Kansas City Southern Corrects and Replaces Previous Earnings Announcement, BW0325, MO-KANSAS-CITY-SOUTHERN

Business Wire, Feb 4, 1999

KANSAS CITY, Mo.--(BUSINESS WIRE)--Feb. 3, 1999--

Record Fourth Quarter Ongoing Earnings -- 27% -- Contribute to

Record Year -- 44% -- for Kansas City Southern Industries, Inc.

6 Kansas City Southern Industries, Inc. ("KCSI" or "Company") announced its highest-ever ongoing earnings per share for a fourth quarter and year ended during those respective periods in 1998. Consolidated fourth quarter 1998 earnings from ongoing operations of $53.3 million (46(cent) per diluted share) increased 27% over the $41.9 million (39(cent) per diluted share) in comparable 1997. Both years exclude certain one-time items as discussed below. Consolidated revenues for the three months ended December 31, 1998 increased to $331.8 million compared to $294.3 million in the same period in 1997.

1998 represented a record year for the Company, as consolidated ongoing earnings reached $207.0 million ($1.81 per diluted share) and revenues increased to $1.3 billion. 1997 consolidated earnings were $144.0 million ($1.34 per diluted share), exclusive of one-time charges, and revenues totaled $1.1 billion. This 21% increase in revenues, together with improved consolidated operating margins, fueled a $91.6 million (30%) increase in 1998 ongoing operating income compared to 1997.

Fourth quarter and year ended 1998 earnings include a one-time $23.2 million (after-tax $0.21 per diluted share) non-cash charge resulting from the merger of a wholly-owned subsidiary of DST Systems, Inc. ("DST"), an equity investment of the Company, with USCS International, Inc. ("USCS"). The merger was accounted for by DST under the pooling of interests method. The charge reflects the Company's reduced ownership of DST (from 41% to approximately 32%), together with the Company's proportionate share of DST and USCS merger-related charges. The Company will continue to report DST under the equity method of accounting as a 32% owned investment. With respect to 1997, earnings for fourth quarter and the year ended December 31, 1997 included $158.1 million (after-tax, $1.47 per diluted share) of special one-time restructuring, asset impairment and other charges relating primarily to the Transportation segment.

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DILUTED EARNINGS PER SHARE AND COMMON SHARE COMPARISONS

                              Fourth Quarter           Year to Date
                             1998        1997        1998        1997
Transportation:
U.S. Operations             $0.09       $0.12       $0.45       $0.25
Grupo TFM and
 associated interest
 (estimated)                (0.02)      (0.09)      (0.13)      (0.16)

Ongoing Operations           0.07        0.03        0.32        0.09
Restructuring
 charges                       --       (1.32)         --       (1.32)
Gain on sale of
 rail line                     --          --        0.02          --

Total Transportation         0.07       (1.29)       0.34       (1.23)

Financial Services:
Ongoing Operations           0.39        0.36        1.49        1.25
Restructuring charges          --       (0.15)         --       (0.15)
Effects of DST merger       (0.21)         --       (0.21)         --
Gain on Janus sale
 of IDEX                       --          --        0.04          --

Total Financial
 Services                    0.18        0.21        1.32        1.10

Total Earnings
 Per Share:
Ongoing Operations           0.46        0.39        1.81        1.34
Restructuring
 charges                       --       (1.47)         --       (1.47)
Effects of DST
 merger                     (0.21)         --       (0.21)         --
Gains on sale
 of assets                     --          --        0.06          --

Total Company               $0.25      $(1.08)      $1.66      $(0.13)

Weighted Average
 Diluted
Common Shares
 Outstanding
 (thousands)              113,358     107,732     113,059     107,602

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TRANSPORTATION (Kansas City Southern Lines, Inc.)

The Transportation segment includes (among others) The Kansas City Southern Railway Company ("KCSR"), Gateway Western Railway Company ("Gateway Western"), and equity investments in Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. ("Grupo TFM") and Mexrail, Inc.

Fourth Quarter

The Transportation segment reported earnings of $7.8 million for the three months ended December 31, 1998 compared to $3.5 million in the same period of 1997, exclusive of the one-time 1997 charges noted above. Fourth quarter 1998 includes $0.2 million in equity earnings from the Company's investment in Grupo TFM compared to a loss of $7.6 million for the same period in 1997. KCSR's contribution to ongoing earnings declined $1.9 million compared to fourth quarter 1997.

Transportation revenues for fourth quarter 1998 of $151.1 million decreased 3% compared to the same 1997 period. Excluding non-recurring 1997 revenue from Union Pacific reroute traffic, KCSR revenues were stable quarter to quarter. Continued growth in unit coal (7%) and agriculture and minerals (12%) were offset by lower metal, paper and forest, and chemical/petroleum products resulting from volume declines.