<PAGE>

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q

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

     For the quarterly period ended June 30, 2001

                                       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     1-6324


              THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY
             (Exact name of registrant as specified in its charter)


             Delaware                                   41-6034000
  (State or other jurisdiction of          (I.R.S. Employer Identification No.)
  incorporation or organization)


           2650 Lou Menk Drive
            Fort Worth, Texas                              76131
(Address of principal executive offices)                (Zip Code)


                                (817) 333-2000
             (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  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.

                                                          Shares
     Class                                     Outstanding at July 20, 2001
     -----                                     ----------------------------

Common stock, $1.00 par value*                          1,000 shares

*  The Burlington Northern and Santa Fe Railway Company is a wholly-owned
   subsidiary of Burlington Northern Santa Fe Corporation; as a result there is
   no market data with respect to registrant's shares.

Registrant meets the conditions set forth in General Instruction H (1)(a) and
(b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced
disclosure format permitted by General Instruction H (2).

<PAGE>

                          PART I FINANCIAL INFORMATION

Item 1.  Financial Statements

     THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY AND SUBSIDIARIES
                        CONSOLIDATED STATEMENT OF INCOME
                             (Dollars in Millions)
                                  (Unaudited)

                                       Three Months Ended     Six Months Ended
                                            June 30,              June 30,
                                     --------------------   -------------------
                                       2001        2000       2001       2000
                                     --------    --------   --------    -------

Revenues                             $  2,269    $  2,260   $  4,561    $ 4,522
                                     --------    --------   --------    -------

Operating expenses:
  Compensation and benefits               694         677      1,423      1,375
  Purchased services                      274         250        536        508
  Depreciation and amortization           230         223        458        444
  Equipment rents                         190         176        377        355
  Fuel                                    246         219        503        430
  Materials and other                     209         233        420        419
                                     --------    --------   --------    -------
    Total operating expenses            1,843       1,778      3,717      3,531
                                     --------    --------   --------    -------

Operating income                          426         482        844        991
Interest expense                           42          47         87         94
Interest expense, related parties          21          29         42         60
Other income (expense), net                 4           3        (33)         -
                                     --------    --------   --------    -------

Income before income taxes                367         409        682        837
Income tax expense                        135         152        255        314
                                     --------    --------   --------    -------

Net income                           $    232    $    257   $    427    $   523
                                     ========    ========   ========    =======

See accompanying notes to consolidated financial statements.

                                       1
<PAGE>

     THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                             (Dollars in Millions)
                                  (Unaudited)



<TABLE>
<CAPTION>
                                                                       June 30,            December 31,
ASSETS                                                                   2001                  2000
                                                                  -----------------     -----------------
<S>                                                            <C>                     <C>
Current assets:
  Cash and cash equivalents                                       $             215     $             117
  Accounts receivable, net                                                      328                   381
  Materials and supplies                                                        214                   220
  Current portion of deferred income taxes                                      296                   299
  Other current assets                                                           88                   125
                                                                  -----------------     -----------------
    Total current assets                                                      1,141                 1,142

Property and equipment, net                                                  22,535                22,286
Other assets                                                                    980                 1,008
                                                                  -----------------     -----------------
      Total assets                                                $          24,656     $          24,436
                                                                  =================     =================

LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities:
  Accounts payable and other current liabilities                  $           1,736     $           1,921
  Long-term debt due within one year                                            237                   232
                                                                  -----------------     -----------------
      Total current liabilities                                               1,973                 2,153

Long-term debt                                                                2,326                 2,408
Intercompany notes payable, net                                               1,313                 1,185
Deferred income taxes                                                         6,554                 6,398
Casualty and environmental liabilities                                          422                   430
Employee merger and separation costs                                            233                   262
Other liabilities                                                             1,035                 1,026
                                                                  -----------------     -----------------
      Total liabilities                                                      13,856                13,862
                                                                  -----------------     -----------------

Commitments and contingencies (see notes 2 and 6)

Stockholder's equity:
  Common stock, $1 par value (1,000 shares authorized, issued
  and outstanding) and paid-in capital                                        4,707                 4,706
  Retained earnings                                                           6,070                 5,878
  Accumulated other comprehensive income (deficit)                               23                   (10)
                                                                  -----------------     -----------------
      Total stockholder's equity                                             10,800                10,574
                                                                  -----------------     -----------------
      Total liabilities and stockholder's equity                  $          24,656     $          24,436
                                                                  =================     =================
</TABLE>
See accompanying notes to consolidated financial statements.

                                       2
<PAGE>

     THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                             (Dollars in Millions)
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                                             Six Months Ended
                                                                                                  June 30,
                                                                                    ----------------------------------
                                                                                          2001                2000
                                                                                    --------------      --------------
<S>                                                                               <C>                  <C>
Operating Activities:
  Net income                                                                        $          427      $          523
  Adjustments to reconcile net income to net cash provided by operating
   activities:
      Depreciation and amortization                                                            458                 444
      Deferred income taxes                                                                    139                 133
      Employee merger and separation costs paid                                                (27)                (32)
      Other, net                                                                                23                  44
      Changes in current assets and liabilities:
        Accounts receivable, net                                                                53                   2
        Materials and supplies                                                                   6                  51
        Other current assets                                                                    37                 (28)
        Accounts payable and other current liabilities                                        (193)               (266)
                                                                                    --------------      --------------
Net cash provided by operating activities                                                      923                 871
                                                                                    --------------      --------------
Investing Activities:
  Capital expenditures                                                                        (637)               (636)
  Other, net                                                                                   (14)                (94)
                                                                                    --------------      --------------
Net cash used for investing activities                                                       ( 651)              ( 730)
                                                                                    --------------      --------------
Financing Activities:
  Proceeds from issuance of long-term debt                                                       -                  50
  Payments on long-term debt                                                                   (68)                (98)
  Net increase (decrease) in intercompany notes payable, net                                   128                 (26)
  Dividends paid                                                                              (235)                  -
  Other, net                                                                                     1                   -
                                                                                    --------------      --------------
Net cash used for financing activities                                                        (174)               ( 74)
                                                                                    --------------      --------------

Increase in cash and cash equivalents                                                           98                  67
Cash and cash equivalents:
  Beginning of period                                                                          117                  79
                                                                                    --------------      --------------
  End of period                                                                     $          215      $          146
                                                                                    ==============      ==============
Supplemental cash flow information:
  Interest paid, net of amounts capitalized                                         $          139      $          156
  Income taxes paid, net of refunds                                                            141                 258
</TABLE>
See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

     THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


1.  ACCOUNTING POLICIES AND INTERIM RESULTS

The consolidated financial statements should be read in conjunction with The
Burlington Northern and Santa Fe Railway Company (BNSF Railway or Company)
Annual Report on Form 10-K for the year ended December 31, 2000, including the
financial statements and notes thereto.  BNSF Railway is a wholly-owned
subsidiary of Burlington Northern Santa Fe Corporation (BNSF).  The consolidated
financial statements include the accounts of BNSF Railway and its majority-owned
subsidiaries.  All significant intercompany accounts and transactions have been
eliminated.

The results of operations for any interim period are not necessarily indicative
of the results of operations to be expected for the entire year.  In the opinion
of management, all adjustments (consisting of only normal recurring adjustments,
except as disclosed) necessary to present fairly BNSF Railway's consolidated
financial position as of June 30, 2001 and the consolidated results of
operations for the three and six month periods ended June 30, 2001 and 2000 have
been included. During the first quarter of 2001, BNSF Railway recorded $36
million of pretax non-recurring losses related to non-rail investments in Other
Income (Expense), net. In addition, during the second quarter of 2000, BNSF
Railway recorded $42 million pretax of non-recurring charges related to employee
related severance, medical and other benefit costs and the loss of previously
earned state tax incentives.

Certain comparative prior-year amounts in the consolidated financial statements
have been reclassified to conform to the current year presentation.

2.  HEDGING ACTIVITIES

On January 1, 2001, BNSF Railway adopted Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities" and recorded a cumulative transition benefit of $56 million, net of
tax, to Accumulated Other Comprehensive Income.  The standard requires that all
derivatives be recorded on the balance sheet at fair value and establishes
criteria for documentation and measurement of hedging activities.

The Company currently uses derivatives to hedge against increases in diesel fuel
prices.  The Company formally documents the relationship between the hedging
instrument and the hedged item, as well as the risk management objective and
strategy for the use of the hedging instrument.  This documentation includes
linking the derivatives that are designated as fair value or cash flow hedges to
specific assets or liabilities on the balance sheet, commitments, or to
forecasted transactions.  The Company assesses at the time a derivative contract
is entered into, and at least quarterly, whether the derivative item is
effective in offsetting the changes in fair value or cash flows.  Any change in
fair value resulting from ineffectiveness, as defined by SFAS No. 133, is
recognized in current period earnings.  For derivative instruments that are
designated and qualify as cash flow hedges, the effective portion of the gain or
loss on the derivative instrument is recorded in Accumulated Other Comprehensive
Income as a separate component of Stockholder's Equity and reclassified into
earnings in the period during which the hedge transaction affects earnings.

FUEL

Fuel costs represented 14 percent and 12 percent of total operating expenses
during the first six months of 2001 and 2000, respectively, reflecting
significantly higher than historical fuel prices, which have continued to date.
Due to the significance of diesel fuel expenses to the operations of BNSF
Railway and the historical volatility of fuel prices, the Company maintains a
program to hedge against fluctuations in the price of its diesel fuel purchases.
The intent of the program is to protect the Company's operating margins and
overall profitability from adverse fuel price changes by entering into fuel-
hedge instruments based on management's evaluation of current and expected
diesel fuel price trends.  However, to the extent the Company hedges portions of
its fuel purchases, it may not realize the impact of decreases in fuel prices.
Conversely, to the extent the Company does not hedge portions of its fuel
purchases, it may be adversely affected by increases in fuel prices.  Based on
annualized fuel consumption during

                                       4
<PAGE>

the first six months of 2001 and excluding the impact of the hedging program,
each one-cent increase in the price of fuel would result in approximately $12
million of additional fuel expense on an annual basis.

The fuel-hedging program includes the use of derivatives that qualify and are
accounted for as cash flow hedges.  As of June 30, 2001, BNSF Railway had
entered into derivatives for approximately 240 million gallons of diesel fuel at
an average price of approximately 50 cents per gallon.  The above price does not
include taxes, transportation costs, certain other fuel handling costs, and any
differences which may occur from time to time between the prices of commodities
hedged and the purchase price of BNSF Railway's diesel fuel. Currently, BNSF
Railway's fuel-hedging program covers approximately 24 percent of estimated fuel
purchases for the remainder of 2001 and 8 percent for 2002. Hedge positions are
closely monitored to ensure that they will not exceed actual fuel requirements
in any period. BNSF Railway also monitors its hedging positions and credit
ratings of its counterparties and does not anticipate losses due to counterparty
nonperformance.

As a result of adopting SFAS No. 133, the Company recorded a cumulative
transition benefit of $56 million, net of tax, to Accumulated Other
Comprehensive Income related to deferred gains on fuel hedge transactions as of
January 1, 2001. For the three-month period ended June 30, 2001, the Company
recognized a loss of $600 thousand associated with the ineffective portion of
derivatives in fuel expense. For the six-month period ended June 30, 2001, the
Company recognized income of approximately $400 thousand associated with the
ineffective portion of derivatives in fuel expense. At June 30, 2001,
Accumulated Other Comprehensive Income includes a pre-tax gain of $53 million of
which $35 million relates to derivative transactions that will expire in 2001.
Receivables of $17 million and $50 million at June 30, 2001 and December 31,
2000, respectively, are recorded in the Company's balance sheet as part of the
Other Current Assets and represent amounts due on settled fuel-hedging
contracts.

3.  COMPREHENSIVE INCOME

BNSF Railway's comprehensive income, net of tax, was $231 million and $460
million for the three and six months ended June 30, 2001, respectively, compared
with $257 million and $523 million for the three and six months ended June 30,
2000, respectively.  BNSF Railway's comprehensive income includes net income and
adjustments to the minimum pension liability, as well as changes related to
derivatives which qualify for cash flow hedge accounting.

The change in Accumulated Other Comprehensive Income (Deficit), net of tax, is
presented in the following table:


<TABLE>
<CAPTION>
                                                                           Three Months Ended              Six Months Ended
                                                                                 June 30,                       June 30,
                                                                            2001        2000                2001         2000
                                                                        ------------------------        ------------------------
                                                                              (in millions)                   (in millions)
<S>                                                                       <C>          <C>                <C>          <C>
Balance at beginning of period                                              $ 24       $ (7)                $ (10)    $  (7)
   Cumulative effect of adoption of SFAS No. 133, net................          -          -                    56         -
   Gain on derivative instruments, included in net income............        (11)         -                   (23)        -
   Change in fair value of derivative instruments....................         10          -                     -         -
                                                                        ------------------------        ------------------------
Balance at end of period                                                    $ 23       $ (7)                $  23     $  (7)
                                                                        ========================        ========================
</TABLE>

4.  ACCOUNTS RECEIVABLE, NET

In the first quarter of 2001, BNSF Railway, through a special purpose
subsidiary, increased capacity to sell variable rate certificates that mature in
2002 and evidence undivided interests in an accounts receivable master trust.
The amount of variable rate certificates which can be sold under the accounts
receivable sales agreement increased by $100 million to $700 million.  At June
30, 2001, $625 million of certificates were outstanding compared to $600 million
at December 31, 2000, which provided $25 million of cash for the first six
months of 2001.  The master trust's assets include an ownership interest in a
revolving portfolio of BNSF Railway's accounts receivable which are used to
support the certificates.

5.  EMPLOYEE MERGER AND SEPARATION COSTS

Current and long-term employee merger and separation liabilities totaling $279
million are included in the consolidated balance sheet at June 30, 2001, and
principally represent:  (i) employee-related severance costs for the
consolidation of clerical functions; (ii) deferred benefits payable upon
separation or retirement to certain active

                                       5
<PAGE>

conductors, trainmen and locomotive engineers; and (iii) certain salaried
employee severance costs. During the first six months of 2001, the Company made
employee merger and separation payments of $27 million and reduced its liability
by $4 million to reflect a change in estimates.

During the second quarter of 2000, the Company incurred $22 million of costs for
severance, medical and other benefit costs for approximately 150 involuntarily
terminated employees, primarily material handlers in mechanical shops and
trainmen on reserve boards, as part of the Company's ongoing initiatives to
reduce operating expense by improving its efficiency.  The initiative eliminated
approximately 200 positions, including reductions through the elimination of
contract services. The majority of these severed employees have elected to
receive payments over the next several years, rather than lump-sum payments.

Liabilities related to the consolidation of clerical functions are paid to
affected employees in the form of a lump-sum payment or payments made over five
to ten years, or in some cases, through retirement.  Liabilities related to
deferred benefits payable to certain active conductors, trainmen and locomotive
engineers are paid upon the employees' separation or retirement.  Liabilities
principally related to certain remaining salaried employee severances will be
paid in the form of a lump sum payment or over the next several years based on
deferral elections made by affected employees.  At June 30, 2001, $46 million of
the remaining liabilities are included within current liabilities for
anticipated costs to be paid over the next twelve months.

6.  COMMITMENTS AND CONTINGENCIES

ENVIRONMENTAL

BNSF Railway's operations, as well as those of its competitors, are subject to
extensive federal, state and local environmental regulation.  BNSF Railway's
operating procedures include practices to protect the environment from the risks
inherent in railroad operations, which frequently involve transporting chemicals
and other hazardous materials.  Additionally, many of BNSF Railway's land
holdings are and have been used for industrial or transportation-related
purposes or leased to commercial or industrial companies whose activities may
have resulted in discharges onto the property.  As a result, BNSF Railway is
subject to environmental clean-up and enforcement actions.  In particular, the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980 (CERCLA), also known as the "Superfund" law, as well as similar state laws
generally impose joint and several liability for clean-up and enforcement costs
on current and former owners and operators of a site without regard to fault or
the legality of the original conduct.  BNSF Railway has been notified that it is
a potentially responsible party (PRP) for study and clean-up costs at
approximately 30 Superfund sites for which investigation and remediation
payments are or will be made or are yet to be determined (the Superfund sites)
and, in many instances, is one of several PRPs.  In addition, BNSF Railway may
be considered a PRP under certain other laws.  Accordingly, under CERCLA and
other federal and state statutes, BNSF Railway may be held jointly and severally
liable for all environmental costs associated with a particular site.  If there
are other PRPs, BNSF Railway generally participates in the clean-up of these
sites through cost-sharing agreements with terms that vary from site to site.
Costs are typically allocated based on relative volumetric contribution of
material, the amount of time the site was owned or operated, and/or the portion
of the total site owned or operated by each PRP.

Environmental costs include initial site surveys and environmental studies of
potentially contaminated sites as well as costs for remediation and restoration
of sites determined to be contaminated.  Liabilities for environmental clean-up
costs are initially recorded when BNSF Railway's liability for environmental
clean-up is both probable and a reasonable estimate of associated costs can be
made.  Adjustments to initial estimates are recorded as necessary based upon
additional information developed in subsequent periods.  BNSF Railway conducts
an ongoing environmental contingency analysis, which considers a combination of
factors including independent consulting reports, site visits, legal reviews,
analysis of the likelihood of participation in and the ability of other PRPs to
pay for clean-up, and historical trend analyses.

BNSF Railway is involved in a number of administrative and judicial proceedings
and other mandatory clean-up efforts at approximately 389 sites, including the
Superfund sites, at which it is participating in the study or clean-up, or both,
of alleged environmental contamination.  BNSF Railway paid approximately $44
million during the first six months of 2001 for mandatory and unasserted clean-
up efforts, including amounts expended under federal and state voluntary clean-
up programs.  BNSF Railway has recorded liabilities for remediation and
restoration of all known sites of approximately $208 million at June 30, 2001.
BNSF Railway anticipates that the majority of the accrued costs at June 30, 2001
will be paid over the next five years.  No individual site is considered to be
material.

                                       6
<PAGE>

Liabilities recorded for environmental costs represent BNSF Railway's best
estimates for remediation and restoration of these sites and include both
asserted and unasserted claims.  Unasserted claims are not considered to be a
material component of the liability.  Although recorded liabilities include BNSF
Railway's best estimates of all costs, without reduction for anticipated
recoveries from third parties, BNSF Railway's total clean-up costs at these
sites cannot be predicted with certainty due to various factors such as the
extent of corrective actions that may be required, evolving environmental laws
and regulations, advances in environmental technology, the extent of other
parties' participation in clean-up efforts, developments in ongoing
environmental analyses related to sites determined to be contaminated, and
developments in environmental surveys and studies of potentially contaminated
sites.  As a result, future charges to income for environmental liabilities
could have a significant effect on results of operations in a particular quarter
or fiscal year as individual site studies and remediation and restoration
efforts proceed or as new sites arise.  However, management believes that it is
unlikely that any identified matters, either individually or in the aggregate,
will have a material adverse effect on BNSF Railway's results of operations,
financial position or liquidity.

OTHER CLAIMS AND LITIGATION

BNSF Railway and its subsidiaries are parties to a number of legal actions and
claims, various governmental proceedings and private civil suits arising in the
ordinary course of business, including those related to environmental matters
and personal injury claims.  While the final outcome of these items cannot be
predicted with certainty, considering among other things the meritorious legal
defenses available, it is the opinion of management that none of these items,
when finally resolved, will have a material adverse effect on the results of
operations, financial position or liquidity of BNSF Railway, although an adverse
resolution of a number of these items could have a material adverse effect on
the results of operations in a particular quarter or fiscal year.

7.  RELATED PARTY TRANSACTIONS

BNSF Railway is involved with BNSF and certain of its subsidiaries in related
party transactions in the ordinary course of business, which included payments
made on each other's behalf and performance of services.  Under the terms of a
tax allocation agreement with BNSF, BNSF Railway made federal and state income
tax payments, net of refunds, of $141 million and $258 million, respectively,
during the first six months of 2001 and 2000, which are reflected in changes in
working capital in the consolidated statement of cash flows.

BNSF Railway had net intercompany receivable balances of $66 million and $68
million at June 30, 2001 and December 31, 2000, respectively, which are
reflected in accounts receivable in the consolidated balance sheet. Net
intercompany receivable or payable balances are settled in ordinary course of
business.

At June 30, 2001 and December 31, 2000, BNSF Railway had $1,459 million and
$1,579 million, respectively, of intercompany notes payable to BNSF that had a
fixed interest rate of 6.90 percent.  At June 30, 2001 and December 31, 2000,
BNSF Railway had $220 million and $245 million, respectively, of intercompany
notes payable to BNSF that had variable interest rates of 1.00 percent above the
monthly average daily effective Federal Funds rate.  During the first six
months of 2001, BNSF Railway had additional borrowings of $32 million and repaid
$57 million of the variable rate notes.  During the first six months of 2001,
BNSF Railway also repaid $120 million of the 6.90 percent fixed rate notes.
Proceeds from borrowings are primarily used to fund capital expenditures and
other investing activities.  Interest is paid semi-annually on all intercompany
notes payable.  Interest expense on intercompany notes payable is reflected in
interest expense, related parties in the consolidated income statement.  The
intercompany notes are due on demand; however, it is not anticipated that BNSF
Railway will be required to pay these obligations in the next twelve months.

At June 30, 2001 and December 31, 2000, BNSF Railway had $366 million and $639
million, respectively, of intercompany notes receivable from BNSF with a
variable interest rate of 1.00 percent above the monthly average daily
effective Federal Funds rate.  The $273 million decrease was due to repayments
from BNSF of $598 million and additional borrowings by BNSF of $325 million
during the first six months of 2001.  Interest is collected semi-annually on all
intercompany notes receivable.  The 2001 and 2000 balances include a $130
million receivable due to SFP Pipelines Holdings, Inc., a subsidiary of BNSF
Railway, from BNSF.  The receivable is due August 15, 2010 and interest is
collected semi-annually.  This receivable originated between SFP Pipelines
Holdings, Inc. and Santa Fe Pacific Corporation (SFP).  During 1997, BNSF
assumed the note payable from SFP and SFP recognized the assumption as a capital
contribution from BNSF.  On January 2, 1998, SFP, which was then BNSF Railway's
parent, merged with and into BNSF Railway.  Interest income on intercompany
notes receivable is reflected in interest expense, related parties in the
consolidated income statement.

                                       7
<PAGE>

In the BNSF Railway consolidated balance sheet, the intercompany notes payable
are presented net of the intercompany notes receivable discussed above.  BNSF
Railway had net intercompany notes payable balances of $1,313 million and $1,185
million at June 30, 2001 and December 31, 2000, respectively, included in its
consolidated balance sheet.

During the second quarter of 2001, BNSF Railway paid a dividend of $235 million
to BNSF.

8.  INCOME TAXES

During the first six months of 2001, the effective tax rate decreased primarily
due to permanent adjustments and lower pretax income.

Item 2.  Management's Narrative Analysis of Results of Operations

Management's narrative analysis relates to the results of operations of The
Burlington Northern and Santa Fe Railway Company and its majority-owned
subsidiaries (collectively BNSF Railway, Registrant or Company).

Results of Operations
---------------------

Six months ended June 30, 2001 compared with six months ended June 30, 2000

BNSF Railway recorded net income for the first six months of 2001 of $427
million compared with $523 million for the first six months of 2000.  The
decrease in net income is due to a $147 million decrease in operating income
primarily as a result of significantly higher fuel costs and higher compensation
and benefit costs principally due to wage rate increases and higher health and
welfare costs. The first quarter of 2001 was impacted by more severe winter
weather conditions, non-recurring losses of $36 million pretax related to non-
rail investments and the second quarter of 2001 was impacted by flooding in the
upper Midwest. In addition, the second quarter of 2000 included $42 million
pretax of non-recurring charges due to employee related severance, medical and
other benefit costs and the loss of previously earned state tax incentives.

Revenues

The following table presents BNSF Railway's revenue information by commodity for
the six months ended June 30, 2001 and 2000 and includes certain
reclassifications of prior year information to conform to current year
presentation:

<TABLE>
<CAPTION>
                                                                                                            Average Revenue
                                               Revenues                      Cars/Units                      Per Car/Unit
                                     --------------------------    ----------------------------     -----------------------------
                                         2001           2000             2001           2000              2001            2000
                                     -----------    -----------    -------------    -----------     -------------    ------------
                                            (In Millions)                  (In Thousands)
<S>                                <C>              <C>            <C>              <C>             <C>              <C>
Consumer                           $       1,649    $     1,651            1,832          1,869     $         900    $        883
Industrial                                 1,156          1,181              781            812             1,480           1,454
Coal                                       1,058          1,054            1,043            994             1,014           1,060
Agricultural Commodities                     639            590              346            325             1,847           1,815
                                     -----------    -----------    -------------    -----------     -------------    ------------
Total Freight Revenues                     4,502          4,476            4,002          4,000     $       1,125    $      1,119
                                                                   =============    ===========     =============    ============
Other Revenues                                59             46
                                     -----------    -----------
Total Operating Revenues           $       4,561  $       4,522
                                     ===========    ===========
</TABLE>

Total revenues of $4,561 million for the first six months of 2001 were $39
million higher than revenues of $4,522 million for the first six months of 2000.
The increase primarily reflects increases in the coal and agricultural
commodities sectors, partially offset by lower consumer and industrial revenues.
Average revenue per car/unit increased to $1,125 from $1,119 for the first six
months of 2000.

Consumer revenues of $1,649 million for the first six months of 2001 were $3
million lower than the first six months of 2000 as a result of decreased
loadings with UPS, Roadway, and Yellow Freight. The loss in late 2000 of some
automotive contract business as well as decreases in the automotive sector as a
result of sluggish industry-wide sales affected automotive revenues.
Additionally, the recent loss in 2001 of some automotive contract business is
expected to affect future automotive revenues. However, lower revenues in
automotive and domestic intermodal shipments were partially offset by
significant growth in intermodal truckload business with NUMMI and J.B. Hunt,
increased international revenues, and dry boxcar business due to strong beverage
shipments.

                                       8
<PAGE>

Industrial revenues of $1,156 million for the first six months of 2001 were $25
million, or 2 percent, lower than the first six months of 2000, despite the
increased revenue per unit reflecting increased length of haul and selected
price increases.  Revenues for the first six months of 2001 fell due to
continued production cutbacks affecting the chemicals, forest products and
metals sectors, partially offset by increases in the minerals and machinery
sectors resulting from government shipments of machinery and increased demand
for clay and sand in the drilling industry as a result of high import oil
prices.

Coal revenues of $1,058 million for the first six months of 2001 increased $4
million as a result of increased demand for electricity, tight eastern coal
supplies and high natural gas prices; this was partially offset by lower revenue
per car/unit on certain contract renewals.

Agricultural products revenues of $639 million for the first six months of 2001
were $49 million, or 8 percent, higher than revenues for the first six months of
2000, primarily due to an increased demand in all sectors.  Average revenue per
car/unit increased 2 percent to $1,847 from the first six months of 2000 of
$1,815 due to overall increased length of haul.

Expenses

Total operating expenses for the first six months of 2001 were $3,717 million,
an increase of $186 million, or 5 percent, over the first six months of 2000,
reflecting an increase of $73 million in fuel expense over the first six months
of 2000 as the average cost of diesel fuel per gallon increased approximately 11
cents.  Expenses other than fuel were higher primarily due to flooding in the
upper Midwest, more severe winter weather conditions, higher wages and increased
health and welfare costs.

Compensation and benefits expenses of $1,423 million were $48 million, or 4
percent, higher than the first six months of 2000 primarily due to wage rate
increases and higher benefit rates.  Additionally, significant increases in
scheduled wages due to more severe winter weather conditions resulting in higher
maintenance and additional crews.  These increases were partially offset by
lower employment levels and lower incentive compensation expense.

Purchased services of $536 million for the first six months of 2001 were $28
million, or 6 percent, higher than the first six months of 2000 primarily due to
higher ramping expenses incurred as a result of new services added which improve
efficiency and safety at the intermodal ramp facilities, increased drayage and
expenses as a result of flooding in the upper Midwest, higher equipment
maintenance due to more locomotives under contract, and increased haulage
expense.

Depreciation and amortization expenses of $458 million for the first six months
of 2001 were $14 million, or 3 percent, higher than the second quarter of 2000
primarily due to a higher capital.  Equipment rents expenses for the first six
months of 2001 of $377 million were $22 million, or 6 percent, higher than the
first six months of 2000 as a result of increased rental expense due to more
railcars and locomotives under lease.

Fuel expenses of $503 million for the first six months of 2001 were $73 million,
or 17 percent, higher than the first six months of 2000 as a result of a 11-
cent, or 15 percent, increase in the average all-in cost per gallon of diesel
fuel.  Consumption was higher in the first six months of 2001 at 590 million
gallons compared with 578 million gallons in the first six months of 2000 due to
an increase in ton-miles.  This was partially offset by gross ton-miles per
gallon which increased to 751 from 745 compared with the first six months of
2000, principally due to a shift in commodity mix. The increase in the average
all-in cost per gallon of diesel fuel includes a 7-cent increase in the average
purchase price as well as a decrease in the hedge benefit of 4 cents per gallon
as compared with a 10-cent hedge benefit for the first six months of 2000.

Materials and other expenses of $420 million for the first six months of 2001
were $1 million higher than the first six months of 2000 principally reflecting
increased utilities as a result of higher rates and increased consumption due to
more severe winter weather conditions, lower income from easements, increased
locomotive servicing and freight car repair due to more severe winter weather
conditions, increased costs caused by flooding in the upper Midwest and higher
environmental and casualty expenses. These increases were offset by $42 million
pretax of non-recurring charges in the first six months of 2000 due to employee
related severance, medical and other benefit costs and the loss of previously
earned state tax incentives.

                                       9
<PAGE>

Interest expense with external and related parties of $129 million for the first
six months of 2001 was $25 million, or 16 percent, lower than in the first six
months of 2000, principally reflecting lower intercompany debt levels.  Total
debt decreased to $3,876 million at June 30, 2001 from $4,260 million at June
30, 2000.

Other income (expense), net was $33 million higher than in the first six months
of 2000 primarily due to $36 million of non-recurring losses related to non-rail
investments, principally: Pathnet, a telecommunications venture; and a portfolio
of other non-core real-estate investments.

Income tax expense of $255 million for the first six months of 2001 was $59
million, or 19 percent, lower than the first six months of 2000 primarily due to
permanent adjustments and lower pretax income.

Other Matters
-------------

Other Claims and Litigation

BNSF Railway and its subsidiaries are parties to a number of legal actions and
claims, various governmental proceedings and private civil suits arising in the
ordinary course of business, including those related to environmental matters
and personal injury claims.  While the final outcome of these items cannot be
predicted with certainty, considering among other things the meritorious legal
defenses available, it is the opinion of management that none of these items,
when finally resolved, will have a material adverse effect on the results of
operations, financial position or liquidity of BNSF Railway, although an adverse
resolution of a number of these items in a single period could have a material
adverse effect on the results of operations in a particular quarter or fiscal
year.

Labor

Labor unions represent approximately 88 percent of BNSF Railway's employees
under collective bargaining agreements with 13 different labor organizations.
The negotiating process for new, major collective bargaining agreements covering
all of BNSF Railway's union employees has been underway since the bargaining
round was initiated November 1, 1999.  Wages, health and welfare benefits, work
rules, and other issues have traditionally been addressed through industry-wide
negotiations.  These negotiations have generally taken place over a number of
months and have previously not resulted in any extended work stoppages.  The
existing agreements have remained in effect and will continue to remain in
effect until new agreements are reached or the Railway Labor Act's procedures
(which include mediation, cooling-off periods, and the possibility of
Presidential intervention) are exhausted.  The current agreements provide for
periodic wage increases until new agreements are reached.  The National
Carriers' Conference Committee (NCCC), BNSF Railway's multi-employer collective
bargaining representative, has reached a final agreement with the Brotherhood of
Maintenance of Way Employees (BMWE) resolving wage, work rule and benefit issues
through 2004 which was implemented July 2001.  BMWE represents BNSF Railway's
track, bridge and building maintenance employees, or about one-fourth of BNSF
Railway's unionized workforce.  In June 2001, the NCCC reached a tentative
agreement with the International Brotherhood of Electrical Workers (IBEW)
resolving wage and work rule issues through 2004.  The agreement leaves health
and welfare benefit issues for settlement in separate talks with other railroad
unions, and is subject to ratification by IBEW members.  The ratification
process should be completed in the third quarter of 2001.  IBEW represents about
five percent of BNSF Railway's unionized workforce.  During the third quarter of
2000, the NCCC reached a tentative agreement with the United Transportation
Union (UTU) covering wage and work rule issues through the year 2004 for
conductors, brakemen, yardmen, yardmasters and firemen, approximately one-third
of BNSF Railway's unionized workforce.  This agreement is also subject to
ratification by the UTU's membership.  As in the tentative IBEW agreement,
health and welfare benefit issues were not resolved with UTU, and remain the
subject of continuing negotiations.

Accounting Pronouncements

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 141, "Business Combinations," which was
effective for all business combinations initiated after June 30, 2001 and SFAS
No. 142 "Goodwill and Other Intangible Assets". SFAS No. 141, which is effective
for fiscal years after December 15, 2001, eliminates the pooling method of
accounting for a business combination and requires that all combinations be
accounted for using the purchase method. SFAS No. 142 addresses accounting for
identifiable intangible assets, eliminates the amortization of goodwill, and
provides specific steps for testing the impairment of goodwill. The Company's
historical consolidated financial statements will be unaffected by these new
standards.

                                      10
<PAGE>

Forward-Looking Information

To the extent that statements made by the Company relate to the Company's future
economic performance or business outlook, predictions or expectations of
financial or operational results, or refer to matters which are not historical
facts, such statements are "forward-looking" statements within the meaning of
the federal securities laws.   Forward-looking statements involve a number of
risks and uncertainties, and actual results may differ materially.  Factors that
could cause actual results to differ materially include, but are not limited to,
economic and industry conditions: material adverse changes in economic or
industry conditions, both within the United States and globally, customer
demand, effects of adverse economic conditions affecting shippers, adverse
economic conditions in the industries and geographic areas that produce and
consume freight, competition and consolidation in the transportation industry,
the extent to which the Company is successful in gaining new long-term
contractual relationships or retaining existing ones, changes in fuel prices,
and changes in labor costs and labor difficulties including stoppages; legal and
regulatory factors: developments and changes in laws and regulations and the
ultimate outcome of shipper claims, environmental investigations or proceedings
and other types of claims and litigation; and operating factors: technical
difficulties, changes in operating conditions and costs, competition and
commodity concentrations, the Company's ability to achieve its operational and
financial initiatives, as well as natural events such as severe weather, floods
and earthquakes. The factors noted, individually or in combination could, among
other things, limit demand and pricing, affect costs and the feasibility of
certain operations, or affect traffic and pricing levels.

The Company cautions against placing undue reliance on forward-looking
statements, which reflect its current beliefs and are based on information
currently available to it as of the date a forward-looking statement is made.
The Company undertakes no obligation to revise forward-looking statements to
reflect future events, changes in circumstances, or changes in beliefs.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

In the ordinary course of business, BNSF Railway utilizes various financial
instruments which inherently have some degree of market risk.  The qualitative
and quantitative information presented in the Management's Narrative Analysis of
Results of Operations section and in Item 7A of the Company's Annual Report on
Form 10-K for the year ended December 31, 2000 describes significant aspects of
BNSF Railway's financial instrument programs which have material market risk.
Presented below is updated quantitative information for those programs that have
changed significantly from the information reported in BNSF Railway's Form 10-K
for the year ended December 31, 2000.

COMMODITY PRICE SENSITIVITY

As discussed in Note 2 to the Company's consolidated financial statements, BNSF
Railway has a program to hedge against fluctuations in the price of its diesel
fuel purchases.  The table below provides information about BNSF Railway's
diesel fuel hedging instruments that are sensitive to changes in diesel fuel
prices.  The table presents notional amounts in gallons and the weighted average
contract price by contractual maturity date as of June 30, 2001.  The prices
included in the table below do not include taxes, transportation costs, certain
other fuel handling costs and any differences which may occur from time to time
between the prices of commodities hedged and the purchase price of BNSF
Railway's diesel fuel.

                                                    June 30, 2001
                                     -----------------------------------------
                                       Maturity Date
                                     ----------------                 Fair
                                      2001      2002       Total    Value (1)
                                     ------    ------     -------  -----------
Diesel Fuel Swaps:
    Gallons (in millions)............    139       101       240      $53
    Weighted average price per
      gallon.........................  $0.49     $0.50     $0.50        -

(1) Represents gains (in millions) in Accumulated Other Comprehensive Income
  based on the price of Gulf Coast #2 heating oil.

                                       11
<PAGE>

     THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY AND SUBSIDIARIES

                           PART II  OTHER INFORMATION

Item 5.  Exhibits and Reports on Form 8-K

A.   Exhibits

     See Index to Exhibits on page E-1 for a description of the exhibits filed
     as part of this report.

                                     -13-

<PAGE>

                                   SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                           THE BURLINGTON NORTHERN AND
                           SANTA FE RAILWAY COMPANY
                           (Registrant)



                           By: /s/ Dennis R. Johnson
                              -------------------------------
                           Dennis R. Johnson
                           Vice President and Controller
                           (On behalf of the Registrant and as principal
                           accounting officer)

Fort Worth, Texas
August 2, 2001

                                      S-1
<PAGE>

              THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY

                                 Exhibit Index


12.1    Computation of Ratio of Earnings to Fixed Charges

                                      E-1