# UNITED STATESSECURITIES AND EXCHANGE
COMMISSIONWashington, D.C. 20549

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FORM 10-Q

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(Mark One)


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

For the quarterly
period ended  04/01/2006

OR

| | o
               TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT
OF 1934
| | --------------------------------------------------------------------------------------------------------

For the transition period from __________________ to __________________

Commission File Number
0-5971

WOODHEAD INDUSTRIES,
INC.(Exact name of registrant as specified in its charter)

|DELAWARE                                                      | 36-1982580                      
|------------------------------------------------------------- | --------------------------------
|(State or other jurisdiction ofincorporation or organization) | (IRS EmployerIdentification No.)

|THREE PARKWAY NORTH #550, Deerfield, IL  | 60015     
|---------------------------------------- | ----------
|(Address of principal executive offices) | (Zip Code)

(Registrants
telephone number, including area code) (847)-236-9300

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


Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes
xNo
o

Indicate by check mark whether the
Registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer.
See definition accelerated filer and large accelerated filer in Rule 12b-2 of
the Exchange Act (check one):


|Large Accelerated Filero | Accelerated Filerx | Non-accelerated filero
|------------------------ | ------------------ | ----------------------

Indicate by a check mark whether the
Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
oNo
x

The number of common shares
outstanding as of April 18, 2006 was 12,405,795.





1

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TABLE OF CONTENTS





Part I  FINANCIAL INFORMATION



Item 1  Financial Statements

| | Consolidated Balance Sheets                                                                    | 3 
| | ---------------------------------------------------------------------------------------------- | --
| | Consolidated Statements of Income                                                              | 4 
| | Consolidated Statements of Cash Flows                                                          | 5 
| | Consolidated Statements of Comprehensive Income                                                | 6 
| | Notes to Financial Statements                                                                  | 7 
| | Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations | 16
| | Item 3  Quantitative and Qualitative Disclosures about Market Risk                            | 21
| | Item 4  Internal Controls and Procedures                                                      | 21
| |                                                                                                |   



Part II  OTHER INFORMATION



| | Item 1  Legal Proceedings                                   | 22
| | ------------------------------------------------------------ | --
| | Item 4  Submission of Matters to a Vote of Security Holders | 23
| | Item 6  Exhibits                                            | 23
| | Signatures                                                   | 24





2

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Part I  FINANCIAL INFORMATION

Item 1  Financial Statements



Woodhead Industries, Inc.

Consolidated Balance Sheets

As of April 01, 2006 and October 1, 2005

(Amounts in Thousands)





|                                               |                                                      |        |                       |          |                       | Unaudited |                       | 
|---------------------------------------------- | ---------------------------------------------------- | ------ | --------------------- | -------- | --------------------- | --------- | --------------------- | 
|Assets                                         |                                                      |        |                       | 4/1/2006 |                       | 10/1/2005
|                                               |                                                      |        |                       |          |                       |          
|Current Assets                                 |                                                      |        |                       |          |                      
|                                               | Cash and short-term investments                      |        | $              16,276 |          | $              13,887
|                                               | Accounts receivable, net                             |        |                       | 42,303   |                       | 39,040   
|                                               | Inventories                                          |        |                       |          | 22,750                |           | 21,173               
|                                               | Prepaid expenses                                     |        |                       |          | 5,764                 |           | 5,785                
|                                               | Refundable income taxes                              |        |                       | 366      |                       | 2,097    
|                                               | Deferred income taxes                                |        |                       | 3,133    |                       | 2,164    
|                                               |                                                      |        |                       |          |                       |          
|Total current assets                           |                                                      | 90,592 |                       | 84,146  
|Property, plant and equipment, net             | 55,340                                               |        | 54,758               
|Other intangible assets, net                   | 545                                                  |        | 568                  
|Goodwill                                       |                                                      |        |                       | 35,993   |                       | 35,730   
|Deferred income taxes                          |                                                      | 2,502  |                       | 2,746   
|Other assets                                   |                                                      |        | 397                   |          | 432                  
|                                               |                                                      |        |                       |          |                      
|Total Assets                                   |                                                      |        |                       | $185,369 |                       | $178,380 
|                                               |                                                      |        |                       |          |                       |          
|                                               |                                                      |        |                       |          |                       |           |                       | 
|                                               |                                                      |        |                       |          |                       |           |                       | 
|                                               |                                                      |        |                       |          |                       |           |                       | 
|Liabilities and Stockholders' Investment      
|Current liabilities                            |                                                      |        |                       |          |                      
|                                               | Accounts payable                                     |        |                       |          | $              11,336 |           | $              11,080
|                                               | Accrued expenses                                     |        |                       |          | 13,979                |           | 11,531               
|                                               | Income taxes payable                                 |        |                       | 1,725    |                       | 1,053    
|                                               | Current portion of long-term debt                    |        | 5,700                 |          | 5,700                
|                                               |                                                      |        |                       |          |                      
|Total current liabilities                      |                                                      | 32,740 |                       | 29,364  
|                                               |                                                      |        |                       |          |                       |           |                       | 
|Long term debt                                 |                                                      |        | 19,500                |          | 19,500               
|Deferred income taxes                          |                                                      | 4,958  |                       | 4,698   
|Other liabilities                              |                                                      |        | 3,828                 |          | 4,139                
|                                               |                                                      |        |                       |          |                      
|Total liabilities                              |                                                      |        | 61,026                |          | 57,701               
|                                               |                                                      |        |                       |          |                       |           |                       | 
|                                               |                                                      |        |                       |          |                       |           |                       | 
|Stockholders' Investment                       |                                                      |        |                      
|                                               | Common stock at par (shares issued: 12,405 at 4/1/06 |       
|                                               | and 12,260 at 10/1/05)                               |        |                       | 12,218   |                       | 12,260   
|                                               | Additional paid-in capital                           |        |                       | 22,157   |                       | 21,596   
|                                               | Deferred stock compensation                          |        |                      |          | (397)                
|                                               | Accumulated other comprehensive income               | 4,679  |                       | 4,726   
|                                               | Retained earnings                                    |        |                       |          | 85,289                |           | 82,494               
|                                               |                                                      |        |                       |          |                       |           |                      
|Total stockholders' Investment                 | 124,343                                              |        | 120,679              
|                                               |                                                      |        |                      
|                                               |                                                      |        |                       |          |                       |           |                       | 
|Total Liabilities and Stockholders Investment | $185,369                                             |        | $178,380             
|                                               |                                                      |        |                      



The accompanying notes are an integral part of these statements.



3

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Woodhead Industries, Inc.

Consolidated Statements of Income

For the Three and Six Months ended April 01, 2006 and April 02, 2005

(Amounts in Thousands, except per share data, unaudited)





|                                                                 |       |       |       |        | Three Months Ended  |                     | Six Months Ended
|---------------------------------------------------------------- | ----- | ----- | ----- | ------ | ------------------- | ------------------- | ----------------
|                                                                 |       |       |       |        |                     |                     |                 
|                                                                 |       |       |       |        | 4/1/2006            | 4/2/2005            |                 
|                                                                 |       |       |       |        |                     |                     |                 
|                                                                 |       |       |       |        |                     |                     |                 
|Net Sales                                                        |       |       |       |        | $59,028             | $56,393             |                 
|Cost of Sales                                                    |       |       |       | 36,704 | 35,548              |                     | 69,987          
|Gross Profit                                                     |       |       |       | 22,324 | 20,845              |                     | 42,480          
|Operating Expenses                                               |       |       |       | 17,466 | 17,748              |                     | 33,993          
|                                                                 |       |       |       |        |                     |                     |                 
|                                                                 |       |       |       |        |                     |                     |                 
|Income From Operations                                           | 4,858 | 3,097 |       | 8,487  | 3,323              
|                                                                 |       |       |       |        |                     |                     |                 
|Other Expenses                                                   |       |       |       |        |                     |                     |                 
|Interest Expense                                                 |       |       |       | 338    | 544                 |                     | 696             
|Interest Income                                                  |       |       |       | (115)  | (67)                |                     | (169)           
|Other (Income)/ Expenses, Net                                    | (147) | 515   |       | (302)  | (1,303)            
|                                                                 |       |       |       |        |                    
|Income Before Taxes                                              |       |       | 4,782 | 2,105  |                     | 8,262               | 3,663           
|                                                                 |       |       |       |        |                     |                     |                 
|Provision For Income Taxes                                       | 1,739 | 778   |       | 3,003  | 1,120              
|                                                                 |       |       |       |        |                    
|Net Income                                                       |       |       |       | $3,043 | $1,327              |                     | $5,259          
|                                                                 |       |       |       |        |                     |                     |                 
|                                                                 |       |       |       |        |                     |                     |                 
|                                                                 |       |       |       |        |                     |                     |                 
|                                                                 |       |       |       |        |                     |                     |                 
|Earnings per share                                               |       |       |       |        |                     |                     |                 
|                                                                 |       |       |       |        |                     |                     |                 
|Basic                                                            |       |       |       |        | $              0.25 | $              0.11 |                 
|Diluted                                                          |       |       |       |        | $              0.25 | $              0.11 |                 
|                                                                 |       |       |       |        |                     |                     |                 
|                                                                 |       |       |       |        |                     |                     |                 
|Weighted-average common shares outstanding                       |       |       |       |       
|                                                                 |       |       |       |        |                     |                     |                 
|Basic                                                            |       |       |       |        | 12,197              | 12,124              |                 
|Diluted                                                          |       |       |       |        | 12,383              | 12,287              |                 
|                                                                 |       |       |       |        |                     |                     |                 
|Dividends Per Share                                              |       |       |       | $0.10  | $0.10               |                     | $0.20           
|                                                                 |       |       |       |        |                     |                     |                 
|                                                                 |       |       |       |        |                     |                     |                 
|                                                                 |       |       |       |        |                     |                     |                 
|The accompanying notes are an integral part of these statements.





4

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Woodhead Industries, Inc.

Consolidated Statements of Cash Flows

For the Six Months ended April 01, 2006 and April 02, 2005

(Amounts in Thousands, unaudited)





|                                                                 |                                             |                |         |         |                 | Six Months ended
|---------------------------------------------------------------- | ------------------------------------------- | -------------- | ------- | ------- | --------------- | ----------------
|                                                                 |                                             |                |         |         |                 | 4/1/2006        
|                                                                 |                                             |                |         |         |                 |                 
|                                                                 |                                             |                |         |         |                 |                 
|Cash flows from operating activities:                            |                                             |                |        
|Net income for the period                                        |                                             | $5,259         | $2,543 
|Adjustments to reconcile net income to net                       |                                             |               
|cash flows from operating activities:                            |                                             |                |        
|Depreciation and amortization                                    |                                             | 6,139          | 5,984  
|Stock compensation                                               |                                             |                | 436     |       
|Excess tax benefit from stock-based compensation                 | (53)                                        |              
|Deferred tax expense                                             |                                             |                | (504)   | 517    
|(Increase) Decrease in:                                          |                                             |                |         |        
|                                                                 | Accounts receivable                         |                |         |         | (3,275)         | (2,707)         
|                                                                 | Inventories                                 |                |         |         | (1,577)         | (2,424)         
|                                                                 | Prepaid expenses                            |                |         |         | 731             | (1,034)         
|                                                                 | Deffered income taxes and other assets      | 2,053          | 649    
|Increase (Decrease) in:                                          |                                             |                |         |        
|                                                                 | Accounts payable                            |                |         |         | 258             | 2,314           
|                                                                 | Accrued expenses                            |                |         |         | 1,473           | (2,914)         
|                                                                 | Income taxes payable                        |                |         | 373     | 772            
|                                                                 | Deferred income taxes and other liabilities | 297            | 50     
|                                                                 |                                             |                |        
|Net cash flows provided by operating activities                  | 11,610                                      | 3,750         
|                                                                 |                                             |               
|Cash flows from investing activities:                            |                                             |                |        
|Purchases of property, plant & equipment                         | (6,723)                                     | (4,136)       
|Retirements of sale of property, plant & equipment               | 210                                         | 96            
|                                                                 |                                             |               
|Net cash used in investing activities                            |                                             | (6,513)        | (4,040)
|                                                                 |                                             |                |        
|Cash flows from financing activities:                            |                                             |                |        
|Excess tax benefit from stock-based compensation                 | 53                                          |              
|Proceeds from exercise of stock options                          | 480                                         | 1,043         
|Dividend payments                                                |                                             |                | (2,464) | (2,444)
|                                                                 |                                             |                |         |        
|Net cash used in financing activities                            |                                             | (1,931)        | (1,401)
|                                                                 |                                             |                |        
|Effect of exchange rates                                         |                                             |                | (777)   | (836)  
|                                                                 |                                             |                |         |        
|Net increase (decrease) in cash and short-term investments       | 2,389                                       | (2,527)       
|                                                                 |                                             |               
|                                                                 |                                             |                |         |         |                 |                 
|                                                                 |                                             |                |         |         |                 |                 
|Cash and short-term investments at beginning of period           | $       13,887                              | $       16,709
|Cash and short-term investments at end of period                 | $       16,276                              | $       14,182
|                                                                 |                                             |               
|                                                                 |                                             |                |         |         |                 |                 
|Supplemental cash flow data                                      |                                             |                |         |        
|Cash paid during the period for:                                 |                                             |                |         |        
|                                                                 | Interest                                    |                |         |         |                 | $            847
|                                                                 | Income taxes                                |                |         |         | $         2,367 | $            442
|                                                                 |                                             |                |         |         |                 |                 
|The accompanying notes are an integral part of these statements.





5

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Woodhead Industries, Inc.

Consolidated Statements of Comprehensive Income

For the Three and Six Months ended April 01, 2006 and April 02, 2005

(Amounts in Thousands, unaudited)





|                            |                                          |                  |        |                 |                | Three Months Ended |                 | Six Months Ended
|--------------------------- | ---------------------------------------- | ---------------- | ------ | --------------- | -------------- | ------------------ | --------------- | ----------------
|                            |                                          |                  |        |                 |                |                    |                 |                 
|                            |                                          |                  |        |                 |                | 4/1/2006           | 4/2/2005        |                 
|                            |                                          |                  |        |                 |                |                    |                 |                 
|                            |                                          |                  |        |                 |                |                    |                 |                 
|Net Income                  |                                          |                  | $3,043 | $         1,327 |                | $5,259             | $         2,543
|Other comprehensive income: |                                          |                  |        |                 |               
|                            | Accumulated foreign currency translation |                  |        |                 |               
|                            |                                          | Adjustment       |        |                 | 1,208          | (3,168)            |                 | (29)            
|                            | Minimum pension liability adjustment,    |                  |        |                 |               
|                            |                                          | Net of tax       |        |                 |                |                   | 230             |                 
|                            | Unrealized loss on cash flow hedging     |                  |        |                 |               
|                            |                                          | Instrument       |        |                 | (4)            | 13                 |                 | (18)            
|                            |                                          |                  |        |                 |                |                    |                 |                 
|                            |                                          |                  |        |                 |                |                    |                 |                 
|Comprehensive income, net   | $4,247                                   | $        (1,598) |        | $5,212          | $        5,193
|                            |                                          |                  |        |                 |               



The accompanying notes are an integral part of these statements.



6

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Woodhead Industries, Inc.

Notes to Financial Statements

(Amounts in Thousands, except per share data, unaudited)



| | 1. | BASIS OF PRESENTATION
| | -- | ---------------------



Our consolidated financial statements include the accounts of all our wholly owned subsidiaries, including those operating outside the United States. All material intercompany transactions have been eliminated in consolidation. We prepare our financial statements in conformity with United States Generally Accepted Accounting Principles. In preparing the financial statements, we must use some estimates and assumptions that may affect reported amounts and disclosures. Among others, we use estimates when accounting for depreciation, amortization, employee benefits, asset valuation allowances, and loss contingencies. We are also subject to risks and uncertainties that may cause actual results to differ from those estimates. Interim results are not necessarily indicative of results for a full year. Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.



The accompanying unaudited, consolidated financial statements have been prepared pursuant to rules and regulations of the Securities and Exchange Commission and, therefore, do not include all information and footnote disclosures normally included in audited financial statements.  In the opinion of management, all normal and necessary adjustments have been made to ensure a fair statement of the results for the interim period.



The information included in this Form 10-Q should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations, and Financial Statements and Notes thereto included in the Woodhead Industries, Inc. 2005 Form 10-K.



| | 2. | RECENT ACCOUNTING PRONOUNCEMENTS
| | -- | --------------------------------



In November 2004 the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 151Inventory Costs, an amendment to ARB No. 43, Chapter 4.  SFAS No. 151 clarifies the accounting for abnormal amounts of idle facilities, freight, handling costs and spoilage and requires these items to be recognized as current period expenses.  Also, SFAS No. 151 requires fixed overhead costs be allocated to inventories based on normal production capacity.  SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005.  We were required to adopt SFAS No. 151 in the first quarter of fiscal 2006 and it did not have an impact on our financial position and results of operations for the quarter ended April 1, 2006.



In December 2004 FASB issued the revised SFAS No. 123,Share-Based Payment(SFAS No. 123(R)).  SFAS No. 123(R) requires compensation costs related to share-based payment transactions to be recognized in the financial statements.  Generally, compensation cost will be measured based on the grant-date fair value of the equity or liability instrument issued.  In addition, the equity or liability awards will be remeasured each reporting period.  Compensation cost will be recognized over the requisite service period, generally as the award vests.  We were required to adopt SFAS No. 123(R) in the first quarter of fiscal 2006.  SFAS No. 123(R) applies to all awards granted after June 30, 2005 and to previously granted awards unvested as of the adoption date.



In May 2005 the FASB issued SFAS No. 154Accounting Changes and Error Corrections a replacement of Accounting Principles Board Opinion (APB) No. 20 and SFAS No. 3.  SFAS No. 154 changes the requirements for the accounting for and reporting of a change in accounting principles and applies to all voluntary changes in accounting principles.  SFAS No. 154 also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions.  SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005.



7

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| | 3. | INVENTORIES
| | -- | -----------



Inventories at the balance sheet dates were comprised of the following:

|                                 |                                    |        |             |             |             |             |             |          
|-------------------------------- | ---------------------------------- | ------ | ----------- | ----------- | ----------- | ----------- | ----------- | ---------
|                                 |                                    |        |             |             |             | 4/1/2006    |             | 10/1/2005
|                                 |                                    |        |             |             |             |             |             |          
|Inventories valued using FIFO    |                                    |        | $    12,216 |             | $    12,435
|                                 |                                    |        |             |             |            
|Inventories valued using LIFO:   |                                    |        |             |             |            
|                                 | At FIFO cost                       |        |             |             | 13,064      |             | 11,057     
|                                 |                                    |        |             |             |             |             |            
|                                 | Less: Reserve to reduce to LIFO    |        | (2,530)     |             | (2,319)    
|                                 |                                    |        |             |             |            
|LIFO Inventories                 |                                    |        |             | 10,534      |             | 8,738      
|                                 |                                    |        |             |             |             |            
|Total Inventories                |                                    |        |             | $    22,750 |             | $    21,173
|                                 |                                    |        |             |             |             |            
|                                 |                                    |        |             |             |             |             |             |          
|Inventory composition using FIFO |                                    |        |             |             |            
|                                 | Raw materials                      |        |             |             | $    14,776 |             | $    12,894
|                                 |                                    |        |             |             |             |             |            
|                                 | Work-in-process and finished goods | 10,504 |             | 10,598     
|                                 |                                    |        |             |            
|Total Inventories at FIFO        |                                    |        |             | $    25,280 |             | $    23,492
|                                 |                                    |        |             |             |             |            



Had we used the FIFO method for all inventories, net income would have been $0.1 million higher for the quarter and six months ended April 1, 2006 and $0.1 million lower for the quarter and six months ended April 2, 2005.



| | 4. | PROPERTY, PLANT AND EQUIPMENT
| | -- | -----------------------------



Property, plant and equipment at the balance sheet date were the following:



|                                                |           |  |                     |  |                     |          |  |          
|----------------------------------------------- | --------- |  | ------------------- |  | ------------------- | -------- |  | ---------
|                                                |           |  |                     |  |                     | 4/1/2006 |  | 10/1/2005
|                                                |           |  |                     |  |                     |          |  |          
|Property, plant and equipment, at cost          |           |  | $          165,784  |  | $          159,449 
|Less: Accumulated depreciation and amortization | (110,444) |  | (104,691)          
|                                                |           |  |                    
|Property, plant and equipment, net              |           |  | $            55,340 |  | $            54,758
|                                                |           |  |                     |  |                    



During the second quarter of fiscal 2006 we purchased $5.2 million of property, plant and equipment compared to $2.1 million in the second quarter of fiscal 2005.  For the six months ended April 1, 2006 we purchased $6.7 million of property, plant and equipment, compared to $4.1 million for the six months ended April 2, 2005.  The increased spending during the quarter and six months ended April 1, 2006 was due to spending on our new ERP system.



| | 5. | LONG-TERM DEBT
| | -- | --------------



On April 28, 2004 we entered into a three-year revolving credit agreement with our existing bank that provides for borrowings up to $25.0 million at the banks prime or offered rate.  This agreement will expire on April 28, 2007.  This revolving credit agreement states that the maximum ratio of debt to EBITDA, as defined, shall be no greater than 2.5 to 1.0 and minimum interest coverage ratio, as defined, shall be no less than 2.5 to 1.0.  We are in compliance with all provisions of our credit agreement.  On April 1, 2006 and October 1, 2005 we had no borrowings under the revolving credit agreement.



Included in our financial statements is a $13.2 million 6.64% senior guaranteed note, which is held by a subsidiary and has a parental guarantee. In addition, there is a $12.0 million, 6.81% senior guaranteed note held by the parent company, which is guaranteed by our U.S. subsidiaries.  We are in compliance with all provisions of our senior guaranteed notes.



8

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As of April 1, 2006 and October 1, 2005 we had no short-term borrowings.



| | 6. | EARNINGS PER SHARE
| | -- | ------------------



Basic earnings per share exclude dilution, and diluted earnings per share reflect the potential dilution from non-vested shares and stock options. The reconciliation between basic and diluted earnings per share is as follows:



|                                                        |         |        |                  |                 | Three Months Ended |                  | Six Months Ended
|------------------------------------------------------- | ------- | ------ | ---------------- | --------------- | ------------------ | ---------------- | ----------------
|                                                        |         |        |                  |                 |                    |                  |                 
|                                                        |         |        |                  |                 | 4/1/2006           | 4/2/2005         |                 
|                                                        |         |        |                  |                 |                    |                  |                 
|                                                        |         |        |                  |                 |                    |                  |                 
|Net Income                                              |         |        | $          3,043 | $         1,327 |                    | $          5,259 | $         2,543 
|Earnings per share                                      |         |        |                  |                 |                    |                 
|                                                        | Basic   |        |                  |                 | $            0.25  | $           0.11 |                 
|                                                        | Diluted |        |                  |                 | $            0.25  | $           0.11 |                 
|                                                        |         |        |                  |                 |                    |                  |                 
|                                                        |         |        |                  |                 |                    |                  |                 
|Weighted-average number of shares outstanding           | 12,197  | 12,124 |                  | 12,180          | 12,097            
|Dilutive common stock options and non-vested stock      | 186     | 163    |                  | 153             | 187               
|                                                        |         |        |                  |                 |                   
|Weighted-average number of shares outstanding           |         |        |                  |                
|Plus dilutive common stock options and non-vested stock | 12,383  | 12,287 |                  | 12,333          | 12,284            
|                                                        |         |        |                  |                 |                   





| | 7. | CAPITAL STOCK
| | -- | -------------



Our total authorized stock is 40,000,000 shares, consisting of 10,000,000 shares of preferred stock, par value $0.01 per share, and 30,000,000 shares of common stock, par value $1.00 per share. No shares of preferred stock have been issued to date. Common stock issued was 12,218,000 and 12,260,000 on April 1, 2006 and October 1, 2005, respectively.  As of April 1, 2006 the common stock issued of 12,218,000 did not include non-vested shares of 187,500.



Prior to October 2, 2005 we applied APB Opinion No. 25:Accounting for Stock Issued to Employees, and related interpretations (Opinion 25) including FIN 44:Accounting for Certain Transactions Involving Stock Compensationin accounting for the plans. Accordingly, we did not recognize compensation expense related to option grants.  In December, 2002 we adopted SFAS No. 148:Accounting for Stock Based Compensation, which amended SFAS No. 123:Accounting for Stock Based Compensation. The following table, per SFAS No. 148, summarizes results as if we had recorded compensation expense for option grants during the three and six months ended April 2, 2005:



|                           |                                        |        |                  | Three Months     | Six Months      
|-------------------------- | -------------------------------------- | ------ | ---------------- | ---------------- | ----------------
|                           |                                        |        |                  | 4/2/2005         |                 
|                           |                                        |        |                  |                  |                 
|Net Income                 |                                        |        |                  |                 
|                           | As reported                            |        | $         1,327  |                  | $          2,543
|                           | Stock based employee compensation cost | (227)  |                  | (662)           
|                           |                                        |        |                  |                 
|                           | Pro forma                              |        |                  | $         1,100  |                 
|Basic earnings per share   |                                        |        |                 
|                           | As reported                            |        | $           0.11 |                  | $           0.21
|                           | Stock based employee compensation cost | (0.02) |                  | (0.05)          
|                           |                                        |        |                  |                 
|                           | Pro forma                              |        |                  | $           0.09 |                 
|Diluted earnings per share |                                        |        |                 
|                           | As reported                            |        | $           0.11 |                  | $           0.21
|                           | Stock based employee compensation cost | (0.02) |                  | (0.05)          
|                           |                                        |        |                  |                 
|                           | Pro forma                              |        |                  | $           0.09 |                 
|                           |                                        |        |                  |                  |                 





9

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Effective October 2, 2005, we adopted SFAS No. 123(R), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including employee stock options based on estimated fair values.  We adopted SFAS No. 123(R) using the modified prospective transition method, which requires the application of this standard as of October 2, 2005, the first day of fiscal 2006.  Our financial statements for the three and six months ended April 1, 2006 reflect the impact of SFAS No. 123(R).  In accordance with the modified prospective transition method our financial statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS No. 123(R).



As a result of adopting SFAS No. 123(R) on October 2, 2005 our income before taxes and our net income were $29 and $19 lower, respectively for the three months ended April 1, 2006.  For the six months ended April 1, 2006 income before taxes and net income were $68 and $44 lower respectively than if we had continued to account for share-based compensation under Opinion 25.  Basic earnings per share for the three and six months ended April 1, 2006 would have been $0.25 and $0.43, respectively had we not adopted SFAS No. 123(R).  Diluted earnings per share would have remained unchanged at $0.25 and $0.43 for the three and six months ended April 1, 2006 respectively had we not adopted SFAS No. 123(R). Prior to the adoption of SFAS No. 123(R) we had presented all tax benefits of deductions resulting from the exercise of stock options as operating cash flows in the Statement of Cash Flows.  Beginning on October
2, 2005 we changed our cash flow presentation in accordance with SFAS No. 123(R), which requires the cash flows resulting from tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows.



SFAS No. 123(R) requires us to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model.  Under this method, compensation cost for the three and six months ended April 1, 2006 includes the portion of the share based compensation vesting in the period for (a) all share-based payments granted prior to, but not vested as of October 1, 2005, based on grant date fair value estimated using the Black-Scholes option pricing model and (b) all share-based payments granted subsequent to October 1, 2005, based on the grant date fair value estimated using the Black-Scholes option pricing model.



The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model, which determines inputs as shown in the following table.



|                        |  |       |       |            |       | Grant Date |       |           
|----------------------- |  | ----- | ----- | ---------- | ----- | ---------- | ----- | ----------
|                        |  |       |       |            |       |            |       |           
|                        |  |       |       | 10/30/2002 |       | 11/2/2002  |       | 12/12/2002
|                        |  |       |       |            |       |            |       |           
|Dividend Yield          |  |       | 3.55% |            | 2.85% |            | 3.72%
|Volatility              |  |       |       | 47.59%     |       | 47.92%     |       | 48.11%    
|Risk Free Interest Rate |  | 4.00% |       | 4.14%      |       | 4.00%     
|Expected Life           |  |       | 8     |            | 8     |            | 8    
|                        |  |       |       |            |       |            |      
|Black-Scholes Value     |  | 3.98% |       | 5.26%      |       | 3.49%     
|                        |  |       |       |            |       |           



The summary of our stock option activity as of April 1, 2006 and changes during the first six months of fiscal 2006 is presented in the following table:



|                                            |       |       |        |        |        |                  | Weighted    |          
|------------------------------------------- | ----- | ----- | ------ | ------ | ------ | ---------------- | ----------- | ---------
|                                            |       |       |        |        |        |                  | Average     |          
|                                            |       |       |        |        |        | Weighted         | Remaining   | Aggregate
|                                            |       |       |        |        |        | Average Exercise | Contractual | Intrinsic
|Options                                     |       |       |        | Shares |        | Price            | Term        | Value    
|                                            |       |       |        |        |        |                  |             |          
|Outstanding at October 1, 2005              | 1,775 |       | $14.64 |        |       
|Exercised                                   |       |       |        | (42)   |        | $11.80           |             |          
|Expired or cancelled                        |       |       | (234)  |        | $16.48 |                  |            
|Outstanding at April 1, 2006                |       | 1,499 |        | $14.43 | 6.26   | $1,796          
|                                            |       |       |        |        |        |                 
|Vested or expected to vest at April 1, 2006 | 1,499 |       | $14.43 | 6.26   | $1,796
|                                            |       |       |        |        |       
|Exercisable at April 1, 2006                |       | 1,364 |        | $14.73 | 6.21   | $1,415          
|                                            |       |       |        |        |        |                 





10

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The intrinsic value for stock options is defined as the difference between the current market price and the grant price.  The intrinsic value of options exercised during the second quarter of fiscal 2006 was $101.  The intrinsic value of options exercised during the first six months of fiscal 2006 was $141.  As of April 1, 2006 there was $197 of unrecognized compensation cost related to stock options outstanding that is expected to be recognized over a weighted average period of 1.7 years.



Non-vested share grants consist of our common stock and generally vest over one to three years.  All non-vested share grants are cliff vested.  Generally, the fair value of each non-vested share grant is equal to the market price of our stock on the date of grant.  A summary of our non-vested share activity as of April 1, 2006, and changes during the first six months of fiscal 2006 is presented in the following table:



|                              |     |  |               |        |  | Weighted-average      | 
|----------------------------- | --- |  | ------------- | ------ |  | --------------------- | 
|                              |     |  |               | Shares |  | Grant-date Fair Value
|                              |     |  |               |        |  |                      
|                              |     |  |               |        |  |                       | 
|Non-vested at October 1, 2005 | 98  |  | $       12.32 |        | 
|Granted                       |     |  |               | 110    |  | $       12.97         | 
|Vested                        |     |  |               | (20)   |  | $       11.24         | 
|Cancelled                     |     |  |               | (1)    |  | $       12.97         | 
|                              |     |  |               |        |  |                       | 
|Non-vested at April 1, 2006   | 187 |  | $       12.54 |        | 
|                              |     |  |               |        | 



Stock-based compensation expense related to non-vested shares recognized under SFAS No. 123(R) for the three and six months ended April 1, 2006 was $0.2 million and $0.4 million respectively.  This expense included stock-based compensation for grants that were issued before the adoption of SFAS No. 123(R) and expense related to the non-vested shares granted on December 2, 2005.  As of April 1, 2006 there was $1.4 million of unrecognized compensation cost related to the non-vested stock grants that is expected to be recognized over a weighted average period of 1.7 years.



As of April 1, 2006 there were 552,789 shares available for grant.



| | 8. | SEGMENT AND GEOGRAPHIC DATA
| | -- | ---------------------------



Segment reporting is presented in accordance with SFAS No. 131,Disclosure about Segments of an Enterprise and Related Information.  SFAS No. 131 requires us to report certain financial information in a manner similar to the way we report it to the chief operating decision maker for the purpose of evaluating performance and allocating resources to the various business segments.  We identified the Chief Executive Officer as the chief operating decision maker.



Our operating segments are based on the organization of business groups comprised of similar products and services. Revenues in ourIndustrial Communications and Connectivity ProductsSegment (ConnectivitySegment) are primarily derived from sales of system components to devices in open networks for automated manufacturing and distribution applications. Revenues in ourElectrical Safety & Industrial ProductsSegment (ElectricalSegment) are primarily derived from sales of specialized products to support enhanced safety and productivity on the factory floor.



Sales between segments were not significant. Sales in geographic areas were determined by customer location.  No single customer accounted for 10% or more of our total revenue.  Sales in foreign countries did not meet minimum disclosure requirements.  We did not allocate certain corporate expenses, primarily those related to the overall management of the corporation, to the segments or geographic areas. Both segments share certain production facilities and equipment (PP&E). These assets, and related additions and depreciation, were allocated based on unit production. Geographic data on assets is based on the physical location of those assets. Corporate assets were primarily investments in subsidiaries and cash.



11

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Three Months

(Amounts in Thousands, unaudited)

Segment data



|                                                       |                         |                       | Net Sales                      |                     | Income from Operations       
|------------------------------------------------------ | ----------------------- | --------------------- | ------------------------------ | ------------------- | -----------------------------
|                                                       |                         |                       |                                |                     |                              
|                                                       |                         |                       | Three months ended             |                     | Three months ended           
|                                                       |                         |                       |                                |                     |                              
|                                                       |                         |                       | 4/1/2006                       | 4/2/2005            |                              
|                                                       |                         |                       |                                |                     |                              
|                                                       |                         |                       |                                |                     |                              
|Connectivity                                           |                         | $             43,527  | $           42,495             |                     | $              3,020         
|Electrical                                             |                         | 15,501                | 13,898                         |                     | 2,813                        
|Corporate and other                                    |                        |                      |                                | (975)               | (756)                        
|                                                       |                         |                       |                                |                     |                              
|Total                                                  |                         | $             59,028  | $           56,393             |                     | $              4,858         
|                                                       |                         |                       |                                |                     |                              
|                                                       |                         |                       |                                |                     |                              
|                                                       |                         |                       | Additions to long-lived assets |                     | Depreciation and Amortization
|                                                       |                         |                       |                                |                     |                              
|                                                       |                         |                       | Three months ended             |                     | Three months ended           
|                                                       |                         |                       |                                |                     |                              
|                                                       |                         |                       | 4/1/2006                       | 4/2/2005            |                              
|                                                       |                         |                       |                                |                     |                              
|                                                       |                         |                       |                                |                     |                              
|Connectivity                                           |                         | $               1,847 | $             1,341            |                     | $             2,489          
|Electrical                                             |                         | 3,070                 | 761                            |                     | 539                          
|Corporate and other                                    | 268                     | 6                     |                                | 17                  | 35                           
|                                                       |                         |                       |                                |                     |                              
|Total                                                  |                         | $               5,185 | $             2,108            |                     | $             3,045          
|                                                       |                         |                       |                                |                     |                              
|                                                       |                         |                       |                                |                     |                              
|                                                       |                         |                       | Total Assets                   |                     |                              
|                                                       |                         |                       |                                |                     |                              
|                                                       |                         |                       | 4/1/2006                       | 10/1/2005           |                              
|                                                       |                         |                       |                                |                     |                              
|                                                       |                         |                       |                                |                     |                              
|Connectivity                                           |                         | $           139,057   | $         136,926              |                     |                              
|Electrical                                             |                         | 36,958                | 31,917                         |                     |                              
|Corporate and other                                    | 9,354                   | 9,537                 |                                |                     |                              
|                                                       |                         |                       |                                |                     |                              
|Total                                                  |                         | $           185,369   | $         178,380              |                     |                              
|                                                       |                         |                       |                                |                     |                              
|                                                       |                         |                       |                                |                     |                              
|                                                       |                         |                       |                                |                     |                              
|                                                       |                         |                       |                                |                     |                              
|Reconciliation of Income from Operations to Net Income | 4/1/2006                | 4/2/2005             
|                                                       |                         |                      
|Income from operations                                 |                         |                       |                                | $             4,858 | $             3,097          
|Less: Interest income (expense), net                   |                         |                       | (223)                          | (477)              
|Other income (expense), net                            |                         |                       | 147                            | (515)              
|Income taxes                                           |                         |                       |                                | (1,739)             | (778)                        
|                                                       |                         |                       |                                |                     |                              
|Net Income                                             |                         |                       |                                |                     | $             3,043          
|                                                       |                         |                       |                                |                     |                              
|                                                       |                         |                       |                                |                     |                              
|Geographic Data                                        |                         |                       |                                |                     |                              
|                                                       |                         | Net Sales             |                                |                     |                              
|                                                       |                         |                       |                                |                     |                              
|                                                       |                         | Three months ended    |                                |                     |                              
|                                                       |                         |                       |                                |                     |                              
|                                                       |                         | 4/1/2006              | 4/2/2005                       |                     |                              
|                                                       |                         |                       |                                |                     |                              
|United States                                          | $                33,577 | $            30,641   |                                |                     | 4/1/2006                     
|                                                       |                         |                       |                                |                     |                              
|All other countries                                    | 25,451                  | 25,752                | United States                  | $           55,861  | $         50,083             
|                                                       |                         |                       | Italy                          |                     | 34,879                       
|Total                                                  | $                59,028 | $            56,393   | France                         |                     | 24,861                       
|                                                       |                         |                       | Mexico                         |                     | 24,060                       
|                                                       |                         |                       |                                | Canada              |                              
|                                                       |                         |                       |                                | All other countries | 24,502                       
|                                                       |                         |                       |                                |                     |                              
|                                                       |                         |                       |                                | Total               |                              
|                                                       |                         |                       |                                |                     |                              





12

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Six Months

(Amounts in Thousands, unaudited)

Segment data



|                                                       |                         |                      | Net Sales                      |                      | Income from Operations       
|------------------------------------------------------ | ----------------------- | -------------------- | ------------------------------ | -------------------- | -----------------------------
|                                                       |                         |                      |                                |                      |                              
|                                                       |                         |                      | Six months ended               |                      | SIx months ended             
|                                                       |                         |                      |                                |                      |                              
|                                                       |                         |                      | 4/1/2006                       | 4/2/2005             |                              
|                                                       |                         |                      |                                |                      |                              
|                                                       |                         |                      |                                |                      |                              
|Connectivity                                           |                         | $             83,904 | $           79,381             |                      | $             4,728          
|Electrical                                             |                         | 28,563               | 25,688                         |                      | 4,060                        
|Corporate and other                                    |                        |                     |                                | (301)                | (891)                        
|                                                       |                         |                      |                                |                      |                              
|Total                                                  |                         | $           112,467  | $         105,069              |                      | $             8,487          
|                                                       |                         |                      |                                |                      |                              
|                                                       |                         |                      |                                |                      |                              
|                                                       |                         |                      | Additions to long-lived assets |                      | Depreciation and Amortization
|                                                       |                         |                      |                                |                      |                              
|                                                       |                         |                      | Six months ended               |                      | Six months ended             
|                                                       |                         |                      |                                |                      |                              
|                                                       |                         |                      | 4/1/2006                       | 4/2/2005             |                              
|                                                       |                         |                      |                                |                      |                              
|                                                       |                         |                      |                                |                      |                              
|Connectivity                                           |                         | $              2,492 | $            2,236             |                      | $           5,023            
|Electrical                                             |                         | 4,104                | 1,875                          |                      | 1,083                        
|Corporate and other                                    | 127                     | 25                   |                                | 33                   | 69                           
|                                                       |                         |                      |                                |                      |                              
|Total                                                  |                         | $              6,723 | $            4,136             |                      | $           6,139            
|                                                       |                         |                      |                                |                      |                              
|                                                       |                         |                      |                                |                      |                              
|                                                       |                         |                      | Total Assets                   |                      |                              
|                                                       |                         |                      |                                |                      |                              
|                                                       |                         |                      | 4/1/2006                       | 10/1/2005            |                              
|                                                       |                         |                      |                                |                      |                              
|                                                       |                         |                      |                                |                      |                              
|Connectivity                                           |                         | $          139,057   | $        136,926               |                      |                              
|Electrical                                             |                         | 36,958               | 31,917                         |                      |                              
|Corporate and other                                    | 9,354                   | 9,537                |                                |                      |                              
|                                                       |                         |                      |                                |                      |                              
|Total                                                  |                         | $          185,369   | $        178,380               |                      |                              
|                                                       |                         |                      |                                |                      |                              
|                                                       |                         |                      |                                |                      |                              
|                                                       |                         |                      |                                |                      |                              
|                                                       |                         |                      |                                |                      |                              
|Reconciliation of Income from Operations to Net Income | 4/1/2006                | 4/2/2005            
|                                                       |                         |                     
|Income from operations                                 |                         |                      |                                | $              8,487 | $           3,323            
|Less: Interest income (expense), net                   |                         |                      | (527)                          | (963)               
|Other income (expense), net                            |                         |                      | 302                            | 1,303               
|Income taxes                                           |                         |                      |                                | (3,003)              | (1,120)                      
|                                                       |                         |                      |                                |                      |                              
|Net Income                                             |                         |                      |                                |                      | $              5,259         
|                                                       |                         |                      |                                |                      |                              
|                                                       |                         |                      |                                |                      |                              
|Geographic Data                                        |                         |                      |                                |                      |                              
|                                                       |                         | Net Sales            |                                |                      |                              
|                                                       |                         |                      |                                |                      |                              
|                                                       |                         | Six months ended     |                                |                      |                              
|                                                       |                         |                      |                                |                      |                              
|                                                       |                         | 4/1/2006             | 4/2/2005                       |                      |                              
|                                                       |                         |                      |                                |                      |                              
|United States                                          | $                63,336 | $          57,247    |                                |                      | 4/1/2006                     
|                                                       |                         |                      |                                |                      |                              
|All other countries                                    | 49,131                  | 47,822               | United States                  | $            55,861  | $         50,083             
|                                                       |                         |                      | Italy                          |                      | 34,879                       
|Total                                                  | $              112,467  | $        105,069     | France                         |                      | 24,861                       
|                                                       |                         |                      | Mexico                         |                      | 24,060                       
|                                                       |                         |                      |                                | Canada               |                              
|                                                       |                         |                      |                                | All other countries  | 24,502                       
|                                                       |                         |                      |                                |                      |                              
|                                                       |                         |                      |                                | Total                |                              
|                                                       |                         |                      |                                |                      |                              





13

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| | 9. | INCOME TAX EXPENSE
| | -- | ------------------



Our effective tax rate for the three months ended April 1, 2006 was 36.4%, compared to 37.0% for the three months ended April 2, 2005.  Our effective tax rate for the six months ended April 1, 2006 was 36.3%, compared to 30.6% for the same period last year.  The lower effective tax rate for the six months ended April 2, 2005 was due mainly to the favorable tax treatment on the exchange gain on the U.S. Dollar loan held by our Canadian subsidiary.



| | 10. | BENEFIT PLANS
| | --- | -------------



The following table provides the components of net periodic benefit cost for our non-union plans for the three and six months ended April 1, 2006 and April 2, 2005:



|                                          |               |            |               | Pension Benefits  
|----------------------------------------- | ------------- | ---------- | ------------- | ------------------
|                                          |               |            |               |                   
|                                          |               |            |               | Three Months Ended
|                                          |               |            |               |                   
|Components of Net Periodic Benefit Costs: | 4/1/2006      | 4/2/2005   |               | 4/1/2006          
|                                          |               |            |               |                   
|Service Cost                              |               |            | $         196 | $       132       
|Interest Cost                             |               |            | 164           | 127               
|Recognizing actuarial loss                | 93            | 75         |               | 208               
|Expected return on plan assets            | (184)         | (126)      |               | (329)             
|Amortization of prior service costs       | 7             | 3          |               | 14                
|                                          |               |            |               |                   
|Net periodic benefit cost                 | $         276 | $      211 |               | $        607      
|                                          |               |            |               |                   



It has been our policy to fund our pension costs by making annual contributions based upon minimum funding provisions of theEmployee Retirement Security Act of 1974.We previously disclosed, in our financial statements for the year ended October 1, 2005, that we did not expect to contribute to our non-union qualified plan in 2006 and as of April 1, 2006 we have made no contributions.



| | 11. | CONTINGENT LIABILITIES
| | --- | ----------------------



We are subject to federal and state hazardous substance cleanup laws that impose liability for the costs of cleaning up contamination resulting from past spills, disposal or other releases of hazardous substances. In this regard, we have incurred, and expect to incur, assessment, remediation and related costs at one of our former facilities. In 1991, we reported to state regulators a release at that site from an underground storage tank ("UST"). The UST and certain contaminated soil subsequently were removed and disposed of at an off-site disposal facility.



We have been conducting an investigation of soil and groundwater at the site with oversight by the state Department of Environmental Quality ("DEQ"). The investigation indicates that, unrelated to the UST release, additional soil and groundwater at the site have been impaired by chlorinated solvents, including tetrachloroethane and trichloroethylene, and other compounds. Also, our investigation revealed that the previous owners of the site had used a portion of the site as a disposal area. We have remediated the soils in this area but we believe that it is a source of contamination of groundwater, both on-site and off-site. Our investigation indicates that there were releases by the previous owners in areas over which additions were subsequently built. These releases have impacted groundwater that has migrated off-site. We have implemented a groundwater remediation system for the on-site contamination. We
continue to monitor and analyze conditions to determine the continued efficacy of the system. We also have implemented a groundwater remediation system for the off-site contamination. We continue to analyze other remedial alternatives for the off-site groundwater contamination and are reviewing these alternatives with the DEQ.









14

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We previously filed a complaint in federal district court seeking contribution from the previous owners of the site for the cost of the investigation and remediation of the site. We settled that litigation through a consent judgment against the former owners. Also, we asserted claims against insurers of the former owners for the amounts specified in the consent judgment. The insurers denied coverage and three of them filed a declaratory judgment action to that effect against us in federal district court.  In July 2004 the federal district court entered an Order and Judgment on cross motions for summary judgment resolving the claims in favor of the insurers.  We filed an appeal to the U.S. Court of Appeals for the Sixth Circuit, and following the Courts per curium affirmance in November 2005 we filed a petition for rehearing en banc.



We have a reserve for the $1.5 million of investigation and remediation expenses we have estimated to be incurred over the next 13 years to address the environmental issue at our site in Michigan. We based our estimate on the future costs expected to be incurred to investigate, monitor and remediate the site.  Our cost estimate continues to be subject to substantial uncertainty because of the extent of the contamination area, the variety and nature of geological conditions throughout the contamination area, the length of the remediation period, changes in remediation technology and the states Department of Environmental Quality feedback.  We are unable to estimate any additional losses or range of additional losses associated with this uncertainty.  Funding this activity will come from operating cash flows and only changes to the reserve estimate will affect the results of operations.



We indemnify certain customers with regard to product liability. We have insurance policies to cover this exposure, which includes a minimal deductible to be paid by us.





| | 12. | Legal Settlement
| | --- | ----------------



On November 11, 2005 one of our subsidiaries (the Subsidiary) entered into an agreement to settle litigation with another party (the Defendant) relating to allegations of breach of contract filed by the Subsidiary and to counterclaims alleged by the Defendant against the Subsidiary relating to allegations of breach of a related contract.  As a result of this settlement the Subsidiary recorded $1.6 million of revenue during the first quarter of fiscal 2006.

15

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Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations



Overview



Woodhead Industries develops, manufactures and markets network and electrical infrastructure products engineered for performance in demanding, harsh, or hazardous environments. We are known in the global industrial market by our recognized brands which include Brad Harrison®, BradPower, BradControl, SST, Daniel Woodhead®,mPm®, applicom®, Aero-Motive® and RJ-Lnxx®. Our expertise extends from mechanical, electrical and electronics products to communication software products and technologies.



Woodhead operates from twenty-one locations in ten countries spanning North America, Europe and Asia/Pacific.



Results of Operations



Second quarter fiscal 2006 results compared with second quarter fiscal 2005 results



SALES

Sales in the quarter ended April 1, 2006 were $59.0 million, an increase of 4.7% compared to sales of $56.4 million for the quarter ended April 2, 2005.  This improvement in sales was due to the performances in both our Connectivity and Electrical segments.  The North American Connectivity business continued to post improved results with revenue increasing 9.1% in the second quarter when compared to last year.  Our North American growth was due mainly to the improved results of our U.S. business, which recorded increases of 16.4% when compared to last year.    In Connectivity, foreign exchange rates changes negatively impacted sales by $1.5 million for the quarter ending April 1, 2006 when compared to last year.  For the second quarter 2006 Connectivity sales were $43.5 million, a 2.4% increase over the $42.5 million in sales reported for the second quarter 2005.  In local currencies sales in North America,
Europe and Asia increased 7.8%, 3.0% and 10.8%, respectively when compared to the second quarter of 2005.  Connectivity sales represented 73.7% of our total second quarter sales.  Electrical sales were $15.5 million in the quarter ended April 1, 2006 and $13.9 million last year, an 11.5% increase.  The increase in our Electrical sales was driven by increased demand in the commercial construction, shipyards and petrochemical markets.  Electrical sales represented 26.3% of our total second quarter sales.



SALES BY REGION

In the United States, sales were $33.6 million in the second quarter of fiscal 2006 compared to $30.6 million in the second quarter of 2005, a 9.6% increase. We recorded 43% of our revenues in foreign currencies during the second quarter of fiscal 2006 compared to 46% in the second quarter of 2005.  Our international revenue was down 1.2% in the second quarter of fiscal 2006 when compared to last year. This decrease was mainly due to the $1.5 million negative impact from changes in exchange rates and decreases in the U.K and France.  In local currencies, sales in the U.K. and France decreased 2.0% and 4.0%, respectively, when compared to the second quarter of 2005.  In local currencies European sales increased in Germany and Italy by 11.0% and 9.1%, respectively.  In local currencies Asian sales increased 10.8%, when compared to last year, due mainly to a 17.1% increase in Japan.



BACKLOG

The backlog of unfilled orders stood at $20.5 million at the end of this quarter, as compared to $19.4 million a year ago, which translates to 23 and 22 average days of sales in 2006 and 2005, respectively.  Our backlog has increased 25.5% compared to the 2005 year-end levels of $16.3 million.

16

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GROSS PROFIT

Gross profit as a percent of sales was 37.8% in the second quarter of fiscal 2006 up 0.8 points from last years gross profit of 37.0%.  The improvement in gross margin is due mainly to higher volumes and pricing actions we took during the fourth quarter of 2005 and early this quarter to offset higher commodity costs.  Gross margins in our Connectivity segment increased slightly while margins in our Electrical segment increased 3.0 points when compared to the second quarter of 2005.  This increase in our Electrical Segment was due mainly to higher volume, operational improvements implemented during previous quarters and diligent cost controls.



OPERATING EXPENSES

Operating expenses were $17.5 million for the quarter ended April 1, 2006 compared to $17.7 million for the quarter ended April 2, 2005.  These expenses were 29.6% and 31.5% of sales, respectively.  This decrease as a percentage of sales was due to the increased sales levels in the second quarter of 2006.  The decrease in operating expenses, when compared to the second quarter of 2005 was due mainly to $0.3 million from changes in exchange rates and $0.2 million of lower costs for Sarbanes-Oxley.  These decreases were partially offset by stock compensation costs of $0.3 million in the second quarter of 2006.   Stock compensation costs will continue to be higher than 2005 levels due to the adoption of Statement of Financial Accounting Standards (SFAS) 123,Share-Based Payment(SFAS 123(R)) in the first quarter of fiscal 2006.  We adopted SFAS No. 123(R) using
the modified prospective transition method, which requires the application of the accounting standard as of October 2, 2005, the first day of fiscal 2006.  In lieu of issuing stock options we issued 110,500 shares of non-vested stock during the first quarter of 2006.  The $0.3 million of stock compensation expense included $0.2 million related to the non-vested stock granted during the first quarter of 2006 and the balance related to prior stock options, which are now required to be expensed as a result of SFAS No. 123(R).  Unrecognized compensation cost at April 1, 2006 was $1.6 million.



SEGMENT OPERATING INCOME

Income from operations in the second quarter of 2006 was $3.0 million in the Connectivity segment compared to $2.3 million in 2005.  Profitability improvement in this segment on a year-over-year basis was the result of increased revenue and continued cost control.  The Electrical segment recorded income from operations in the second quarter of 2006 of $2.8 million compared to $1.6 million in 2005.  This significant improvement was due mainly to increased revenue, operational improvements implemented during previous quarters and diligent cost controls.



MISCELLANEOUS INCOME / EXPENSE

Other income in the second quarter of 2006 was $0.1 million compared to other expense of $0.5 million in the second quarter of 2005.  Other expense in the second quarter of 2005 was due to the loss from exchange rate changes, due primarily to the U.S. Dollar denominated loan held in Canada.



NET INCOME

Net income in the second quarter of 2006 was $3.0 million compared to $1.3 million in 2005.  Our effective tax rate was 36.4% and 37.0% for 2006 and 2005, respectively.



Six Months fiscal 2006 results compared with Six Months fiscal 2005 results



SALES

Sales in the six months ended April 1, 2006 were $112.5 million, an increase of 7.0% compared to sales of $105.1 million for the six months ended April 2, 2005.  This improvement in sales was due to the improved performances in both our Connectivity and Electrical segments.  The North American Connectivity business continued to post improved results with revenue increasing 15.2% when compared to last year.  Our North American growth was due mainly to the strong results of our U.S. business, which recorded increases of 21.6% when compared to last year.  This growth in North America coupled with the improving results from our European operations, which was up 5.0% in local currency allowed us to record 9.8% growth in local currencies in our Connectivity segment.  In Connectivity, foreign exchange rates changes negatively impacted sales by $3.3 million for the six months ended April 1, 2006 when compared to
last year.  However, this negative impact was partially offset by the receipt of $1.6 million in the first quarter of 2006 related to a previously disclosed legal settlement. For the first six months of 2006 Connectivity sales were $83.9 million, a 5.7% increase over the $79.4 million in sales reported for 2005.  In local currencies sales in North America, Europe and Asia increased 14.2%, 5.0% and 7.2%, respectively when compared to 2005.  Connectivity sales represented 74.6% of our first six months sales.  Electrical sales were $28.6 million in the six months ended April 1, 2006 and $25.7 million last year, an 11.2% increase.  Electrical sales represented 25.4% of our first six months sales.

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SALES BY REGION

In the United States, sales were $63.3 million in the first six months of fiscal 2006 compared to $57.2 million in 2005, a 10.6% increase. We recorded 44% of our revenues in foreign currencies during the first six months of fiscal 2006 compared to 46% in 2005.  Our international revenue was up 2.7% in the first six months of fiscal 2006 when compared to last year.  In local currencies, sales in Canada, Europe and Japan increased 15.5%, 5.0% and 15.0%, respectively, when compared to 2005.  Partially contributing to this increase in Canada was the $1.6 million legal settlement that occurred in the first quarter of fiscal 2006.  In local currencies European sales increased in Germany, Italy and France by 11.8%, 6.6% and 5.3%, respectively.  In local currencies Asian sales increased 7.2% due mainly to a 15.0% increase in Japan.



GROSS PROFIT

Gross profit as a percent of sales was 37.8% in the first six months of fiscal 2006.  This is an increase of 2.0 points from last years gross profit of 35.8%.  The legal settlement accounted for 0.9 points of the first six months of fiscal 2006 gross profit.  The improvement in gross margin is due mainly to this legal settlement, higher volumes and pricing actions we took in the fourth quarter of 2005 and early in the second quarter of 2006 to offset higher commodity costs.  Gross margins in our Connectivity segment increased 1.8 points, while margins in our Electrical segment increased 2.9 points when compared to the first six months of 2005.  The increase in our Electrical Segment was due mainly to higher volume, operational improvements implemented during previous quarters and diligent cost controls.



OPERATING EXPENSES

Operating expenses were $34.0 million for the first six months ended April 1, 2006 compared to $34.2 million for the six months ended April 2, 2005.  These expenses were 30.2% and 32.6% of sales, respectively.  This decrease as a percentage of sales was due mainly to the increased sales levels in the first six months of 2006.  Changes in foreign exchange rates had a positive effect of $0.7 million on operating expense in the first six months of fiscal 2006, compared to last year.  This positive effect was partially offset by a small increase in Sarbanes-Oxley costs of $0.1 million and stock compensation expense of $0.4 million during the first six months of 2006. As mentioned above, stock compensation costs will continue to be higher than 2005 levels due to the adoption of Statement of Financial Accounting Standards (SFAS) 123,Share-Based Payment(SFAS 123(R))
in the first quarter of fiscal 2006.



SEGMENT OPERATING INCOME

Income from operations in the first six months of 2006 was $4.7 million in the Connectivity segment compared to $2.3 million in 2005.  The full impact of foreign exchange rate changes are reflected in the Connectivity segment revenues.  The legal settlement, which occurred in the first quarter of 2006 accounted for $0.6 million of the increase in income from operations.  This $0.6 million benefit is after a $1.0 million charge to the segments operating expenses to reflect the multi-year total of legal fees associated with the settlement ($0.8 million of these costs had been charged to corporate over the past several years and as a result there was a corresponding credit to our corporate general and administrative expense line in the first quarter of 2006). Contributing to the profitability improvement in this segment on a year-over-year basis was the result of increased revenue and continued cost
control.  The Electrical segment recorded income from operations in the first six months of 2006 of $4.1 million, compared to $1.9 million in 2005.  This significant improvement is due mainly to increased revenue, operational improvements implemented during previous quarters and diligent cost controls.



MISCELLANEOUS INCOME / EXPENSE

Other income in the first six months of 2006 was $0.3 million compared to other income of $1.3 million in the first six months of 2005.  Miscellaneous income in the first six months of 2005 was primarily due to $0.7 from exchange rate changes, due primarily to a U.S. Dollar denominated loan held in Canada.  Also included were earn-out fees of $0.3 million received for the sale of the Aero-Motive product line in the first quarter of 2004 and the gain of $0.2 million from the sale of a small product line in Germany.



NET INCOME

Net income in the first six months of 2006 was $5.3 million, compared to $2.5 million in 2005.  Our effective tax rate was 36.3% and 30.6% for 2006 and 2005, respectively. The low effective tax rate for the first six months of 2005 was due mainly to the favorable tax treatment on the exchange gain on the U.S. dollar loan held by our Canadian subsidiary.

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Financial Condition, Liquidity and Capital Resources



On April 1, 2006 we had $16.3 million in cash and short-term investments, up $2.4 million from our year-end amount of $13.9 million.  This increase in cash was due mainly to the operating cash flow of $11.6 million, which includes the previously mentioned legal settlement.  This increase was partially offset by spending for property, plant and equipment and quarterly dividends.



Working capital increased to $57.9 million on April 1, 2006 compared to $54.8 million on October 1, 2005. The increase in working capital was due mainly to the increase in cash, which resulted from higher sales, due partially to the legal settlement, which occurred in the first quarter of fiscal 2006.



We continue to invest in equipment. For the first six months of fiscal 2006 we invested $6.7 million compared to $4.1 million in the first six months of fiscal 2005.  The purchases made during the first six months of 2006 were the result of continued investment a new world-wide ERP system, which began to roll out in North America in April 2006.



Our cash, short-term investments and the revolver are available for strategic investments, acquisitions and other potential cash needs that may arise. We believe that existing cash, short-term investments and the revolver, together with funds generated from operations, will be sufficient to meet our operating requirements through the current fiscal year.



On April 1, 2006 we had $25.2 million of long-term debt outstanding ($5.7 million shown as current debt) and we had unused credit facilities that provide for additional borrowings of up to $25.0 million.  On April 28, 2004 we entered into a three-year revolving credit agreement with our existing bank that will provide for borrowings up to $25.0 million at the banks prime or offered rate.  This agreement will expire on April 28, 2007.  This revolving credit agreement provides that the maximum ratio of debt to EBITDA, as defined, shall be no greater than 2.5 to 1.0 and minimum interest coverage ratio, as defined, shall be no less than 2.5 to 1.0.  We are in compliance with all provisions of our funding agreement.  At April 1, 2006 and October 1, 2005 we had no short-term borrowings.



We do not have any exposures to off-balance sheet arrangements, including special purpose entities, or activities that include non-exchange-traded contracts accounted for at fair value.



Contractual Obligations



Our contractual obligations for long-term debt, purchase obligations, capital leases and operating leases on the balance sheet remained substantially unchanged as of April 1, 2006 from the amounts disclosed as of October 1, 2005 in our Form 10-K.



Contingent Liabilities and Environmental Matters



Our operations are subject to international, federal, state and local environmental laws and regulations. We are party to an environmental matter, which obligates us to investigate, remediate or mitigate the effects on the environment of the release of certain substances at one of our manufacturing facilities. It is possible that this matter could affect cash flows and results of operations. For additional details on contingent liabilities and the environmental exposure, see Footnote No. 11.



Critical Accounting Policies



The preparation of this Quarterly Report requires managements judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting period.  There can be no assurance that actual results will not differ from those estimates.



Our significant accounting policies are described in the Managements Discussion and Analysis of Financial Condition and Results of Operation in our Form 10-K for the year ended October 1, 2005.  There have been no significant changes to those accounting policies subsequent to October 1, 2005.

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FORWARD-LOOKING STATEMENTS



The Securities and Exchange Commission encourages companies to disclose forward-looking information, so that investors can better understand a companys future prospects, and make informed investment decisions. This report, and other written and oral statements that we make from time to time, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements set out anticipated results based on managements plans and assumptions. We have tried, wherever possible, to identify such statements by using words such as anticipate, estimate, expect, plan, believe, and words and terms of similar substance, in connection with any discussion of future operating or financial performance.



We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties, and inaccurate assumptions.



In particular, such risks include statements relating to future actions, prospective products, future performance or results of current or anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, general economic and business conditions, business system conversions, currency fluctuations, and competition.



International-based revenues and substantial international assets result in our exposure to currency exchange rate fluctuations. We continue to evaluate the economic and operational impact of all foreign currencies, including its impact on competition, pricing, and foreign currency exchange risks. There is no guarantee, however, that all problems have been foreseen and corrected, or that no material disruption will occur in our businesses.



Growth in costs and expenses, changes in product mix, and the impact of acquisitions, restructuring, divestitures and other unusual items that could result from evolving business strategies could affect future results. Changes in the U.S. tax code and the tax laws in other countries can affect our net earnings. Claims have been brought against us and our subsidiaries for various legal, environmental, and tax matters, and additional claims arise from time to time. It is possible that our cash flows and results of operations could be affected by the resolution of these matters.



Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements.



This discussion of potential risks and uncertainties is by no means complete but is designed to highlight important factors that may impact our outlook. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise.

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Item 3  Quantitative and Qualitative Disclosures about Market Risk



In our global operating activities and in the normal course of our business, we are exposed to changes in foreign currency exchange rates, which may adversely affect our results of operations and financial condition. We seek to minimize those risks through our regular operating activities and, when deemed appropriate, through the use of derivative financial instruments. We use financial instruments to selectively hedge our foreign currency risk and do not use financial instruments for speculative purposes.



In 1998 we entered into a foreign currency swap agreement with an AA- rated counter-party to hedge a portion of our cash flows from our Italian subsidiary. We base the fair value for our cross-currency swap on the total cost estimate to terminate the agreement.  The fair value of the swap on December 31, 2005 was recorded as a $0.2 million liability.



In 2005 our Canadian subsidiary entered into three foreign currency forward contracts to cover its debt obligations under a U.S. Dollar denominated loan.  These forward contracts will reduce the exposure to fluctuations in foreign currency exchange rates, since gains and losses on these contracts offset losses and gains on the underlying positions.  We have elected not to treat these instruments as hedges for accounting purposes and, accordingly, both realized and unrealized gains and losses on these instruments have been recorded in miscellaneous income and expense on our Canadian subsidiarys general ledger.



All of our $25.2 million of long-term debt is denominated in U.S. Dollars and carries fixed interest. We base the fair value of our long-term debt on market, or dealer quotes. The difference between fair and carrying values of our financial instruments, other than the swap, were not material at the balance sheet dates.



Item 4  Internal Controls and Procedures



We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. This information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. Our management, including our principal executive officer and our principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.



Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures within 90 days of the filing date of this report.  Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in alerting them on a timely basis to material information required to be disclosed in our periodic filings.



As a result of the material weakness identified at October 1, 2005 management has instituted procedures to verify that inventory reconciliations are completed on a timely basis and operating effectively.  We have made the appropriate changes to our internal controls and now all accounts are reconciled on a timely basis.



In April, 2006, we implemented a new global Enterprise Resource Planning (ERP) system.  This new ERP system, which replaced multiple legacy financial systems with a single, standardized, integrated financial system, will be our primary financial system in North America beginning in April, 2006, and forward.  As a result of the implementation of this new ERP system, our internal controls over financial reporting and related processes were modified and/or redesigned to conform with and support the new ERP system.  We also have plans to undertake additional projects that will replace other Company financial systems in Europe and Asia in the next two years.



Although our management believes that the new ERP system has maintained or enhanced the internal controls over financial reporting, our management has yet to test the effectiveness of the new ERP systems impact on the internal control environment.  As such, there is the risk that the new ERP system and/or new internal controls have yet unidentified deficiencies that could constitute significant deficiencies, material weaknesses or aggregate to material weaknesses in our internal control over financial reporting.  Our management anticipates testing the new system and the new internal controls during fiscal 2006 as part of its ongoing testing of the internal controls.

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PART II - OTHER INFORMATION

Item 1  Legal Proceedings



We are subject to federal and state hazardous substance cleanup laws that impose liability for the costs of cleaning up contamination resulting from past spills, disposal or other releases of hazardous substances. In this regard, we have incurred, and expect to incur, assessment, remediation and related costs at one of our former facilities. In 1991, we reported to state regulators a release at that site from an underground storage tank ("UST"). The UST and certain contaminated soil subsequently were removed and disposed of at an off-site disposal facility.



We have been conducting an investigation of soil and groundwater at the site with oversight by the state Department of Environmental Quality ("DEQ"). The investigation indicates that, unrelated to the UST release, additional soil and groundwater at the site have been impaired by chlorinated solvents, including tetrachloroethane and trichloroethylene, and other compounds. Also, our investigation revealed that the previous owners of the site had used a portion of the site as a disposal area. We have remediated the soils in this area but we believe that it is a source of contamination of groundwater, both on-site and off-site. Our investigation indicates that there were releases by the previous owners in areas over which additions were subsequently built. These releases have impacted groundwater that has migrated off-site. We have implemented a groundwater remediation system for the on-site contamination. We
continue to monitor and analyze conditions to determine the continued efficacy of the system. We also have implemented a groundwater remediation system for the off-site contamination. We continue to analyze other remedial alternatives for the off-site groundwater contamination and are reviewing these alternatives with the DEQ.



We previously filed a complaint in federal district court seeking contribution from the previous owners of the site for the cost of the investigation and remediation of the site. We settled that litigation through a consent judgment against the former owners. Also, we asserted claims against insurers of the former owners for the amounts specified in the consent judgment. The insurers denied coverage and three of them filed a declaratory judgment action to that effect against us in federal district court.  In July 2004 the federal district court entered an Order and Judgment on cross motions for summary judgment resolving the claims in favor of the insurers.  We filed an appeal to the U.S. Court of Appeals for the Sixth Circuit, and following the Courts per curium affirmance in November 2005 we filed a petition for rehearing en banc.



We have a reserve for the $1.5 million of investigation and remediation expenses we have estimated to be incurred over the next 13 years to address the environmental issue at our site in Michigan. We based our estimate on the future costs expected to be incurred to investigate, monitor and remediate the site.  Our cost estimate continues to be subject to substantial uncertainty because of the extent of the contamination area, the variety and nature of geological conditions throughout the contamination area, the length of the remediation period, changes in remediation technology and the states Department of Environmental Quality feedback.  We are unable to estimate any additional losses or range of additional losses associated with this uncertainty.  Funding this activity will come from operating cash flows and only changes to the reserve estimate will affect the results of operations.



We indemnify certain customers with regard to product liability. We have insurance policies to cover this exposure, which includes a minimal deductible to be paid by us.

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PART II OTHER INFORMATION

Item 4  Submission of matters to a vote of security holders



We held our Annual Meeting of Stockholders on February 2, 2006. The following proposals were adopted by the margins indicated:



|1. | To vote for the election of the following nominees to the Board of Directors:
|-- | -----------------------------------------------------------------------------





|                  | For        | Authority Withheld | Broker Non Votes
|----------------- | ---------- | ------------------ | ----------------
|Charles W. Denny  | 11,138,335 | 72,670             | 0               
|Ann F. Hackett    | 11,128,693 | 82,312             | 0               
|Eugene P. Nesbeda | 11,128,993 | 82,012             | 0               



|2. | Ratification of the appointment of Ernst & Young LLP as Woodhead Industries, Inc.s independent public accountants:
|-- | -------------------------------------------------------------------------------------------------------------------



| | For        | Against | Abstain | Broker Non Votes
| | ---------- | ------- | ------- | ----------------
| | 11,179,153 | 5,524   | 26,328  | 0               





PART II - OTHER INFORMATION

Item 6  Exhibits



| | A. | Exhibits
| | -- | --------



Exhibit 31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 signed by Philippe Lemaitre  President and C.E.O.



Exhibit 31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 signed by Robert H. Fisher  Vice President, Finance and Chief Financial Officer.



Exhibit 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



Exhibit 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES



Under the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, this report was signed on behalf of the Registrant by the authorized persons below.





WOODHEAD INDUSTRIES, INC.



|Date: May 10, 2006
|------------------







|BY:  /s/ Robert H. Fisher          | BY:  /s/Joseph P. Nogal        | 
|---------------------------------- | ------------------------------ | 
|Robert H. Fisher                   | Joseph P. Nogal                | 
|Vice President, Finance and C.F.O. | Vice President,                | 
|(Principal Financial Officer)      | Treasurer/Controller           | 
|                                   | (Principal Accounting Officer)
|                                   |                                | 

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