SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

            [X] QUARTELY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended April 4,1999
                                       
          [ ] 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 0-22978

                             STIMSONITE CORPORATION
             (Exact name of registrant as specified in its charter)

                    Delaware                                 36-3718658
         (State or other jurisdiction of                 (I.R.S. Employer
         incorporation or organization)                 Identification Number)

             6565 West Howard Street
                 Niles, Illinois                             60714-3373
    (Address of principal executive offices)                 (Zip Code)

                                 (847) 647-7717
               (Registrant's telephone number, including area code)

        


                                                        
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No [ ]


The  number  of  shares  of the  registrant's  common  stock,  $.01  par  value,
outstanding as of April 15,1999 was 8,343,877.

                                       1
<PAGE>


                             STIMSONITE CORPORATION

                                      Index

                                                                         Page
Part I.  Financial Information

Item 1.  Condensed Consolidated Financial Statements
             Condensed Consolidated Balance Sheets                           3
             Condensed Consolidated Statements of Operations
               and Comprehensive Income                                      4
             Condensed Consolidated Statements of Cash Flows                 5
             Notes to Condensed Consolidated Financial Statements          6-8

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                              9-15  

Item 3.  Quantitative and Qualitative Disclosures about Market Risks        15

Part II. Other Information
Item 6.  Exhibits and Reports on Form 8-K                                   16


         Signatures                                                         17 

         Exhibit Index                                                      18
                                       2
<PAGE>


                                     PART I - FINANCIAL INFORMATION

Item 1 - Condensed Consolidated Financial Statements.

                                STIMSONITE CORPORATION AND SUBSIDIARIES
                                 CONDENSED CONSOLIDATED BALANCE SHEETS
                                         (Dollars in Thousands)
<TABLE>

<CAPTION>

                                                                             4/4/99         12/31/98
                                                                         ------------     ---------------
                                                                           (Unaudited)      (Audited)
ASSETS

Current assets

<S>                                                                             <C>                 <C> 
        Cash and cash equivalents                                               $599              $1,645
        Trade accounts receivable less allowance for
              doubtful accounts of $602 (1999)
              and $737 (1998)                                                 16,179              18,686
        Inventories                                                           12,809              11,921
        Prepaid expenses and other                                             1,927               2,007
        Deferred tax assets                                                    1,261               1,261
                                                                         ------------     ---------------
                           Total current assets                               32,775              35,520

Property, plant and equipment, net                                            15,628              14,604
Intangible assets, net                                                         8,247               8,814
Deferred financing costs, net                                                    176                 191
Deferred tax assets and other                                                  1,939               1,943
                                                                         ------------     ---------------
                           Total assets                                      $58,765             $61,072
                                                                         ============     ===============


</TABLE>

<TABLE>
<CAPTION>

LIABILITIES

Current liabilities:
<S>                                                                           <C>                 <C>   
        Accounts payable                                                      $7,901              $8,552
        Current maturities of long-term debt                                   2,500               2,500
        Other accrued expenses                                                 1,121               1,412
                                                                         ------------     ---------------
                  Total current liabilities                                   11,522              12,464

Accrued postretirement benefits                                                  556                556

Long-term debt                                                                17,000              17,575
                                                                         ------------     ---------------
                  Total liabilities                                           29,078              30,595

STOCKHOLDERS' EQUITY

Total stockholders' equity                                                    29,687              30,477
                                                                         ------------     ---------------
                  Total liabilities and stockholders' equity                 $58,765             $61,072
                                                                         ============     ===============

</TABLE>
See Accompanying Notes


                                       3
<PAGE>


               STIMSONITE CORPORATION AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                    (Amounts in Thousands Except Share Data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                        Quarter Ended          Twelve Months Ended                               
                                                   4/4/99        4/5/98        4/4/99        4/5/98      
                                                ----------    ----------    ----------    ----------

<S>                                               <C>           <C>           <C>           <C>           
Net sales                                         $15,449       $13,857       $88,954       $80,618       
Cost of goods sold                                 11,408        10,244        57,216        53,864                        
                                                ----------    ----------    ----------    ----------

Gross profit                                        4,041         3,613        31,738        26,754           

Operating expenses:
  Selling and administrative                        3,813         3,474        15,998        14,134                  
  Research and development                            572           817         2,492         2,258                      
  Amortization of intangibles                         647           683         2,525         2,702            
                                                ----------    ----------    ----------    ----------

Total operating expenses                            5,032         4,974        21,015        19,094      
                                                ----------    ----------    ----------    ----------              

Operating income (loss)                              (991)       (1,361)       10,723         7,660          

Interest expense                                      394           430         1,705         2,154            
Minority interest                                     ---           ---            41           ---           
                                                ----------    ----------    ----------    ----------

Income (loss) before income tax
  provision (benefit)                              (1,385)       (1,791)        8,977         5,506          

Income tax provision (benefit)                       (596)         (742)        3,814         2,150          
                                                ----------    ----------    ---------     ----------   

Net income (loss)                                   ($789)      ($1,049)       $5,163        $3,356         
                                                ----------    ----------    ----------    ----------       


Other comprehensive income (loss) - net of tax:
   Foreign exchange translation                        (1)          (19)         (128)         (124)         
                                                ----------    ----------    ----------    ----------

Comprehensive income (loss) - net of tax            ($790)      ($1,068)       $5,035        $3,232          
                                                ==========    ==========    ==========    ==========    
</TABLE>

Earnings (loss) per common and common 
equivalent share:
<TABLE>
<CAPTION>

Net income (loss):
<S>                                                <C>           <C>            <C>           <C>  
      Basic                                        ($0.09)       ($0.12)        $0.62         $0.39
      Diluted                                      ($0.09)       ($0.12)        $0.61         $0.39


Weighted average number of shares and
share equivalents outstanding :
      Basic                                     8,343,877     8,498,442     8,356,540     8,498,442
      Diluted                                   8,343,877     8,498,442     8,516,653     8,615,321

</TABLE>

See Accompanying Notes

                                       4
<PAGE>


                                    STIMSONITE CORPORATION AND SUBSIDIARIES
                                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                              (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                       Three Months Ended             Twelve Months Ended
                                                                   -----------------------------   -----------------------------

                                                                      4/4/99          4/5/98          4/4/99          4/5/98
                                                                   -------------   -------------   -------------    ------------



<S>                                                                      <C>              <C>            <C>             <C>   
Net cash provided by (used in) operating activities:                     $1,346           ($988)         $8,669          $9,553

Cash flows from investing activities:
       Purchase of property, plant and equipment                         (1,789)           (802)         (7,657)         (2,881)
       Proceeds from disposal of property, plant and equipment               -               -            751             5,750 
                                                                  -------------   -------------   -------------    ------------

       Net cash (used in) provided by investing activities               (1,789)           (802)         (6,906)          2,869

Cash flows from financing activities:
       Proceeds from the issuance of common stock                             -               8               -              34     
       Payments to reacquire common stock                                     -            (493)           (165)         (1,537)
       Principal payments under capital lease obligations                   (27)            (65)           (164)           (273)
       Proceeds from long-term debt                                       3,050           3,000           9,350           6,725
       Payments on long-term debt                                        (3,625)           (625)        (10,300)        (17,000)
                                                                   -------------   -------------   -------------    ------------
       Net cash provided by (used in) financing activities                 (602)          1,825          (1,279)        (12,051)

       Effect of exchange rate changes on cash                               (1)            (31)           (226)           (208)
                                                                   -------------   -------------   -------------    ------------

       Net increase (decrease) in cash and cash equivalents              (1,046)              4             258             163

       Cash and cash equivalents, beginning of period                     1,645             337             341             178
                                                                   -------------   -------------   -------------    ------------

       Cash and cash equivalents, end of period                            $599            $341            $599            $341
                                                                   =============   =============   =============    ============



Supplemental disclosure of cash flow information:
      Cash paid during the period for interest                             $389            $408          $1,749          $2,124

      Cash paid during the period for income taxes                             -           $222          $4,868          $1,029



</TABLE>


See Accompanying Notes

                                       5
<PAGE>

                         Notes to Condensed Consolidated
                              Financial Statements
                                   (Unaudited)

Note 1 - Financial Information

The  consolidated  financial  statements  included  herein  have  been  prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have been  condensed or omitted  pursuant to, or as permitted by, such rules and
regulations.  In the opinion of management,  the financial information presented
reflects all adjustments (which are normal and recurring) that are necessary for
a fair statement of financial results for the interim periods  presented.  These
financial  statements  should  be  read in  conjunction  with  the  consolidated
financial  statements and footnotes  thereto  contained in the Company's  Annual
Report on Form 10-K for the year ended December 31, 1998 (the "1998 Form 10-K").

The Company's  business is seasonal and,  accordingly,  comparative twelve month
trailing information is provided.  The financial  information included herein at
April 4,  1999 and for the  periods  ended  April 4,  1999 and  April 5, 1998 is
unaudited and, in the opinion of the Company,  reflects all  adjustments  (which
include  only  normal  and  recurring   adjustments)   necessary  for  the  fair
presentation  of the  financial  position  as of that  date and the  results  of
operations for these  periods.  The  information  in the condensed  consolidated
balance sheet at December 31, 1998 was derived from the  Company's  consolidated
financial statements included in the 1998 Form 10-K.

The results for the quarter ended April 4, 1999 are not  necessarily  indicative
of results that can be expected for the full year ending December 31, 1999.


Note 2 - Inventories

Inventories consist of the following:
<TABLE>
<CAPTION>

                                                             April 4,                 December 31,
                                                               1999                       1998
                                                         ----------------        ----------------------
($000)                                                      (Unaudited)               (Audited)
<S>                                                               <C>                       <C>   
Raw materials                                                     $5,447                    $4,714
Work in process                                                    1,931                     1,465
Finished goods                                                     5,431                     5,742
                                                               ---------                 ---------
                                                                 $12,809                   $11,921
                                                                  ======                    ======

</TABLE>


                                       6
<PAGE>

Note 3 - Earnings Per Share

The  computation  of basic and  diluted  EPS,  as  prescribed  by SFAS  128,  is
presented below:
<TABLE>
<CAPTION>

                                                                                  Weighted
                                                           Net Income (Loss)   Average Shares        Per Share
                                                            (Numerator)        (Denominator)          Amounts
Quarter ended April 4, 1999

Basic EPS
<S>                                                             <C>                   <C>                <C>    
Income (loss) available to common stockholders                  ($789,000)            8,343,877          ($0.09)

Effect of dilutive options                                            -                     -               -

Diluted EPS
Income (loss) available to common stockholders
plus assumed conversions                                        ($789,000)           $8,343,877          ($0.09)

----------------------------------------------------------------------------------------------------------------
Quarter ended April 5, 1998

Basic EPS
Income (loss) available to common stockholders                ($1,049,000)            8,498,442          ($0.12)

Effect of dilutive options                                            -                     -               -

Diluted EPS
Income (loss) available to common stockholders
plus assumed conversions                                      ($1,049,000)           $8,498,442          ($0.12)

----------------------------------------------------------------------------------------------------------------
Twelve months ended April 4, 1999

Basic EPS
Income available to common stockholders                        $5,163,000             8,356,540           $0.62

Effect of dilutive options                                            -                 160,113           $0.01

Diluted EPS
Income available to common stockholders
plus assumed conversions                                       $5,163,000             8,516,653           $0.61

----------------------------------------------------------------------------------------------------------------
Twelve months ended April 5, 1998

Basic EPS
Income available to common stockholders                        $3,356,000             8,498,442           $0.39

Effect of dilutive options                                            -                 116,879             -

Diluted EPS
Income available to common stockholders
plus assumed conversions                                       $3,356,000             8,615,321           $0.39

----------------------------------------------------------------------------------------------------------------
</TABLE>
                                       7
<PAGE>


4. Operating Segments and Geographic data:

The  Company is engaged in one line of  business - the  manufacture  and sale of
highway safety products - which represents more than 90% of consolidated  sales.
The Company's  marketing strategy emphasizes a single sales force for all of its
products. Substantially all of the Company's customers are active in the highway
construction industry.  Accordingly,  financial results are reported as a single
industry segment.  Sales and selected  financial  information by geographic area
for the three months ended April 4, 1999 and April 5, 1998 are as follows:
<TABLE>
<CAPTION>


     Three months ending April 4, 1999                      United States    International   Consolidated
     ---------------------------------                      -------------    ----------------------------
<S>                                                               <C>             <C>            <C>    
     Revenues from external parties...........................    $14,164         $1,285         $15,449
     Operating loss...........................................       (837)          (154)           (991)
     Net loss.................................................       (638)          (151)           (789)
     Total assets.............................................     54,065          4,700          58,765
     Long lived assets........................................     22,605          1,270          23,875

     Three months ending April 5, 1998                      United States    International   Consolidated
     ---------------------------------                      -------------    ----------------------------
     Revenues from external parties...........................    $12,063         $1,794         $13,857
     Operating loss...........................................     (1,307)           (54)         (1,361)
     Net loss.................................................       (995)           (54)         (1,049)
     Total assets.............................................     49,293          5,574          54,867
     Long lived assets........................................     20,944          1,604          22,548
</TABLE>

Revenues from external parties, as noted above, are recognized based on point of
origin.

International  assets are principally trade receivables,  inventory and goodwill
associated with the acquisition of Simsco. United States revenue includes export
sales to  non-affiliates  for the three  months ended April 4, 1999 and April 5,
1998 of $1,736 and $1,220 respectively.


Note 5  -  Impact of New Accounting Standards

The Company will implement the  provisions of Statement of Financial  Accounting
Standards No. 133, "Accounting for Derivatives and Hedging Activities" (SFAS No.
133),  which will be effective for fiscal years  beginning  after June 15, 1999.
SFAS No. 133  establishes  accounting  and reporting  standards  for  derivative
instruments,   including  certain  derivative   instruments  imbedded  in  other
contracts, and for hedging activities. Management is still assessing the effects
adoption  of SFAS No.  133  will  have on its  financial  position,  results  of
operations or cash flow, but does not expect the impact to be material.

                                       8
<PAGE>



Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations

The  following  is a  discussion  and  analysis  of the  consolidated  financial
condition  and results of  operations  of the  Company for the three  months and
twelve  months ended April 4, 1999 and April 5, 1998.  The  following  should be
read in conjunction  with the condensed  consolidated  financial  statements and
related  notes  appearing  elsewhere  herein  and  the  consolidated   financial
statements and related notes contained in the Company's 1998 Form 10-K.

The Company  manufactures and markets reflective highway safety products,  which
are  designed  to offer  enhanced  visual  guidance  to  vehicle  operators  and
pedestrians  in a variety of driving  conditions.  The  Company  operates in one
business  segment.  Its products  are sold  primarily by a single sales force to
similar customers in the highway construction business.

Seasonality and Quarterly Results

The  Company's  sales  are  seasonal.   The  domestic  highway  maintenance  and
construction  season tends to reach its peak in the second and third quarters of
the year, and domestic sales of the Company's  products are generally highest in
these  quarters.  While  international  sales are also  seasonal,  international
maintenance and  construction  seasons vary from the domestic season and tend to
offset  somewhat  the  seasonality  of  domestic  sales.   International   sales
constituted 19.6% and 21.8% of net sales in the first quarters of 1999 and 1998,
respectively, and 15.4% and 16.5% of net sales in the twelve month period ending
April 4, 1999 and April 5 1998, respectively.  Because the Company operates with
little backlog,  sales in any given quarter  generally result from orders booked
and shipped in that quarter.  Accordingly,  net sales and  operating  income are
particularly  sensitive to the timing of domestic  market  demand and tend to be
highest in the second and third quarters, whereas net sales and operating income
tend to be reduced  during the first and fourth  quarters,  resulting  in either
operating  losses or  reduced  earnings  for those  periods.  In  addition,  the
Company's performance in any given quarter is affected by weather anomalies.

The Company's  sales are dependent on the ability and willingness of the federal
and state governments to fund highway construction  projects.  Such sales may be
affected by real or perceived  uncertainty  concerning  the level of  government
funding for highway construction projects. In 1998, the U.S. Congress approved a
new federal  highway  spending  bill.  The Company  expects that the new federal
highway  bill will  increase  the number of new highway  construction  projects,
which,  over an extended  period of time,  may benefit the sale of the Company's
products.

Results of Operations

The following table sets forth, for the periods indicated, the percentage of net
sales of certain  items in the  Company's  condensed  consolidated  statement of
operations  and the  percentage  change in each  item from the prior  comparable
period.
                                       9
<PAGE>

<TABLE>
<CAPTION>

Table.                             Percentage of     Inc (Dec)        Percentage of         Inc (Dec)
                                     Net Sales       % Change           Net Sales           % Change
                                   Quarter Ended       from        Twelve Months Ended        from
                                  4/4/99   4/5/98   Prior Period     4/4/99   4/5/98      Prior Period
                                                           
<S>                              <C>        <C>        <C>           <C>         <C>            <C>     
Net sales                        100.0 %    100.0 %    11.5  %       100.0 %     100.0  %       10.3   %

Cost of goods sold                73.8       73.9      11.4           64.3        66.8           6.2

Gross profit                      26.2       26.1      11.9           35.7        33.2          18.7

Selling and administrative        24.7       25.1       9.8           18.0        17.5          13.2

Research and development           3.7        5.9     (30.0)           2.8         2.8          10.4

Amortization of intangibles        4.2        4.9      (5.3)           2.8         3.4          (6.6)
 
Operating income (loss)           (6.4)      (9.8)     27.2           12.1         9.5          40.0

Interest expense                   2.6        3.1      (8.4)           1.9         2.7         (20.8)

Income (loss) before provision
  for income taxes                (9.0)     (12.9)     22.7           10.1         6.8          63.0

Net income (loss)                 (5.1)      (7.6)     24.8            5.8         4.2          53.8

</TABLE>


Quarter ended April 4, 1999
Compared to
Quarter ended April 5, 1998

Net sales of $15.4  million for the quarter ended April 4, 1999  increased  $1.6
million or 11.5% from the comparable fiscal 1998 quarter.  Net domestic sales of
highway  delineation  products increased 6.4% compared with the first quarter of
1998,  while  domestic  sales of  optical  film  products  increased  by  43.5%.
International  sales in the first  quarter were  unchanged  from last year.  The
43.5%  increase  in  domestic  sales  of  optical  film  reflected  a  continued
acceptance  of the  Company's  products  among  many of the  large  governmental
buyers.

Cost of goods sold for the first quarter of 1999 totaled $11.4 million  compared
to $10.2 million for the 1998 period. The $1.2 million increase in cost of goods
sold is  attributable  to a higher sales  volume.  As a percentage of net sales,
cost of goods sold decreased slightly from 73.9% in the first quarter of 1998 to
73.8% in 1999.

Selling  and  administrative  expenses  for the first  quarter of 1999 were $3.8
million compared to $3.5 million in the first quarter of 1998. The 9.8% increase
is largely due to the employment of additional  sales personnel and higher sales
commission  expenses  associated with a higher sales volume.  As a percentage of
net sales,  selling and administrative  expenses were 24.7% in 1999 and 25.1% in
the 1998 period.

Research and  development  expenses for the first  quarter of 1999 were $0.6
million  compared to $0.8 million in the first  quarter of 1998.  

                                       10
<PAGE>




Interest  expense was $0.4 million in the first quarter of 1999 and $0.4 million
in 1998.

Income tax benefit of $0.6  million in the first  quarter of 1999  reflected  an
estimated  annual  effective  tax rate of 43.0%  compared to a $0.7  million tax
benefit and a 41.4% rate in the first quarter of 1998.


Twelve months ended April 4, 1999
Compared to
Twelve months ended April 5, 1998

Net sales for the  twelve  months  ended  April 4, 1999 were $89.0  million,  an
increase  of $8.3  million or 10.3%  compared  to 1998.  Net  domestic  sales of
highway  delineation  products  increased $3.0 million or 5.1% compared with the
twelve months ended April 5, 1998.  Net domestic sales of optical film increased
$4.9 million,  or 60.3%,  due to the receipt of several  large supply  contracts
from governmental buyers. Net international sales increased $0.4 million or 3.1%
compared with the twelve months ended April 5, 1998.

Cost of goods sold for the  twelve  months  ended  April 4, 1999  totaled  $57.2
million  (64.3% of net sales)  compared to $53.9 million (66.8% of net sales) in
the comparable 1998 period.  The corresponding  2.5% increase in gross margin is
largely  attributable to improved  productivity  in the Company's  manufacturing
processes.

Selling and  administrative  expenses for the twelve  months ended April 4, 1999
totaled  $16.0  million,  an increase of $1.9  million or 13.2%  compared to the
previous  twelve  month  period.  As a  percentage  of net  sales,  selling  and
administrative  expenses  were  18.0% in 1999 and  17.5% in 1998.  Increases  in
expenses were largely the result of additional  sales  personnel for the optical
film  product  line and higher  incentive  compensation  costs  associated  with
improved net income.

Research and  development  expenses for the twelve  months ended April 4, 1999
were $2.5 million  (2.8% of net sales)  compared to $2.3 million 
(2.8% of net sales) in the previous twelve month period.

Interest  expense for the twelve  months  ended April 4, 1999 was $1.7  million,
compared to $2.2 million in the previous  twelve month period.  The decrease was
the result of a lower level of debt  primarily due to the repayment of debt with
$5.8 million in net proceeds from the sale of the Company's  Waukegan,  Illinois
property on August 1, 1997.

Liquidity and Capital Resources

The Company  finances  working  capital  requirements  and capital  expenditures
through internally  generated funds,  revolving  borrowings and lease financing.
During the three  month  period  ended  April 4,  1999,  the  Company  decreased
borrowings  under its long term credit  facility by $0.6 million.  The principal
inflows and outflows of cash during the three months ended April 4, 1999 were as
follows:
                                       11
<PAGE>

                                Cash Flow Summary
                        Three Months Ended April 4, 1999

                                   ($millions)

         Cash inflows                        

         Net cash provided by operating activities                      $ 1.3
         Other                                                            0.1
                                                                       -------

                  Total inflows                                           1.4
                                                                       -------

         Cash outflows

         Capital expenditures                                            (1.8)
         Repayment of long term debt, net                                (0.6)
                                                                       -------

                  Total outflows                                         (2.4)

         Net change in cash balance                                     $(1.0)
                                                                       -------

The Company's sales are seasonal,  with domestic  revenues tending to be highest
in the second and third quarter of the year consistent with the domestic highway
maintenance  and  construction  season.  The  Company  builds  working  capital,
principally  accounts  receivable  and  inventory,  during  the second and third
quarters to support  sales.  Positive  cash flow from  operations  is  generally
realized in the third  quarter as cash  collections  are higher than  production
levels  and in the  fourth  quarter  of  the  year  as  production  and  related
expenditures   seasonally   decline  and  accounts   receivable  are  collected.
Conversely,  the Company generally  experiences  negative cash flow in the first
quarter,  when sales are lower,  and in the second quarter,  when the Company is
building working capital but has not yet collected  revenues from second quarter
sales.

The Company has historically borrowed funds available under its revolving credit
facilities to fund working capital during its first and second quarters.  During
the third and fourth quarters, the Company normally reduces its borrowings using
funds generated by normal operating activities. During the first three months of
fiscal  1999,  operating  activities  provided  the Company with $1.3 million in
cash,  compared to $1.0  million  used during the same period of 1998.  The $2.3
million  increase in cash flow from operating  activities  during the period was
the result of an increase in net earnings ($0.3 million) and relative changes in
working capital ($2.0 million). The Company realized $8.7 million from operating
activities  in the twelve  month  period  ended April 4, 1999,  compared to $9.6
million from operating  activities in the twelve months ended April 5, 1998. The
$0.9  million  decrease in cash flow from  operating  activities  resulted  from
unfavorable relative changes in working capital ($2.7 million), partly offset by
increased net earnings ($1.8 million).

                                       12
<PAGE>

At  April 4,  1999,  the  Company's  outstanding  borrowings  under  its  credit
agreement consisted of $13.0 million of term loans and $6.5 million of revolving
loans. Under the terms of the agreement,  $1.9 million of term loans will become
due during the remainder of 1999,  and an additional  $2.5 million of term loans
become due during 2000. At April 4, 1999, the additional  amount available under
the revolving portion of the Company's credit agreement,  after consideration of
all borrowing base limitations and outstanding loans, was $9.4 million.

The Company  expects  capital  expenditures  for additions and  replacements  to
approximate  $4.8 million in 1999 and $4.0  million in 2000,  with funding to be
provided principally from internally generated funds. Through April 4, 1999, the
Company had spent $1.8 million on capital expenditures.

In October  1995,  the Board of Directors  authorized  the  repurchase  of up to
500,000  shares  of the  Company's  common  stock.  In July  1997,  the Board of
Directors  authorized  an  additional  500,000  shares  of  common  stock  to be
repurchased,  raising the total allowable purchases to 1,000,000 shares. Through
April 4, 1999,  the Company had purchased  635,500 shares of its common stock at
an average price of $6.33 per share.

The Company  expects that cash flow from  operations  and  borrowings  under the
credit  facility  will be  sufficient  to fund working  capital  needs,  capital
expenditures and mandatory  principal payments under the credit facility through
2000.  From  time to  time,  the  Company  considers  possible  acquisitions  of
businesses  complementary  to the  Company's  business.  It is  likely  that any
significant acquisition would be funded with additional long term debt.

Engagement of financial advisor

In  February  1999,  the Board of  Directors  engaged  Merrill  Lynch & Co. as a
financial  advisor to assist the Board in analyzing  strategic  alternatives  to
improve  shareholder  value.  In this regard,  the Board has agreed to explore a
possible sale of the Company and has  authorized  Merrill Lynch & Co. to provide
confidential   information  to  a  selected  group  of  potential  buyers.  Such
activities  are still in the early stages and there can be no  assurance  that a
sale of the Company will occur.

Adoption of new accounting standards

Reference  is made to Note 4 of the Notes to  Condensed  Consolidated  Financial
Statements.

Year 2000 issues
Some computers,  software and other equipment include  programming code in which
calendar year data are  abbreviated  to two digits.  As a result,  some of these
systems could fail to operate,  or fail to produce correct results, if dates are
not correctly interpreted.
These problems are commonly referred to as the "Year 2000 Problem."

                                       13
<PAGE>

Since  1997,  the Company has been  working to  identify  and address  Year 2000
issues.  The evaluation  phase of the Company's  Year 2000 readiness  project is
intended to determine the readiness of internal systems and equipment as well as
third parties.  The remediation  phase includes (i)  reprogramming  of software,
(ii)  replacing  computer  software,  hardware and  operating  equipment,  (iii)
testing specific  modifications and (iv) identifying solutions to possible third
party  noncompliance.  The  testing  phase  includes  integrated  testing of all
systems that were modified.  As of April 4, 1999, the Company estimates that the
internal evaluation phase is substantially complete, but the assessment of third
parties described above has not yet begun. The Company has not yet completed the
remediation  or  testing  phases,  but each  phase of the  Company's  Year  2000
readiness  project is expected to be completed by the end of the fourth  quarter
of 1999.

The  related  costs  of  compliance  have  not  yet  been  determined.  However,
preliminary  estimates,  which include  costs  attributable  to the  accelerated
purchase of  replacement  hardware and software,  approximate  $0.5 million,  of
which $0.4  million has been  incurred  through the end of the first  quarter of
1999, to address Year 2000 issues. While the estimated cost of these efforts are
not expected to be material to the Company's  financial  condition or any year's
results of operations, there can be no assurance as to this effect.

The costs of the Company's  plans to assess and remediate  Year 2000 issues in a
timely manner are based on management estimates. The inability of the Company or
its material suppliers and customers to effectuate solutions to their respective
Year  2000  issues on a timely  and cost  effective  basis  may have a  material
adverse  effect on the  Company's  business,  financial  condition or results of
operations.

The Company  believes  that in the most  likely  worst case  scenario,  internal
remediation and testing of information technology and non-information technology
systems will be completed as indicated  above and will have minimal  unfavorable
impact on the Company's financial condition and results of operations. If any or
all of these  efforts are delayed,  however,  there could be  disruption  of the
financial and operating systems at one or more of the Company's  business units.
Additionally,  as discussed  above,  the Company has not begun its assessment of
third parties'  readiness.  The Company  currently expects that certain external
parties  providing  materials  and  services to the Company will be reluctant to
disclose  fully certain  information  about their  readiness.  Accordingly,  the
Company cannot be assured that there will be no disruption of operations because
of vendors and service providers who are not fully Year 2000 compliant.

The Company has not yet completed its contingency  planning with respect to Year
2000 issues. The Company intends to complete its contingency planning by the end
of the third  quarter  of 1999 as part of the  remediation  and  testing  phases
described above.

Forward Looking Statements

This Form 10-Q contains "forward looking  statements"  within the meaning of the
Private Securities Litigation Reform Act of 1995, including (without limitation)
statements as to expectations,
                                       14
<PAGE>

beliefs and future financial performance and assumptions underlying the
foregoing  related to product  demand,  the effect of the federal  appropriation
bill, the ability to meet short and long term debt  requirements,  expected cash
flow from operations, projected capital spending levels and compliance with Year
2000 issues.  The actual results or outcomes could differ  materially from those
discussed in the  particular  forward  looking  statements  based on a number of
factors,  including; (i) changes in economic conditions;  (ii) pricing and other
actions taken by competitors; (iii) government funding (or perceptions regarding
such funding) of highway  construction  projects;  (iv) the Company's ability to
develop  and  protect  its  proprietary  technology  and to react  to  increased
competition  resulting from expiring patents and (v) the ability of the Company,
its vendors and its  customers to identify and  remediate  Year 2000 issues on a
timely and cost effective basis.

Item 3 - Quantitative and Qualitative Disclosures about Market Risks.
The  Company is  exposed to market  risk from  changes in foreign  exchange  and
interest rates and, to a lesser extent,  commodities.  To reduce such risks, the
Company  selectively uses financial  instruments.  All hedging  transactions are
authorized and executed pursuant to clearly defined policies and procedures.

Currency Risk - The Company transacts  business in multiple foreign  currencies.
These  transactions  expose the Company to fluctuations in exchange rates, which
could impact the financial results of the Company.

The Company has identified two categories of currency risk:
o             Transaction  exposures  relating to the denomination of cash flows
              in a currency other than the functional  currency of the operating
              unit.
o             Translation  exposures  relating  to  the  conversion  of a  given
              operating unit's financial statements into US Dollars at different
              exchange rates at various points in time.

The Company identifies naturally occurring offsetting positions and periodically
purchases hedging  instruments to protect anticipated  exposures.  The Company's
financial position is not materially sensitive to fluctuations in exchange rates
as any gains or losses on foreign  currency  exposures are  generally  offset by
gains and losses on underlying payables,  receivables and investments in foreign
subsidiaries.

Interest Rate Risk - The Company occasionally enters into interest rate swaps to
stabilize  financing  costs by minimizing the effect of potential  interest rate
increases on  floating-rate  debt in a rising interest rate  environment.  Under
these  agreements,  the Company  contracts with a counter-party  to exchange the
difference  between a fixed rate and a  floating  rate  applied to the  notional
amount  of the swap.  The  Company's  existing  contracts  expire  in 2001.  The
differential  to be paid  or  received  on  interest  rate  swap  agreements  is
recognized in net income as an adjustment to interest expense.

Commodity  Prices - The Company is exposed to  fluctuations  in market price for
plastic,  resins and iron. The Company has not entered into any  arrangements to
minimize the effects of price fluctuations for these commodities.
                                       15
<PAGE>

                        Part II - Other Information







Item 6 - Exhibits and Reports on Form 8-K

(A)     Exhibits


         27.1     Financial Data Schedule


(B)      Reports on Form 8-K

       The Company did not file any Current Reports on Form 8-K during the 
quarter ended April 4, 1999.

                                       16
<PAGE>



                                  SIGNATURES



Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:  May 7, 1999                    STIMSONITE CORPORATION



                                       /s/THOMAS C. RATCHFORD 
                                       ----------------------
                                       Thomas C. Ratchford            
                                       Vice President-Finance, Treasurer,
                                       Secretary and Chief Financial Officer
                                      (Its Duly Authorized Officer and Principal
                                       Financial and Accounting Officer)

                                       17
<PAGE>

                                                       Exhibit Index


                                                                      Sequential
Exhibit                                                                 Page
Number                Description                                      Number

27.1                  Financial Data Schedule                            19

                                       18