---

---

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

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

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FORM 10-Q

|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the Period Ended September 30, 2001

or

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission file number 0-7903

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

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QUIXOTE CORPORATION(a Delaware Corporation)

One 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 /x/  No / /

Indicate
the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 7,668,455 shares of the Company's Common Stock
($.012/3 par value) were outstanding as of September 30, 2001.

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---

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PART IFINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

QUIXOTE CORPORATION AND SUBSIDIARIES  Consolidated Statements of Operations  (Unaudited)

|                                                           |                                            | Three Months Ended September 30, |           
|---------------------------------------------------------- | ------------------------------------------ | -------------------------------- | ----------
|
|Net sales                                                  |                                            | $                                | 20,814,000
|Cost of sales                                              |                                            |                                  | 12,950,000
|                                                           |                                            |                                  |           
|Gross profit                                               |                                            |                                  | 7,864,000 
|                                                           |                                            |                                  |           
|Operating expenses:                                        |                                            |                                  |           
|                                                           | Selling & administrative                   |                                  |           
|                                                           | Research & development                     |                                  |           
|                                                           |                                            |                                  |           
|                                                           |                                            |                                  | 6,275,000 
|Operating profit                                           |                                            |                                  | 1,589,000 
|                                                           |                                            |                                  |           
|Other income (expense):                                    |                                            |                                  |           
|                                                           | Interest income                            |                                  |           
|                                                           | Interest expense                           |                                  |           
|                                                           | Other                                      |                                  |           
|                                                           |                                            |                                  |           
|                                                           |                                            |                                  | 389,000   
|                                                           |                                            |                                  |           
|Earnings from continuing operations before income taxes    |                                            |                                  | 1,978,000 
|Provision for income taxes                                 |                                            |                                  | 712,000   
|                                                           |                                            |                                  |           
|Earnings from continuing operations                        |                                            |                                  | 1,266,000 
|Earnings from discontinued operations, net of income taxes |                                            |                                  | 192,000   
|                                                           |                                            |                                  |           
|Net earnings                                               |                                            | $                                | 1,458,000 
|                                                           |                                            |                                  |           
|Per share databasic:                                      |                                            |                                  |           
|                                                           | Earnings from continuing operations        |                                  |           
|                                                           | Earnings from discontinued operations      |                                  |           
|                                                           |                                            |                                  |           
|                                                           | Net earnings                               |                                  | $         
|                                                           |                                            |                                  |           
|                                                           | Weighted average common shares outstanding |                                  |           
|                                                           |                                            |                                  |           
|Per share datadiluted:                                    |                                            |                                  |           
|                                                           | Earnings from continuing operations        |                                  |           
|                                                           | Earnings from discontinued operations      |                                  |           
|                                                           |                                            |                                  |           
|                                                           | Net earnings                               |                                  | $         
|                                                           |                                            |                                  |           
|                                                           | Weighted average common shares outstanding |                                  |           
|                                                           |                                            |                                  |           

See
Notes to Consolidated Financial Statements.

2

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QUIXOTE CORPORATION AND SUBSIDIARIES  Consolidated Balance Sheets

|                                       |                                                                                                                    | September 30,
2001 |             | June 30,
2001 |           
|-------------------------------------- | ------------------------------------------------------------------------------------------------------------------ | ------------------ | ----------- | ------------- | ----------
|
|ASSETS                                 |                                                                                                                    |                    |             |               |           
|Current assets:                        |                                                                                                                    |                    |             |               |           
|                                       | Cash and cash equivalents                                                                                          |                    | $           | 5,790,000     |           
|                                       | Accounts receivable, net of allowances for doubtful accounts of $1,287,000 at September 30 and $777,000 at June 30 |                    |             | 20,056,000    |           
|                                       | Inventories, net:                                                                                                  |                    |             |               |           
|                                       |                                                                                                                    | Raw materials      |             |               | 3,261,000 
|                                       |                                                                                                                    | Work in process    |             |               | 2,812,000 
|                                       |                                                                                                                    | Finished goods     |             |               | 11,484,000
|                                       |                                                                                                                    |                    |             |               |           
|                                       |                                                                                                                    |                    | 17,557,000  |               |           
|                                       |                                                                                                                    |                    |             |               |           
|                                       | Deferred income tax assets                                                                                         |                    |             | 2,671,000     |           
|                                       | Other current assets                                                                                               |                    |             | 1,240,000     |           
|                                       |                                                                                                                    |                    |             |               |           
|Total current assets                   |                                                                                                                    |                    | 47,314,000  |               |           
|                                       |                                                                                                                    |                    |             |               |           
|Property, plant and equipment, at cost |                                                                                                                    |                    | 34,914,000  |               |           
|Less accumulated depreciation          |                                                                                                                    |                    | (14,920,000 | )             |           
|                                       |                                                                                                                    |                    |             |               |           
|                                       |                                                                                                                    |                    | 19,994,000  |               |           
|                                       |                                                                                                                    |                    |             |               |           
|Goodwill                               |                                                                                                                    |                    | 28,140,000  |               |           
|Intangible assets, net                 |                                                                                                                    |                    | 4,471,000   |               |           
|Other assets                           |                                                                                                                    |                    | 2,737,000   |               |           
|                                       |                                                                                                                    |                    |             |               |           
|                                       |                                                                                                                    | $                  | 102,656,000 |               | $         
|                                       |                                                                                                                    |                    |             |               |           

See
Notes to Consolidated Financial Statements.

3

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QUIXOTE CORPORATION AND SUBSIDIARIES  Consolidated Balance Sheets

|                                       |                                                                                                                                        | September 30,
2001 |             | June 30,
2001 |  
|-------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ----------- | ------------- | -
|
|LIABILITIES AND SHAREHOLDERS' EQUITY   |                                                                                                                                        |                    |             |               |  
|Current liabilities:                   |                                                                                                                                        |                    |             |               |  
|                                       | Current portion of long-term debt                                                                                                      |                    | $           | 1,246,000     |  
|                                       | Accounts payable                                                                                                                       |                    |             | 4,347,000     |  
|                                       | Dividends payable                                                                                                                      |                    |             |               |  
|                                       | Accrued expenses                                                                                                                       |                    |             | 6,439,000     |  
|                                       | Income tax payable                                                                                                                     |                    |             | 1,834,000     |  
|                                       | Liabilities of discontinued operations                                                                                                 |                    |             | 1,001,000     |  
|                                       |                                                                                                                                        |                    |             |               |  
|Total current liabilities              |                                                                                                                                        |                    | 14,867,000  |               |  
|                                       |                                                                                                                                        |                    |             |               |  
|Long-term debt, net of current portion |                                                                                                                                        |                    | 31,867,000  |               |  
|Deferred income tax liabilities        |                                                                                                                                        |                    | 1,874,000   |               |  
|Liabilities of discontinued operations |                                                                                                                                        |                    | 441,000     |               |  
|                                       |                                                                                                                                        |                    |             |               |  
|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 9,636,418 shares at September 30 and 9,485,585 shares at June 30 |                    |             | 160,000       |  
|                                       | Capital in excess of par value of stock                                                                                                |                    |             | 37,309,000    |  
|                                       | Retained earnings                                                                                                                      |                    |             | 37,650,000    |  
|                                       | Currency translation adjustment                                                                                                        |                    |             | (420,000      | )
|                                       | Treasury stock, at cost, 1,967,963 shares at September 30 and at June 30                                                               |                    |             | (21,092,000   | )
|                                       |                                                                                                                                        |                    |             |               |  
|Total shareholders' equity             |                                                                                                                                        |                    | 53,607,000  |               |  
|                                       |                                                                                                                                        |                    |             |               |  
|                                       |                                                                                                                                        | $                  | 102,656,000 |               | $
|                                       |                                                                                                                                        |                    |             |               |  

See
Notes to Consolidated Financial Statements.

4

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

|                                                                   |                                                                                                              | Three Months Ended September 30,               |                                      
|------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------ | ---------------------------------------------- | -------------------------------------
|
|Operating activities:                                              |                                                                                                              |                                                |                                      
|                                                                   | Earnings from continuing operations                                                                          |                                                | $                                    
|                                                                   |                                                                                                              | Discontinued operations:                       |                                      
|                                                                   |                                                                                                              | Gain on disposal, net of income taxes          |                                      
|                                                                   |                                                                                                              |                                                |                                      
|                                                                   | Net earnings                                                                                                 |                                                |                                      
|                                                                   | Adjustments to reconcile net earnings to net cash provided by operating activities of continuing operations: |                                                |                                      
|                                                                   |                                                                                                              | Discontinued operations                        |                                      
|                                                                   |                                                                                                              | Gain on sale of assets                         |                                      
|                                                                   |                                                                                                              | Depreciation                                   |                                      
|                                                                   |                                                                                                              | Amortization                                   |                                      
|                                                                   |                                                                                                              | Provisions for losses on accounts receivable   |                                      
|                                                                   |                                                                                                              | Equity loss on investment in TMT joint venture |                                      
|                                                                   |                                                                                                              | Changes in operating assets and liabilities:   |                                      
|                                                                   |                                                                                                              |                                                | Accounts receivable                  
|                                                                   |                                                                                                              |                                                | Inventories and other assets         
|                                                                   |                                                                                                              |                                                | Accounts payable and accrued expenses
|                                                                   |                                                                                                              |                                                | Income taxes payable                 
|                                                                   |                                                                                                              |                                                |                                      
|Net cash provided by operating activities of continuing operations |                                                                                                              |                                                | 3,954,000                            
|Net cash provided by (used in) discontinued operations             |                                                                                                              |                                                | 224,000                              
|                                                                   |                                                                                                              |                                                |                                      
|Net cash provided by operating activities                          |                                                                                                              |                                                | 4,178,000                            
|                                                                   |                                                                                                              |                                                |                                      
|Investing activities:                                              |                                                                                                              |                                                |                                      
|                                                                   | Purchase of property, plant and equipment                                                                    |                                                |                                      
|                                                                   | Cash paid for acquired businesses, net of cash acquired                                                      |                                                |                                      
|                                                                   | Proceeds from sale of assets                                                                                 |                                                |                                      
|                                                                   | Investment in TMT joint venture                                                                              |                                                |                                      
|                                                                   | Other                                                                                                        |                                                |                                      
|                                                                   |                                                                                                              |                                                |                                      
|Net cash used in investing activities                              |                                                                                                              |                                                | (13,268,000                          
|                                                                   |                                                                                                              |                                                |                                      
|Financing activities:                                              |                                                                                                              |                                                |                                      
|                                                                   | Payments on notes payable                                                                                    |                                                |                                      
|                                                                   | Payments on revolving credit facility                                                                        |                                                |                                      
|                                                                   | Proceeds from revolving credit facility                                                                      |                                                |                                      
|                                                                   | Decrease in bank overdrafts                                                                                  |                                                |                                      
|                                                                   | Payment of semi-annual cash dividend                                                                         |                                                |                                      
|                                                                   | Proceeds from exercise of stock options                                                                      |                                                |                                      
|                                                                   | Repurchase of common stock for treasury                                                                      |                                                |                                      
|                                                                   |                                                                                                              |                                                |                                      
|Net cash provided by (used in) financing activities                |                                                                                                              |                                                | 10,792,000                           
|                                                                   |                                                                                                              |                                                |                                      
|Effect of exchange rate changes on cash                            |                                                                                                              |                                                | (30,000                              
|                                                                   |                                                                                                              |                                                |                                      
|Increase in cash and cash equivalents                              |                                                                                                              |                                                | 1,672,000                            
|Cash and cash equivalents at beginning of period                   |                                                                                                              |                                                | 4,118,000                            
|                                                                   |                                                                                                              |                                                |                                      
|Cash and cash equivalents at end of period                         |                                                                                                              | $                                              | 5,790,000                            
|                                                                   |                                                                                                              |                                                |                                      

See
Notes to Consolidated Financial Statements.

5

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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, 2001 consolidated balance sheet 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, 2001. Management believes the
financial statements include all normal recurring adjustments necessary for a fair presentation of the results for the interim periods.

2.  The
provision for income taxes is based upon the estimated effective tax rate for the year.

3.  Operating
results for the first three months of fiscal 2002 are not necessarily indicative of performance for the entire year. The Company's business is seasonal
with a higher level of sales of highway safety products in the Company's fourth fiscal quarter.

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

Three Months Ended
September 30,2001

2000Numerator:Net earnings available to common shareholdersbasic and diluted:

$
1,458,000

$
2,234,000Denominator:Weighted average shares outstandingbasic:


7,525,699


7,358,904Effect of dilutive securitiescommon stock options


660,531


318,171Weighted average of shares outstandingdiluted


8,186,230


7,677,075Net earnings per share of common stock:Basic

$
.19

$
.30Diluted

$
.18

$
.29


5.  The
assets and liabilities of substantially all subsidiaries outside the United States are translated to the United States dollar at period-end rates of
exchange, and earnings and cash flow statements are translated at weighted-average rates of exchange. Translation adjustments are accumulated with other comprehensive earnings (losses) as a separate
component of shareholders' equity. The Company has no other components of other comprehensive earnings and had no comprehensive income items prior to fiscal 2001. The Company's total comprehensive
earnings consists of the following for the three month period ended September 30, 2001:

Net earnings

$
1,458,000Currency translation adjustment


(30,000
)Total comprehensive earnings

$
1,428,000


6.  The
Company's operations are classified as two principal reportable segments within the highway and transportation safety industry. The segment financial data
presented herein has been restated to present the Company's two reportable segments: the manufacture and sale of highway and

6

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transportation safety 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 following table presents financial information about reported segments as of and for the three month periods ended September 30, 2001 and 2000 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
|--------------------------------- |  | ------------------ | ---------- | ------ | - | --------------------- |  | -----
|2002                              |  |                    |            |        |   |                       |  |      
|THREE MONTHS                      |  |                    |            |        |   |                       |  |      
|Net sales from external customers |  | $                  | 15,477,000 |        | $ | 5,337,000             |  |      
|Operating profit (loss)           |  |                    | 2,086,000  |        |   | 706,000               |  | $    
|2001                              |  |                    |            |        |   |                       |  |      
|THREE MONTHS                      |  |                    |            |        |   |                       |  |      
|Net sales from external customers |  | $                  | 18,093,000 |        | $ | 3,228,000             |  |      
|Operating profit (loss)           |  |                    | 4,490,000  |        |   | 987,000               |  | $    

Identifiable
assets of the Inform segment increased to $40,947,000 as of September 30, 2001 from $26,061,000 as of June 30, 2001 primarily due to the acquisition of
Surface Systems, Inc. (see footnote 8).

7.  In
July 2001, the Company sold certain assets of its non-highway plastic-molded product line for $500,000 in cash and $700,000 in a
three-year promissory note with interest imputed at 8%. In addition, the Company is to receive $250,000 over the next twelve months for consulting services related to the sale. Other
income of $749,000 was recorded in the first quarter of fiscal 2002 from the gain on the sale.

8.  Effective
August 31, 2001, the Company acquired all of the outstanding stock of Surface Systems, Inc. (SSI). The acquisition has been accounted for
under the purchase method, and the operating results have been included in the consolidated results since the date of acquisition. SSI has been included in the Company's Inform segment.

SSI
is a manufacturer and seller of patented pavement sensing equipment and specialized weather forecasting stations and also provides weather forecasting services. SSI is a domestic
leader in manufacturing and developing road and runway weather information systems. The Company believes that SSI will play an important part in the Inform segment by providing weather information to
improve safety on the roads. SSI had revenues in its fiscal year ended June 30, 2001 of approximately $9,000,000. The Company paid a purchase price of approximately $11,300,000 in cash, net of
cash acquired. No SSI bank debt was assumed. The Company's source of funds for this acquisition was from its existing bank credit facility.

7

---

The following unaudited summary presents the estimated fair values of the assets acquired and liabilities assumed as of August 31, 2001, the date of acquisition.

Current assets

$
5,118,000Property, plant and equipment


1,005,000Intangible assets


4,040,000Goodwill


3,301,000Other long-term assets


1,752,000Total assets


15,216,000Current liabilities


3,588,000Long-term liabilities


152,000Total liabilities


3,740,000Net assets

$
11,476,000


The goodwill acquired in the acquisition was assigned to the Inform segment. The remaining intangible assets acquired were assigned as follows:

Gross
Carrying Amount

Weighted-average
Useful LifeAmortized intangible assets:Technology and installed base

$
2,610,000

14 yearsCustomer relationships


200,000

5 yearsOther


130,000

9 years2,940,000

13 yearsIndefinite-lived intangible assets:Trade names


1,100,000Total

$
4,040,000


The
following unaudited pro forma summary presents the Company's consolidated results of operations for each of the three-month periods ended September 30 as if the acquisition
had occurred at the beginning of fiscal year 2001.

2002

2001Net sales

$
21,601,000

$
23,258,000Net earnings


207,000


1,574,000Net earnings per diluted share


.03


.21


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

9.  In
July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (FAS) No. 141, Business Combinations,
and FAS No. 142, Goodwill and Other Intangible Assets. FAS No. 141 requires, among other things, that the purchase method of accounting be used for all business combinations initiated
after June 30, 2001. FAS No. 142 addresses the accounting for goodwill and other intangible assets subsequent to their acquisition. FAS No. 142 requires, among other things, that
goodwill and other indefinite-lived intangible assets no longer be amortized and that such assets be tested for impairment at least annually. Early application is permitted for fiscal years beginning
after March 15, 2001. The Company has elected to adopt FAS No. 142 effective July 1, 2001.

8

---

Intangible assets consist of the following:

September 30, 2001

June 30, 2001Gross
Carrying
Amount

Accumulated
Amortization

Gross
Carrying
Amount

Accumulated
AmortizationAmortized intangible assets:Patents and licenses

$
1,502,000

$
1,050,000

$
1,462,000

$
1,009,000Technology and installed base


2,610,000


16,000Customer relationships


200,000


3,000Other


130,000


2,0004,442,000


1,071,000


1,462,000


1,009,000Indefinite-lived intangible assets:Trade names


1,100,000Total

$
5,542,000

$
1,071,000

$
1,462,000

$
1,009,000


Amortization
expense was $62,000 and $429,000 for the three months ended September 30, 2001 and 2000, respectively. The estimated amortization expense for this fiscal year
ended June 30, 2002 and for the four fiscal years subsequent to 2002 is as follows: $294,000, $336,000, $300,000, $284,000 and $264,000.

The
carrying amount of goodwill consists of the following:

September 30, 2001

June 30, 2001Protect
and Direct
Segment

Inform
Segment

Protect
and Direct
Segment

Inform
Segment$
8,139,000

$
20,001,000

$
8,139,000

$
16,750,000


The
initial goodwill impairment test has not been completed, although the Company does not believe that the results of the test will have a material impact on the Company's financial
position or results of its operations. During the current quarter, goodwill in the amount of $3,301,000 was acquired in connection with the acquisition of SSI, and is included in the Inform segment.

The
reconciliation of net income, basic earnings per share and diluted earnings per share as reported, to that adjusted on a pro forma basis to exclude goodwill amortization,
including related tax effects, as a result of adopting FAS No. 142 is as follows:

Three Months Ended
September 30,2001

2000Reported net income

$
1,458,000

$
2,234,000Add back: Goodwill amortization





226,000Adjusted net income

$
1,458,000

$
2,460,000Basic earnings per share:Net income as reported

$
.19

$
.30Add back: Goodwill amortization





.03Adjusted net income

$
.19

$
.33Diluted earnings per share:Net income as reported

$
.18

$
.29Add back: Goodwill amortization





.03Adjusted net income

$
.18

$
.32


9

---



PART IFINANCIAL INFORMATION

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

CURRENT YEAR-TO-DATE VERSUS PRIOR YEAR-TO-DATE

The Company's sales for the first quarter of fiscal 2002 decreased 2% to $20,814,000 from $21,321,000 in the first quarter last year primarily due to soft
orders and shipments during the first quarter of fiscal 2002. Sales of the Protect and Direct segment decreased 14% for the current first quarter to $15,477,000 as a result of fewer sales across most
of its product lines with the exception of increased sales of Triton Barrier®, FreezeFree anti-icing systems and parts. Sales of the water-filled Triton Barrier
more than doubled to $581,000 as interest grew in the product's functionality as a portable security barrier. The Company began to see interest in one of its newest products, The
FreezeFree anti-icing system, with 2 shipments this first quarter of fiscal 2002. Sales of the Inform segment increased 65% for the current first quarter to $5,337,000 from
$3,228,000 as a result of the acquisitions of National Signal, Inc. (NSI) in January 2001 and the Company's newest acquisition, Surface Systems, Inc. (SSI) in August 2001.
SSI is a manufacturer of patented pavement sensing equipment and specialized weather forecasting stations and also provides weather forecasting services. These two acquisitions added $2,412,000 in
sales for the current first quarter. Organic sales for this segment decreased 9% for the first quarter due to decreased sales of advanced sensing products.

The
gross profit margin in the first quarter of the current year decreased to 37.8% from 47.2% last year due principally to volume inefficiencies associated with the lower level of
sales of the Protect and Direct segment. The gross profit margin declined to a lesser extent due to a modest change in product sales mix and from the lower gross margins generated at NSI offset
somewhat by higher gross margins at SSI.

Selling
and administrative expenses in the first quarter of the current year remained consistent at $5,863,000 in the first quarter of fiscal 2002 compared with $5,818,000 in the
first quarter of fiscal 2001. The decrease in selling and administrative expenses was due to the lower level of sales, offset by the inclusion of NSI and SSI which added $783,000 in selling and
administrative expenses in the current quarter.

Research
and development expenses in the first quarter of the current year increased 27% to $412,000 from $325,000 in the first quarter last year. During the current quarter, the
Company worked on extending its crash cushion product line with the development of the QuadGuard® HS, an advanced crash cushion with the ability to withstand impacts up to 70 miles per
hour. The Company also worked on developing wider models of the REACT 350® crash cushion, advanced pavement sensing products as well as other developmental products.

Operating
profit decreased to $1,589,000 in the first quarter of the current year from $3,922,000 in the first quarter of the prior year.

Interest
expense in the first quarter of the current year was $367,000 compared to $329,000 in the first quarter last year. The increase in interest expense is due to the higher level
of outstanding debt during the current quarter primarily due to the acquisition of SSI, offset partially by lower average interest rates. Other income was $749,000 in the first quarter of fiscal 2002
representing the gain on the sale of the Company's non-highway plastic-molded product line.

The
Company's effective income tax rate for the current quarter was 36% compared to an effective income tax rate of 38% in the same quarter last year. The decrease in the effective
rate is due

10

---

in part to the expected utilization of certain tax planning strategies. The Company believes its effective income tax rate for the current year will be approximately 36%.

Earnings
from continuing operations for the current quarter were $1,266,000 compared to $2,234,000 for the first quarter of the prior year. Net earnings were $1,458,000, or $.18 per
diluted share, for the current quarter compared to $2,234,000, or $.29 per diluted share, for the first quarter of the prior year. Net earnings for the current first quarter included a gain from
discontinued operations of $192,000, net of income taxes, or $.02 per diluted share, due to the favorable settlement of a lawsuit.

LIQUIDITY AND CAPITAL RESOURCES

The Company had cash and cash equivalents of $5,790,000 and access to additional funds of $11,500,000 under its bank arrangements as of September 30,
2001. Operating activities were a source of cash for the Company for the first quarter of fiscal 2002 providing $4,178,000.

Investing
activities used cash of $13,268,000 during the current quarter including $2,428,000 for capital expenditures and $11,300,000 for the acquisition of SSI. Capital expenditures
during the current quarter related principally to the expansion of the Company's primary manufacturing facility. Offsetting the expenditures, the Company received $500,000 in cash proceeds from the
sale of the Company's non-highway plastic-molded product line.

Financing
activities provided cash of $10,792,000 during the current quarter. The Company increased its borrowings on its outstanding revolving credit facility by $10,500,000 related
to the acquisition of SSI. The payment of the Company's semi-annual cash dividend used cash of $1,123,000 and the payment of notes payable used cash of $158,000. The Company also received
cash of $1,573,000 for the exercise of common stock options.

For
fiscal 2002, the Company anticipates needing approximately $7,000,000 in cash for capital expenditures, which includes $4,000,000 in connection with the expansion of the Company's
primary manufacturing facility in Pell City, Alabama to 300,000 square feet and $1,000,000 to upgrade the Company's information technology systems. 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 funds to
repurchase its own 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 revolving credit facility. The Company believes its existing cash, cash generated from operations and funds available under its existing credit facility are sufficient for all planned
operating and capital requirements.

FORWARD LOOKING STATEMENTS

Various statements made within the Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly Report
on Form 10-Q constitute "forward looking statements" for purposes of the Securities and Exchange Commission'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. Investors are cautioned that all forward looking statements involve risks and uncertainties,
including those detailed in the Company's filings with the Securities and Exchange Commission, without limitation. There can be no assurance that actual results will not differ from the Company's
expectations. Factors which could cause materially different results include, among others, uncertainties related to the introduction of the Company's products and services; the successful completion
and integration of acquisitions; continued funding from federal highway legislation; an
unfavorable change in product sales mix; seasonality along with the extent and timing of the award of large contracts; weather conditions; acts of war and terrorist activities; the possible impairment
of intangible assets; and competitive and general economic conditions.

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PART IIOTHER INFORMATION

There
is no information required to be reported under any items except as indicated below:

ITEM 1. Legal Proceedings

ODIN SYSTEMS INTERNATIONAL. INC. v. ENERGY ABSORPTION SYSTEMS, INC., NO. CV200-082, U.S. District Court for the Southern District of
Georgia. The parties have agreed in principle to the settlement of this litigation and are preparing the final settlement documents. The resolution of this litigation, as currently agreed upon and
pending by the parties, is not expected to have a material effect on the Company's financial position or results of operations. See the Company's annual Form 10-K for the year ended
June 30, 2001, Item 3, for additional information.

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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 September 30, 2001 to be signed on its behalf by the undersigned thereunto duly authorized.

|                  |  | QUIXOTE CORPORATION
|----------------- |  | -------------------
|November 13, 2001 |  | By:                

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