter 1998. KCSR revenues remained essentially flat
(see below for explanation of commodity groups),  while Gateway Western revenues
declined  approximately  8%, based  primarily on overall volume  declines.  This
decline  was   partially   offset  by  higher   revenues   at  several   smaller
Transportation  companies  arising from volume gains. The following is a summary
of revenues and carloads for KCSR's major commodity groups:




                                                                                        Carloads and
                                                  Revenues                            Intermodal Units      
                                               (in millions)                           (in thousands)
                                                Three months                            Three months
                                               ended March 31,                         ended March 31,      
                                           1999              1998                  1999              1998   
                                                                                     
   General commodities:
     Chemical and petroleum             $      32.2       $     34.6                  40.1              41.9
     Paper and forest                          25.7             27.1                  40.8              44.1
     Agricultural and mineral                  24.6             22.8                  32.9              31.9
     Other                                      4.9              5.9                   6.0               7.6
                                        -----------       ----------            ----------       -----------
   Total general commodities                   87.4             90.4                 119.8             125.5
       Intermodal                              11.6             11.0                  47.9              41.3
       Coal                                    29.7             28.4                  52.8              52.9
                                        -----------       ----------            ----------       -----------
   Subtotal                                   128.7            129.8                 220.5             219.7
       Other                                    6.6              5.9                   -                 -  
                                        -----------       ----------            ----------       -----------
         Total                          $     135.3       $    135.7                 220.5             219.7
                                        ===========       ==========            ==========       ===========


16


         Agricultural  and mineral  products - Agricultural  and mineral product
revenues  rose  7.8% for the  three  months  ended  March 31,  1999  versus  the
comparable 1998 period.  This increase resulted from higher carloads and revenue
per carload for domestic grain  movements,  primarily  because of an increase in
demand at certain chicken feed customers with shipment  destinations serviced by
KCSR. Higher domestic grain revenues were partially offset by volume declines in
export  grain  arising  from a decreased  demand in Mexico.  Decreases  in first
quarter  1999 grain  shipments to Mexico  resulted  from a change in the Mexican
government's purchasing strategy, which, in the first quarter, transitioned from
a government  entity to private industry during which there was a period of time
when no import permits were issued.  This  transition to private  industry is in
process and management does not expect this to have a long-term impact on future
exports of grain to Mexico.  Management  believes that grain shipments to Mexico
will increase during second quarter 1999 and expects that, on a long-term basis,
KCSR will continue to derive  increased  revenues from future grain movements to
Mexico.

         Chemical  and  petroleum  products -  Chemical  and  petroleum  product
revenues  decreased $2.4 million (7%) quarter to quarter,  primarily as a result
of declines  in  miscellaneous  chemical  and soda ash  revenues.  Miscellaneous
chemical  carloads were down  approximately  8% due in part to the expiration in
late 1998 of the  emergency  service  order in the  Houston  area,  as well as a
decline in demand due to  chemical  market  conditions.  Soda ash  carloads  and
revenues per carload declined  primarily as a result of a weak export market due
to the continuing difficulty in the economic climate in Asia and South America.

         Paper and forest products - Paper and forest product revenues  declined
5.3% for the three  months  ended  March 31, 1999  compared to the three  months
ended March 31, 1998.  Reductions  in these  revenues  during first quarter 1999
occurred   primarily  because  of  lower  demand  and  current   stockpiles  and
inventories.  Management  believes that paper and forest  product  revenues will
continue to remain somewhat flat during the second quarter;  however,  long-term
prospects, including potential exports to Mexico, appear to be more favorable in
the third and fourth quarters of 1999.

         Coal - Coal  revenues  increased  4.4%  quarter  to  quarter  resulting
primarily  from an increase in the length of haul of certain  unit coal  trains.
During January 1999, one of KCSR's  electric  generating  utility plants (Kansas
City Power and Light's ("KCP&L") Hawthorne plant) had an explosion and is out of
service for an undetermined period. As a result, KCP&L increased its capacity at
its Amsterdam  plant leading to higher coal  demands.  The Amsterdam  plant is a
longer haul for KCSR and thus, the related  revenues  generated are higher.  The
KCP&L Hawthorne plant represented  approximately 5% of total coal tons hauled by
KCSR in 1998 and is a short haul move.  The  extended  outage is,  however,  not
expected to have a material effect on overall coal revenues.

         Intermodal and other - Intermodal  revenues increased nearly 6% for the
three months ended March 31, 1999 versus the comparable  1998 period,  primarily
due to higher  intermodal  unit  shipments  (16.1%)  quarter to  quarter.  Other
carload  revenues  declined  approximately $1 million as a result of weakness in
the steel market arising from slower  domestic oil  production.  Note,  however,
that automobile traffic revenues have almost doubled compared with first quarter
1998 and  management  expects  future  growth  in these  revenues  as the  CN/IC
alliance traffic continues to increase.


The  Transportation  segment's  total  operating  expenses  increased $7 million
(5.8%),  to $127.5 million for the three months ended March 31, 1999 from $120.5
million for the three months ended March 31, 1998.  First quarter KCSR operating
costs  increased $2.6 million from 1998,  primarily due to higher car hire costs
resulting from fewer KCSR cars and trailers  being utilized by other  railroads,
and higher salaries and wages arising from general wage  increases.  As a result
of essentially  flat revenues and higher  operating  expenses,  KCSR's operating
ratio,  a common  efficiency  measure  among  Class I rail  carriers,  was 80.7%
compared with 78.3% in first quarter 1998. Other Transportation  operating costs
increased $4.4 million quarter to quarter, primarily due

17

to higher  costs at Gateway  Western  resulting  largely  from an  unusual  $1.4
million  March  1999   derailment  and  increased   costs  at  various   smaller
Transportation  companies (attributable to higher revenues as noted above). As a
result of essentially  flat revenues and higher  operating  expenses,  operating
income for the Transportation segment declined $7.6 million quarter to quarter.

The  Transportation  segment  recorded  equity  earnings  of $1.1  million  from
unconsolidated  affiliates for the three months ended March 31, 1999 compared to
losses of $3.0 million for the three  months ended March 31, 1998.  The increase
is attributed  primarily to equity earnings from Grupo TFM, reflecting continued
operating  improvements  and the  tax  impact  related  to  fluctuations  in the
valuation  of the peso  versus the U.S.  dollar.  Grupo  TFM's  operating  ratio
improved to 78.8% in first  quarter  1999 versus  90.7% in first  quarter  1998.
Results of Grupo TFM are reported on a U.S. GAAP basis. Also contributing to the
increase  was Mexrail,  which  recorded  equity  losses of $0.1 million in first
quarter 1999 versus losses of $0.5 million in the comparable 1998 period. Equity
earnings from Southern Capital improved by approximately $0.1 million quarter to
quarter.

Interest expense declined $1.0 million,  or nearly 7%, during first quarter 1999
compared to first  quarter  1998,  primarily  as a result of lower  average debt
balances.  Other, net decreased $2.3 million quarter to quarter  attributable to
first quarter 1998 gains on sales of property.



FINANCIAL SERVICES


                                                        CONSOLIDATED
                                                      FINANCIAL SERVICES          
                                                        (in millions)
                                                        THREE MONTHS
                                                       ENDED MARCH 31,            
                                                 1999                  1998       
                                           -------------         --------------

                                                           
Revenues                                   $       233.3         $       143.2
Costs and expenses                                 129.3                  82.0
Depreciation and amortization                        6.8                   2.8
                                           -------------         -------------
    Operating income                                97.2                  58.4
Equity in net earnings of
  unconsolidated affiliates:
    DST Systems, Inc.                               10.7                   7.5
    Other                                            0.5                   0.3
Interest expense                                    (1.0)                 (2.4)
Other, net                                           4.9                   3.4
                                           -------------         -------------
    Pretax income                                  112.3                  67.2
Income tax provision                                40.1                  23.5
Minority interest                                   11.2                   6.7
                                           -------------         -------------
    Net income                             $        61.0         $        37.0
                                           =============         =============




The Financial  Services  segment  reported net earnings of $61.0 million for the
three months ended March 31, 1999,  an increase of 65% over the $37.0 million in
comparable  1998.  Assets under  management grew to $142.0 billion,  25% and 69%
higher than December 31, 1998 and March 31, 1998, respectively. This significant
growth in assets under management fueled a $90.1 million (63%) and $38.8 million
(66%)  increase in  revenues  and  operating  income,  respectively,  quarter to
quarter.

18

First quarter 1999 net fund sales totaled $13.1 billion compared to $2.3 billion
in the same 1998 quarter and market appreciation of $15.4 billion exceeded first
quarter  1998 by $5.2  billion.  U.S.  shareowner  accounts  increased  12% from
December  31,  1998,  nearing 3.4 million  accounts  as of March 31,  1999.  New
accounts  during first  quarter  1999  exceeded the total number of new accounts
opened for all of 1998.

Driven by the dramatic  growth in assets under  management,  Financial  Services
revenues increased at a higher proportionate rate than costs and expenses during
first  quarter 1999 versus first quarter 1998,  resulting in an  improvement  in
operating  margins to 41.7% from 40.8% in comparable 1998.  Higher first quarter
1999  costs  included:   i)  salaries  and  wages  as  a  result  of  investment
performance-based  incentive  compensation and an increased number of employees;
ii) alliance and supermarket fees  attributable to an increased number of assets
under  management  through this  distribution  channel;  iii)  depreciation  and
amortization, reflecting the infrastructure development in 1998; and iv) various
less  significant  variable  cost  components  as a result of the 63%  growth in
revenues.

First quarter 1999 equity  earnings from DST increased 43% to $10.7 million from
$7.5 million in the prior year quarter.  This improvement in DST equity earnings
recorded by KCSI was largely  attributable  to  improvements  in DST's Financial
Services segment,  driven by higher revenues quarter to quarter resulting from a
12% increase in  shareowner  accounts  serviced  (51.6 million at March 31, 1999
versus 45.9 million at March 31,  1998) and  continued  growth in  international
business.  DST results also reflect: i) improved consolidated  operating margins
quarter to quarter; and ii) capitalization of $3.8 million of costs for internal
use software during first quarter 1999 in connection with the required  adoption
of Statement of Position 98-1 effective January 1, 1999 (DST previously expensed
all  internally  developed  proprietary  software).  First quarter 1999 includes
earnings  from USCS  International,  Inc.,  which was merged  with DST under the
pooling of interests  accounting method in December 1998. The merger reduced the
Company's ownership in DST from 41% to approximately 32%.

The following is a brief  discussion of significant  first quarter 1999 activity
at key Financial Services subsidiaries.

     Janus
     Janus continued to report improved product  performance and asset growth --
     assets under  management  increased  $28.5  billion from December 31, 1998,
     reaching  $136.8 billion at March 31, 1999. This success is attributable to
     several  factors,  including  a  strong  equity  market,   higher-than-peer
     investment  performance  by the  majority  of Janus  funds and  portfolios,
     effective  marketing,  competitive  alternative  distribution  channels for
     products, and a well-known and respected brand name.

     As of March 31, 1999,  the Janus  Investment  Funds reported ten funds with
     over $1 billion in assets under management,  including two in excess of $20
     billion.  Since March 31, 1998,  the Janus Aspen Series of funds has almost
     doubled its assets under  management,  nearing $7.6 billion as of March 31,
     1999. The Janus World Funds, initiated in late December 1998, exceeded $350
     million in assets under management as of March 31, 1999.

     Berger
     Berger's  assets under  management grew slightly during first quarter 1999,
     nearing $4.0 billion.  While performance of the various funds in the Berger
     Complex has been  competitive  (six of  Berger's  ten funds rank in the top
     quartile  compared to peers  based on twelve  month  rolling  performance),
     continued  redemptions as a result of declining  shareowner accounts in the
     funds introduced prior to 1997 (primarily the Berger One Hundred Fund) have
     offset  market  gains.  Accordingly,   in  May  1999,  Berger  announced  a
     realignment  of its  management  team in an effort to reverse  this  recent
     trend and to improve  Berger's  competitive  position  in the  mutual  fund
     marketplace.

19

     Berger  reported an 8% decline in operating  expenses in first quarter 1999
     versus 1998,  reflecting  more targeted  marketing  strategies  and reduced
     salaries and wages  related to  performance-based  incentive  compensation.
     Because of lower expenses and essentially  flat revenue quarter to quarter,
     Berger's operating margin improved.

     Nelson
     Nelson  reported  approximately  $0.2  million  in net  earnings  for first
     quarter 1999  (exclusive  of  amortization  expense  attributed to Nelson).
     Revenues  totaled  $4.1  million and funds under  management  increased  to
     (pound)739  million  ($1.19  billion)  at March 31,  1999  from  (pound)696
     million ($1.15 billion) at year end 1998.



TRENDS AND OUTLOOK

The Company's  first  quarter 1999 diluted  earnings per share of $0.60 was more
than 46% higher than the $0.41 per share in first quarter 1998.  Revenue  growth
in the Financial  Services  segment  resulted in a 35% increase in  consolidated
operating income quarter to quarter.

A current  outlook for the Company's  businesses for the remainder of 1999 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):

i)   Transportation - Management expects that general commodities and intermodal
     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, revenues
     are expected to increase  slightly during the remainder of 1999 compared to
     1998.  Management  expects  the NAFTA  Railway  to  continue  to provide an
     attractive service offering for shippers,  and the Company believes it will
     realize continued benefits from traffic with Mexico and the CN/IC alliance.
     Variable   costs  and   expenses   are   expected  to  continue  at  levels
     proportionate with revenue activity.

ii)  Financial  Services - Future growth will be largely dependent on prevailing
     financial  market  conditions,  relative  performance of Janus,  Berger and
     Nelson products, introduction and market reception of new products, as well
     as other factors, including changes in stock and bond markets, increases in
     the  rate  of  return  of  alternative   investment  products,   increasing
     competition as the number of mutual funds continues to grow, and changes in
     marketing and distribution channels.

          Based on a higher level of assets under management starting the second
     quarter,  revenues  for  the  remainder  of 1999  are  expected  to  exceed
     comparable  prior  year  periods.   Management  expects  ongoing  Financial
     Services margin pressure  challenges as  subsidiaries  continue  efforts to
     ensure that the operational and administrative  infrastructure consistently
     meets the high  standards of quality and service  historically  provided to
     investors.  Additionally,  a higher  rate of  growth in costs  compared  to
     revenues is  expected in  connection  with  Nelson's  efforts to expand its
     operations.

iii) Equity  Investments - The Company expects to continue to participate in the
     earnings/losses  from its equity  investments in DST,  Grupo TFM,  Southern
     Capital and Mexrail. As a result of the sale of the loan portfolio,  equity
     earnings from Southern Capital are expected to decline in the future.

20



LIQUIDITY AND CAPITAL RESOURCES


Summary cash flow data is as follows (in millions):
                                                   Three Months
                                                  Ended March 31,      
                                              1999              1998   
Cash flows provided by (used for):

                                                      
Operating activities                       $    74.5        $     (0.7)
    Investing activities                       (44.5)              4.7
    Financing activities                       (14.7)            (17.8)
                                           ---------        ----------
    Cash and equivalents:
      Net increase (decrease)                   15.3             (13.8)
      At beginning of year                      27.2              33.5
                                           ---------        ----------
      At end of period                     $    42.5        $     19.7
                                           =========        ==========


During the three months ended March 31, 1999,  the Company's  consolidated  cash
position  increased $15.3 million from December 31, 1998. This increase resulted
primarily  from  earnings and  proceeds  from the issuance of common stock under
employee stock plans, partially offset by property acquisitions, cash dividends,
net purchases of investments in advised funds by Janus,  and stock  repurchases.
Net  operating  cash  inflows  for the  quarter  ended March 31, 1999 were $74.5
million compared to net operating cash outflows of $0.7 million in the same 1998
period.  This improvement in operating cash flows was chiefly  attributable to a
first  quarter 1998  payment of  approximately  $23 million  related to the KCSR
Union Productivity fund termination,  higher first quarter 1999 earnings, higher
current  income  taxes  payable,  and  net  changes  in  other  working  capital
components.

Net investing  cash  outflows were $44.5 million  during the quarter ended March
31, 1999  compared to $4.7  million of net  investing  cash  inflows  during the
comparable  1998 period.  This  difference  results  primarily from higher first
quarter 1999 capital  expenditures,  and  fluctuations in investments in advised
funds at Janus  associated with the timing of Janus' dividend  payments.  During
first quarter 1999, Janus used approximately  $18.5 million for net purchases of
investments  in advised funds  compared with net sales of these  investments  of
$12.6 million during first quarter 1998.

During first quarter 1999,  financing  cash outflows were used primarily for the
repayment of debt,  stock  repurchases and cash dividends,  while 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
flows of $14.7  million were used during the first  quarter 1999  compared  with
$17.8 million used during the comparable 1998 period.  This was due primarily to
1999 first  quarter net proceeds  from the  issuance of  long-term  debt of $3.6
million  compared with net repayments of $26.4 million during first quarter 1998
offset by cash used for stock  repurchases  of $22.3  million  versus  only $0.6
million in first quarter 1998.

Cash flows from operations are expected to increase during the remainder of 1999
from positive  operating  income,  which has historically  resulted in favorable
operating  cash flows.  Investing  activities  will continue to use  significant
amounts of cash. Future roadway  improvement  projects are expected to be funded
by KCSR operating cash flow.  Based on anticipated  financing  arrangements  for
Grupo TFM, significant additional operational  contributions from the Company to
Grupo TFM are not  expected to be  necessary.  However,  there exists a possible
approximate  $74  million  capital  call if  certain  Grupo TFM  benchmarks,  as
outlined in Grupo TFM's financing  arrangements,  are not met. Additionally,  if
circumstances develop in which a contribution may be requested by Grupo TFM, the
Company  will  evaluate  the  contribution  based on the merits of the  specific
underlying  need.  Further,  as discussed  above in "Recent  Developments",  the
Company  has the option to purchase a portion of the  Mexican  Government's  20%
interest in TFM at a discount. Management

21

anticipates  using  working  capital and  existing  lines of credit to fund this
transaction in the event it elects to exercise this option.

In addition to operating cash flows, the Company has financing available through
its various  lines of credit  with a maximum  borrowing  amount of $600  million
(which  includes $55 million of uncommitted  facilities).  As of March 31, 1999,
$280 million was available under these lines of credit, $100 million of which is
to be used solely by the Financial  Services  segment.  In conjunction  with the
annual  renewal of certain  credit  facilities  during  April and May 1999,  the
364-day  credit  facility for KCSI was renewed at $75 million  (previously  $100
million) and the Financial  Services  364-day credit facility was renewed at its
previous  amount  of  $100  million.  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 $500 million.
The SEC  declared  the  Registration  Statement  effective  on April  22,  1996;
however,  no  securities  have  been  issued.  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.  The Company  believes
its operating  cash flows and available  financing  resources are  sufficient to
fund working capital and other requirements for the remainder of 1999.

The Company's  debt ratio (total debt as a percent of total debt plus equity) at
March  31,  1999 was 46.0%  compared  to 47.3% at  December  31,  1998.  Company
consolidated  debt  increased  $3.6  million  from  December 31, 1998 (to $839.9
million  at March 31,  1999) as a result  of  borrowings  exceeding  repayments.
Consolidated  equity  increased  $53.5  million from  December  31,  1998.  This
increase was due to net income of $68.6 million and the issuance of common stock
under the Employee  Stock  Purchase  Plan and other plans,  partially  offset by
common stock  repurchases  (as  discussed  above in "Recent  Developments")  and
dividends  paid.  This increase in equity coupled with only a slight increase in
debt  resulted in a lower debt ratio at March 31, 1999  compared to December 31,
1998.

Management  anticipates that the debt ratio will continue to decrease during the
remainder of 1999 as a result of expected  net debt  repayments  and  profitable
operations.  Note,  however,  that  unrealized  gains on  "available  for  sale"
securities  are  contingent  on market  conditions  and,  thus,  are  subject to
significant  fluctuations in value.  Significant  declines in the value of these
securities would negatively impact  accumulated other  comprehensive  income and
affect the Company's debt ratio.



OTHER

Year 2000. The Year 2000 discussion below contains  forward-looking  statements,
including those  concerning the Company's plans and expected  completion  dates,
cost  estimates,  assessments  of Year 2000 readiness for the Company as well as
for third  parties,  and the  potential  risks of any failure on the part of the
Company  or  third   parties   to  be  Year  2000  ready  on  a  timely   basis.
Forward-looking  statements  involve a number of risks  and  uncertainties  that
could cause actual  results to differ from those  projected.  See the "Overview"
section for additional information.

While the Company continues to evaluate and pursue  discussions with its various
customers, partners and vendors with respect to their preparedness for Year 2000
issues,  no assurance can be made that all such parties will be Year 2000 ready.
Additionally, while the Company cannot fully determine the impact, the inability
to complete Year 2000 readiness for the Company's  computer systems could result
in significant difficulties in

22

processing  and  completing  fundamental  transactions.   In  such  events,  the
Company's  results of  operations,  financial  position  and cash flows could be
materially adversely affected.

Many existing  computer  programs and  microprocessors  that use only two digits
(rather  than four) to  identify a year could fail or create  erroneous  results
with respect to dates after  December 31, 1999 if not corrected to read all four
digits.  This  computer  program  flaw is expected to affect all  companies  and
organizations,  either  directly  (through a company's own computer  programs or
systems that use computer  programs,  such as telephone  systems) or  indirectly
(through customers and vendors of the company).

These Year 2000 related issues are of particular  importance to the Company. The
Company  depends upon its computer and other systems and the computers and other
systems of third parties to conduct and manage the Company's  Transportation and
Financial  Services  businesses  and the  Company's  products  and  services are
heavily dependent upon using accurate dates in order to function properly. These
Year 2000 related issues may also adversely  affect the operations and financial
performance  of one or more  of the  Company's  customers  and  suppliers.  As a
result,  the failure of the Company's  computer and other  systems,  products or
services, the computer systems and other systems upon which the Company depends,
or the  Company's  customers  or  suppliers  to be Year 2000 ready  could have a
material  adverse  impact on the  Company's  results  of  operations,  financial
position and cash flows.  The Company is unable to assess the extent or duration
of that impact at this time, but it could be substantial.

In 1997, the Company and its key subsidiaries  formed project teams comprised of
employees  and third  party  consultants  to identify  and resolve the  numerous
issues surrounding the Year 2000,  focusing primarily on information  technology
("IT") systems,  non-IT systems,  and third party issues. The project teams also
provide  comprehensive  corporate  tracking,  coordination and monitoring of all
Year 2000 activities.  As part of resolving any potential Year 2000 issues,  the
Company expects to: identify all computer systems, products,  services and other
systems  (including  systems  provided by third  parties) that must be modified;
evaluate the alternatives available to make any identified systems,  products or
services Year 2000 ready (including  modification,  replacement or abandonment);
complete the modifications and/or replacement of identified systems; and conduct
adequate  testing of the systems,  products and services,  including  testing of
certain   key   systems   used  by  various   North   American   railroads   and
interoperability  testing with clients and key  organizations  in the  financial
services  industry.  The project teams meet  regularly to discuss their progress
and ensure that all issues and problems are identified  and properly  addressed.
Meetings are regularly held with senior  management  and the Company's  Board of
Directors to keep them apprised of the progress of the Year 2000 project.

The  following  provides  a  summary  of  each  area  and  the  progress  toward
identifying and resolving Year 2000 issues:

     IT  Systems.  In the  Transportation  segment,  all  internal  IT  systems,
     including  mission  critical systems and  non-critical  systems,  have been
     analyzed and are in the process of being  modified and tested for Year 2000
     readiness.  To date,  management  believes  that  approximately  99% of the
     necessary  remediation  and 94% of the  testing has been  completed.  Final
     remediation and testing for certain  non-critical  support systems has been
     completed and management  believes these systems are Year 2000 ready. Final
     remediation  and  testing of mission  critical  systems  is  scheduled  for
     completion by the end of August 1999.

     In  addition,  the IT  hardware  and  software  necessary  to  operate  the
     mainframe  computer and associated  equipment are currently being evaluated
     for  Year  2000  issues.   A  compilation  of  the  hardware  and  software
     inventories was completed in 1998. The hardware and software, including the
     completion of integrated testing of the infrastructure software and network
     components, are expected to be Year 2000 ready by September 30, 1999.

23

     The IT systems  (including  mission  critical and significant  non-critical
     operating,  accounting and supporting  systems) and underlying hardware for
     the companies  comprising the Financial Services segment have been analyzed
     and are being  modified  and  tested  for Year 2000  readiness.  Management
     believes that approximately 85% of mission critical systems, and 90% of all
     systems,  have been tested and are  believed  to be Year 2000 ready.  Final
     remediation  and testing is expected to be  completed  by the end of second
     quarter 1999.

     Non-IT  Systems.  All equipment that contains an internal clock or embedded
     micro-processor  is being analyzed for Year 2000  readiness.  This includes
     PC's, software, fax machines, telephone systems, elevator systems, security
     and fire control systems,  locomotives,  signal and communications  systems
     and other miscellaneous equipment. Replacement and upgrades of this type of
     equipment is underway and expected to be completed for both segments of the
     Company by July 15, 1999.

     As of  March  31,  1999,  management  believes  that 98% of all PC's in the
     Transportation  companies  were Year 2000 ready.  In addition,  all related
     software,  customized  programs  and  external  data  interfaces  are being
     evaluated, modified and tested for Year 2000 readiness, as are locomotives,
     signals and communication  systems and other equipment with internal clocks
     and embedded micro-processors.

     As of March  31,  1999  approximately  85% of  replacement  and/or  upgrade
     efforts  on  the  Financial  Services  hardware  and  software   inventory,
     including network infrastructure and telecommunications  technologies, have
     been completed.

     Third Party  Systems.  Both segments of the Company depend heavily on third
     party  systems in the  operation of their  businesses.  As part of the Year
     2000 project,  significant third party relationships are being evaluated to
     determine the status of their Year 2000 readiness and the potential  impact
     on the  Company's  operations  if those  significant  third parties fail to
     become  Year  2000  ready.   Questionnaires  have  been  sent  to  critical
     suppliers, major customers, key banking and financial institutions, utility
     providers and  interchange  railroads to determine the status of their Year
     2000 readiness.

     The  Transportation  companies  are also  working with the  Association  of
     American Railroads ("AAR") and other AAR-member railroads to coordinate the
     testing and  certification  of the systems  administered  by the AAR. These
     systems,  including  interline  settlement,  shipment  tracing  and waybill
     processing are relied on by a number of North American  railroads and their
     customers.  Initial testing between railroads started during second quarter
     1998 and these  systems  are  expected  to be Year  2000  ready on a timely
     basis.

     Similarly,  the Financial  Services  entities are  participating in various
     industry-wide  efforts  (e.g.,  trading  and  account  maintenance,   trade
     execution,   confirmation,   etc.)  to  facilitate  testing  of  Year  2000
     preparedness and reliability.  Additionally,  Janus and Berger are required
     to periodically  report to the SEC their progress with respect to Year 2000
     preparedness.

     Based  upon  the  responses  received  to the  questionnaires  and  ongoing
     discussions  with  these  third  parties,  the  Company  believes  that the
     majority of the significant customers,  banking and financial institutions,
     suppliers and  interchange  railroads are or will be Year 2000 ready in all
     material  respects by mid-1999.  The Company does not anticipate,  however,
     performing  significant  independent  testing procedures to verify that the
     information  received by the Company  from these third  parties is accurate
     (except for the above mentioned  industry-wide testing efforts).  For those
     third parties who have not responded or who have  expressed  uncertainty as
     to their Year 2000 readiness, management is exploring alternatives to limit
     the  impact  this  will  have on the  Company's  operations  and  financial
     results. The Company will continue to monitor its third party relationships
     for Year 2000 issues.

24

     DST, an approximate 32% owned equity investment,  provides various services
     to Janus and Berger. DST completed its review and evaluation of its mission
     critical U.S. shareowner  accounting and U.S. portfolio  accounting related
     products,  services and internal systems and believes it achieved  material
     Year 2000 readiness in such products, services and systems. DST anticipates
     internal  readiness  for all of its  other  mission  critical  systems  and
     products by September  30, 1999.  Additionally,  DST intends on testing its
     systems with clients and other third  parties for Year 2000 related  issues
     as needed throughout 1999. DST is developing contingency plans for its U.S.
     shareowner  accounting and U.S. portfolio  accounting  business units (with
     testing  expected to be completed by June 30,  1999),  as well as for other
     mission critical products,  services and systems.  Formal contingency plans
     for DST's Winchester and Poindexter Data Centers have been completed.

Testing and  Documentation  Procedures.  All  material  modifications  to IT and
non-IT  systems are being  documented  and  maintained  by the project teams for
purposes of tracking  the Year 2000 project and as a part of the  Company's  due
diligence process. All modified systems have been or are in the process of being
tested for Year 2000  remediation,  unit acceptance,  system acceptance and user
acceptance. The testing procedures used and the results of these tests are being
documented and maintained as a part of the Year 2000 due diligence process.

Year  2000  Risks.  The  Company  continues  to  evaluate  the  principal  risks
associated  with its IT and non-IT  systems,  as well as third party  systems if
they were not to be Year  2000  ready on a timely  basis.  Areas  that  could be
affected  include,  but are not limited to, the  ability  to:  accurately  track
pricing and trading information, obtain and process customer orders and investor
transactions,  properly  track and record  revenue  movements  (including  train
movements),  order and obtain  critical  supplies,  and  operate  equipment  and
control systems. These risks are presently under assessment, and the Company has
no  basis  to form an  estimate  of  costs or lost  revenues  and is  unable  to
determine its impact on operations at this time.

The Company  believes,  however,  that the risks  involved  with the  successful
completion of its Year 2000 conversion  relate primarily to available  resources
and third party readiness. The key factors to success include the proper quality
and quantity of human and capital  resources to address the complexity and costs
of the project  tasks.  The Company has allocated  substantial  resources to the
Year 2000  project and  believes  that it is  adequately  staffed by  employees,
consultants and  contractors.  The inability to complete Year 2000 readiness for
the computer systems of the Company could result in significant  difficulties in
processing and completing fundamental transactions.

In  addition,  the  Company  is taking  precautions  to ensure  its third  party
relationships  have  been  adequately  addressed.  Based on work  performed  and
information received to date, the Company believes its key suppliers,  customers
and other  significant third party  relationships  will be prepared for the Year
2000  in all  material  respects  within  an  acceptable  time  frame  (or  that
acceptable alternatives will be available);  however,  management of the Company
makes no  assurances  that all such  parties  will be Year 2000 ready  within an
acceptable time frame.

In the event that the Company or key third parties are not Year 2000 ready,  the
Company's  results of  operations,  financial  position  and cash flows could be
materially adversely affected.

Contingency  Plans.  The  Company  and its  subsidiaries  are in the  process of
identifying  alternative  plans in the event  that the Year 2000  project is not
completed on a timely  basis or otherwise  does not meet  anticipated  needs.  A
business contingency planning specialist was hired by KCSR and is working on the
contingency  plans  for  critical  business  processes.   Similarly,  consulting
professionals have been utilized by Janus,  Berger and Nelson in connection with
Year 2000 efforts,  including contingency  planning.  The Company is also making
alternative  arrangements  in the  event  that  critical  suppliers,  customers,
utility  providers and other  significant third parties are not Year 2000 ready.
The contingency planning process is scheduled to be completed by July 1999.

25

In addition,  information  system  black out periods have been  scheduled at the
various Company  subsidiaries,  generally from third quarter 1999 through second
quarter 2000.  During this period,  the Year 2000 project team and other members
of the information systems group will focus all of their efforts and time toward
addressing   Year   2000   related   issues.   No  new   project   requests   or
hardware/software upgrades will be allowed during this time.

Year 2000 Costs. To date, the Company has spent  approximately  $14.6 million in
connection with ensuring that all Company and subsidiary  computer  programs are
compatible with Year 2000  requirements.  In addition,  the Company  anticipates
future  spending of  approximately  $9 million in connection  with this process.
Current accounting principles require all costs associated with Year 2000 issues
to be  expensed  as  incurred.  A portion  of these  costs will not result in an
increase in expense to the Company because existing  employees and equipment are
being used to complete the project.



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, 1998.


26


PART II - OTHER INFORMATION


Item 1.  Legal Proceedings

Part I, Item 1.  Financial  Statements,  Note 12 to the  Consolidated  Condensed
Financial  Statements  of  this  Form  10-Q is  hereby  incorporated  herein  by
reference.


Item 4.  Submission of Matters to a Vote of Security Holders

a)      The  Company  held its 1999  Annual  Meeting  of  Stockholders  ("Annual
        Meeting")  on May 6, 1999.  A total of  98,062,221  shares of the Common
        Stock,  $.01 per share par value,  and Preferred Stock, par value $25.00
        per share, or 89.2% of the  outstanding  voting stock on the record date
        (109,936,774  shares),  was represented at the Annual  Meeting,  thereby
        constituting a quorum.  These shares voted together as a single class.

b)      Proxies for the meeting were solicited pursuant to Regulation 14A; there
        was no solicitation in opposition to management's nominees for directors
        as listed in such Proxy  Statement  and all such  nominees were elected.
        The voting was as follows:



                                                     Total
                                                     Shares     
                                               
        Election of  Two Directors
          (i)   James E. Barnes
                      For                           97,038,116
                      Withheld                       2,384,810
                                                  ------------
                                      Total         99,422,926
                                                  ============


          (ii)  Jose F. Serrano
                      For                           94,316,706
                      Withheld                       2,384,810
                                                  ------------
                                      Total         96,701,516
                                                  ============



c)      Listed  below  is the  other  matter  voted on at the  Company's  Annual
        Meeting.  This matter is fully  described  in the  Company's  Definitive
        Proxy Statement. The voting was as follows:



                                                     Total
                                                     Shares
        Ratification of the Board of Directors'
        selection of PricewaterhouseCoopers  LLP
        as the Company's Independent Accountants for 1999
                                               

                      For                           97,632,730
                      Against                          269,348
                      Abstentions                      160,143
                      Non-votes                              -
                                                  ------------
                                      Total         98,062,221
                                                  ============


27


Based upon the majority of affirmative votes of the shares present at the Annual
Meeting required for approval, this matter passed.


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 dated February 25, 1999
          under  Item 5,  reporting  the  repurchase  of  460,000  shares of the
          Company's  common  stock from the DST  Systems,  Inc.  Employee  Stock
          Ownership Plan.

28



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 May 14, 1999.


Kansas City Southern Industries, Inc.


                         /s/ Joseph D. Monello             
                          Joseph D. Monello
              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)