<PAGE>   1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                    Form 10-Q

       Quarterly Report pursuant to Section 13 or 15(d) of the Securities
                              Exchange Act of 1934

                     For the period ended September 30, 1998
                                          ------------------

                         Commission File Number 2-89530
                                                -------

                       FLORIDA EAST COAST INDUSTRIES, INC.
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

             FLORIDA                                            59-2349968
-------------------------------                             -------------------
(State or other jurisdiction of                               (IRS Employer
incorporation or organization)                              Identification No.)

One Malaga Street, St. Augustine, FL                              32085-1048
----------------------------------------                          ----------
(Address of principal executive offices)                          (Zip Code)

       Registrant's telephone number, including area code - (904) 829-3421
                                                            --------------

                  1650 Prudential Drive, Jacksonville, FL 32207
                 -----------------------------------------------
                 (Former name, former address, and former fiscal
                       year, if changed since last report)

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.

          Class                               Outstanding at September 30, 1998
          -----                               ---------------------------------
Common Stock-no par value                            36,286,360 shares



<PAGE>   2

                       FLORIDA EAST COAST INDUSTRIES, INC.
                                      INDEX



                                                                        Page No.
                                                                        --------
PART I   Financial Information:

              Consolidated Condensed Balance Sheets -
                September 30, 1998 and December 31, 1997                    2

              Consolidated Condensed Statements of Income
                and Retained Earnings - Three Months and Nine
                Months Ended September 30, 1998 and 1997                    3

              Consolidated Statements of Cash Flows -
                Nine Months Ended September 30, 1998 and 1997               4

              Notes to Consolidated Condensed Financial
                Statements                                                 5-6

              Management's Discussion and Analysis of
                the Consolidated Financial Condition
                and Results of Operations                                  7-11


PART II  Other Information                                                11-12




                                     Page 1

<PAGE>   3

                       FLORIDA EAST COAST INDUSTRIES, INC.
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                    Sept. 30       December 31
                                                                   ---------       -----------
                                                                      1998            1997
                                                                  (Unaudited)
<S>                                                                <C>             <C>      
                                     ASSETS
Current assets:

  Cash and cash equivalents                                        $  50,466       $  30,845
  Short-term investments                                                 507             258
  Accounts receivable, net                                            29,854          31,045
  Materials and supplies                                              10,719          11,789
  Other                                                                9,815           7,987
                                                                   ---------       ---------
     Total current assets                                            101,361          81,924

Other investments                                                     53,089          72,041

Properties, less accumulated depreciation and amortization           702,064         663,672

Other assets and deferred charges                                      5,968           7,853
                                                                   ---------       ---------
                                                                   $ 862,482       $ 825,490
                                                                   =========       =========



                      LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:

  Accounts payable                                                 $  20,420       $  20,580
  Income taxes                                                         7,503           4,630
  Accrued property taxes                                               9,672           1,008
  Accrued casualty and other reserves                                  4,992           5,143
  Other accrued liabilities                                            2,529           3,005
                                                                   ---------       ---------
     Total current liabilities                                        45,116          34,366

Deferred income taxes                                                132,741         133,884

Reserves and other long-term liabilities                               7,709           8,365

Shareholders' equity:
  Common stock, no par value; 50,000,000 shares authorized;
   37,085,444 shares issued and 36,286,360 shares outstanding         60,802          60,802
  Retained earnings                                                  624,318         594,132
  Accumulated other comprehensive income                               1,151           3,296
   Less:
    Treasury stock at cost (799,084 shares)                           (9,355)         (9,355)
                                                                   ---------       ---------
    Total shareholders' equity                                       676,916         648,875
                                                                   ---------       ---------

                                                                   $ 862,482       $ 825,490
                                                                   =========       =========
</TABLE>


                            (See accompanying notes)


                                     Page 2
<PAGE>   4

                       FLORIDA EAST COAST INDUSTRIES, INC.
        CONSOLIDATED CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
                 (Dollars in Thousands Except Per Share Amounts)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                       THREE MONTHS                       NINE MONTHS
                                                                      ENDED SEPT. 30                    ENDED SEPT. 30
                                                                     1998           1997            1998            1997
                                                                 -------------------------       -------------------------
<S>                                                              <C>             <C>             <C>             <C>      
OPERATING REVENUES:
  Transportation                                                 $  47,081       $  46,333       $ 145,230       $ 136,526
   Realty-Sales                                                      5,050           4,885           5,319          26,703
   Realty-Rents & Other                                             11,601           9,689          32,012          28,123
                                                                 ---------       ---------       ---------       ---------
    Total Operating Revenues                                        63,732          60,907         182,561         191,352

OPERATING COSTS:
  Transportation                                                    31,231          31,326          97,304          93,749
  Realty                                                             7,114           5,823          20,417          16,740
  Realty Sales                                                         521           1,286             592          22,424
  General and Administrative                                         6,263           6,050          19,983          19,749
                                                                 ---------       ---------       ---------       ---------
    Total Operating Costs                                           45,129          44,485         138,296         152,662

Operating Profit                                                    18,603          16,422          44,265          38,690

OTHER INCOME (EXPENSE):
  Dividends                                                            637             178           1,204             383
  Interest income                                                      780           1,538           3,298           3,961
  Interest expense                                                    (105)            (89)           (248)           (331)
  Gains (Loss) on sales and other disposition of properties           (241)            202             235           1,534
  Other (net)                                                          989             968           3,574           2,551
                                                                 ---------       ---------       ---------       ---------
    Total Other Income (Expense)                                     2,060           2,797           8,063           8,098

Income before income taxes                                          20,663          19,219          52,328          46,788

INCOME TAXES:
  Current                                                            8,107           6,927          19,229          17,115
  Deferred                                                            (411)            281             193             434
                                                                 ---------       ---------       ---------       ---------
    Total Income Taxes                                               7,696           7,208          19,422          17,549
                                                                 ---------       ---------       ---------       ---------


Net income                                                       $  12,967       $  12,011       $  32,906       $  29,239
                                                                 ---------       ---------       ---------       ---------

Retained earnings:
  Balance at beginning of period                                   612,259         573,038         594,132         557,621
  Cash dividends                                                      (908)           (905)         (2,720)         (2,716)
                                                                 ---------       ---------       ---------       ---------

  Balance at end of period                                       $ 624,318       $ 584,144       $ 624,318       $ 584,144
                                                                 =========       =========       =========       =========

Per Share data:
  Cash dividends                                                 $   0.025       $   0.025       $   0.075       $   0.075
                                                                 =========       =========       =========       =========

Earnings per common share                                        $    0.36       $    0.33       $    0.91       $    0.81
                                                                 =========       =========       =========       =========
</TABLE>

                            (See accompanying notes)


                                     Page 3
<PAGE>   5

                       FLORIDA EAST COAST INDUSTRIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                             NINE MONTHS ENDED SEPT. 30
                                                                1998            1997
                                                              --------       --------
<S>                                                           <C>            <C>     
Cash flows from operating activities:
  Net income                                                  $ 32,906       $ 29,239
  Adjustments to reconcile net income to cash generated:
    Depreciation and amortization                               20,414         18,102
    Gain on disposition of assets                                 (235)        (1,534)
    Realized gains on investments                               (2,991)        (1,960)
    Non-monetary fiber optic transaction                        (2,557)             0
    Deferred taxes                                                 193            434
    Changes in operating assets and liabilities:
          Accounts receivable                                    1,191          4,388
          Other current assets                                    (758)           166
          Other assets and deferred charges                      1,885            577
          Accounts payable                                        (160)         1,485
          Income taxes payable                                   2,873          1,540
          Estimated property taxes                               8,664          4,711
          Other current liabilities                               (627)          (188)
          Reserves and other long-term liabilities                (656)           196
                                                              --------       --------

Net cash generated by operating activities                      60,142         57,156

Cash flows from investing activities:
  Purchases of properties                                      (61,808)       (48,353)
  Purchases of investments:
       Available-for-sale                                      (32,285)       (14,917)
       Held-to-maturity                                              0         (8,044)
  Maturities and redemption of investments:
       Available-for-sale                                       39,542         11,737
       Held-to-maturity                                         11,000          9,960
  Proceeds from disposition of assets                            5,750         10,855
                                                              --------       --------

Net cash used in investing activities                          (37,801)       (38,762)

Cash flows from financing activities:
  Payment of dividends                                          (2,720)        (2,716)
                                                              --------       --------

Net cash used in financing activities                         $ (2,720)      $ (2,716)

Net increase in cash and cash equivalents                       19,621         15,678
Cash and cash equivalents at beginning of period                30,845         23,602
                                                              --------       --------

Cash and cash equivalents at end of period                    $ 50,466       $ 39,280
                                                              ========       ========

Supplemental disclosure of cash flow information:
  Cash paid during the period for income taxes                $ 16,049       $ 15,727
                                                              ========       ========
  Cash paid during the period for interest                    $    248       $    331
                                                              ========       ========
</TABLE>


                            (See accompanying notes)


                                     Page 4
<PAGE>   6

                       FLORIDA EAST COAST INDUSTRIES, INC.


              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                             (Dollars in thousands)
                                   (Unaudited)


1.             In the opinion of the Company, the accompanying unaudited
               consolidated condensed financial statements contain all
               adjustments (consisting of normal recurring accruals) considered
               necessary to present fairly the financial position as of
               September 30, 1998 and December 31, 1997, and the results of
               operations and cash flows for the three- and nine-month periods
               ended September 30, 1998 and September 30, 1997.

2.             The results of operations for the nine months ended September 30,
               1998 are not necessarily indicative of the results that may be
               expected for the full year.

3.             The Company has retained certain self-insurance risks with
               respect to losses for third-party liability, property damage and
               group health insurance coverage provided employees. The Company
               is the defendant and plaintiff in various lawsuits resulting from
               its operations. In the opinion of management, adequate provision
               has been made in the financial statements for the estimated
               liability which may result from disposition of such lawsuits.

               The Company is subject to proceedings arising out of
               environmental laws and regulations, which primarily relate to the
               disposal and use of fuel and oil in the transportation business.
               It is the Company's policy to accrue and charge against earnings
               environmental cleanup costs when it is probable that a liability
               has been incurred and an amount can be reasonably estimated.

               The Company is currently a party to, or involved in legal
               proceedings directed at the cleanup of three Superfund sites. The
               Company has accrued its allocated share of the total estimated
               cleanup costs for these three sites. Based upon management's
               evaluation of the other potentially responsible parties, the
               Company does not expect to incur additional amounts even though
               the Company has joint and several liability. Other proceedings
               involving environmental matters, such as alleged discharge of oil
               or waste material into water or soil, are pending against the
               Company.

               It is difficult to quantify future environmental costs because of
               many issues relating to actions by third parties or changes in
               environmental regulation. However, based on information presently
               available, management believes that the ultimate disposition of
               currently known matters will not have a material effect on the
               financial position or liquidity of the Company in any one period.
               Environmental liabilities of $2.0 million at September 30, 1998
               will be paid over an extended period, and the timing of such
               payments cannot be predicted with any confidence.



                                     Page 5
<PAGE>   7

4.             Gran Central Corporation, a wholly-owned subsidiary of the
               Company, entered into an agreement with the State of Florida
               Department of Transportation to furnish all land necessary for
               the construction of the N.W. 106th Street Interchange on the
               Homestead Extension of the Florida Turnpike and to subsidize the
               Department for 15 years to cover any annual operating deficit
               related to the interchange which is not covered by toll revenues.
               The maximum assessment amount over the 15 years would be
               approximately $9.3 million with no annual assessment to exceed
               $1.1 million. No assessments have been made to date.

5.             The revenue recognition policies are:

               Transportation Revenues: Revenues are substantially recognized
               upon completion of transportation services at destination.

               Realty Land Sales: Revenue is recognized upon closing of sales
               contracts for sale of land or upon settlement of legal
               proceedings such as condemnations.

               Rental Income: Revenue is recognized upon completion of rental
               and lease contracts. The Company uses the straight-line basis for
               recording the revenues over the life of the lease contract.

6.             Because a large percentage of the Company's properties is
               long-lived, asset replacement will be at a higher cost and will
               take place over many years. The acquisition of new assets will
               result in higher depreciation charges and, in the case of realty,
               higher taxes and operating costs.

               Generally accepted accounting principles require the use of
               historical costs in preparing financial statements. This approach
               disregards the effect of inflation on the replacement cost of
               property and equipment. The Company is a capital-intensive
               company and has approximately $917 million (original cost)
               invested in such assets as of December 31, 1997. The replacement
               costs of these assets, as well as the related depreciation
               expense, would be substantially greater than the amounts reported
               on the basis of historical costs.

7.             All share numbers and per share amounts have been restated to
               reflect the four-for-one split of the Company's common stock
               which became effective June 1, 1998.

8.             The Company adopted the provisions of Statement of Financial
               Accounting Standards No. 130, "Reporting Comprehensive Income,"
               effective January 1, 1998. This Statement establishes standards
               for reporting and display of comprehensive income and its
               components. Comprehensive income for the nine months ended
               September 30, 1998 and 1997 was approximately $30.8 and $30.7
               million, respectively. Comprehensive income for the three months
               ending September 30, 1998 and 1997 was approximately $10.8 and
               $12.2 million, respectively. This amount differs from net income
               due to changes in the net unrealized holding gains generated from
               available-for-sale securities.



                                     Page 6
<PAGE>   8

                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
           CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS


                              RESULTS OF OPERATIONS


                                    OVERVIEW


Florida East Coast Industries, Inc.'s (FECI) operating revenues for the first
nine months of 1998 reflected a decrease of approximately $8.8 million.
Operating costs for the same comparative period decreased approximately $14.4
million, resulting in an increase in operating profits of approximately $5.6
million.

Operating revenues for the third quarter 1998, when compared to the third
quarter 1997, increased approximately $2.8 million. Operating costs for the
third quarter 1998, when compared to the same period 1997, increased by $.6
million, resulting in an increase of $2.2 million in operating profits.

When comparing third quarter 1998 with second quarter 1998, operating revenues
increased by approximately $1.7 million, while operating expenses decreased by
approximately $1.5 million, resulting in an increase in operating profits of
$3.2 million.


                                    ANALYSIS


Revenues - When comparing the first nine months of 1998 with the same period in
1997, transportation revenues increased by approximately $8.7 million or 6.4%.
Included in transportation revenues was a non-monetary gain of approximately
$2.6 million related to an exchange involving fiber optics that was reported in
second quarter 1998. This gain was the result of an exchange of unrestricted
rights to 36 dark fiber optic communication fibers for the forgiveness of 1998
rental income payable to the Company on certain right-of-way operating leases,
and a final installment covering the sale of conduit owned by the Company.
Excluding the total increase in fiber optic income of approximately $3.7 million
for the first nine months of 1998, transportation revenues increased
approximately $5.0 million. These increases consist of approximately $1.9
million in revenue from rail-related operations, and $3.1 million in revenues
from trucking-related operations. The composition of rail-related traffic for
the first nine months of 1998 versus 1997 reflects a decrease in the total
number of shipments of 846. Within the different classifications of traffic,
this decrease was comprised of increases of 8.0% in aggregate, and 22.5% in
automotive and automotive-related shipments offset by decreases of 2.9% in
intermodal traffic, and 7.6% in all other carload traffic. The increase in
aggregate products is


                                     Page 7
<PAGE>   9


related to their use in residential, commercial and highway construction within
the state. The increase in the number of automotive shipments is primarily
attributable to a new Norfolk Southern automobile facility located on the
Railway's right-of-way in Titusville. The decline in other carload shipments has
been primarily attributed to coal shipments because of shipper's use of
alternative transportation. However, a new contract was negotiated in April 1998
that secures future shipments via rail. Even though the rail segment shows a net
decrease in the number of shipments, the rail-related revenues increased
approximately $1.9 million. Of the $1.9 million increase, approximately $.3
million was directly related to rail shipments, whereas $1.6 million was related
to ancillary services associated with rail moves. Realty sales of properties
decreased approximately $21.4 million when comparing nine months of 1998 with
same period in 1997. This decrease was substantially comprised of four separate
dispositions of properties in the first nine months of 1997 of approximately
$23.7 million. Realty rents and other income increased approximately $3.9
million for the first nine months of 1998 versus 1997. This increase is
primarily attributed to the addition of leasable space of approximately .5
million square feet, and the normal increases associated with tenant billings.

Comparing third quarter 1998 with third quarter 1997, transportation revenues
increased approximately $.7 million or 1.6%. This increase was comprised of
decreases in rail-related revenues of approximately $.5 million offset by
increases in trucking-related revenues of approximately $1.2 million. Fiber
optic income remained approximately the same at $.5 million. The rail-related
revenues represent a decrease in total shipments of 5,473. Within the different
classifications of shipments, this decrease was comprised of increases of 4.4%
shipments in aggregate, and 26.4% in automotive and automotive-related shipments
offset by decreases of 8.7% in intermodal traffic, and 2.4% in all other carload
traffic. As previously discussed, the increase in aggregate shipments was
related to the various types of construction being performed within the state.
The increase in the number of automotive shipments was primarily attributed to
the new automobile facility at Titusville. The revenues directly related to rail
shipments decreased approximately $1.0 million, whereas revenues related to
ancillary services associated with the rail moves increased approximately $.5
million. The increase in truck-related revenues primarily reflects increases in
long-haul shipments to the transportation segment's railhead for movement to
destinations in Florida. During this same period, realty sales increased
approximately $.2 million, while realty rents and other income increased
approximately $1.9 million. This increase was primarily related to the .1
million square feet of leasable space added to inventory, and the normal
increases associated with the tenant billings.

Comparing third quarter 1998 with second quarter 1998, transportation revenues
decreased approximately $4.3 million or 8.3%. During second quarter 1998,
transportation revenues included the non-monetary gain related to fiber optic
income. Excluding this decrease in total fiber optic income of approximately
$3.5 million, transportation revenues for the third quarter 1998 decreased
approximately $.7 million or 1.6%. This decrease of approximately $1.1 million
was comprised of decreases of approximately $1.1 million in rail-related
revenues offset by increases in trucking-related revenues of approximately $.4
million. The $.7 million decrease was reflected in a decrease in the total
number of shipments of 6,099. Within the different classifications of shipments,
these decreases were comprised of 3.7% in aggregates, 4.4% in automotive and


                                     Page 8
<PAGE>   10

automotive-related shipments, 5.3% in intermodal traffic, and 5.8% in all other
carload traffic. Basically, the same rationale as previously discussed applies
when comparing third quarter with second quarter 1998. Rail-related revenues
decreased approximately $1.1 million, while revenues related to ancillary
services associated with rail moves remained approximately the same as second
quarter 1998 at approximately $1.6 million. Sales of realty properties increased
approximately $5.1 million from second quarter to third quarter 1998. Realty
rents and other income increased $.9 million from second quarter to third
quarter 1998, which is primarily attributable to the addition of leasable space
from new construction, and normal increases associated with tenant billings.

Operating Costs - Operating costs in the first nine months of 1998 decreased by
approximately $14.4 million when compared to the same period in 1997. This
decrease was comprised of increases of $3.7 million in realty operating costs,
$.2 million in general and administrative costs, and $3.5 million in
transportation costs offset by a decrease in costs of realty sales of
approximately $21.8 million. The decrease in cost of realty sales was primarily
attributable to the cost of four separate dispositions of realty properties of
approximately $21.6 million in the first nine months of 1997. The increase of
$3.5 million in transportation costs consisted of $.7 million in rail-related
costs, and $2.8 million in trucking-related costs. The $.7 million increase in
transportation costs was primarily comprised of increases of approximately $1.3
million in casualty and insurance, and $.8 million in property taxes offset by
decreases of approximately $1.5 million in fuel costs, $.7 million in purchased
services and $.6 million in repairs. The $2.8 million increase in
trucking-related costs primarily reflects the costs of long-haul shipments to
the transportation segment's railhead for movement to destinations in Florida.
General and administrative costs for the first nine months of 1997 included a
special charge of $2.9 million for expenses incurred prior to the May 5, 1997
announcement concerning the possible disposition of the Florida East Coast
Railway and Gran Central Corporation. Excluding this $2.9 million charge,
general and administrative expenses increased approximately $3.1 million in the
first nine months of 1998 when compared to the same period in 1997. This
increase of $3.1 million was related to the outsourcing of the asset and
property management function of Gran Central Corporation to The St. Joe Company
and related entities of approximately $1.4 million, a severance package offered
to supervisory employees in an effort to downsize of approximately $.8 million,
bonuses awarded to officers for the 1997 performance appraisals of approximately
$.3 million, and other operating costs of the Company of approximately $.6
million.

Operating costs for the third quarter 1998 increased by $.6 million when
compared to the third quarter 1997. These increases were comprised of $1.3
million in realty operating costs, and $.2 million in general and administrative
costs offset by decreases of $.8 million in realty sales, and transportation
costs of approximately $.1 million.

When comparing third quarter 1998 with second quarter 1998, operating costs
decreased by approximately $1.5 million. These decreases were comprised of $1.8
million in transportation costs, and $.6 million in general and administrative
costs offset by increases of $.5 million in realty sales, and $.4 million in
realty operating expenses. The decrease in transportation costs of $1.8 million
consisted of an increase in trucking-related costs of $.4 million, and a
decrease in rail-


                                     Page 9
<PAGE>   11

related costs of $2.2 million. The decreases in rail costs were primarily
attributable to $.4 million in fuel costs, $.8 million in fringe benefits, $.5
million in material, and $.3 million in casualty and insurance costs.

Other Income - Other income for the first nine months of 1998, when compared to
the same period in 1997, remained approximately the same as 1997 at $8.1
million. When comparing third quarter 1998 with third quarter 1997, other income
decreased approximately $.7 million. This decrease was comprised of
approximately $.4 million in gain on sale and other disposition of property, and
approximately $.8 million in interest income offset by an increase in dividend
income of approximately $.5 million.

When comparing third quarter 1998 with second quarter 1998, other income
decreased approximately $.9 million. This decrease was primarily attributed to
approximately $.4 million in interest income, and approximately $.5 million in
gain on sale and other disposition of properties.

Net Income - Net income increased approximately $3.7 million when comparing the
first nine months of 1998 with 1997. Comparing third quarter 1998 with third
quarter 1997, net income increased by approximately $1.0 million. Comparing
third quarter with second quarter 1998, net income increased by approximately
$1.3 million.

Stock Split - At the Annual Meeting of Shareholders on May 20, 1998, the
shareholders approved an increase in the authorized number of shares of the
Company's common stock from 9,360,000 shares to 50,000,000 shares, and approved
a four-for-one stock split to holders of record on June 1, 1998, payable on June
15, 1998.



                         LIQUIDITY AND CAPITAL RESOURCES


FECI's principal sources of liquidity include cash generated by operations;
earnings on invested cash; and earnings on its investment portfolio, consisting
largely of U. S. Treasury securities for its short-term investments, and
approximately $49.7 million being actively managed in other diversified
investment funds.

Current cash generations are used for capital expenditures in the transportation
and realty sectors and for payment of dividends. The investment portfolio is
informally dedicated to major real estate development.

Cash and cash equivalents increased approximately $19.6 million to $50.5 million
at September 30, 1998 from $30.8 million at year-end 1997. The investment
portfolios decreased $18.7 million at September 30, 1998 from $72.3 million at
year-end 1997. The Company's working capital position changed from a ratio of
2.4 to 1 at year-end 1997 to a ratio of 2.3 to 1 at September 30, 1998.


                                    Page 10
<PAGE>   12

There was no significant change in debt, reserves or other liabilities during
the nine-month period and capital projects at September 30, 1998 amounted to
approximately $77.3 million authorized and outstanding from $34.0 million
authorized and outstanding at December 31, 1997. Of the $77.3 million of capital
projects, development projects represent approximately 84%.

Year 2000 Compliance - The Company has created a program management office to
direct the project's effort in achieving year 2000 compliance. A Year 2000
Compliance Steering Committee has been established that is sponsored by the CEO
and comprised of senior management as active participants in the project.

The project contains four phases to address the year 2000 issues: (1) an
inventory phase to identify all computer-based systems and applications which
might not be year 2000 compliant; (2) an assessment phase to determine what
revisions or replacements would be needed to achieve compliance, and the
priority of each correction in assuring that business strategies and goals are
met; (3) a conversion phase to implement the actions necessary to achieve
compliance, and to conduct tests necessary to verify that the systems are
operational; and (4) an implementation phase to transition the compliant systems
into the everyday operations of the Company. Management believes that the four
phases are approximately 70%, 50%, 20% and 10%, respectively, complete, and that
all critical systems will be compliant with the century change by third quarter
1999.

The Company has budgeted approximately $250,000 to address the year 2000
remediation issues, which includes the estimated costs of modifications and
consultant fees addressing these issues. Of this amount, approximately $63,000
has been expended through September 1998. By third quarter 1999, the major
business applications will have been replaced with new compliant versions at a
cost of approximately $4.4 million, which is not a part of the remediation
budget.

As part of the year 2000 review, the Company is examining vendor and customer
relationships to determine, to the extent practical, the degree of such parties'
year 2000 compliance, and to develop strategies for working with such parties
through the system changes.

Should the Company have problems with outside parties, the area most likely to
be affected centers around shipments received from and/or forwarded to
connecting rail carriers. Contingency plans are being developed to address this
possibility.


                           PART II - OTHER INFORMATION


Item 1.        Legal Proceedings


There are no legal or regulatory proceedings pending or known to be contemplated
which, in the opinion of the General Attorney of the Registrant, are other than
normal and incidental to the



                                    Page 11
<PAGE>   13

kinds of businesses conducted by the Registrant.


Item 5.        Other Information


(a) The Company's Board of Directors has adopted several amendments to the
Company's By-Laws. A composite copy of the By-Laws, as in effect on date hereof,
is filed as Exhibit 3(ii) to this 10-Q.

(b) On January 1, 1998, Gran Central Corporation entered into a Management
Agreement with St. Joe Corporation respecting the management of certain of Gran
Central's real estate interests. A copy of the Management Agreement is being
filed as Exhibit 10 to this 10-Q.


Item 6.        Exhibits and Reports

(a) Exhibit 3(ii). Composite copy of the Company's By-Laws as amended through
August 17, 1998.

(b) Exhibit 10. Management Agreement dated January 1, 1998 between Gran Central
Corporation and St. Joe Company.

(c) Exhibit 27.1 Financial Data Schedule, September 30, 1998.

(d) Exhibit 27.2 Financial Data Schedule, restated December 31, 1997.





                                   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.

                                           FLORIDA EAST COAST INDUSTRIES, INC.
                                                        (Registrant)


Date:  11-11-98                                /s/ C. F. Zellers, Jr.
     --------------                        -----------------------------------
                                                  C. F. Zellers, Jr.
                                               Chairman, President and CEO


Date:  11-11-98                                /s/ T. N. Smith
     --------------                        -----------------------------------
                                                        T. N. Smith
                                                Vice President and Secretary


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