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

FORM 10-Q

(Mark One)
[x]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended        12/27/2003       

OR

[  ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________

Commission File Number        0-5971        

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

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)   Yes      X        No             .

The number of common shares outstanding as of January 26, 2004 was 12,093,523.

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TABLE OF CONTENTS

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Part I — FINANCIAL INFORMATION
Item 1 — Financial Statements

Woodhead Industries, Inc.
Consolidated Balance Sheets
As of December 27, 2003 and September 27, 2003
(Amounts in Thousands)

The accompanying notes are an integral part of these statements.

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Woodhead Industries, Inc.
Consolidated Statements of Income
For the Three Months ended December 27, 2003 and December 28, 2002
(Amounts in Thousands, except per share data, unaudited)

The accompanying notes are an integral part of these statements.

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Woodhead Industries, Inc.
Consolidated Statements of Cash Flows
For the Three Months ended December, 27 2003 and December 28, 2002
(Amounts in Thousands, unaudited)

The accompanying notes are an integral part of these statements.

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Woodhead Industries, Inc.
Consolidated Statements of Comprehensive Income
For the Three Months ended December 27, 2003 and December 28, 2002
(Amounts in Thousands, unaudited)

The accompanying notes are an integral part of these statements.

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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. 2003 Form 10-K.

2.     RECENT ACCOUNTING PRONOUNCEMENTS

In December 2002 the FASB issued SFAS No. 148 Accounting for Stock-Based Compensation – Transition and Disclosure (SFAS 148), which amends SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 148 provides alternative methods of transition for companies that voluntarily change to the fair value-based method of accounting for stock-based employee compensation, and also requires expanded disclosures in both interim and annual financial statements. We are required to adopt the expanded disclosure requirements of SFAS No. 148 for the quarter ending June 28, 2003. Our expanded disclosure regarding pro forma amounts for the effects of not recording FAS 123 expense is included in Footnote No. 7.

In January 2003 we adopted FASB Statement No. 146 Accounting for Costs Associated with Exit or Disposal Activities, which generally requires that a liability for costs associated with an exit or disposal activity be expensed as incurred. Exit costs primarily consist of future minimum lease payments on vacated facilities, facility closure costs and facility consolidation costs. Employee separation costs consist primarily of severance costs. At each reporting date, we will evaluate our accruals for exit costs and employee separation costs to ensure that the accruals are still appropriate. In certain circumstances, accruals are no longer required because of efficiencies in carrying out the plans or because employees previously identified for separation resigned unexpectedly and did not receive severance or were redeployed due to circumstances not foreseen when the original plans were initiated. For the quarter ending December 27, 2003 our expanded disclosure regarding restructuring and other related charges is included in Footnote No. 10.

In January 2003 the FASB issued FASB Interpretation No. 46 (“FIN 46”) Consolidation of Variable Interest Entities, which requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 was effective immediately for all new variable interest entities created or acquired after January 31, 2003. We do not have any variable interest entities that require consolidation under FIN 46.

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3.    INVENTORIES

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

There was no LIFO impact on net income for the three months ended December 27, 2003. For the quarter ended December 28, 2002 had we used the FIFO method for all inventories net income would have been $0.1 million less than reported.

4.    PROPERTY, PLANT AND EQUIPMENT

During the first quarter of fiscal 2004 we purchased $1.8 million of property, plant and equipment compared to $0.9 million in the first quarter of fiscal 2003.

5.    LONG TERM DEBT

Effective March 30, 2002 we amended our revolving credit agreement with a bank to increase the maximum ratio of debt to EBITDA, as defined, from 2.5 to 2.9, and reduce the minimum interest coverage ratio, as defined, from 3.0 to 2.0. This amendment expired on March 29, 2003, when the maximum debt to EBITDA ratio reverted back to 2.5 and the minimum interest coverage ratio reverted back to 3.0. We are in compliance with all provisions of our funding arrangements. At December 27, 2003 we had unused revolving credit agreements with a bank that provide for borrowings of up to $25.0 million at the bank’s prime or offered rate. This agreement expires on February 28, 2004. We are in the process of negotiating credit facilities for the time after the current agreement expires. At December 27, 2003 and September 27, 2003 we had no short-term borrowings.

Included in our financial statements is a 6.64% senior guaranteed note, which is held by a subsidiary and has a parental guarantee. In addition, there is a 6.81% senior guaranteed note held by the parent company, which is guaranteed by our U.S. subsidiaries.

6.    EARNINGS PER SHARE

Basic earnings per share exclude dilution, and diluted earnings per share reflect the potential dilution that could occur if stock options were exercised. The reconciliation between basic and diluted earnings per share is as follows:

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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 12,086,000 and 12,011,000 on December 27, 2003 and September 27, 2003, respectively.

We apply Accounting Principles Board Opinion No. 25: Accounting for Stock Issued to Employees, and related interpretations, including FASB Interpretation (FIN) 44: Accounting for Certain Transactions Involving Stock Compensation in accounting for the plans. Accordingly, we do not recognize compensation expense related to option grants. 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 148, summarizes results as if we had recorded compensation expense for option grants during the three months ended December 27, 2003 and December 28, 2002:

The pro forma effect of stock option grants on results of operations may not be representative of the pro forma effect on results of operations for future years.

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8.    SEGMENT AND GEOGRAPHIC DATA

Segment reporting is presented in accordance with Statement of Financial Accounting Standards (SFAS) No. 131: Disclosure about Segments of an Enterprise and Related Information. This statement 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 our Industrial Communications and Connectivity ProductsSegment (Connectivity Segment) are primarily derived from sales of system components to devices in open networks for automated manufacturing and distribution applications. Revenues in our Electrical Safety & Specialty Products Segment (Electrical Segment) 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 percent 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.

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Three Months
(Amounts in Thousands, unaudited)
    Segment data

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9.    SALE OF AKAPP OPERATIONS

On September 29, 2002 we adopted SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 states that the results of operations of a component of an entity that has either been disposed of or is classified as held for sale shall be reported in discontinued operations if both the following conditions are met: (a) the operations and cash flows of the component have been (or will be) eliminated from the ongoing operations of the entity as a result of the disposal transaction and (b) the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction.

In November 2002 we sold our Dutch subsidiary, AKAPP, to a third party. We sold the AKAPP operation for $4.9 million in cash, which included the payment of a $2.6 million inter-company loan and the receipt of $2.3 million in cash. As a result of this transaction we recorded a $0.7 million gain on disposal, which in accordance with SFAS No. 144 has been reported as Income from Discontinued Operations. The results of operations related to AKAPP for fiscal 2003 have also been recorded as Income from Discontinued Operations.

10.    RESTRUCTURING CHARGES

In January 2003 we adopted FASB Statement No. 146 Accounting for Costs Associated with Exit or Disposal Activities, which generally requires that a liability for costs associated with an exit or disposal activity be expensed as incurred. Exit costs primarily consist of future minimum lease payments on vacated facilities, facility closure costs and facility consolidation costs. Employee separation costs consist primarily of severance costs. At each reporting date, we will evaluate our anticipated restructuring and other charges and accruals for employee separation costs to ensure that the amounts are still appropriate.

In the quarter ending June 28, 2003 we announced the closing of our Aero-Motive facility in Kalamazoo, Michigan. During the first quarter of 2004 we completed the sale of the Aero-Motive government hose reel product line and recorded a gain of $1.2 million. In addition to having sold two small product lines that did not align strategically with our current operations we will consolidate and integrate the remaining manufacturing operations into our facility in Juarez, Mexico, which will improve our overall operating efficiencies. The office operations will be integrated with our Northbrook, Illinois facility. The closing of this facility will terminate the employment of 111 total employees, which includes sixty-four plant employees and forty-seven office employees. As of the quarter ended December 27, 2003 twenty-one employees have left the company. The sale and integration process will take several quarters to complete and it is estimated that the Kalamazoo, Michigan facility will remain open until the second quarter of calendar year 2004.

For the first quarter 2004 we recorded restructuring and other related charges of $0.6 million, which related to the closing of our Aero-Motive facility. This restructuring charge is composed of the following:

The costs included as a one-time termination benefit are the estimates of severance benefits that will be incurred as the Kalamazoo facility is closed. In accordance with SFAS No. 144 we have accelerated the depreciation on those assets that are expected to be excess when the facility is closed. We have included $0.3 million of accelerated depreciation in other associated costs for the quarter ending December 27, 2003. Legal fees, system conversion costs, incidental salaries and travel expense represent the balance of other associated costs. There are no anticipated contract termination costs related to this project.

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In addition, related to the Aero-Motive restructuring, we anticipate pension settlement charges over the balance of our fiscal year estimated to be approximately $0.8 triggered by reduced employment levels that require us to recognize past gains and losses in our pension accounts.

The following table details the activity in the Aero-Motive restructuring accrual accounts for the quarter ending December 27, 2003

11.    INCOME TAX EXPENSE

Our effective tax rate was 11.1% and 21.1% for the first three months of 2004 and 2003, respectively. The decrease in our effective tax rate for the first three months of 2004 was due mainly to the utilization of capital loss carryforwards (which previously had a valuation allowance reported against it) to offset $0.4 million in tax on capital gains from the Aero-Motive product line sale, the tax treatment on the exchange gain on the U.S. dollar loan held by our Canadian subsidiary and the change in the effective Canadian tax rate (due to a change in tax legislation) on deferred tax assets, which resulted in a tax benefit of $0.2 million. The decrease in our effective tax rate in the first quarter of 2003 was due mainly to the effects of utilizing $0.3 million of excess foreign tax credits.

12.    BENEFIT PLANS

Beginning in April 2003, our post retirement benefit plan was modified to require participants to fund the total cost of the retiree medical program. At September 28, 2002 we had accrued postretirement benefit cost, which is included in our consolidated balance sheet in the amount of $2.2 million. At December 27, 2003 we had no liability for any of these post retirement benefit costs and the reduction of this $2.2 million liability was amortized over the period from April 1, 2003 to December 27, 2003. During the quarter ended December 27, 2003 we lowered our benefits liability account $0.8 million, which represents the last of the amortization of the $2.2 million liability.

13.    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 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.

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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 have asserted claims against insurers of the former owners for the amounts specified in the consent judgment. The insurers have denied coverage and three of them filed a declaratory judgment action to that effect against us in federal district court.

We have a reserve for the $1.3 million of investigation and remediation expenses we have estimated to be incurred over the next 14 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, changes in remediation technology and the state’s Department of Environmental Quality feedback. 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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Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We develop, manufacture and market electronic and industrial communications products, primarily serving the global automation and control markets with connectivity solutions and specialty electrical products. Through our Industrial Communications and Connectivity Segment (Connectivity Segment, or Connectivity) we provide the industrial automation industry with a single, worldwide source for industrial communications and connectivity solutions. Our product lines, comprising five recognized industry-leading brands, Brad Harrison^®, mPm^®, SST™, applicom^® and RJ-Lnxx^® make us the premier supplier of application-specific connectivity solutions. Our Electrical Safety & Specialty Segment (Electrical Segment, or Electrical) manufactures highly customized products to support enhanced safety and productivity on the factory floor. Our Electrical product brands include Daniel Woodhead^® and Aero-Motive^®. We sell our products to stocking distributors, original equipment manufacturers (OEM) and system integrators. Our direct sales force, as well as manufacturers’ agencies, service our customers and promote our products to end-customers.

We have operations in nine countries outside the United States, and fluctuations in foreign currency exchange rates can impact our results of operations and financial condition.

Results of Operations

First quarter fiscal 2004 results compared with first quarter fiscal 2003 results

SALES
Sales in the quarter ended December 27, 2003 were $45.1 million, an increase of 6.9% compared to sales of $42.2 million for the quarter ended December 28, 2002. This increase was due mainly to the positive effects resulting from changes in exchange rates, which was partially offset by the lost revenue from the sale of the two Aero-Motive product lines. During the first quarter of 2004 we lost a portion of a low margin OEM account in the data communication industry, which represented approximately 4% of Connectivity revenue. Recent economic reports indicate expansion in the manufacturing sector and we are starting to see our customer’s willingness to initiate new projects, which will increase sales levels. For the first quarter 2004 Connectivity sales were $33.1 million, a 16.6% increase over the $28.4 million in sales reported for the first quarter 2003. Favorable foreign exchange rates accounted for $3.2 million of this increase but we also experienced solid growth in the United Kingdom, Italy and Japan. Connectivity sales represented 73.3% of our total first quarter sales, which reflects our increased focus on the continued growth of this segment. Electrical sales were $12.0 million in the quarter ended December 27, 2003 and $13.8 million last year, a 13.0% decrease. This decrease was due mainly to the $1.3 million of lost revenue from the sale of the two Aero-Motive product lines.

SALES BY REGION
In the United States, sales were $25.6 million in the first quarter of fiscal 2004 and $26.5 million last year, a 3.4% decrease. We recorded 43% and 37% of our revenues in foreign currencies during the first quarters of fiscal 2004 and 2003, respectively. Our international revenue was up 24.5% in the first quarter of fiscal 2004 when compared to last year. This increase was mainly due to the strong operating performance of our European and Japanese businesses and the favorable impact of foreign exchange rate changes, particularly the Euro and Canadian dollar. In constant dollars, sales increased 9.6% and 3.0% in Europe and North America, respectively when compared to the first quarter of 2003.

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BACKLOG
The backlog of unfilled orders stood at $17.7 million at the end of this quarter as compared to $12.9 million a year ago, which translates to 24 and 18 average days of sales for the first quarters of 2004 and 2003, respectively. This 37.0% increase in backlog is consistent with improved business trends

GROSS PROFIT
Gross profit as a percent of sales was 36.6% in the first quarter of fiscal 2004 and 37.2% last year. This decline was primarily due to the mix shift in sales by location (margins in Europe are lower due to the competitive environment), and a warranty provision that was recorded to cover a component failure in one of our Aero-Motive products lines, which has been identified and corrective actions have been implemented. Decreases in our LIFO reserve requirement increased our gross profit by $0.2 million in the first quarter of fiscal 2003 and there was no corresponding increase in the first quarter of 2004.

OPERATING EXPENSES
Operating expenses were $15.6 million in the first quarter 2004 compared to $13.8 million in the first quarter of 2003. Including expenses for Research and Development these expenses were 34.5% of sales in 2004 compared to last year’s 32.6%. Operating expenses in the first quarter of 2004 included a restructuring charge of $0.6 million related to the migration of our operations from our Aero-Motive subsidiary to Juarez, Mexico. The Aero-Motive restructuring will continue through the third quarter of 2004 with anticipated costs of $1.7 million for the year. In addition we anticipate an approximate expense of $0.8 million for pension settlement charges over the next two quarters of fiscal 2004. Exchange rate changes increased operating expenses by $1.0 million when compared to the first quarter of 2003. Also contributing to this increase was the planned investment in sales and marketing initiatives, which includes the hiring of additional experienced sales professionals in North America. This investment also includes a branding study to maximize the Woodhead name, the implementation of a new E-Catalog and the improvement of our marketing tools and programs to increase customer awareness. Partially offsetting these increases was the $0.8 million credit to operating expense due to the modification of our retiree medical program.

SEGMENT OPERATING INCOME
Income from operations in the first quarter of 2004 was $0.3 million in the Connectivity segment compared to $0.4 million in 2003. This decline was due to the sales mix shift and higher operating expenses, which includes the investment in the new marketing initiatives. The Electrical segment recorded income from operations in the first quarter of 2004 of $0.9 million compared to $1.9 million in 2003. This decrease was due mainly to the Aero-Motive restructuring charge in 2004 and the lost revenue from the sale of the two Aero-Motive product lines.

MISCELLANEOUS INCOME
Other income in the first quarter of 2004 was $1.9 million and consisted mainly of the $1.2 million gain on the sale of the Aero-Motive government hose reel product line and a $0.9 million gain realized from exchange rate changes on a U.S. dollar loan that our Canadian subsidiary used to acquire the assets of SST in early 1998.

DISCONTINUED OPERATIONS
In the first quarter of 2003 we sold our AKAPP operations for $4.9 million in cash. This sale resulted in a gain of $0.7 million and was recorded as Income from Discontinued Operations. The results of operations related to AKAPP for fiscal 2003 have also been recorded as Income from Discontinued Operations.

NET INCOME
Net income in the first quarter of 2004 was $2.1 million compared to $2.2 million in 2003. Our effective tax rate was 11.1% and 21.1% for the first three months of 2004 and 2003, respectively. The decrease in our effective tax rate for the first three months of 2004 was due mainly to the utilization of capital loss carryforwards (which previously had a valuation allowance reported against it) to offset $0.4 million in tax on capital gains from the Aero-Motive product line sale, the tax treatment on the exchange gain on the U.S. dollar loan held by our Canadian subsidiary and the change in the effective Canadian tax rate (due to a change in tax legislation) on deferred tax assets, which resulted in a tax benefit of $0.2 million. The decrease in our effective tax rate in the first quarter of 2003 was due mainly to the effects of utilizing $0.3 million of excess foreign tax credits.

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Financial Condition, Liquidity and Capital Resources

At December 27, 2003 we had $25.9 million in cash and short-term investments, up from $22.5 million at fiscal year end September 27, 2003. This increase in cash is due mainly to our strong operating cash flow of $7.6 million, which includes the impact from the sale of our Aero-Motive product line. This was partially offset by increased spending in property, plant and equipment and the increase in our quarterly dividend.

Working capital in the first quarter of 2004 increased to $50.9 million compared to $47.3 million at September 27, 2003. This increase in working capital was due mainly to the increased profit levels that were generated in the first quarter of 2004 and the favorable exchange rate effects on our foreign assets.

We continue to invest in property and equipment, including new machinery, computer systems and facilities. For the first quarter of 2004 we invested $1.8 million in property, plant and equipment compared to $0.9 million in the first quarter of 2003.

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

At December 27, 2003 we had $36.6 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. Effective March 30 2002 we amended our revolving credit agreement with a bank to increase the maximum ratio of debt to EBITDA, as defined, from 2.5 to 2.9, and reduce the minimum interest coverage ratio, as defined, from 3.0 to 2.0. This amendment expired on March 29, 2003, when the maximum debt to EBITDA ratio reverted back to 2.5, and the minimum interest coverage ratio has reverted back to 3.0. We are in compliance with all provisions of our funding arrangements. We are currently in the process of negotiating a new revolving credit agreement. Our current credit agreement expires on February 28, 2004. We believe, that we will continue to be in compliance with all provisions of our funding arrangements.

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.

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 the environmental exposure, see Part II – Other Information: Item 1 – Legal Proceedings.

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 September 27, 2003. There have been no significant changes to those accounting policies subsequent to September 27, 2003.

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

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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, 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.

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 at December 27, 2003 was recorded as a $1.0 million liability.

$36.6 million of our 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.

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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.

There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referenced in the foregoing paragraph.

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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 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 have asserted claims against insurers of the former owners for the amounts specified in the consent judgment. The insurers have denied coverage and three of them filed a declaratory judgment action to that effect against us in federal district court.

We have a reserve for the $1.3 million of investigation and remediation expenses we have estimated to be incurred over the next 14 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, changes in remediation technology and the state’s Department of Environmental Quality feedback. Funding this activity will come from operating cash flows and only changes to the reserve estimate will affect the results of operations.

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PART II — OTHER INFORMATION

Item 6 – Exhibits and Reports on Form 8-K

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.

B.    Reports on Form 8-K

        During the quarter just ended we filed an 8-K on November 14, 2003 releasing our annual 2003 earnings.

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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: February 9, 2004

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