---

---

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

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|ý  | Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 
|-- | ----------------------------------------------------------------------------------------
|   | For the period ended December 31, 2003                                                  
|   | or                                                                                      
|o  | Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
|   | for the transition period from                                                          
|To

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Commission file number 0-7903

I.R.S. Employer Identification Number 36-2675371

QUIXOTE CORPORATION

(a Delaware Corporation)
35 East Wacker Drive
Chicago, Illinois 60601
Telephone: (312) 467-6755

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  ý    NO  o

Indicate
by check mark whether the registrant is an accelerated filer as defined by Rule 12b-2 of the Securities Exchange Act of
1934.    YES  ý    NO  o

Indicate
the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 8,577,273 shares of the Company's Common Stock
($.012/3 par value) were outstanding as of December 31, 2003.

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PART IFINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

QUIXOTE CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)

|                                         |                                            | Six Months Ended December 31, |           
|---------------------------------------- | ------------------------------------------ | ----------------------------- | ----------
|
|Net sales                                |                                            | $                             | 74,678,000
|Cost of sales                            |                                            |                               | 50,832,000
|                                         |                                            |                               |           
|Gross profit                             |                                            |                               | 23,846,000
|                                         |                                            |                               |           
|Operating expenses:                      |                                            |                               |           
|                                         | Selling & administrative                   |                               |           
|                                         | Research & development                     |                               |           
|                                         |                                            |                               |           
|                                         |                                            |                               | 18,510,000
|Operating profit                         |                                            |                               | 5,336,000 
|                                         |                                            |                               |           
|Other income (expense):                  |                                            |                               |           
|                                         | Interest income                            |                               |           
|                                         | Interest expense                           |                               |           
|                                         |                                            |                               |           
|                                         |                                            |                               | (982,000  
|                                         |                                            |                               |           
|Earnings before income taxes             |                                            |                               | 4,354,000 
|Provision for income taxes               |                                            |                               | 1,567,000 
|                                         |                                            |                               |           
|Net earnings                             |                                            | $                             | 2,787,000 
|                                         |                                            |                               |           
|Per share databasic:                    |                                            |                               |           
|                                         | Net earnings                               |                               | $         
|                                         |                                            |                               |           
|                                         | Weighted average common shares outstanding |                               |           
|                                         |                                            |                               |           
|Per share datadiluted:                  |                                            |                               |           
|                                         | Net earnings                               |                               | $         
|                                         |                                            |                               |           
|                                         | Weighted average common shares outstanding |                               |           
|                                         |                                            |                               |           
|Cash dividends declared per common share |                                            | $                             | .17       
|                                         |                                            |                               |           

See
Notes to Consolidated Financial Statements.

2

---



QUIXOTE CORPORATION AND SUBSIDIARIES  Consolidated Statements of Operations  (Unaudited)

|                                         |                                            | Three Months Ended December 31, |           
|---------------------------------------- | ------------------------------------------ | ------------------------------- | ----------
|
|Net sales                                |                                            | $                               | 35,494,000
|Cost of sales                            |                                            |                                 | 24,424,000
|                                         |                                            |                                 |           
|Gross profit                             |                                            |                                 | 11,070,000
|Operating expenses:                      |                                            |                                 |           
|                                         | Selling & administrative                   |                                 |           
|                                         | Research & development                     |                                 |           
|                                         |                                            |                                 |           
|                                         |                                            |                                 | 9,843,000 
|Operating profit                         |                                            |                                 | 1,227,000 
|                                         |                                            |                                 |           
|Other income (expense):                  |                                            |                                 |           
|                                         | Interest income                            |                                 |           
|                                         | Interest expense                           |                                 |           
|                                         |                                            |                                 |           
|                                         |                                            |                                 | (499,000  
|                                         |                                            |                                 |           
|Earnings before income taxes             |                                            |                                 | 728,000   
|Provision for income taxes               |                                            |                                 | 262,000   
|                                         |                                            |                                 |           
|Net earnings                             |                                            | $                               | 466,000   
|                                         |                                            |                                 |           
|Per share databasic:                    |                                            |                                 |           
|                                         | Net earnings                               |                                 | $         
|                                         |                                            |                                 |           
|                                         | Weighted average common shares outstanding |                                 |           
|                                         |                                            |                                 |           
|Per share datadiluted:                  |                                            |                                 |           
|                                         | Net earnings                               |                                 | $         
|                                         |                                            |                                 |           
|                                         | Weighted average common shares outstanding |                                 |           
|                                         |                                            |                                 |           
|Cash dividends declared per common share |                                            | $                               | .17       
|                                         |                                            |                                 |           

See
Notes to Consolidated Financial Statements.

3

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QUIXOTE CORPORATION AND SUBSIDIARIES  Consolidated Balance Sheets  (Unaudited)

|                                       |                                                                                                                     | December 31,
2003 |             | June 30,
2003 |           
|-------------------------------------- | ------------------------------------------------------------------------------------------------------------------- | ----------------- | ----------- | ------------- | ----------
|ASSETS                                 |                                                                                                                     |                   |             |               |           
|Current assets:                        |                                                                                                                     |                   |             |               |           
|                                       | Cash and cash equivalents                                                                                           |                   | $           | 1,354,000     |           
|                                       | Accounts receivable, net of allowances for doubtful accounts of $1,604,000 at December 31 and $1,267,000 at June 30 |                   |             | 34,311,000    |           
|                                       | Inventories, net:                                                                                                   |                   |             |               |           
|                                       |                                                                                                                     | Raw materials     |             |               | 13,315,000
|                                       |                                                                                                                     | Work in process   |             |               | 3,800,000 
|                                       |                                                                                                                     | Finished goods    |             |               | 6,730,000 
|                                       |                                                                                                                     |                   |             |               |           
|                                       |                                                                                                                     |                   | 23,845,000  |               |           
|                                       |                                                                                                                     |                   |             |               |           
|                                       | Notes receivable                                                                                                    |                   |             | 217,000       |           
|                                       | Deferred income tax assets                                                                                          |                   |             | 2,793,000     |           
|                                       | Other current assets                                                                                                |                   |             | 2,639,000     |           
|                                       |                                                                                                                     |                   |             |               |           
|Total current assets                   |                                                                                                                     |                   | 65,159,000  |               |           
|                                       |                                                                                                                     |                   |             |               |           
|Property, plant and equipment, at cost |                                                                                                                     |                   | 50,103,000  |               |           
|Less accumulated depreciation          |                                                                                                                     |                   | (21,167,000 | )             |           
|                                       |                                                                                                                     |                   |             |               |           
|                                       |                                                                                                                     |                   | 28,936,000  |               |           
|                                       |                                                                                                                     |                   |             |               |           
|Goodwill                               |                                                                                                                     |                   | 56,253,000  |               |           
|Intangible assets, net                 |                                                                                                                     |                   | 13,363,000  |               |           
|Other assets                           |                                                                                                                     |                   | 384,000     |               |           
|                                       |                                                                                                                     |                   |             |               |           
|                                       |                                                                                                                     | $                 | 164,095,000 |               | $         
|                                       |                                                                                                                     |                   |             |               |           

See
Notes to Consolidated Financial Statements.

4

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QUIXOTE CORPORATION AND SUBSIDIARIES  Consolidated Balance Sheets  (Unaudited)

|                                                |                                                                                                                                         | December 31,
2003 |             | June 30,
2003 |  
|----------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | ----------- | ------------- | -
|LIABILITIES AND SHAREHOLDERS' EQUITY            |                                                                                                                                         |                   |             |               |  
|Current liabilities:                            |                                                                                                                                         |                   |             |               |  
|                                                | Current portion of long-term debt                                                                                                       |                   | $           | 4,012,000     |  
|                                                | Accounts payable                                                                                                                        |                   |             | 7,567,000     |  
|                                                | Dividends payable                                                                                                                       |                   |             | 1,426,000     |  
|                                                | Income tax payable                                                                                                                      |                   |             | 215,000       |  
|                                                | Accrued expenses                                                                                                                        |                   |             | 13,747,000    |  
|                                                |                                                                                                                                         |                   |             |               |  
|Total current liabilities                       |                                                                                                                                         |                   | 26,967,000  |               |  
|                                                |                                                                                                                                         |                   |             |               |  
|Long-term debt, net of current portion          |                                                                                                                                         |                   | 50,325,000  |               |  
|Deferred income tax liabilities                 |                                                                                                                                         |                   | 3,917,000   |               |  
|Other long-term liabilities                     |                                                                                                                                         |                   | 370,000     |               |  
|                                                |                                                                                                                                         |                   |             |               |  
|Commitments and contingent liabilities (Note 9) |                                                                                                                                         |                   |             |               |  
|Shareholders' equity:                           |                                                                                                                                         |                   |             |               |  
|                                                | Preferred stock, no par value; authorized 100,000 shares; none issued                                                                   |                   |             |               |  
|                                                | Common stock, par value $.012/3; authorized 15,000,000 shares; issued 10,528,513 shares at December 31 and 10,437,436 shares at June 30 |                   |             | 175,000       |  
|                                                | Capital in excess of par value of common stock                                                                                          |                   |             | 55,427,000    |  
|                                                | Retained earnings                                                                                                                       |                   |             | 48,728,000    |  
|                                                | Accumulated other comprehensive income (loss)                                                                                           |                   |             | 258,000       |  
|                                                | Treasury stock, at cost, 1,951,240 shares at December 31 and 2,131,963 shares at June 30                                                |                   |             | (22,072,000   | )
|                                                |                                                                                                                                         |                   |             |               |  
|Total shareholders' equity                      |                                                                                                                                         |                   | 82,516,000  |               |  
|                                                |                                                                                                                                         |                   |             |               |  
|                                                |                                                                                                                                         | $                 | 164,095,000 |               | $
|                                                |                                                                                                                                         |                   |             |               |  

See
Notes to Consolidated Financial Statements.

5

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QUIXOTE CORPORATION AND SUBSIDIARIES  Consolidated Statements of Cash Flows  (Unaudited)

|                                                    |                                                                                     | Six Months Ended December 31,                |                                      
|--------------------------------------------------- | ----------------------------------------------------------------------------------- | -------------------------------------------- | -------------------------------------
|
|Operating activities:                               |                                                                                     |                                              |                                      
|                                                    | Net earnings                                                                        |                                              | $                                    
|                                                    | Adjustments to reconcile net earnings to net cash provided by operating activities: |                                              |                                      
|                                                    |                                                                                     | Depreciation                                 |                                      
|                                                    |                                                                                     | Amortization                                 |                                      
|                                                    |                                                                                     | Provisions for losses on accounts receivable |                                      
|                                                    |                                                                                     | Changes in operating assets and liabilities: |                                      
|                                                    |                                                                                     |                                              | Accounts receivable                  
|                                                    |                                                                                     |                                              | Inventories                          
|                                                    |                                                                                     |                                              | Other assets                         
|                                                    |                                                                                     |                                              | Accounts payable and accrued expenses
|                                                    |                                                                                     |                                              | Income taxes                         
|                                                    |                                                                                     |                                              | Other long-term liabilities          
|                                                    |                                                                                     |                                              |                                      
|Net cash provided by operating activities           |                                                                                     |                                              | 953,000                              
|                                                    |                                                                                     |                                              |                                      
|Investing activities:                               |                                                                                     |                                              |                                      
|                                                    | Cash paid for acquired business, net of cash acquired                               |                                              |                                      
|                                                    | Capital expenditures                                                                |                                              |                                      
|                                                    | Patent expenditures                                                                 |                                              |                                      
|                                                    |                                                                                     |                                              |                                      
|Net cash used in investing activities               |                                                                                     |                                              | (13,261,000                          
|                                                    |                                                                                     |                                              |                                      
|Financing activities:                               |                                                                                     |                                              |                                      
|                                                    | Proceeds from revolving credit agreement                                            |                                              |                                      
|                                                    | Payments on revolving credit agreement                                              |                                              |                                      
|                                                    | Payments on term loan                                                               |                                              |                                      
|                                                    | Payments on notes payable                                                           |                                              |                                      
|                                                    | Payment of semi-annual cash dividend                                                |                                              |                                      
|                                                    | Proceeds from exercise of common stock options                                      |                                              |                                      
|                                                    | Repurchase of common stock for treasury                                             |                                              |                                      
|                                                    |                                                                                     |                                              |                                      
|Net cash provided by (used in) financing activities |                                                                                     |                                              | 9,879,000                            
|                                                    |                                                                                     |                                              |                                      
|Effect of exchange rate changes on cash             |                                                                                     |                                              | 30,000                               
|                                                    |                                                                                     |                                              |                                      
|Decrease in cash and cash equivalents               |                                                                                     |                                              | (2,399,000                           
|Cash and cash equivalents at beginning of period    |                                                                                     |                                              | 3,753,000                            
|                                                    |                                                                                     |                                              |                                      
|Cash and cash equivalents at end of period          |                                                                                     | $                                            | 1,354,000                            
|                                                    |                                                                                     |                                              |                                      

See
Notes to Consolidated Financial Statements.

6

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QUIXOTE CORPORATION AND SUBSIDIARIES        Notes to Consolidated Financial Statements        (Unaudited)

1.     The accompanying unaudited consolidated financial statements present information in accordance with generally accepted accounting principles for interim financial
information and applicable rules of Regulation S-X. Accordingly, they do not include all information or footnotes required by generally accepted accounting principles for complete financial
statements. The June 30, 2003 consolidated balance sheet as presented was derived from audited financial statements. The interim financial statements and notes should be read in conjunction
with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended June 30, 2003. Management believes the financial
statements include all normal recurring adjustments necessary for a fair presentation of the results for the interim periods presented.

2.     At
December 31, 2003, the Company had common stock option plans providing for grants of stock options for directors based upon a fixed calculation and grants of
stock options and restricted stock for employees as may be determined by the Compensation Committee of the Board of Directors. The cost of restricted stock granted is expensed in the period the stock
is issued. The Company accounts for the stock options granted under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. No charges are made to earnings in connection with the stock options granted, as all stock options granted had an exercise price equal to the market value of the underlying common
stock on the date of grant. The following table illustrates the effect on net earnings and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No.
123, Accounting for Stock-Based Compensation, to the stock options granted.

|                                                                                                                                            |                     | Six Months Ended
December 31, |           | Three Months Ended
December 31, |  
|------------------------------------------------------------------------------------------------------------------------------------------- | ------------------- | ----------------------------- | --------- | ------------------------------- | -
|
|Net earnings, as reported                                                                                                                   |                     | $                             | 2,787,000 |                                 | $
|Add: Stock-based employee compensation expense included in reported net earnings, net of related tax effects                                |                     |                               | 252,000   |                                 |  
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects |                     |                               | (826,000  | )                               |  
|                                                                                                                                            |                     |                               |           |                                 |  
|Pro-forma net earnings                                                                                                                      |                     | $                             | 2,213,000 |                                 | $
|                                                                                                                                            |                     |                               |           |                                 |  
|Earnings per share:                                                                                                                         |                     |                               |           |                                 |  
|                                                                                                                                            | Basicas reported   |                               | $         | .33                             |  
|                                                                                                                                            | Basicpro forma     |                               | $         | .26                             |  
|                                                                                                                                            | Dilutedas reported |                               | $         | .32                             |  
|                                                                                                                                            | Dilutedpro forma   |                               | $         | .25                             |  

3.     The
provision for income taxes is based upon the estimated effective income tax rate for the full fiscal year.

4.     Operating
results for the first six months of fiscal 2004 are not necessarily indicative of the performance for the entire year. The Company's business is seasonal with a
higher level of sales in the Company's fourth fiscal quarter.

7

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5.     The
computation of basic and diluted earnings per share is as follows:

|                                                   |  | Six Months Ended
December 31, |           | Three Months Ended
December 31,
|-------------------------------------------------- |  | ----------------------------- | --------- | -------------------------------
|
|Numerator:                                         |  |                               |           |                                
|Net earnings available to common shareholders      |  | $                             | 2,787,000 |                                
|                                                   |  |                               |           |                                
|Denominator:                                       |  |                               |           |                                
|Weighted average shares outstanding-basic          |  |                               | 8,404,162 |                                
|Effect of dilutive securities-common stock options |  |                               | 305,864   |                                
|                                                   |  |                               |           |                                
|Weighted average shares outstanding-diluted        |  |                               | 8,710,026 |                                
|                                                   |  |                               |           |                                
|Net earnings per share of common stock:            |  |                               |           |                                
|Basic                                              |  | $                             | .33       |                                
|Diluted                                            |  | $                             | .32       |                                

There
were outstanding options to purchase common stock at prices that exceeded the average market price for the income statement period. These options have been excluded from the
computation of diluted earnings per share for both the six-month and three-month periods ended December 31, 2003 and 2002 and are as follows:

2003

2002Average exercise price per share

$
25.26

$
23.78Number of shares


283,200


246,300


6.     The
Company is exposed to market risk from fluctuations in interest rates. The Company manages its exposure to interest rate fluctuations through the use of derivative
instruments in the form of non-trading interest rate swaps. The objective of the swap is to fix the interest rate on certain variable rate debt to stabilize interest rates and to more effectively
balance the Company's long-term borrowing costs and interest rate risk. During July 2003, the Company entered into an interest rate swap agreement (the Agreement) to set a fixed interest rate relating
to $20 million of its outstanding debt at variable interest rates. The terms of the Agreement match the terms of the underlying debt. In addition, the Agreement has been designated as, and is
effective as, a cash-flow hedge of an outstanding debt obligation. Changes in fair value of the Agreement are reported as other comprehensive income and are recognized into earnings when the hedge
transaction affects earnings.

8

---

Accumulated
other comprehensive income (loss) consists of the following:

Currency translation adjustment:BalanceJuly 1, 2003

$
(44,000
)Currency translation adjustment


15,000BalanceDecember 31, 2003

$
(29,000
)Unrealized gain on derivative instrument:BalanceJuly 1, 2003

$
Change in derivative instrument


287,000BalanceDecember 31, 2003

$
287,000


Comprehensive
income consists of the following:

Six Months Ended
December 31,

Three Months Ended
December 31,2003

2002

2003

2002Net earnings

$
2,787,000

$
3,331,000

$
466,000

$
1,552,000Other comprehensive income:Currency translation adjustment


15,000


32,000


9,000


(10,000
)Change in derivative instrument


287,000





241,000Comprehensive income

$
3,089,000

$
3,363,000

$
716,000

$
1,542,000


7.     The
Company's operations are classified as two reportable segments within the highway and transportation safety industry. The Company's two reportable segments are the
manufacture and sale of the Company's products which Protect and Direct, and the manufacture and sale of products which Inform and are often referred to as Intelligent Transportation Systems (ITS)
products. The Company's segments are discussed in further detail in the Company's Annual Report on Form 10-K.

9

---

The
following table presents financial information about reported segments for the six-month and three-month periods ended December 31, 2003 and 2002 along with the items
necessary to reconcile the segment information to the totals reported in the consolidated financial statements.

|                                  |  | Protect and Direct |            | Inform |   | Unallocated Corporate |   | Total
|--------------------------------- |  | ------------------ | ---------- | ------ | - | --------------------- | - | -----
|2004                              |  |                    |            |        |   |                       |   |      
|SIX MONTHS                        |  |                    |            |        |   |                       |   |      
|Net sales from external customers |  | $                  | 35,809,000 |        | $ | 38,869,000            |   |      
|Operating profit (loss)           |  |                    | 7,851,000  |        |   | 1,250,000             |   | $    
|Identifiable assets               |  |                    | 51,431,000 |        |   | 108,129,000           |   |      
|THREE MONTHS                      |  |                    |            |        |   |                       |   |      
|Net sales from external customers |  | $                  | 16,413,000 |        | $ | 19,081,000            |   |      
|Operating profit (loss)           |  |                    | 3,368,000  |        |   | (121,000              | ) | $    
|2003                              |  |                    |            |        |   |                       |   |      
|SIX MONTHS                        |  |                    |            |        |   |                       |   |      
|Net sales from external customers |  | $                  | 35,986,000 |        | $ | 14,281,000            |   |      
|Operating profit (loss)           |  |                    | 7,751,000  |        |   | 1,340,000             |   | $    
|Identifiable assets               |  |                    | 51,300,000 |        |   | 42,545,000            |   |      
|THREE MONTHS                      |  |                    |            |        |   |                       |   |      
|Net sales from external customers |  | $                  | 17,221,000 |        | $ | 8,417,000             |   |      
|Operating profit (loss)           |  |                    | 3,248,000  |        |   | 1,114,000             |   | $    

Identifiable
assets of the Inform segment as of December 31, 2003 increased to $108,129,000 from $42,545,000 as of December 31, 2002 primarily due to the acquisitions of
U.S. Traffic Corporation in May 2003 and Peek Traffic Corporation in December 2003 (see Note 10).

8.     Intangible
assets consist of the following:

|                                    |                               | December 31, 2003 |            | June 30, 2003
|----------------------------------- | ----------------------------- | ----------------- | ---------- | -------------
|
|Amortized intangible assets:        |                               |                   |            |              
|                                    | Patents and licenses          |                   | $          | 2,779,000    
|                                    | Technology and installed base |                   |            | 3,940,000    
|                                    | Customer relationships        |                   |            | 5,430,000    
|                                    | Trade names                   |                   |            | 1,700,000    
|                                    | Other                         |                   |            | 640,000      
|                                    |                               |                   |            |              
|                                    |                               |                   | 14,489,000 |              
|Indefinite-lived intangible assets: |                               |                   |            |              
|                                    | Trade names                   |                   |            | 1,660,000    
|                                    |                               |                   |            |              
|Total                               |                               | $                 | 16,149,000 |              
|                                    |                               |                   |            |              

Amortization
expense was $784,000 and $232,000 for the six months ended December 31, 2003 and 2002, respectively. The estimated amortization expenses for this fiscal year ended
June 30, 2004 and for

10

---

the
four fiscal years subsequent to 2004 are as follows: $1,765,000, $1,394,000, $1,490,000, $1,469,000 and $1,371,000. The carrying amount of goodwill consists of $48,114,000 for the Inform segment
and $8,139,000 for the Protect and Direct segment as of December 31, 2003. The acquisition of Peek Traffic Corporation in December 2003 added $7,611,000 of goodwill to the Inform
segment, and the acquisition of U.S. Traffic Corporation in May 2003 added $19,048,000 of goodwill to the Inform segment.

9.     The
Company's guarantees, commitments and contingent liabilities are discussed in detail in the Company's Annual Report on Form 10-K. The following discusses
changes since June 30, 2003.

The
Company warrants to the original purchaser of its products that it will, at its option, repair or replace, without charge, such products if they fail due to a manufacturing defect.
The term of these warranties varies (30 days to 5 years) by product. The Company accrues for product warranties, when, based on available information, it is probable that customers will make claims
under warranties relating to products that have been sold, and a reasonable estimate of the costs can be made. The Company's estimated product warranty liability is as follows:

BalanceJuly 1, 2003

$
1,986,000Current provisions


60,000Expenditures


(112,000
)Changes in estimates


(152,000
)Acquisitions


2,513,000BalanceDecember 31, 2003

$
4,295,000


The
Company has entered into bid and performance related bonds associated with various contracts. Potential payments due under these bonds are related to the Company's performance under
the applicable contract. The total amount of bid and performance related bonds that were available and undrawn was $4,100,000 at December 31, 2003 and $5,300,000 at June 30, 2003.
Historically, the Company has not made significant payments on bid and performance bonds, and no amount has been accrued in the accompanying consolidated financial statements.

The
Company has standby letters of credit covering potential workers' compensation liabilities. The total amount of standby letters of credit that were outstanding at December 31,
2003 was $740,000 and at June 30, 2003 was $330,000.

10.   Effective
December 1, 2003, the Company acquired substantially all of the assets and assumed certain liabilities of the North American operations of Peek Traffic
Corporation (Peek Traffic). The Company paid a purchase price of $15,693,000. The purchase price consisted of $11,263,000 in cash and 180,723 of the Company's common stock, issued from Treasury Stock,
valued at $4,430,000. The cash portion of the purchase price was obtained from the Company's revolving credit facility. Peek Traffic is a designer, manufacturer and supplier of intelligent
intersection control systems, red light enforcement systems and other transportation equipment. The results of Peek Traffic have been included in the Company's Inform segment since the date of
acquisition.

11

---

The
following unaudited summary presents the estimated fair values of the assets acquired and liabilities of Peek Traffic assumed as of December 1, 2003, the effective date of the
acquisition.

Current assets

$
5,977,000Property, plant and equipment


2,902,000Intangible assets


5,760,000Goodwill


7,611,000Total assets


22,250,000Current liabilities


6,557,000Net assets

$
15,693,000


The
allocation of purchase price above is subject to change based on finalization of valuations of certain assets and liabilities.

The
intangible assets acquired in connection with the acquisition of Peek Traffic were assigned as follows:

|                             |                        | Gross Carrying Amount |   | Weighted-average Useful Life
|---------------------------- | ---------------------- | --------------------- | - | ----------------------------
|Amortized intangible assets: |                        |                       |   |                             
|                             | Customer relationships |                       | $ | 3,110,000                   
|                             | Trade names            |                       |   | 1,700,000                   
|                             | Technology             |                       |   | 840,000                     
|                             | Backlog                |                       |   | 110,000                     
|                             |                        |                       |   |                             
|                             | Total                  |                       | $ | 5,760,000                   
|                             |                        |                       |   |                             

Effective
May 16, 2003, the Company acquired certain assets and liabilities of the Traffic and Transit Lighting businesses of U.S. Traffic Corporation (UST). The Company paid a purchase
price of $35,725,000, net of cash acquired, consisting of $20,158,000 in cash, a $5,000,000 five-year note and 558,534 shares of the Company's common stock with a fair value of $10,567,000. The
Company's source of funds for this acquisition was a $70,000,000 credit facility. UST is a designer, manufacturer and supplier of intelligent intersection control systems and other transportation
equipment. The results of UST have been included in the Company's Inform segment since the date of acquisition.

The
Company anticipates that the UST and Peek Traffic businesses will provide future operating synergies in the traffic control market, expand the Company's customer base in the
municipal and county markets and leverage the Company's existing technologies within the Inform segment.

12

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The
following pro forma summary presents the Company's consolidated results of operations for each of the six-month and three-month periods ended December 31 as if the
acquisitions had occurred at the beginning of fiscal year 2003.

|                               |  | Six Months Ended December 31 |            | Three Months Ended December 31
|------------------------------ |  | ---------------------------- | ---------- | ------------------------------
|
|Net sales                      |  | $                            | 84,275,000 |                               
|Net earnings                   |  |                              | 2,566,000  |                               
|Net earnings per diluted share |  | $                            | 0.29       |                               

The
results above for the three-month and six-month periods ended December 31, 2002 include restructuring and other nonrecurring costs incurred by Peek Traffic of $2,086,000 and
$2,554,000, respectively.

The
consolidated pro forma information is not necessarily indicative of the combined results that would have occurred had the acquisitions occurred on that date, nor is it indicative of
the results that may occur in the future.

13

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PART IFINANCIAL INFORMATION

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Quixote Corporation (the Company) and its subsidiaries develop, manufacture and market highway and transportation safety products to protect, direct and inform
motorists and highway workers in both domestic and international markets. The Company's operations are comprised of two reportable segments within the highway and transportation safety industry,
concentrating on safety problems and designing products to provide solutions for the highways. The Company's two reportable segments arethe manufacture and sale of highway and
transportation safety products which "Protect and Direct", and the manufacture and sale of products and services which "Inform" that are often referred to as Intelligent Transportation Systems (ITS)
products. The Company's Protect and Direct segment provides solutions for improving safety on the roads either by minimizing the severity of crashes that occur or by preventing crashes from occurring
by directing or guiding traffic. The primary product lines within the Protect and Direct segment include energy-absorbing products such as crash cushions, truck-mounted attenuators,
sand-filled barrels and water-filled barriers, and also directing and guiding products such as flexible post delineators and a glare screen system. The Company's Inform segment provides
solutions for improving traffic flow and safety on roads and runways by providing information. The primary product lines within the Inform segment include intelligent intersection control systems,
mobile and permanent variable message signs, advanced sensing products which measure distance, count and classify vehicles, and sense weather conditions, computerized highway advisory radio
transmitting systems, automated red light enforcement systems, and other transportation equipment.

The
Company's products are sold by both a direct sales force and a distribution network to customers in the highway construction and safety business, state departments of transportation,
county and local governments and other governmental transportation agencies. The domestic market for highway and transportation safety products is directly affected by federal, state and local
governmental policies. A
portion of the Company's sales is ultimately financed by funds provided to the states by the federal government. Historically, these funds have covered 75% to 90% of the cost of highway safety
projects on roads constructed or maintained with federal assistance. Seasonality affects the Company's business with a higher level of sales in the Company's fourth fiscal quarter.

RESULTS OF OPERATIONS

The Company continues to be affected by factors contributing to a difficult operating environment which have negatively impacted results for the second quarter of
fiscal 2004. These factors include revenue shortfalls and budget deficits at the state and municipal level where many states are reducing spending to avoid operating deficits. The passage of new
federal highway funding legislation has been delayed. The previous bill, TEA-21, expired in September 2003, but was extended until February 29, 2004. The passage of the new
six-year reauthorization bill, called SAFE-TEA, may not occur by February 29, 2004. Since current funding has only been extended to that date, another extension could be
required. Until the new bill is approved, however, the transportation safety allotment in federal, state and municipal budgets may continue to be uncertain, and the Company believes this uncertainty
will continue to negatively impact spending on the products and services offered by the Company.

The
Company recently acquired two businesses, which now comprise a majority of the Company's Inform segment, U.S. Traffic Corporation (UST) in May 2003 and Peek Traffic Corporation (Peek
Traffic) in December 2003. These businesses are affected by the difficult operating environment and are currently operating below planned levels. In addition, the Company is currently in the process
of integrating these businesses, which is requiring a considerable amount of management's time and

14

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resources.
The Company believes it is currently uncertain as to when these businesses will be successfully integrated and will achieve expected returns.

The
following table sets forth selected key operating statistics relating to the Company's financial results:

|                                                             |                       | Three Months Ended
December 31 |            | Six Months Ended
December 31 |  
|------------------------------------------------------------ | --------------------- | ------------------------------ | ---------- | ---------------------------- | -
|
|Revenues by Segment:                                         |                       |                                |            |                              |  
|                                                             | Protect and Direct    |                                | $          | 16,413,000                   |  
|                                                             | Inform                |                                |            | 19,081,000                   |  
|                                                             |                       |                                |            |                              |  
|                                                             |                       | $                              | 35,494,000 |                              | $
|                                                             |                       |                                |            |                              |  
|Geographic Revenues:                                         |                       |                                |            |                              |  
|                                                             | Domestic              |                                | $          | 31,832,000                   |  
|                                                             | International         |                                |            | 3,662,000                    |  
|                                                             |                       |                                |            |                              |  
|                                                             |                       | $                              | 35,494,000 |                              | $
|                                                             |                       |                                |            |                              |  
|Operating Income by Segment:                                 |                       |                                |            |                              |  
|                                                             | Protect and Direct    |                                | $          | 3,368,000                    |  
|                                                             | Inform                |                                |            | (121,000                     | )
|                                                             | Unallocated Corporate |                                |            | (2,020,000                   | )
|                                                             |                       |                                |            |                              |  
|                                                             |                       | $                              | 1,227,000  |                              | $
|                                                             |                       |                                |            |                              |  
|Gross profit percentage                                      |                       |                                | 31.2       | %                            |  
|                                                             |                       |                                |            |                              |  
|Selling and administrative expenses as a percentage of sales |                       |                                | 25.4       | %                            |  
|                                                             |                       |                                |            |                              |  
|Diluted earnings per share                                   |                       | $                              | 0.05       |                              | $
|                                                             |                       |                                |            |                              |  

Revenues

The Company's net sales for the second quarter of fiscal 2004 increased $9,856,000, or 38%, to $35,494,000 from $25,638,000 for the second quarter last year. This
was primarily due to the acquisitions of UST in May 2003 and Peek Traffic in December 2003, which contributed $13,073,000 of net sales which was not comparable to the second quarter of
the prior year. Excluding the two recent acquisitions, net sales decreased by $3,217,000, or 14%, due to decreases in sales across both its Protect and Direct and Inform segments in the second quarter
of fiscal 2004.

The
Company's net sales for the first six months of fiscal 2004 increased $24,411,000, or 49%, to $74,678,000 from $50,267,000 in the same period last year. The acquisitions of UST and
Peek Traffic contributed $25,781,000 in net sales for the current six-month period not comparable to the prior year. Excluding the two recent acquisitions, net sales decreased by
$1,370,000, or 3%, as increases in sales during the first quarter of 2004 were offset by decreased sales in the second quarter of fiscal 2004 for both segments.

Protect and DirectNet sales for the Company's Protect and Direct segment for the second quarter of fiscal 2004 decreased 5%
to $16,413,000 from $17,221,000 for the second quarter last year. The Company believes the decrease in sales is due to state budgetary constraints and transportation funding uncertainties caused by
the delay in the passage of the new federal highway funding bill. Decreased sales of truck-mounted attenuators, flexible post delineators and parts were partially offset by increased sales of
permanent crash cushions, sand filled barrels and the Triton Barrier® product line.

15

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For
the first six-months of fiscal 2004, net sales for the Protect and Direct segment were $35,809,000, which were slightly lower than the $35,986,000 in sales for the same
period last year. Decreased sales of permanent crash cushions, flexible post delineators and parts were partially offset by increased sales of truck-mounted attenuators and the Triton
Barrier® product line.

InformNet sales for the Company's Inform segment for the second quarter of fiscal 2004 increased $10,664,000 to $19,081,000
from $8,417,000 for the second quarter last year. This was primarily due to the acquisitions of UST and Peek Traffic, which added $13,073,000 in net sales for the second quarter of fiscal 2004 not
comparable to the second quarter of the prior year. Excluding the two recent acquisitions, net sales for the Inform segment decreased $2,409,000, or 29%. The second quarter of the prior year included
shipments totaling $2,800,000 on two large contracts that were not replaced in the current quarter. Sales across most major product lines decreased due to decreased order flows throughout the segment,
which were partially offset by strong sales of highway advisory radio systems. The acquisitions of UST and Peek Traffic have also been affected by the difficult operating environment which has
resulted in depressed order flows and sales levels lower than planned.

For
the first six months of fiscal 2004, net sales for the Company's Inform segment increased to $38,869,000 from $14,281,000 for the same period last year. The increase was primarily
due to the acquisitions of UST and Peek Traffic, which added $25,781,000 in net sales not comparable to the first six months of the prior year. Excluding the two recent acquisitions, net sales
decreased $1,193,000, or 8%, due to the difficult comparison related to the large contract sales in the second quarter of last year. Sales across most major product lines decreased for the first six
months of fiscal 2004 due to weak sales in the second quarter, which were partially offset by strong sales of highway advisory radio systems.

GeographicInternational sales for the second quarter of fiscal 2004 increased 11% to $3,662,000 from $3,298,000 for the
second quarter last year due to strong sales in Europe, particularly in Sweden and Spain. Domestic sales for the second quarter of fiscal 2004 increased 42% to $31,832,000 from $22,340,000. The
acquisitions of UST and Peek Traffic contributed $12,993,000 in domestic net sales in the second quarter of fiscal 2004 offset by decreased domestic sales, excluding acquisitions, for both segments.

International
sales for the first six months of fiscal 2004 increased 17% to $7,691,000 from $6,585,000 for the same period last year. Sales of the Triton Barrier® product
line continue to be strong in Australia. Domestic sales for the first six months of fiscal 2004 increased 53% to $66,987,000 from $43,682,000. The acquisitions of UST and Peek Traffic contributed
$26,089,000 in domestic net sales in the first six months of fiscal 2004 offset by decreased domestic sales, excluding acquisitions, for both segments.

Gross Profit Margin

The Company's gross profit margin for the second quarter of fiscal 2004 was 31.2% compared to 38.3% for the second quarter last year due principally to the lower
gross profit margins generated at UST and Peek Traffic. The gross profit margin for the Protect and Direct segment increased due to a favorable change in product mix with increased sales of higher
margin permanent crash cushions and decreased sales of the lower margin truck-mounted attenuators. Excluding UST and Peek Traffic results, the gross profit margin for the Inform segment decreased due
to decreased sales volume.

The
gross profit margin for the first six-month period was 31.9% compared to 40.7% for the same period last year due principally to lower gross profit margins generated at
UST and Peek Traffic. The gross profit margin for the Protect and Direct segment for the first six months of fiscal 2004 was consistent with the gross profit margin for the same period last year.
Excluding UST and Peek Traffic results, the gross profit margin for the Inform segment decreased due to decreased sales volume. The

16

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Company
currently estimates consolidated gross profit margins to be lower than management's original range of 38% to 40% for fiscal year 2004.

Selling and Administrative Expenses

Selling and administrative expenses for the second quarter of fiscal 2004 increased $2,207,000 to $9,013,000 from $6,806,000 for the second quarter last year due
to the inclusion of expenses from UST and Peek Traffic which added $2,329,000 for the quarter. Excluding UST and Peek Traffic results, selling and administrative expenses for the second quarter of
fiscal 2004 were consistent with the prior year. Selling and administrative expenses declined as a percentage of sales to 25.4% for the second quarter of 2004 from 26.5% last year as UST and Peek
Traffic have lower selling and administrative expenses as a percentage of sales than the Company's historical average.

Selling
and Administrative expenses for the first six-month period increased $2,855,000, or 20%, to $16,964,000 from $14,109,000 for the same period last year due to
inclusion of UST and Peek Traffic which added $4,033,000 for the first six-months of fiscal 2004. Excluding UST and Peek Traffic results, selling and administrative expenses decreased for
the first six months of fiscal 2004 as selling and administrative expenses for the first quarter of fiscal 2003 were unusually high due to costs associated with acquisition and
non-recurring consulting work. Selling and administrative expenses decreased as a percentage of sales to 22.7% for the first six months of fiscal 2004 compared to 28.0% last year as UST
and Peek Traffic have lower selling and administrative expenses as a percentage of sales than the Company's historical average. The Company currently estimates selling and administrative expenses as a
percentage of sales to be lower than management's original range of 23% to 25% of sales for fiscal year 2004.

Research and Development

Research and development expenditures were $830,000 for the second quarter of fiscal 2004 compared to $473,000 for the second quarter last year. Research and
development expenditures were $1,546,000 for the current six-month period compared with $908,000 for the same period last year. The increases of $357,000 and $638,000, respectively, were
due to the inclusion of research and development expenses at UST and Peek Traffic, as well as increased inside and outside development costs for several projects. The Company continues to invest in
development projects for new applications as well as upgrades and modifications to existing products.

Interest Expense

Interest expense for the second quarter of fiscal 2004 increased to $504,000 from $210,000 for the second quarter last year. Interest expense for the first six
months of fiscal 2004 increased to $1,002,000 from $450,000 for the same six-month period last year. The increases were due to the higher level of average long-term debt since
the acquisitions of UST in May 2003 and Peek Traffic in December 2003. The interest rate on the Company's $70 million, three-year unsecured credit agreement is based
on prime or LIBOR and a fixed rate, plus a margin, and the weighted average was 3.6% as of December 31, 2003.

Provision for Income Taxes

The provision for income taxes for the second quarter of fiscal 2004 was $262,000 and was $1,567,000 for the first six months of fiscal 2004 reflecting a 36%
effective income tax rate compared to a 34% effective income tax rate for fiscal 2003. The Company expects to continue to provide for income taxes at a rate of 36% for the remainder of fiscal 2004.

17

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Net Earnings

Net earnings for the second quarter of fiscal 2004 were $466,000, or $0.05 cents per diluted share, compared to $1,552,000, or $0.19 cents per diluted share, for
the second quarter last year. Net earnings for the first six-month period were $2,787,000, or $0.32 cents per diluted share, compared to $3,331,000, or $0.41 cents per diluted share, for
the same period last year.

FINANCIAL CONDITION

Liquidity and Capital Resources

The Company's principal sources of funds historically have been cash flows from operations and borrowings from banks. The Company had cash and cash equivalents of
$1,354,000 as of December 31, 2003 and access to additional funds of $14,500,000 under a three-year unsecured bank credit agreement which currently expires as of May 16,
2006. The Company believes that this credit facility is an important source of liquidity. The credit agreement provides for a $50 million revolving credit facility and a $20 million term
loan agreement. Principal on the term loan is payable quarterly in installments of $750,000, plus interest. The facility contains both fixed and floating interest rate options, at the prime rate or
LIBOR rate, plus a margin. The facility contains affirmative and negative covenants including requirements that the Company maintain certain financial ratios and be profitable each year. Access to
additional funds is limited based upon a leverage ratio. The agreement may be renewed one additional year on each anniversary date upon mutual consent of the Company and the banks. The Company is
currently in compliance with all covenants in this agreement. The Company's outstanding borrowings were $54,337,000, or 40% of total capitalization, as of December 31, 2003, of which
$47,500,000 was outstanding related to the revolving credit facility. This compares to $43,817,000, or 37% of total capitalization, as of June 30, 2003. The increase relates to the acquisition
of Peek Traffic in December 2003 for which the Company borrowed $11,000,000 against the revolving credit facility.

Cash Flows

Cash flows provided by operations were $953,000 during the first six months of fiscal 2004. An investment in working capital, primarily at UST, through the
payment of accounts payable and accrued expenses in the first quarter of fiscal 2004 were offset by decreases in the level of accounts receivable and inventory throughout the first six months of
fiscal 2004 due to the decreased level of sales.

Investing
activities used cash of $13,261,000 during the first six months of fiscal 2004, including $11,263,000 for the purchase of Peek Traffic and $1,998,000 for capital expenditures.

Financing
activities provided cash of $9,879,000 during the first six months of fiscal 2004. The Company borrowed a net $12,500,000 against its outstanding revolving credit facility
primarily for the acquisition of Peek Traffic. The Company also paid $1,500,000 in quarterly payments on the term loan due in connection with the acquisition of UST and $193,000 on other notes
payable. The payment of the Company's semi-annual cash dividend used cash of $1,403,000. The Company received cash of $475,000 from the exercise of common stock options.

For
the remainder of fiscal 2004, the Company anticipates needing less than an additional $3,000,000 in cash for capital expenditures. The Company also anticipates spending approximately
$500,000 primarily during the third and fourth quarters to comply with Section 404 of the Sarbanes-Oxley Act of 2002. The Company may also need additional cash as it considers acquiring
businesses that complement its existing operations. Also, the Company will require additional investments in working capital to maintain growth. The Company may also need additional funds to
repurchase its own common stock from time to time. These expenditures will be financed either through the Company's invested cash, cash generated from its operations or from borrowings available under
the Company's bank credit facility. The Company believes its existing cash, cash generated from operations

18

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and
funds available under its existing credit facility are sufficient for all planned operating and capital requirements. If needed and available on favorable terms, the Company may also enter other
debt or equity financing arrangements.

SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements.
Management's estimates also affect the reported amounts of revenues and expenses during the reporting period. In addition, certain normal and recurring estimates are made including estimates in
determining the allowance for doubtful accounts receivable, inventory valuation reserves, valuation allowance on deferred tax assets and health care liabilities. These estimates are made using
management's best judgment given relevant factors and available data. Actual results could differ materially from those estimates. Note 2 to the Company's June 30, 2003 consolidated
financial statements includes a summary of the significant accounting policies, methods and estimates used in the preparation of the Company's consolidated financial statements. There have been no
subsequent material changes in accounting policies, methods and estimates used by management. In the opinion of management, the Company does not have any individual accounting policy or use any
individual estimate that is critical to the preparation of its consolidated financial statements. In most instances, the Company must use an accounting policy or method because it is the only policy
or method permitted under U.S. GAAP. The Company believes the following significant accounting policies and methods used by the Company are the most important to the presentation of the Company's
financial statements:

Revenue
Recognition: Revenues, net of sales incentives, are recognized when either services have been rendered or both title and risk of loss of products have been transferred to
unaffiliated customers. Additionally, the Company ensures that collection of the resulting receivable is probable, persuasive evidence that an arrangement exists, and the fee is fixed or determinable.
Provision for estimated uncollectible amounts is made based upon management's analysis of sales returns and bad debts.

Inventories:
Inventories are valued at the lower of cost (first-in, first-out method) or market. Actual costs are used to value raw materials and supplies.
Standard costs, which approximate actual costs, are used to value finished goods and work-in-process. Standard costs include raw materials, direct labor and manufacturing
overhead. Provision for potentially obsolete or slow-moving inventory is made based on management's analysis of inventory levels, ages and salability.

Long-Lived
Assets: Long-lived assets include such items as goodwill, patents, product rights and other intangible assets. Long-lived assets held and
used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the
recoverability of long-lived assets, the Company assesses the possibility of obsolescence, demand, new technology, competition, and other pertinent economic factors and trends that may
have an impact on the value or remaining lives of these assets. Additionally, goodwill and other indefinite-lived intangible assets are tested for impairment at least annually using the discounted
cash flow method. Patents and other finite-lived intangible assets are amortized on a straight-line basis over the life of the patent or agreement.

Income
Taxes: The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax
returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates
in effect for the year in which the differences are expected to reverse. In addition, the amount of any future tax benefits are reduced by a valuation allowance to the extent such benefits are not
expected to be fully realized.

19

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RECENTLY ISSUED ACCOUNTING PRONOUNCMENTS

In December 2003, the Financial Accounting Standards Board (FASB) revised FAS No. 132, "Employers' Disclosures about Pensions and other
Postretirement Benefits," establishing additional annual disclosures about plan assets, investment strategy, measurement date, plan obligations and cash flows and interim disclosures about net
periodic costs and contributions. In January 2004, the FASB issued FASB Staff Position No. FAS 106-1, "Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003" (FSP No. 106-1) in response to a new federal law regarding prescription drug benefits under Medicare. FSP
No. 106-1 relates to FAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." Currently, the Company does not offer a pension plan or
postretirement benefits. In addition, the Company does not expect that these statements will have a significant impact on the Company's results of operations or financial condition.

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

The Company is subject to certain debt obligations, guarantees, commitments and contingent liabilities further described in the Company's annual report on
Form 10-K for the year ended June 30, 2003. The following table presents the Company's contractual obligations to make future payments under contracts, such as debt and lease
agreements, as of December 31, 2003:

|                         |  | Total |            | Less than
1 Year |   | 1-3 Years |  | 3-5 Years |            | More than
5 Years
|------------------------ |  | ----- | ---------- | ---------------- | - | --------- |  | --------- | ---------- | -----------------
|Long-term debt           |  | $     | 54,337,000 |                  | $ | 4,012,000 |  | $         | 6,820,000  |                  
|Operating leases         |  |       | 16,963,000 |                  |   | 3,457,000 |  |           | 5,413,000  |                  
|Minimum royalty payments |  |       | 2,613,000  |                  |   | 513,000   |  |           | 600,000    |                  
|Purchase obligations     |  |       | 288,000    |                  |   | 288,000   |  |           |            |                  
|                         |  |       |            |                  |   |           |  |           |            |                  
|Total                    |  | $     | 74,201,000 |                  | $ | 8,270,000 |  | $         | 12,833,000 |                  
|                         |  |       |            |                  |   |           |  |           |            |                  

FORWARD LOOKING STATEMENTS

Various statements made within the Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report constitute
"forward-looking statements" for purposes of the SEC's "safe harbor" provisions under the Private Securities Litigation Reform Act of 1995 and Rule 3b-6 under the Securities
Exchange Act of 1934, as amended. Any statement that addresses expectations or projections about the future, including statements about the Company's strategy for growth, product development, market
position, expenditures and financial results, are forward-looking statements.

Investors
are cautioned that all forward-looking statements involve risks and uncertainties, including those detailed in the Company's public filings with the SEC, news releases and
other communications, which speak only as of the dates of those filings or communications. The Company does not undertake any obligation to release publicly any revisions to these forward-looking
statements to reflect events or circumstances after the date hereto or to reflect the occurrence of unanticipated events. There can be no assurance that actual results will not differ materially from
the Company's expectations. Factors which could cause materially different results include, among others, uncertainties related to continued federal and state funding for highways and risks related to
reductions in government expenditures; the successful integration of acquisitions; the introduction and acceptance of the Company's products and services; an unfavorable change in product sales mix;
seasonality along with the extent and timing of the award of large contracts; the cyclical nature of the Company's governmental markets; competitive and pricing pressures; increasing raw material
costs; excess

20

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manufacturing
capacity; weather conditions; acts of war and terrorist activities; the possible impairment of intangible assets; and general economic conditions.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Item 7.A. of the Company's Annual Report on Form 10-K for the year ended June 30, 2003 presents information regarding Quantitative and
Qualitative Disclosures about Market Risk.

The
Company is exposed to market risk from fluctuations in interest rates. The Company manages its exposure to interest rate fluctuations through the use of derivative instruments in the
form of non-trading interest rate swaps. The objective of the swap is to fix the interest rate on certain variable rate debt to stabilize interest rates and to more effectively balance the
Company's long-term borrowing costs and interest rate risk. During July 2003, the Company entered into an interest rate swap agreement to set a fixed interest rate relating to
$20 million of its outstanding debt at variable interest rates.

ITEM 4. Controls and Procedures

Disclosure
controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the reports that are filed or submitted
under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that are filed under the Exchange Act is accumulated and
communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Under the supervision of
and with the participation of management, including the principal executive officer and principal financial officer, the Company has evaluated the effectiveness of the design and operation of its
disclosure controls and procedures as of the end of the period covered by this report, and, based on its evaluation, our principal executive officer and principal financial officer have concluded that
these controls and procedures are effective.

There
have been no significant changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation described above.
In addition, there have been no corrective actions with regard to significant deficiencies and material weaknesses.

21

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PART IIOTHER INFORMATION

There is not information required to be reported under any items except as indicated below:

ITEM 2.    Changes in Securities

On December 11, 2003 the Company sold 180,723 shares of the common stock of the Company, $0.012/3 par value per share (the "Shares") issued
from Treasury Stock, to Peek Corporation. The sale of the shares was in partial payment of the purchase price paid by the Company for its acquisition of the North American operations of Peek
Corporation. Per the Asset Purchase Agreement, the Shares were valued at $24.90 per share, equaling consideration in the aggregate of $4,500,000. The Company sold the Shares in reliance on the
exemption from registration for private placements pursuant to Section 4(2) of the Securities Act of 1933.

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

The
Company's Annual Meeting of Stockholders was held on November 13, 2003. The matters voted on at the Annual Meeting were as follows:

(i)    The
election of James H. DeVries and Lawrence C. McQuade to serve as directors.

(ii)   The
ratification of the appointment of PricewaterhouseCoopers LLP as independent auditors for the Company.

Messrs. DeVries
and McQuade were elected and all other matters were approved as a result of the following stockholder votes:

|                                       |                     | FOR       |           | AGAINST |  | ABSTAIN
OR WITHHELD
|-------------------------------------- | ------------------- | --------- | --------- | ------- |  | -------------------
|ELECTION OF DIRECTORS                  |                     |           |           |         |  |                    
|                                       | James H. DeVries    |           | 7,053,018 |         |  |                    
|                                       | Lawrence C. McQuade |           | 7,135,330 |         |  |                    
|APPROVAL OF PRICEWATERHOUSECOOPERS LLP |                     | 7,370,408 |           | 39,330  |  | 9,442              

ITEM 6.    Exhibits and Reports on Form 8-K

(a)    Exhibits

|10.1 |  | First Amendment to Credit Agreement and Reaffirmation of Subsidiary Guaranty dated as of December 9, 2003 by and among Quixote Corporation as the Borrower, and The Northern Trust Company, LaSalle National Bank, Harris Trust and Savings Bank and
National City Bank of Michigan/Illinois, as lenders (the "Lenders"), and Subsidiary Guaranty dated as of December 9, 2003 as a counterpart to the Subsidiary Guaranty dated as of May 16, 2003 in favor of the Lenders by certain identified
subsidiaries of the Company.
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31   |  | Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|32   |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                       

(b)    Reports
on Form 8-K

On
October 29, 2003 the Company filed a report on Form 8-K dated October 28, 2003 to report the issuance of a press release announcing its first quarter
fiscal 2004 results and to report revisions to its estimates of certain fiscal 2004 financial results that were disclosed during its conference call to report earnings.

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On
December 11, 2003 the Company filed a report on Form 8-K dated the same date to report its announcement of the acquisition by its wholly-owned subsidiary,
Vision Acquisition Corporation, of the North American operations of Peek Traffic Corporation from Peek Traffic, Inc. and Peek Traffic Systems, Inc. effective December 1, 2003. The
Form 8-K also reported that the Company had disclosed a revision of its previous guidance for its second quarter fiscal 2004 financial results to a range of $0.05 to $0.07 per
diluted share.

On
December 19, 2003 the Company filed a report on Form 8-K dated December 10, 2003 with respect to its acquisition of the North American operations of
Peek Traffic Corporation from Peek Traffic, Inc. and Peek Traffic Systems, Inc. The Form 8-K included as exhibits the material acquisition documents.

On
January 30, 2004 the Company filed a report on Form 8-K dated January 29, 2004 to report the issuance of a press release announcing its second quarter
2004 financial results.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q for the
quarter ended December 31, 2003 to be signed on its behalf by the undersigned thereunto duly authorized.

|                         |  | QUIXOTE CORPORATION                                                                                                            
|------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------
|DATED: February 13, 2004 |  | /s/DANIEL P. GOREYDaniel P. Gorey,
Chief Financial Officer,
Vice President and Treasurer
(Chief Financial & Accounting Officer)

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