10-Q

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

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2008
or
o	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 001-08123

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

Delaware (State or other jurisdiction of incorporation or organization)	36-2675371 (IRS Employer Identification No.)
35 East Wacker Drive Chicago, Illinois (Address of principal executive offices)	60601 (Zip Code)

(312) 467-6755

(Registrant's telephone number, including area code)

No Change

Former name, former address and former fiscal year, if changed since last report

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

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer ý Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o YES ý NO

        As of October 31, 2008, there were 9,223,457 shares of the registrant's common stock ($.01²/3 par value) outstanding.

ITEM 1.    FINANCIAL STATEMENTS

QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)

		Three Months Ended September 30,
		2008			2007
Net sales		$	25,139,000		$	24,504,000
Cost of sales			16,901,000			16,085,000
Gross profit			8,238,000			8,419,000
Operating expenses:
	Selling & administrative		5,974,000			5,513,000
	Research & development		922,000			889,000
			6,896,000			6,402,000
Operating profit			1,342,000			2,017,000
Other income (expense):
	Interest income					2,000
	Interest expense		(917,000	)		(1,095,000	)
			(917,000	)		(1,093,000	)
Earnings from continuing operations before income taxes			425,000			924,000
Income tax provision			162,000			350,000
Earnings from continuing operations			263,000			574,000
Discontinued operations:
	Loss from operations, net of income taxes		(46,000	)		(104,000	)
	Loss on sale, net of income taxes		(712,000	)
	Loss from discontinued operations, net of income taxes		(758,000	)		(104,000	)
Net earnings (loss)		$	(495,000	)	$	470,000
Per share data—basic:
	Earnings from continuing operations	$	0.03		$	0.06
	Loss from discontinued operations		(0.08	)		(0.01	)
	Net earnings (loss)	$	(0.05	)	$	0.05
	Weighted average common shares outstanding		9,188,195			9,057,365
Per share data—diluted:
	Earnings from continuing operations	$	0.03		$	0.06
	Loss from discontinued operations		(0.08	)		(0.01	)
	Net earnings (loss)	$	(0.05	)	$	0.05
	Weighted average common shares outstanding		9,188,195			9,127,167
Cash dividends declared per share of common stock		$	—		$	—

See Notes to Consolidated Financial Statements.

2

QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)

			September 30, 2008			June 30, 2008
ASSETS
Current assets:
	Cash and cash equivalents		$	207,000		$	408,000
	Accounts receivable, net of allowance for doubtful accounts of $392,000 at September 30 and $418,000 at June 30			22,180,000			23,801,000
	Inventories, net:
		Raw materials		3,567,000			3,943,000
		Work in process		5,142,000			5,007,000
		Finished goods		11,627,000			10,439,000
				20,336,000			19,389,000
	Deferred income tax assets			2,608,000			2,608,000
	Other current assets			1,267,000			504,000
	Current assets of business held for sale						20,161,000
Total current assets				46,598,000			66,871,000
Property, plant and equipment, at cost				44,284,000			43,873,000
Less accumulated depreciation				(27,890,000	)		(27,162,000	)
				16,394,000			16,711,000
Goodwill				17,385,000			17,385,000
Intangible assets, net				2,147,000			2,206,000
Deferred income tax assets				13,508,000			13,371,000
Other assets				678,000			890,000
Assets of business held for sale							4,109,000
			$	96,710,000		$	121,543,000

See Notes to Consolidated Financial Statements.

3

QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)

		September 30, 2008			June 30, 2008
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Current portion of long-term debt	$	900,000		$	17,600,000
	Accounts payable		5,997,000			5,950,000
	Accrued expenses		4,858,000			7,577,000
	Current liabilities of business held for sale					5,520,000
Total current liabilities			11,755,000			36,647,000
Long-term debt, net of current portion			40,000,000			40,000,000
Other long-term liabilities			1,045,000			1,059,000
			52,800,000			77,706,000
Commitments and contingent liabilities (Note 10)
Shareholders' equity:
	Preferred stock, no par value; authorized 100,000 shares; none issued
	Common stock, par value $.012/3; authorized 30,000,000 shares; issued 11,082,377 shares at September 30 and 11,051,815 at June 30		185,000			184,000
	Capital in excess of par value of common stock		66,726,000			66,498,000
	Accumulated deficit		(545,000	)		(49,000	)
	Treasury stock, at cost, 1,865,304 shares at September 30 and 1,893,552 shares at June 30		(22,456,000	)		(22,796,000	)
Total shareholders' equity			43,910,000			43,837,000
		$	96,710,000		$	121,543,000

See Notes to Consolidated Financial Statements.

4

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

				Three Months Ended September 30,
				2008			2007
Operating activities:
Net earnings (loss)				$	(495,000	)	$	470,000
	Loss on sale, net of tax				712,000
	Loss from discontinued operations, net of tax				46,000			104,000
Income from continuing operations, net of tax					263,000			574,000
	Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities:
		Depreciation			728,000			712,000
		Amortization			241,000			212,000
		Provisions for losses on accounts receivable			(26,000	)		(213,000	)
		Issuance of stock retirement plan shares			268,000
		Issuance of stock to 401K plan			225,000			299,000
		Share-based compensation expense			75,000			186,000
		Changes in operating assets and liabilities:
			Accounts receivable		1,647,000			4,486,000
			Inventories		(947,000	)		(1,251,000	)
			Other assets		(710,000	)		(698,000	)
			Income taxes		(386,000	)		350,000
			Accounts payable and accrued expenses		(1,032,000	)		(4,160,000	)
			Other long-term liabilities		(14,000	)		(11,000	)
Net cash provided by operating activities—continuing operations					332,000			486,000
Net cash used in operating activities—discontinued operations					(1,545,000	)		(2,622,000	)
Net cash used in operating activities					(1,213,000	)		(2,136,000	)
Investing activities:
	Capital expenditures				(411,000	)		(870,000	)
	Patent expenditures				(23,000	)		(10,000	)
	Proceeds from sale of business				20,000,000
Net cash provided by (used in) investing activities—continuing operations					19,566,000			(880,000	)
Net cash used in investing activities—discontinued operations					(25,000	)		(414,000	)
Net cash provided by (used in) investing activities					19,541,000			(1,294,000	)
Financing activities:
	Proceeds from revolving credit agreement				8,450,000			12,000,000
	Payments on revolving credit agreement				(25,150,000	)		(7,000,000	)
	Payment of semi-annual cash dividend				(1,829,000	)		(1,715,000	)
Net cash (used in) provided by financing activities					(18,529,000	)		3,285,000
Decrease in cash and cash equivalents					(201,000	)		(145,000	)
Cash and cash equivalents at beginning of period					408,000			848,000
Cash and cash equivalents at end of period				$	207,000		$	703,000

See Notes to Consolidated Financial Statements.

5

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, 2008 consolidated balance sheet as presented was derived from the audited financial statements. The interim financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended June 30, 2008. Management believes the financial statements include all normal recurring adjustments necessary for a fair presentation of the results for the interim periods presented.

        Certain balances in fiscal 2008 have been reclassified to conform to the 2009 presentation. Included with the reclassifications are restatements for discontinued operations. The discontinued operations arise out of the Intersection Control segment.

Recently Adopted and Recently Issued Accounting Pronouncements

        In September 2006, the Financial Accounting Standards Board (FASB) issued Financial Accounting Standard No. 157 (FAS No. 157), "Fair Value Measurements". This statement clarifies the definition of fair value, establishes a framework for measuring fair value, and expands the disclosures on fair value measurements. In February 2008, the FASB issued FASB Staff Position FSP 157-2, "Effective Date of FASB Statement No. 157" (FSP 157-2), which delays the effective date of FAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are disclosed at fair value in the financial statements on a recurring basis (at least annually). In October 2008, the FASB issued FASB Staff Position No. FAS 157-3, "Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active", which clarifies the application of FAS No. 157 in determining the fair values of assets or liabilities in a market that is not active. Staff Position No. FAS 157-3 became effective upon issuance, including prior periods for which financial statements have not been issued. We adopted FAS No. 157 related to financial assets and liabilities on July 1, 2008, as discussed further in footnote 11 and it did not have a material impact on our consolidated financial statements. We are currently evaluating the impact, if any, that FAS No. 157 may have on our future consolidated financial statements related to non-financial assets and liabilities.

        In February 2007, the FASB issued FAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities." FAS No. 159 provides companies with an option to report selected financial assets and liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each subsequent reporting date. We adopted FAS No. 159 on July 1, 2008. We did not adopt the fair value option permitted under this statement and therefore the adoption of this statement had no effect on our results of operations or financial position.

        In December 2007, the FASB issued FAS No. 141 (revised 2007), "Business Combinations", and FAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements". FAS No. 141 (revised 2007) requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. This standard also requires the fair value measurement of certain other assets and liabilities related to the acquisition such as contingencies and research and development. FAS No. 160 clarifies that a noncontrolling interest in a subsidiary should be reported as equity in the consolidated financial statements. Consolidated net income should include the net income for both the parent and the noncontrolling interest with disclosure of both amounts on the consolidated statement of income. The calculation of earnings per share will continue to be based on

6

QUIXOTE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

income amounts attributable to the parent. The effective date for both Statements is the beginning of fiscal 2010. We are currently in the process of evaluating the impact, if any, that the adoption of FAS No. 141 (revised 2007) and FAS No. 160 will have on our financial position, consolidated results of operations and cash flows.

        In March 2008, the FASB issued FAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities—an Amendment of FASB Statement 133". FAS No. 161 enhances required disclosures regarding derivatives and hedging activities, including enhanced disclosures regarding: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities"; and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. This Statement is effective for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. We do not expect the adoption of this statement to have a material effect on our results of operations or financial position.

        In April 2008, the FASB issued Staff Position (FSP) No. FAS 142-3, "Determination of the Useful Life of Intangible Assets" (FSP 142-3). This guidance is intended to improve the consistency between the useful life of a recognized intangible asset under FAS 142, "Goodwill and Other Intangible Assets" and the period cash flows used to measure the fair value of the asset under FAS 141R when the underlying arrangement includes renewal or extension of terms that would require substantial costs or result in a material modification to the asset upon renewal or extension. Companies estimating the useful life of a recognized intangible asset must now consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, must consider assumptions that market participants would use about renewal or extension as adjusted for FAS 142's entity-specific factors. The effective date for FAS 142-3 is the beginning of fiscal 2010. We are currently evaluating the impact, if any, that the adoption of this statement will have on our results of operations and financial position.

        In May 2008, the FASB issued FSP Accounting Principles Board (APB) 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Settlement)" (FSP APB 14-1). FSP APB 14-1 requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate. The effective date for FSP APB 14-1 is the beginning of fiscal 2010. We are currently evaluating the impact that the adoption of FSP APB 14-1 will have on our results of operations and financial position.

        In May 2008, the FASB issued FAS No. 162, "The hierarchy of Generally Accepted Accounting Principles" (FAS No. 162). FAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statement of nongovernmental entities that are presented in conformity with generally accepted accounting principles (the GAAP hierarchy). FAS No. 162 will become effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles." We do not currently expect the adoption of FAS No. 162 to have a material effect on our consolidated results of operations or financial position.

2.     On July 25, 2008, we sold our Intersection Control segment to Signal Group, Inc. for $20 million in cash. The Intersection Control segment sold products including traffic controllers, traffic and pedestrian signals, traffic uninterruptible power supply (UPS) systems, video detection equipment,

7

QUIXOTE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

toll road monitoring systems and parking detection devices. We have reflected the results of those operations as discontinued operations. We recognized a loss on sale of the Intersection Control segment of $712,000, net of income taxes of $436,000, in the first quarter of fiscal 2009.

        The results of discontinued operations are as follows:

	Three months ended September 30
	2008			2007
Net sales	$	1,732,000		$	7,515,000
Loss from operations of discontinued operations before income taxes	$	(75,000	)	$	(166,000	)
Loss from sale of assets of business		(1,148,000	)		—
Loss before taxes		(1,223,000	)		(166,000	)
Income tax benefit		(465,000	)		(62,000	)
Loss from discontinued operations, net of income tax benefit	$	(758,000	)	$	(104,000	)

        Assets and liabilities of the Intersection Control segment were classified as assets and liabilities held for sale within our consolidated balance sheet as of June 30, 2008 and consisted of the following:

		June 30
Assets:
Current assets
	Receivables	$	6,270,000
	Inventories		13,134,000
	Other current assets		757,000
	Total current assets		20,161,000
Property, plant and equipment			2,474,000
Other assets			1,635,000
Total assets of business held for sale		$	24,270,000
Liabilities:
Total liabilities of business held for sale		$	5,520,000

        As of September 30, 2008, there were no assets or liabilities of the Intersection Control segment due to the sale of the segment on July 25, 2008.

3.     Share-based compensation cost recognized in the three-month periods ended September 30, 2008 and 2007 includes compensation cost for share-based awards based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123(R). As of September 30, 2008, we have 466,593 common shares reserved for future grants from our stock option and award plans. Our stock option and award plans are discussed in further detail in our Annual Report on Form 10-K for the year ended June 30, 2008.

8

QUIXOTE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Share-based Compensation Expense

        The share-based compensation cost that has been charged to Selling and Administrative Expense for stock options and restricted stock awards under our stock option and award plans was $75,000 and $186,000 for the three-month periods ended September 30, 2008 and 2007, respectively. As of September 30, 2008, the total compensation cost related to unvested stock options and restricted stock granted under our stock option plans not yet recognized was approximately $681,000. This cost will be amortized on a straight-line basis over a weighted average period of approximately 1.9 years and will be adjusted for subsequent changes in estimated forfeitures. The 169,433 unvested stock options outstanding at September 30, 2008 had a weighted-average fair value of $2.45. The 18,198 shares of restricted stock unvested at September 30, 2008 had a fair value of $19.52.

Determining Fair Value

        The fair value of stock options granted is estimated using the Black-Scholes option-pricing model that uses the assumptions noted below for the first three months of fiscal 2009. No options were granted in the first three months of fiscal 2008. Expected volatilities are based on historical volatility of the Company's stock. We use historical data to estimate option exercise patterns, employee termination and forfeiture rates within the valuation model; separate groups of optionees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding; the range given below results from certain groups of employees exhibiting different behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The expected dividend yield is determined by dividing the current level of per share dividend by the grant date stock price. We do not incorporate changes in dividends anticipated by management unless those changes have been communicated to marketplace participants.

	Fiscal 2009
Risk free interest rate	2.9%
Expected dividend yield	5.0%
Weighted average expected volatility.	38%
Expected term	3.9 – 4.1 yrs
Weighted average expected term	4.0 yrs
Weighted average grant date fair value	$1.74

        The fair value of the options granted is being amortized on a straight-line basis over the requisite service period, which is generally the vesting period.

        The fair value of the restricted stock granted in the first quarter of fiscal 2008 was determined and fixed based on the price of our stock at the time of the grant. The fair value of the restricted stock awarded is being amortized on a straight-line basis over the requisite service period, which is the vesting period.

9

QUIXOTE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Stock Option and Restricted Stock Activity

        Information with respect to stock option activity under our plans is as follows:

	Common Shares			Weighted- Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at July 1, 2007		859,203		$	18.54
Granted
Exercised
Cancelled or expired		(18,601	)	$	21.71
Outstanding at September 30, 2007		840,602		$	18.47	3.0 Years	$	1,914,000
Outstanding at July 1, 2008		830,670		$	18.72
Granted		127,100		$	8.05
Exercised
Cancelled or expired		(23,030	)	$	19.01
Outstanding at September 30, 2008		934,740		$	17.26	2.5 Years	$	19,065
Vested at September 30, 2008		765,307		$	18.69	2.0 Years	$	0

        Options outstanding at September 30, 2008 are exercisable as follows: 765,307 currently, 84,702 within one year, 42,363 in two years and 42,368 in three years. As of September 30, 2007, 718,045 options were exercisable. During the three-month periods ended September 30, 2008 and 2007, the following stock option activity occurred under our plans:

	Three Months Ended September 30,
	2008		2007
Total intrinsic value of stock options exercised		—		—
Total fair value of stock options vested	$	356,000	$	73,000

10

QUIXOTE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        Information with respect to restricted stock activity under our plans is as follows:

	Number of Shares			Weighted-Average Grant Date Fair Value
Outstanding at July 1, 2007		—			—
Restricted stock granted		29,100		$	19.52
Restricted stock vested		—			—
Cancelled or expired		—			—
Unvested at September 30, 2007		29,100		$	19.52
Outstanding at July 1, 2008		29,100		$	19.52
Restricted stock granted		—			—
Restricted stock vested		(9,102	)	$	19.52
Cancelled or expired		(1,800	)	$	19.52
Unvested at September 30, 2008		18,198		$	19.52
Vested at September 30, 2008		9,102		$	19.52

        We also have a retirement stock award program for certain of our key executives which ended with the final issuance of shares in July 2008. The retirement stock award program resulted in a charge to earnings for compensation expense of $268,000 for the three months ended September 30, 2008 and $54,000 for the three months ended September 30, 2007.

4.     The income tax benefit for the current quarter is based upon the estimated effective income tax rate for the full fiscal year.

        On July 1, 2007 we adopted FASB Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109" as required under U.S. generally accepted accounting principles. We had unrecognized tax benefits of $227,000 as of September 30, 2008 and June 30, 2008, of which $189,000, if recognized, would favorably affect our income tax rate. The tax liability under FIN 48 is recorded in accrued expenses.

        We record the interest related to uncertain tax positions as interest expense during the period incurred. Penalties related to uncertain tax positions, which have historically been immaterial, are recorded as part of the income tax expense during the period incurred. In accrued expenses, we had accrued $38,000 for interest and $5,000 for penalties as of September 30, 2008 and $37,000 for interest and $5,000 for penalties as of June 30, 2008.

        We file income tax returns in jurisdictions of operation, including federal, state and international jurisdictions. At times, we are subject to audits in these jurisdictions. The final resolution of any such tax audit could result in either a reduction in our accruals or an increase in our income tax provision, both of which could have an impact on consolidated results of operations in any given period. U.S. federal income tax returns have been audited through fiscal 2004. The tax years 2005 through 2008 remain open to examination by the other major taxing authorities to which we are subject. We currently have no audits in process. We do not anticipate changes in the unrecognized tax benefits within the next twelve months as the result of examinations or lapse of statues of limitations to be material to our results of operations or financial position.

11

QUIXOTE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

5.     Operating results for the first three months of fiscal 2009 are not necessarily indicative of the performance for the entire year. Our business is generally seasonal with a higher level of sales in the fourth fiscal quarter.

6.     The computation of basic and diluted earnings (loss) per share is as follows:

	Three Months Ended September 30,
	2008			2007
Numerator:
Earnings from continuing operations	$	263,000		$	574,000
Loss from discontinued operations		(46,000	)		(104,000	)
Loss on sale of discontinued operation		(712,000	)		—
Net earnings (loss)	$	(495,000	)	$	470,000
Denominator:
Weighted average shares outstanding—basic		9,188,195			9,057,365
Effect of dilutive securities—common stock options					69,802
Weighted average shares outstanding—diluted		9,188,195			9,127,167
Earnings (loss) per share of common stock—basic:
Earnings from continuing operations	$	0.03		$	0.06
Loss from discontinued operations		(0.01	)		(0.01	)
Loss on sale of discontinued operations		(0.07	)		—
Net earnings (loss)	$	(0.05	)	$	0.05
Earnings (loss) per share of common stock—diluted:
Earnings from continuing operations	$	0.03		$	0.06
Loss from discontinued operations		(0.01	)		(0.01	)
Loss on sale of discontinued operations		(0.07	)		—
Net earnings (loss)	$	(0.05	)	$	0.05

        There were outstanding options to purchase common stock at prices that exceeded the average market price for the income statement periods. These options have been excluded from the computation of diluted earnings per share for the three-month period ended September 30, 2008 and 2007 and are as follows:

	Three Months Ended September 30,
	2008		2007
Average exercise price per share	$	18.71	$	21.37
Number of shares		806,440		470,266

        In addition, employee stock options totaling 470 shares for the three-month period ending September 30, 2008 were not included in the diluted weighted average shares calculation because the effects of these securities were anti-dilutive.

12

QUIXOTE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

7.     Accumulated other comprehensive income consists of the following:

		September 30, 2008		September 30, 2007
Unrealized gain on derivative instrument:
	Beginning balance—July 1	$	—	$	109,000
	Amortization to earnings				(30,000	)
Total accumulated comprehensive income		$	—	$	79,000

8.     We have two continuing reportable segments, one of which manufactures and sells products that Protect and Direct and one of which manufactures and sells products that Inform. In July, 2008, our Intersection Control segment was divested. The operations from this business segment have been included in discontinued operations, and are discussed in more detail in Note 2 on dispositions. The segment information included below has been reclassified to reflect such discontinued operations.

        The primary product lines within the Protect and Direct segment include energy-absorbing products such as crash cushions, truck-mounted attenuators, sand-filled barrels and barriers as well as highway delineators. The products within this segment absorb and dissipate the force of impact in collisions between vehicles and fixed roadside objects as well as prevent collisions and help to control the flow of traffic by directing or guiding. The primary product lines within the Inform segment include highway advisory radio systems; advanced sensing products which measure distance, count and classify vehicles; weather sensing systems and other transportation equipment. The products within this segment provide information to prevent collisions from occurring and to ease traffic congestion.

        The majority of our sales of highway and transportation safety products are to distributors and contractors who then provide product and services to federal, state and local governmental units. Our business is conducted principally in the United States, our country of domicile, with sales outside the United States of $7,958,000 in the first quarter of fiscal 2009 and $5,049,000 in the first quarter of fiscal 2008. Inter-company sales between segments represented less than one percent of consolidated net sales in the first quarters of fiscal 2009 and 2008.

        Our reportable segments are based on similarities in products and represent the aggregation of operating units for which financial information is regularly evaluated in determining resource allocation and assessing performance. We evaluate the performance of our segments and allocate resources to them based on operating income as well as other factors. Operating income is determined by deducting operating expenses from all revenues. In computing operating income, none of the following has been added or deducted: unallocated corporate expenses, interest income or expense, other income or loss or income tax provisions or benefits. Corporate assets consist primarily of cash and cash equivalents, depreciable assets and income tax assets. Accounting policies for the segments are the same as those for the Company.

13

QUIXOTE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        The following table presents financial information about our continuing operations by segment for the three-month periods ended September, 2008 and 2007 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
2008
THREE MONTHS
Net sales from external customers	$	19,982,000	$	5,157,000				$	25,139,000
Operating profit (loss)	$	2,372,000	$	420,000	$	(1,450,000	)	$	1,342,000
Unallocated interest and other						(917,000	)		(917,000	)
Total earnings (loss) from continuing operations before taxes	$	2,372,000	$	420,000	$	(2,367,000	)	$	425,000
Identifiable assets	$	55,779,000	$	22,877,000	$	18,054,000		$	96,710,000
2007
THREE MONTHS
Net sales from external customers	$	19,725,000	$	4,779,000				$	24,504,000
Operating profit (loss)	$	3,229,000	$	345,000	$	(1,557,000	)	$	2,017,000
Unallocated interest and other						(1,093,000	)		(1,093,000	)
Total earnings (loss) from continuing operations before taxes	$	3,229,000	$	345,000	$	(2,650,000	)	$	924,000
Identifiable assets	$	55,563,000	$	21,832,000	$	20,369,000		$	97,764,000
Assets held for sale						20,291,000			20,291,000
Total identifiable assets	$	55,563,000	$	21,832,000	$	40,660,000		$	118,055,000

9.     Intangible assets consist of the following:

		September 30, 2008						June 30, 2008
		Gross Carrying Amount		Accumulated Amortization		Net Intangible Assets		Gross Carrying Amount		Accumulated Amortization		Net Intangible Assets
Amortized intangible assets:
	Patents and licenses	$	3,770,000	$	2,217,000	$	1,553,000	$	3,746,000	$	2,160,000	$	1,586,000
	Technology and installed base		1,271,000		866,000		405,000		1,271,000		849,000		422,000
	Customer relationships		200,000		200,000				200,000		200,000
	Trade names		330,000		141,000		189,000		330,000		132,000		198,000
	Other		20,000		20,000				20,000		20,000
Total		$	5,591,000	$	3,444,000	$	2,147,000	$	5,567,000	$	3,361,000	$	2,206,000

        Intangible amortization expense was $82,000 for the three-month periods ended September 30, 2008 and 2007, respectively. The estimated amortization expense for this fiscal year ended June 30,

14

QUIXOTE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

2009 and for the five fiscal years subsequent to 2009 is as follows: $321,000, $321,000, $320,000, $267,000, $264,000 and $252,000. The carrying amount of goodwill consists of $9,246,000 for the Inform segment and $8,139,000 for the Protect and Direct segment as of September 30, 2008 and June 30, 2008.

10.   Disclosures regarding guarantees, commitments and contingencies are provided below.

Lease Commitments

        We use various leased facilities and equipment in our operations. The terms for these leased assets vary depending on the lease agreements. These operating leases may include options for renewal and we may guarantee the performance of our obligations under the leases. Annual minimum future rental payments for lease commitments will be approximately $1,506,000 in fiscal year 2009, a total of $2,057,000 in fiscal years 2010 to 2011 and a total of $16,000 in fiscal year 2012, for an aggregate of $3,579,000.

Product Warranty Liability

        We warrant to the original purchaser of our products that we will, at our option, repair or replace, without charge, such products if they fail due to a manufacturing defect. The term of these warranties typically varies (30 days to 1 year) by product. We accrue for product warranties, when, based on available information, it is probable that customers will make claims under warranties relating to products that have been sold, and a reasonable estimate of the costs can be made. Our estimated product warranty liability for the three-month periods ended September 30 is as follows:

		2008			2007
Beginning Balance—July 1		$	130,000		$	231,000
	Warranties issued		44,000			48,000
	Repairs, replacements and settlements		(48,000	)		(79,000	)
	Changes in liability for pre-existing warranties, including expirations		—			—
Ending balance—September 30		$	126,000		$	200,000

Legal

        We are involved in several pending judicial proceedings for product liability and other damages arising out of the conduct of our business. We record loss contingencies where appropriate within the guidelines established by Statement of FAS No. 5 "Accounting for Contingencies". While the outcome of litigation is subject to uncertainties, we believe, after consultation with counsel, that the outcome of these proceedings, based on current available information and after taking into account the availability and limits of our insurance coverage, will not have a material effect on our consolidated financial condition and results of operations.

Executive Agreements

        We have agreements with certain named executives which are designed to retain the services of key employees and to provide for continuity of management in the event of an actual or threatened

15

QUIXOTE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

change in control of the Company. Upon occurrence of a triggering event after a change in control, as defined, we would be liable for payment of benefits under these agreements, of approximately $4.4 million. A portion of these benefits will fluctuate based upon the share price at the time of the triggering event. We also have employment agreements with certain key executives which are designed to retain the services of those key employees. Upon occurrence of a triggering event under these agreements, we would be liable for payment of certain benefits under these agreements of approximately $2.1 million.

        We have by-laws and agreements under which we indemnify our directors and officers from liability for certain events or occurrences while the directors or officers are, or were, serving at the Company's request in such capacities. The term of the indemnification period is for the director's or officer's lifetime. We believe that any obligations relating to this indemnification are predominantly covered by insurance subject to certain exclusions and deductibles. Historically, we have not made payments under these executive agreements, and no amount has been accrued in the accompanying consolidated financial statements.

Indemnification of Lenders and Agents Under Credit Facilities

        Under our credit facility, we have agreed to indemnify our lender against costs or losses resulting from changes in laws and regulations which would increase the lender's costs, and from any legal action brought against the lender related to the use of loan proceeds. These indemnifications generally extend for the term of the credit facility and do not provide for any limit on the maximum potential liability. Historically, we have not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying consolidated financial statements with respect to these indemnification guarantees.

Bid and Performance Bonds

        We have entered into bid and performance related bonds associated with various contracts. Potential payments due under these bonds are related to our performance under the applicable contract. The total amount of bid and performance related bonds that were available and undrawn was $2,923,000 as of September 30, 2008 and $2,684,000 as of June 30, 2008. Historically, customers have not drawn upon these instruments due to non-performance, and no amount has been accrued in the accompanying consolidated financial statements.

Other Commitments

        We have standby letters of credit covering potential workers' compensation liabilities. The total amount of standby letters of credit that were outstanding was $902,000 as of September 30, 2008 and $1,012,000 as of June 30, 2008. We have included $752,000 in accrued liabilities for potential workers' compensation liabilities as of September 30, 2008.

        We have certain non-cancelable royalty agreements, which contain certain minimum payments in the aggregate of $1,410,000 through fiscal year 2012. We have included $247,000 in accrued liabilities for current obligations relating to royalty agreements as of September 30, 2008.

16

QUIXOTE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

11.   On July 1, 2008, we adopted FAS No. 157, "Fair Value Measurements", related to financial assets and liabilities. In accordance with FASB Staff Position No. FAS 157-2, "Effective Date of SFAS 157", we deferred the adoption of FAS No. 157 for nonfinancial assets and nonfinancial liabilities, which include goodwill, intangible assets and fixed assets, for one year. The effect of adoption of FAS No. 157 was not material, resulting only in increased disclosures.

        FAS No. 157 establishes a framework for measuring fair value and expands disclosure about fair value measurements. The statement requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity).

        We chose not to elect the fair value option as prescribed by FAS No. 159 for our financial assets and liabilities. Our financial instruments, which consist principally of cash, accounts receivable, accounts payable, short-term debt and convertible debt, are carried at cost. The carrying value of our cash, accounts receivable, accounts payable and accrued liabilities approximates fair value due to their short maturities. The carrying value of our short-term debt approximates fair value due to the variable-rate nature of the respective borrowings. The fair value of the company's convertible notes as of September 30, 2008 was estimated at $37,600,000, determined based on the closing price of the convertible debt traded in the limited trade market. The convertible notes are recorded on the balance sheet at $40,000,000 as of September 30, 2008.

17

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

OVERVIEW

        We develop, manufacture and market highway and transportation safety products to protect, direct and inform motorists, pedestrians and road workers in both domestic and international markets. Our continuing operations are comprised of two reportable segments within the highway and transportation safety industry. Our two reportable segments are: the manufacture and sale of highway and transportation safety products which Protect and Direct and the manufacture and sale of highway products and services which Inform motorists and highway personnel. The Protect and Direct segment provides solutions for improving safety on the roads either by minimizing the severity of crashes that occur or by preventing crashes from occurring by directing or guiding traffic. The primary product lines within the Protect and Direct segment include energy-absorbing products such as crash cushions, truck-mounted attenuators, sand-filled barrels and water-filled barriers, and directing and guiding products such as flexible post delineators and glare screen systems. The Inform segment provides solutions for improving traffic flow and safety on roads and runways by providing information. The primary product lines within the Inform segment include advanced sensing products which measure distance, count and classify vehicles; weather sensing systems and computerized highway advisory radio transmitting systems.

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

        Due to the recent market events that have adversely affected most industries and the economy as a whole, management has placed increased emphasis on monitoring the risks associated with the current environment, particularly the collectibility of accounts receivables and our liquidity. If the future economic environment continues to deteriorate, the company could experience difficulties due to the financial viability of certain of its customers and suppliers. In addition, the volatility in the company's stock price and declines in its market capitalization could put pressure on the carrying value of goodwill and other long-lived assets if these conditions persist for an extended time. At this point in time, there has not been a material impact on our assets and liquidity. Management will continue to monitor the risks associated with the current economic environment and their impact on our results.

DISCONTINUED OPERATIONS

        On July 25, 2008, we sold our Intersection Control segment to Signal Group, Inc. for $20 million in cash. The Intersection Control segment sold products including traffic controllers, traffic and pedestrian signals, traffic uninterruptible power supply (UPS) systems, video detection equipment and toll road monitoring systems. Accordingly, we reflect the results of those operations as discontinued operations for all periods presented. The assets and liabilities of the divested segment were classified as assets and liabilities held for sale within our consolidated balance sheets until the sale. In the quarter ended September 30, 2008, we recorded a loss on the sale of this business of $712,000, net of income taxes. The sale of this business allowed us to strengthen our balance sheet and improve our financial flexibility by reducing the amount outstanding against our revolving credit facility.

18

RESULTS OF OPERATIONS

        For the current first quarter, sales increased 3% compared to the first quarter of fiscal 2008 due to increased sales in both the Protect and Direct and the Inform segments offset somewhat by decreased domestic sales in the Protect and Direct segment. International sales for the first quarter of fiscal 2009 increased 58%, or $2,909,000, compared to the first quarter last year as sales increased across all major non-US regions, particularly in Europe. Domestic sales decreased 12%, or $2,274,000, compared to the first quarter of fiscal 2008 due to state and municipal budgetary constraints. Sales for the Protect and Direct segment increased 1% compared to the first quarter of last year due to increased international sales which were mostly offset by decreased domestic sales. Sales in the Inform segment increased 8% driven by strong international sales. For the first quarter, operating profit decreased primarily due to unfavorable product sales mix in the Protect and Direct segment. See FUTURE OUTLOOK for further information.

        The following table sets forth selected key operating statistics relating to the financial results of our continuing operations:

		Three Months Ended September,
		2008			2007
Revenues by Segment:
	Protect and Direct	$	19,982,000		$	19,725,000
	Inform		5,157,000			4,779,000
		$	25,139,000		$	24,504,000
Geographic Revenues:
	Domestic	$	17,181,000		$	19,455,000
	International		7,958,000			5,049,000
		$	25,139,000		$	24,504,000
Operating Income (Loss) by Segment:
	Protect and Direct	$	2,372,000		$	3,229,000
	Inform		420,000			345,000
	Unallocated Corporate		(1,450,000	)		(1,557,000	)
		$	1,342,000		$	2,017,000
Gross profit percentage			32.8	%		34.4	%
Selling and administrative expenses as a percentage of sales			23.8	%		22.5	%
Diluted earnings from continuing operations per share		$	0.03		$	0.06

19

Revenues

        Our net sales for the first quarter of fiscal 2009 increased $635,000, or 3%, to $25,139,000 from $24,504,000 for the first quarter last year. This was due to increased international sales in both segments, which were partially offset by decreased domestic sales in the Protect and Direct segment.

         Geographic—International sales for the first quarter of fiscal 2009 increased $2,909,000, or 58%, to $7,958,000, compared to $5,049,000 for the first quarter last year with increases across all regions, particularly in Europe. International sales for the Protect and Direct segment increased 55%, or $2,565,000, primarily due to increased sales of ABC Terminal products in Europe and Latin America. International sales for the Inform segment increased 90%, or $344,000, from last year primarily in Canada and the Asia Pacific region. Domestic sales for the first quarter of fiscal 2009 decreased 12% to $17,181,000 from $19,455,000 due to decreased sales in the Protect and Direct segment which we believe is due to the current economic uncertainty and state and municipal budgetary constraints. Domestic sales in the Inform segment increased 1% over the first quarter last year.

         Protect and Direct—Net sales for the Protect and Direct segment for the first quarter of fiscal 2009 increased 1% to $19,982,000 from $19,725,000 for the first quarter last year due to increases in international sales, partially offset by decreases in domestic sales compared to last year. The increase in international sales was across most regions, but most significant in Europe, where we added several new distributors late last fiscal year; in the Mideast/Africa region, where we opened a new sales office in Dubai late last year; and in Latin America. Sales of our ABC Terminal products are up $2,127,000 over the prior year, primarily in Europe and Latin America. Sales of Triton Barriers® and permanent crash cushions also increased over the prior year, while sales of truck mounted attenuators, parts and delineators decreased from last year.

         Inform—Net sales for the Inform segment for the first quarter of fiscal 2009 increased 8%, or $378,000, to $5,157,000 from $4,779,000 for the first quarter last year primarily due to increased international sales. Sales of weather and traffic sensing systems increased, offset somewhat by decreased sales of highway advisory radio products.

Gross Profit Margin

        Our gross profit margin for the first quarter of fiscal 2009 was 32.8% compared to 34.4% for the first quarter last year. The gross margin for the Protect and Direct segment declined primarily due to unfavorable product sales mix as a result of increased sales of our lower margin ABC Terminal products. The gross margin for the Inform segment increased somewhat due partially to volume efficiencies and partially due to a favorable product sales mix with increased sales of higher-margin traffic sensing systems.

Selling and Administrative Expenses

        Selling and administrative expenses for the first quarter of fiscal 2009 increased $461,000, or 8%, to $5,974,000 from $5,513,000 for the first quarter last year. This was primarily due to increased legal and marketing promotion expenses in our Protect and Direct segment and due to decreased bad debt expense for both segments for the first quarter last year. Selling and administrative expenses increased as a percentage of sales to 23.8% for the first quarter of 2009 from 22.5% last year.

Research and Development

        Research and development expenditures increased to $922,000 for the first quarter of fiscal 2009 compared to $889,000 for the same period last year as we continue our development of new products.

20

Operating Profit

        Operating profit for the first quarter of fiscal 2009 was $1,342,000 compared to operating profit of $2,017,000 for the first quarter of fiscal 2008. For the first quarter of fiscal 2009, operating profit for the Protect and Direct segment decreased 27% to $2,372,000 from $3,229,000 due primarily to unfavorable product sales mix and increased legal and marketing promotion expenses. Operating profit for the Inform segment increased 22% to $420,000 compared to operating profit of $345,000 for the first quarter of last year related to their increased sales this year.

Interest Expense

        Interest expense for the first quarter of fiscal 2009 decreased to $917,000 from $1,095,000 for the first quarter last year, primarily due to the lower average level of borrowings outstanding. The majority of our interest expense relates to $40 million in convertible debentures at a fixed rate of 7.0%. The interest rate on our bank revolving credit facility, against which $900,000 is outstanding as of September 30, 2008, is based on prime or LIBOR plus a margin. Our overall weighted average interest rate was 7.0% as of September 30, 2008.

Income Tax Provision

        The income tax provision for the first quarter of fiscal 2009 was $162,000 representing a 38% effective income tax rate. The income tax provision for the first quarter of fiscal 2008 was $350,000 also representing a 38% effective income tax rate.

Earnings from Continuing Operations

        Earnings from continuing operations for the first quarter of fiscal 2009 were $263,000, or $0.03 cents per diluted share, compared to earnings of $574,000, or $0.06 cents per diluted share, for the first quarter last year.

Loss from Discontinued Operations, net of income taxes

        The loss from discontinued operations, net of income taxes, for the first quarter of fiscal 2009 was $758,000, or $0.08 per diluted share, compared to a loss of $104,000, or $0.01 per diluted share for the first quarter last year. Included in the loss was a $712,000 loss on the sale of the Intersection Control segment in the first quarter of fiscal 2009.

Net Earnings (Loss)

        The net loss for the first quarter of fiscal 2009 was $495,000, or $0.05 per diluted share, compared to net earnings of $470,000, or $0.05 per diluted share for the first quarter last year.

21

FINANCIAL CONDITION

Liquidity and Capital Resources

        Our principal sources of cash historically have been cash flows from operations and borrowings from banks and other sources. We had cash and cash equivalents of $207,000 as of September 30, 2008. Our secured bank credit agreement provides for $40 million in borrowings under which we have access to additional funds of approximately $15 million as of September 30, 2008. The credit agreement includes both fixed and floating interest rate options, at the prime rate or LIBOR rate, plus a margin. The credit agreement also contains affirmative and negative covenants including requirements that we meet certain consolidated financial criteria, including a fixed charge coverage ratio, a maximum senior leverage ratio, and a maximum total leverage ratio. The covenants also limit the incurrence of additional indebtedness, acquisitions, liens and encumbrances and other matters customarily restricted in such agreements. We were either in compliance with these covenants or we received the necessary waivers from the bank through the first quarter of fiscal 2009. The credit agreement currently expires in February 2010, but may be renewed one additional year on each anniversary date upon mutual consent of the Company and the bank.

        Our outstanding borrowings were $40,900,000, or 48.2% of total capitalization, as of September 30, 2008, of which $900,000 was outstanding against our bank credit facility. This compares to outstanding borrowings of $57,600,000, or 56.8% of total capitalization, as of June 30, 2008, of which $17,600,000 was outstanding against our bank credit facility. We used $20 million in proceeds from the sale of the Intersection Control segment in the first quarter to pay down substantially all of our revolving bank debt. Included in long-term debt as of September 30, 2008 and June 30, 2008 was $40 million in 7% Convertible Senior Subordinated Notes due February 2025, which the noteholders may require us to repurchase in February 2010. The amount of standby letters of credit outstanding was $902,000 as of September 30, 2008 and $1,012,000 as of June 30, 2008.

        Although the variable interest rates under our revolving credit facility have been volatile due to the current difficult credit environment, the financial effect on us has not been significant as the amount outstanding against the facility was only $900,000 as of September 30, 2008. Currently, we do not believe that our operating cash flow needs would require us to significantly increase our bank borrowings in the near term. The majority of our outstanding debt as of September 30, 2008, $40 million of the $40.9 million, represents convertible debentures at a fixed rate of 7.0%.

Cash Flows

        Cash flows provided by continuing operations were $332,000 during the first three months of fiscal 2009. This compares with $486,000 provided by continuing operations in the first three months of fiscal 2008. Cash flow generated by operations is derived primarily from earnings before non-cash expenses such as depreciation and amortization. Non-cash expenses of $1,551,000 were nearly offset by a net decrease in cash of $1,442,000 used to fund working capital, primarily representing decreased accounts payable and accrued expenses.

        Cash flows used in discontinued operations were $1,545,000 during the first three months of fiscal 2009 compared with $2,622,000 used in the first three months of fiscal 2008 primarily representing decreased accounts payable and accrued expenses.

        Investing activities of continuing operations provided cash of $19,566,000 during the first three months of fiscal 2009, compared to using cash of $880,000 in the first three months of the prior year. Proceeds from the sale of the Intersection Control segment provided cash of $20 million in the first quarter of fiscal 2009. Expenditures during the first quarter of fiscal 2009 included $411,000 for capital expenditures compared with $870,000 for the first quarter last year.

22

        Financing activities used cash of $18,529,000 during the first quarter of fiscal 2009, compared with $3,285,000 of cash provided during the first quarter of fiscal 2008. The $20 million in proceeds from the sale of the Intersection Control segment was used to pay down substantially all of our bank debt in the first quarter of this year. Also during the first quarter of fiscal 2009, we borrowed a net $3,300,000, excluding the $20 million, against our outstanding revolving credit facility. The payment of our semi-annual cash dividend used cash of $1,829,000 during the first quarter of fiscal 2009.

        For fiscal 2009, we anticipate needing approximately $3,000,000 in cash for capital expenditures. We may require additional investments in working capital to support growth. The credit markets have recently experienced adverse conditions. Continuing volatility in the credit markets may increase costs associated with borrowing and issuing debt instruments or affect our ability to access those markets. Notwithstanding these adverse market conditions, we currently believe that future cash needs will be financed either through cash on-hand, cash generated from operations, from borrowings available under our bank credit facility or from proceeds resulting from the sale of assets. We currently believe that these sources of cash should be sufficient for all planned operating and capital requirements in the near term. Management will continue to closely monitor our liquidity and the credit markets. However, management cannot predict the impact to our company related to any further disruption in the credit environment.

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

        We are subject to certain debt obligations, guarantees, commitments and contingent liabilities further described in our Annual Report on Form 10-K for the year ended June 30, 2008. The following table presents our contractual obligations to make future payments under contracts, such as debt and lease agreements, as of September 30, 2008:

	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Long-term debt(1)	$	40,900,000	$	900,000	$	40,000,000
Estimated interest payments(2)		5,800,000		3,000,000		2,800,000
Operating leases		3,579,000		1,506,000		2,057,000		16,000
Minimum royalty payments		1,410,000		510,000		600,000		300,000
Uncertain tax benefits		227,000		109,000		118,000
Purchase obligations		1,706,000		1,706,000
Total	$	53,622,000	$	7,731,000	$	45,575,000	$	316,000

(1)

Amount includes expected cash payments on long-term debt based upon current and effective maturities as well as expected renewals.

(2)

Amount includes estimated interest payments based on interest rates as of the current period. Interest rates on variable-rate debt are subject to change in the future. Interest is estimated based upon current and effective maturities as well as expected renewals of long-term debt currently outstanding.

        As disclosed in the footnotes to the consolidated financial statements, we have entered into bid and performance related bonds associated with various contracts. Potential payments due under these bonds are related to our performance under certain contracts. The total amount of bid and performance related bonds that were available and undrawn as of September 30, 2008 was $2,923,000. We also have standby letters of credit covering potential workers' compensation liabilities and other liabilities. The total standby exposure relating to letters of credit as of September 30, 2008 was $902,000.

23

FUTURE OUTLOOK

        Looking forward, we remain cautious due to domestic state and municipal budgetary constraints and the difficult financial market. The domestic marketplace also remains challenging due to the economic environment and higher commodity prices. Although the near-term outlook for domestic spending remains uncertain, recent developments may lead to an improvement in current market conditions. Recent legislation has injected $8.0 billion into the federal highway trust fund that will ensure full federal funding until September 2009. In addition, the current trend towards lower gasoline prices may positively impact state and federal gasoline tax collections as drivers return to the road. There is also the prospect of a possible economic stimulus package aimed at increasing jobs through infrastructure projects. Although we remain cautious, these factors provide us with guarded optimism that prospects for domestic sales of our products may improve in the near term.

        We expect international sales to continue to be an important driver of our sales growth and we plan to continue to focus on these markets to reduce our exposure to the domestic market. We continue to invest in our international operations, which is enabling us to further diversify our geographic coverage and increase our exposure to marketplaces where demand for our products continues to grow. We expect that international sales will be an increasing part of our business and may continue to offset the softness in domestic sales this fiscal year. However, there can be no assurance that either international or domestic sales will increase.

SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ESTIMATES

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. Management's estimates also affect the reported amounts of revenues and expenses during the reporting period. In addition, certain normal and recurring estimates are made, including estimates in determining the allowance for doubtful accounts receivable, inventory valuation reserves, valuation allowance on deferred tax assets and health care liabilities. These estimates are made using management's best judgment given relevant factors and available data. Actual results could differ materially from those estimates. Note 2 to our June 30, 2008 consolidated financial statements includes a summary of the significant accounting policies, methods and estimates used in the preparation of our consolidated financial statements. There have been no material changes in accounting policies, methods and estimates used by management during this fiscal year except for the adoption of accounting pronouncements as described in Note 1 in the Notes to Consolidated Financial Statements. In most instances, we must use an accounting policy or method because it is the only policy or method permitted under U.S. GAAP.

24

RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

        See Note 1 in the Notes to Consolidated Financial Statements.

FORWARD LOOKING STATEMENTS

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

        Readers are cautioned not to place undue reliance on these forward-looking statements and that all forward-looking statements involve risks and uncertainties, including those detailed in our public filings with the SEC, news releases and other communications, which speak only as of the dates of those filings or communications. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. There can be no assurance that actual results will not differ materially from our expectations. Factors which could cause materially different results include uncertainties related to continued federal, state and municipal funding for highways and risks related to reductions in government expenditures; economic conditions; market demand; pricing and competitive factors, among others which are set forth in the "Risk Factors" of Part I, Item 1A, to our Annual Report on Form 10-K for the year ended June 30, 2008, which are hereby incorporated by reference.

25

ITEM 3.    Quantitative and Qualitative Disclosures about Market Risk

        Part I, Item 7.A. of our Annual Report on Form 10-K for the year ended June 30, 2008 presents information regarding Quantitative and Qualitative Disclosures about Market Risk.

        We are exposed to market risk from fluctuations in interest rates on our revolving credit facility, and, to a very limited extent, currency exchange rates. The majority of our debt is outstanding at a fixed interest rate. Given that our exposure to interest rate fluctuations with respect to amounts borrowed against our revolving credit facility is lower, we currently believe that the use of derivative instruments in the form of non-trading interest rate swaps to manage the risk is not necessary.

        Assets, liabilities and commitments that are to be settled in cash and are denominated in foreign currencies for transaction purposes are sensitive to changes in currency exchange rates. The majority of our business is transacted in U.S. dollars and the U.S. dollar is considered the primary currency for the majority of our operations. There were no significant transaction gains or losses during the first three months of fiscal 2009 or in fiscal year 2008 and we do not believe we are currently exposed to any material risk of loss from currency exchange fluctuations. We will continue to evaluate derivative financial instruments to manage foreign currency exchange rate changes. In the next few years we may confront greater risks from currency exchange fluctuations as our business expands internationally.

ITEM 4.    Controls and Procedures

(a)

Evaluation of Disclosure Controls and Procedures

        We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. The design of any system of disclosure controls and procedures is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any disclosure controls and procedures will succeed in achieving their stated goals under all potential future conditions.

        Our management, under the supervision of and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2008.

(b)

Changes in Internal Controls over Financial Reporting

        There have been no changes in our internal controls over financial reporting that may have materially affected, or are likely to materially affect, our internal control over financial reporting. Our process for evaluating controls and procedures is continuous and encompasses review of the design and effectiveness of established controls and procedures and the remediation of any deficiencies which may be identified during this process.

26

PART II—OTHER INFORMATION

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

Item 1.    Legal Proceedings

        We are involved in several pending judicial proceedings for product liability and other damages arising out of the conduct of our business. While the outcome of litigation is subject to uncertainties, we believe, after consultation with counsel, that the outcome of these proceedings, based on current available information and after taking into account the availability and limits of our insurance coverage, will not have a material effect on our consolidated financial condition and results of operations.

Item 6.    Exhibits

(a)

Exhibits

10(a)	Fourth Amendment to Amended and Restated Credit Agreement and Reaffirmation of Guaranties dated as of November 7, 2008 by and between Quixote Corporation and certain Subsidiaries thereof and Bank of America, N.A.
31	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

27

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, 2008 to be signed on its behalf by the undersigned thereunto duly authorized.

	QUIXOTE CORPORATION
DATED: November 7, 2008	By:	/s/ DANIEL P. GOREY Daniel P. Gorey Chief Financial Officer, Vice President and Treasurer (Chief Financial & Accounting Officer)

28

EXHIBIT INDEX

Exhibits:

10(a)	Fourth Amendment to Amended and Restated Credit Agreement and Reaffirmation of Guaranties dated as of November 7, 2008 by and between Quixote Corporation and certain Subsidiaries thereof and Bank of America, N.A.
31	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

29

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ITEM 1. FINANCIAL STATEMENTS

Consolidated Statements of Operations
Consolidated Balance Sheets
QUIXOTE CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

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

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
ITEM 4. Controls and Procedures

PART II—OTHER INFORMATION

Item 1. Legal Proceedings
Item 6. Exhibits

SIGNATURE
EXHIBIT INDEX

EX-10.(A)

Exhibit 10.(a)

FOURTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

AND REAFFIRMATION OF GUARANTIES

THIS FOURTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT AND REAFFIRMATION OF GUARANTIES, dated as of November 7, 2008 (the “Fourth Amendment”), is entered into by and between Quixote Corporation, a Delaware corporation (the “Borrower”), whose address is 35 East Wacker Drive, Chicago, Illinois 60601, and Quixote Transportation Safety, Inc., Transafe Corporation, Energy Absorption Systems, Inc., Energy Absorption Systems (AL) LLC, Surface Systems, Inc., Nu-Metrics, Inc., and Highway Information Systems, Inc., as Subsidiary Guarantors, (each being referred to herein as a “Guarantor” and collectively referred to herein as the “Guarantors”), and Bank of America, N.A., as successor by merger to LaSalle Bank National Association, a national banking association (the “Lender”), whose address is 135 South LaSalle Street, Chicago, Illinois 60603.

RECITALS:

A.Borrower and Lender entered into that certain Amended and Restated Credit Agreement, dated as of April 20, 2005 (the “Original Credit Agreement”), as amended by that certain First Amendment to Amended and Restated Credit Agreement and Reaffirmation of Guaranties dated as of December 1, 2006, (the “First Amendment”), that certain Second Amendment to Amended and Restated Credit Agreement and Reaffirmation of Guaranties dated as of March 15, 2007 (the “Second Amendment”) and that certain Third Amendment to Amended and Restated Credit Agreement and Reaffirmation of Guaranties dated as of November 7, 2007 (the “Third Amendment”, and together with the Original Credit Agreement, the First Amendment and the Second Amendment, the “Credit Agreement”) pursuant to which Credit Agreement Lender has made a Revolving Loan to Borrower evidenced by that certain Amended and Restated Revolving Loan Note, dated as of November 7, 2007, in the maximum principal amount of $40,000,000, executed by Borrower and made payable to the order of Lender (the “Revolving Note”).

B.In connection with the Original Credit Agreement, the Guarantors executed and delivered to Lender that certain Guaranty dated as of May 16, 2003 in favor of Lender, as amended by that Reaffirmation and Amendment of Subsidiary Guaranty dated as of April 20, 2005 (the “Guaranty”).

C.At the present time Borrower and the Guarantors request, and Lender is agreeable to, the modification of certain terms contained in the Credit Agreement as set forth herein, all pursuant to the terms and conditions hereinafter set forth.

NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Borrower, the Guarantors and Lender hereby agree as follows:

AGREEMENTS:

1.RECITALS.  The foregoing Recitals are hereby made a part of this Fourth Amendment.

2.DEFINITIONS.  Capitalized words and phrases used herein without definition shall have the respective meanings ascribed thereto in the Credit Agreement.

3.AMENDMENTS TO THE CREDIT AGREEMENT.

3.1Section 1.1 of the Credit Agreement.

(a)The definition of “Alternate Base Rate” in Section 1.1 of the Credit Agreement is hereby deleted in its entirety and restated as follows:

“Alternate Base Rate” means a fluctuating rate of interest equal to the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as selected by the Lender from time to time) as determined for each banking day at approximately 11:00 a.m. London time two (2) Business Days (or three Business Days prior to the commencement of such Interest Period if banks in London, England were not open and dealing in offshore Dollars on such second preceding Business Day) prior to the date in question, for Dollar deposits (for delivery on the first day of such Interest Period) with a one month term, as adjusted from time to time in the Lender’s sole discretion for reserve requirements, deposit insurance assessment rates and other regulatory costs.  If such rate is not available at such time for any reason, then the rate for that interest period will be determined by such alternate method as reasonably selected by the Lender.  The Lender’s determination of BBA Libor shall be conclusive absent manifest error.

3.2Section 2.13 of the Credit Agreement.  Section 2.13(D)(ii) is hereby amended by deleting the existing pricing grid in its entirety and replacing it with the following:

Level	Maximum Total Leverage Ratio	Applicable Eurodollar Margin/L/C Fee Percentage		Applicable ABR Margin		Commitment Fee Percentage
V	>3.00	2.25	%	2.25	%	0.50	%
IV	>2.50 BUT <3.00	2.00	%	2.00	%	0.50	%
III	>2.00 BUT <2.50	1.75	%	1.75	%	0.375	%
II	>1.50 BUT <2.00	1.50	%	1.50	%	0.375	%
I	<1.50	1.25	%	1.25	%	0.375	%

3.3Section 7.4 of the Credit Agreement.  The introductory language of Section 7.4of the Credit Agreement is hereby deleted in its entirety and restated as follows:

“7.4Financial Covenants.  The Borrower shall comply with the financial covenants set forth below.  Solely for the purposes of calculating the financial covenants, consolidated Subsidiaries of Borrower shall exclude U.S. Traffic Corporation and Peek Traffic Corporation.”

4.REAFFIRMATION OF GUARANTIES.  Each of the Guarantors hereby expressly (a) consents to the execution by Borrower and Lender of this Fourth Amendment, (b) acknowledges that the “Guaranteed Debt” (as defined in each of the Guaranties) includes all of the obligations and liabilities

2

owing from Borrower to Lender, including, but not limited to, the obligations and liabilities of Borrower to Lender under and pursuant to the Credit Agreement, as amended from time to time, and as evidenced by the Revolving Note, as modified, extended and/or replaced from time to time, (c) reaffirms, assumes and binds themselves in all respects to all of the obligations, liabilities, duties, covenants, terms and conditions that are contained in their respective Guaranty, (d) agrees that all such obligations and liabilities under their respective Guaranty shall continue in full force and effect and shall not be discharged, limited, impaired or affected in any manner whatsoever, and (e) represents and warrants that each of the representations and warranties made by such Guarantor in any of the documents executed in connection with the Loans remain true and correct as of the date hereof.

5.REPRESENTATIONS AND WARRANTIES.  To induce Lender to enter into this Fourth Amendment, Borrower and each Guarantor hereby certifies, represents and warrants to Lender that:

5.1Organization.  Borrower and each Guarantor is a corporation or a limited liability company duly organized, existing and in good standing under the laws of its state or organization with full and adequate corporate or limited liability power, as the case may be, to carry on and conduct its business as presently conducted.  Other than as shown on Schedule I hereto, Borrower and each Guarantor is duly licensed or qualified in all foreign jurisdictions wherein the nature of its activities require such qualification or licensing.  The Articles of Incorporation or Organization, as the case may be, Bylaws (other than an amendment to the By-laws of Borrower dated July 24, 2008) or Operating Agreement, as the case may be, Resolutions and Incumbency Certificate of Borrower and each Guarantor have not been changed or amended since the certified copies thereof were delivered to Lender in connection with the Original Credit Agreement and the First Amendment.  The state issued organizational identification number for Borrower and each Guarantor is listed on Schedule I hereto.  The exact legal name of Borrower and each Guarantor is as set forth in the preamble of this Fourth Amendment, and neither Borrower nor any Guarantor currently conducts, nor has it during the last five (5) years conducted, business under any other name or trade name.  Neither Borrower nor any Guarantor will change its name, its organizational identification number, if it has one, its type of organization, its jurisdiction of organization or other legal structure.

5.2Authorization.  Borrower and each Guarantor is duly authorized to execute and deliver this Fourth Amendment and Borrower is and will continue to be duly authorized to borrow monies under the Credit Agreement, as amended hereby, and to perform its obligations under the Credit Agreement, as amended hereby.

5.3No Conflicts.  The execution and delivery of this Fourth Amendment and the performance by Borrower and each Guarantor of its obligations under the Credit Agreement, as amended hereby, do not and will not conflict with any provision of law or of the articles of incorporation or bylaws of Borrower or any Guarantor or of any agreement binding upon Borrower or any Guarantor.

5.4Validity and Binding Effect.  The Credit Agreement, as amended hereby, is a legal, valid and binding obligation of Borrower and each Guarantor, enforceable against Borrower and each Guarantor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors’ rights or by general principles of equity limiting the availability of equitable remedies.

3

5.5Compliance with Credit Agreement.  The representation and warranties set forth in Section VI of the Credit Agreement, as amended hereby, are true and correct with the same effect as if such representations and warranties had been made on the date hereof, with the exception that all references to the financial statements shall mean the financial statements most recently delivered to Lender and except for such changes as are specifically permitted under the Credit Agreement.  In addition, Borrower and each Guarantor has complied with and is in compliance with all of the covenants set forth in the Credit Agreement, as amended hereby, including, but not limited to, those set forth in Section VII thereof.

5.6No Event of Default.  As of the date hereof, no Event of Default under Section VII of the Credit Agreement, as amended hereby, or event or condition which, with the giving of notice or the passage of time, or both, would constitute an Event of Default, has occurred or is continuing.

5.7No Subordinated Debt Default.  As of the date hereof, no default under any of the documents evidencing or securing any of the Subordinated Debt, or event or condition which, with the giving of notice or the passage of time, or both, would constitute a default under any of the documents evidencing or securing any of the Subordinated Debt, has occurred or is continuing.

5.8Schedules to Credit Agreement.  Other than as shown by the updated Schedules attached hereto as Exhibit A, the Schedules attached to the Credit Agreement are true and correct as of the date hereof.

6.CONDITIONS PRECEDENT.  This Fourth Amendment shall become effective as of the date above first written after receipt by Lender of the following documents:

6.1Fourth Amendment.  This Fourth Amendment executed by Borrower, the Guarantors, and Lender.

6.2Resolutions.  A certified copy of Resolutions of the board of directors of Borrower and each Guarantor authorizing the execution, delivery and performance of this Fourth Amendment and related loan documents.

6.3Certificate of Good Standing.  Certificates of Good Standing for Borrower and each Guarantor from their respective jurisdictions of organization.

6.4Other Documents.  Such other documents, certificates and/or opinions of counsel as Lender may request.

7.GENERAL.

7.1Governing Law; Severability.  This Fourth Amendment shall be construed in accordance with and governed by the laws of Illinois.  Wherever possible each provision of the Credit Agreement and this Fourth Amendment shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of the Credit Agreement and this Fourth Amendment shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of the Credit Agreement and this Fourth Amendment.

7.2Successors and Assigns.  This Fourth Amendment shall be binding upon Borrower, the Guarantors, and Lender and their respective successors and assigns, and shall inure to the benefit of Borrower, the Guarantors, and Lender and the successors and assigns of Lender.

4

7.3Waiver of Claims.  Borrower hereby acknowledges, agrees and affirms that it possesses no claims, defenses, offsets, recoupment or counterclaims of any kind or nature against or with respect to the enforcement of the Credit Agreement, as amended hereby, the Revolving Note or any other Loan Document (collectively referred to herein as the “Claims”), nor does Borrower now have knowledge of any facts that would or might give rise to any Claims.  If facts now exist which would or could give rise to any Claim against or with respect to the enforcement of the Credit Agreement as amended hereby, the Revolving Note, and/or any other Loan Documents, Borrower hereby unconditionally, irrevocably and unequivocally waives and fully releases any and all such Claims as if such Claims were the subject of a lawsuit, adjudicated to final judgment from which no appeal could be taken and therein dismissed with prejudice.

7.4Continuing Force and Effect of Loan Documents and Guaranty.  Except as specifically modified or amended by the terms of this Fourth Amendment, all other terms and provisions of the Credit Agreement and the other Loan Documents are incorporated by reference herein, and in all respects, shall continue in full force and effect.  Borrower, by execution of this Fourth Amendment, hereby reaffirms, assumes and binds itself to all of the obligations, duties, rights, covenants, terms and conditions that are contained in the Credit Agreement and the other Loan Documents.  Each of the Guarantors, by execution of this Fourth Amendment, hereby reaffirms, assumes and binds itself to all of the obligations, duties, rights, covenants, terms and conditions that are contained in Guaranty.

7.5Financing Statements.  Borrower hereby irrevocably authorizes Lender at any time and from time to time to file in any jurisdiction any initial UCC financing statements and/or amendments thereto that (a) describe the Collateral, and (b) contain any other information required by part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement or amendment.

7.6References to Credit Agreement.  Each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof’, or words of like import, and each reference to the Credit Agreement in any and all instruments or documents delivered in connection therewith, shall be deemed to refer to the Credit Agreement, as amended hereby.

7.7Expenses.  Borrower shall pay all costs and expenses in connection with the preparation of this Fourth Amendment and other related loan documents, including, without limitation, reasonable attorneys’ fees and time charges of attorneys who may be employees of Lender or any affiliate or parent of Lender.  Borrower shall pay any and all stamp and other taxes, UCC search fees, filing fees and other costs and expenses in connection with the execution and delivery of this Fourth Amendment and the other instruments and documents to be delivered hereunder, and agrees to save Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such costs and expenses.

7.8Counterparts.  This Fourth Amendment may be executed in any number of counterparts, all of which shall constitute one and the same agreement.

[Signatures on following page]

5

IN WITNESS WHEREOF, the parties hereto have executed this Fourth Amendment to the Amended and Restated Credit Agreement and Reaffirmation of Guaranties as of the date first above written.

Borrower:
QUIXOTE CORPORATION,
a Delaware corporation, as Borrower
By:	/s/ DANIEL P. GOREY
Name:	Daniel P. Gorey
Title:	Vice President, Chief Financial Officer & Treasurer
Guarantors:
QUIXOTE TRANSPORTATION SAFETY, INC. TRANSAFE CORPORATION
ENERGY ABSORPTION SYSTEMS, INC.
ENERGY ABSORPTION SYSTEMS (AL) LLC SURFACE SYSTEMS, INC.
NU-METRICS, INC.
HIGHWAY INFORMATION SYSTEMS, INC.
By:	/s/ DANIEL P. GOREY
Name:	Daniel P. Gorey
Title:	Vice President & Treasurer
Lender:
Bank of America, N.A., as successor by merger to LaSalle Bank National Association, a national banking association
By:	/s/ LORA BACKOFEN
Name:	Lora Backofen
Title:	Sr. Vice President

6

Schedule I

Qualification Issues

Energy Absorption Systems, Inc. is not currently in good standing in the State of California.

Energy Absorption Systems (AL) LLC is not currently in good standing in the State of Alabama.

7

Schedule II

Organizational Identification Numbers

CORPORATION	STATE	STATE ID
Quixote Corporation	Delaware	0720523
Quixote Transportation Safety, Inc.	Delaware	2803660
Transafe Corporation	Delaware	3197646
Energy Absorption Systems, Inc.	Delaware	0904033
Energy Absorption (AL) LLC	Delaware	3539333
Surface Systems, Inc.	Missouri	00157025
Nu-Metrics, Inc.	Pennsylvania	978728
Highway Information Systems, Inc.	Delaware	2867376

8

EX-31

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EXHIBIT 31

CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
(Rule 13a-14(a)/15d-14(a))

I, Leslie J. Jezuit, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Quixote Corporation ("the registrant");

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 7, 2008 By: /s/ LESLIE J. JEZUIT
Leslie J. Jezuit
Chairman and Chief Executive Officer

CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
(Rule 13a-14(a)/15d-14(a))

I, Daniel P. Gorey, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Quixote Corporation ("the registrant");

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 7, 2008 By: /s/ DANIEL P. GOREY
Daniel P. Gorey
Vice President, Chief Financial Officer
and Treasurer

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EXHIBIT 31

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 (Rule 13a-14(a)/15d-14(a))

EX-32

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EXHIBIT 32

CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350

        In connection with the quarterly report of Quixote Corporation (the "Company") on Form 10-Q for the period ended September 30, 2008, as filed with the Securities and Exchange Commission as of the date hereof (the "Report"), each of the officers of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer's knowledge:

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

Date: November 7, 2008	By:	/s/ LESLIE J. JEZUIT Leslie J. Jezuit, Chairman and Chief Executive Officer
Date: November 7, 2008	By:	/s/ DANIEL P. GOREY Daniel P. Gorey, Chief Financial Officer

        The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure.

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EXHIBIT 32