<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 1, 2005.

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSISTION PERIOD FROM _______ TO _________.

                         Commission File Number 1-14182

                              TB WOOD'S CORPORATION
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in its charter)

                Delaware                               25-1771145
        (State of incorporation)                 (IRS Employer I.D. No)

                             440 North Fifth Avenue
                             Chambersburg, PA 17201
               (Address of principal executive offices, Zip Code)

                                  717-264-7161
              (Registrant's Telephone Number, Including Area Code)

Indicate by checkmark 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, 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 Securities Exchange Act of 1934. Yes [ ] No [X]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

                  Class                       Outstanding at April 1, 2005
      ----------------------------            ----------------------------
      Common Stock, $.01 par value                      5,179,634

<PAGE>

                              TB WOOD'S CORPORATION
                                FORM 10-Q - INDEX
                                  APRIL 1, 2005

<TABLE>
<CAPTION>
                                                                                                    Page No.
                                                                                                    --------

<S>       <C>                                                                                             <C>
Part 1. - Financial Information

Item 1.   Financial Statements (unaudited):

            Condensed Consolidated Statements of Operations - for the
             Three Months ended April 1, 2005 and April 2, 2004                                            3

            Condensed Consolidated Balance Sheets -
             April 1, 2005 and December 31, 2004                                                           4

            Condensed Consolidated Statements of Cash Flows - for the
             Three Months ended April 1, 2005 and April 2, 2004                                            5

            Notes to Condensed Consolidated Financial Statements                                           6

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

Item 3.   Quantitative and Qualitative Disclosures about Market Risk                                      14

Item 4.   Controls and Procedures                                                                         14

Part II - Other Information                                                                               15

Item 1    Legal Proceedings
Item 2    Changes in Securities and Use of Proceeds
Item 3    Defaults on Senior Securities
Item 4    Submission of Matters to a Vote of Security Holders
Item 5    Other Information
Item 6    Exhibits

Signatures                                                                                                16

Exhibit 31.1 Certification pursuant to Section 302 of the Sarbanes Oxley Act of 2002
Exhibit 31.2 Certification pursuant to Section 302 of the Sarbanes Oxley Act of 2002
Exhibit 32   Statement Pursuant to 18 U.S.C. Section 1350 as required by Section 906
              of the Sarbanes Oxley Act of 2002
</TABLE>

                                        2
<PAGE>

PART 1. - FINANCIAL INFORMATION
Item 1 Financial Statements

                     TB Wood's Corporation and Subsidiaries
                 Condensed Consolidated Statements of Operations
                                   (Unaudited)

                                                       First Quarter Ended
                                                     -----------------------
                                                      April 1,     April 2,
(in thousands, except per share amounts)                2005         2004
--------------------------------------------------   ----------   ----------
Net Sales                                            $   27,711   $   26,081
Cost of Goods Sold                                       19,558       18,567
                                                     ----------   ----------
Gross profit                                              8,153        7,514
Selling, general and administrative expense               6,860        6,790
                                                     ----------   ----------
Operating income                                          1,293          724
Interest expense and other finance charges                  616          369
                                                     ----------   ----------
Income before provision for income taxes                    677          355
Provision for income taxes                                  305          221
                                                     ----------   ----------
Net income                                           $      372   $      134
                                                     ==========   ==========

PER SHARE AMOUNTS - BASIC AND DILUTED:
  Basic net income per common share                  $     0.07   $     0.03
                                                     ==========   ==========
  Diluted net income per common share                $     0.07   $     0.03
                                                     ==========   ==========
  Basic weighted average shares of common stock
   and equivalents outstanding                            5,177        5,157
                                                     ==========   ==========
  Diluted weighted average shares of common stock
   and equivalents outstanding                            5,177        5,167
                                                     ==========   ==========

The accompanying notes are an integral part of these condensed consolidated
financial statements.

                                        3
<PAGE>

                     TB Wood's Corporation and Subsidiaries
                      Condensed Consolidated Balance Sheets
                                   (Unaudited)

                                                      April 1,     December 31,
(in thousands, except per share amounts)                2005           2004
--------------------------------------------------   ----------    ------------
ASSETS
Current Assets:
  Cash and cash equivalents                          $    1,346    $        556
  Accounts receivable less allowances of $904 at
   April 1, 2005 and $880 at December 31, 2004           15,820          13,353
  Inventories--Note 2                                    19,332          20,418
  Other current assets                                    3,273           3,742
                                                     ----------    ------------
    Total current assets                                 39,771          38,069

Property, plant and equipment                            81,967          82,125
  Less accumulated depreciation                          58,182          57,666
                                                     ----------    ------------
    Net property, plant and equipment                    23,785          24,459
Other Assets:
  Goodwill                                                5,795           5,902
  Other                                                   1,287             940
                                                     ----------    ------------
    Total other assets                                    7,082           6,842
                                                     ----------    ------------
TOTAL ASSETS                                         $   70,638    $     69,370
                                                     ==========    ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Current maturities of long-term debt               $    8,883    $      7,605
  Accounts payable                                        8,524           7,803
  Accrued expenses                                        6,404           6,343
  Deferred income taxes                                     101             134
                                                     ----------    ------------
    Total current liabilities                            23,912          21,885

Long-term debt, less current maturities                  15,742          16,708
Postretirement benefit obligation, less current
 portion                                                    235             235
Deferred income taxes                                       675             807

Shareholders' Equity:
  Preferred stock, $.01 par value, 100 shares
   authorized at April 1, 2005 and December 31,
   2004, and no shares issued or outstanding                 --              --
  Common stock, $.01 par value, 10,000,000 shares
   authorized; 5,639,798 issued; 5,179,634 and
   5,172,690 outstanding at April 1, 2005 and
   December 31, 2004                                         57              57
  Additional paid-in-capital                             27,150          27,095
  Retained earnings                                       7,289           6,943
  Accumulated other comprehensive loss                       29             158
  Treasury stock at cost                                 (4,451)         (4,518)
                                                     ----------    ------------
    Total shareholders' equity                           30,074          29,735
                                                     ----------    ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY           $   70,638    $     69,370
                                                     ==========    ============

The accompanying notes are an integral part of these condensed consolidated
financial statements.

                                        4
<PAGE>

                     TB Wood's Corporation and Subsidiaries
                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)

                                                       First Quarter Ended
                                                     -----------------------
                                                       April 1     April 2,
(in thousands)                                          2005         2004
---------------------------------------------------  ----------   ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income                                           $      372   $      134
Adjustments to reconcile net income to net cash
 provided by operating activities:
  Depreciation and amortization                           1,259        1,351
  Change in deferred income taxes, net                     (165)         (55)
  Other                                                      85           67
  Changes in operating assets and liabilities:
    Accounts receivable                                  (2,467)      (2,543)
    Inventories                                           1,086         (280)
    Other current assets                                    469         (209)
    Accounts payable                                        721          827
    Accrued and other liabilities                            61          (38)
                                                     ----------   ----------
  Total adjustments                                       1,049         (880)
                                                     ----------   ----------
Net cash provided by (used in) operating activities       1,421         (746)

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                     (451)        (373)
  Other                                                    (377)        (176)
                                                     ----------   ----------
Net cash used in investing activities                      (828)        (549)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from revolving credit facilities              19,739       11,000
  Repayments of revolving credit facilities             (19,408)      (8,815)
  Repayments of other long-term debt, net                   (18)         (11)
  Payments of dividends                                      --         (464)
  Issuance of treasury stock                                 13           13
                                                     ----------   ----------
Net cash provided by financing activities                   326        1,723

Effect of changes in foreign exchange rates                (129)         (92)
                                                     ----------   ----------
Net increase in cash and cash equivalents                   790          336
Cash and cash equivalents at beginning of period            556          781
                                                     ----------   ----------
Cash and cash equivalents at end of period           $    1,346   $    1,117
                                                     ==========   ==========
Income taxes paid (refunded)                         $      110   $     (339)
                                                     ==========   ==========
Interest paid                                        $      554   $      380
                                                     ==========   ==========

The accompanying notes are an integral part of these condensed consolidated
financial statements

                                        5
<PAGE>

                     TB Wood's Corporation and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (unaudited)
                    (in thousands, except per share amounts)

1.      Basis of Presentation

        In the opinion of management, the accompanying unaudited condensed
        consolidated financial statements contain all adjustments consisting of
        normal recurring adjustments necessary to present fairly the
        consolidated financial position of TB Wood's Corporation and
        Subsidiaries (the "Company") and the results of their operations and
        cash flows for the periods presented. Certain information and footnote
        disclosures normally included in the financial statements prepared in
        accordance with accounting principles generally accepted in the United
        States have been condensed or omitted. Certain prior period amounts have
        been reclassified to conform to the current period presentation.

        These financial statements should be read together with the audited
        financial statements and notes in the Company's 2004 Annual Report on
        Form 10-K filed with the Securities and Exchange Commission. Operating
        results for the interim periods presented are not necessarily indicative
        of the results that may be expected for the full fiscal year.

        Effective January 1, 2005 the Company adopted a calendar year as the
        annual period for reporting its financial results. Interim periods
        consist of four quarters of 13 weeks each, except for the fourth quarter
        that ends on December 31. Previously, the Company reported on a 52/53
        week fiscal year ending on the Friday nearest December 31. Fiscal 2004
        was a 52-week year that ended on December 31, 2004, and this change is
        not expected to have any material impact on comparability between fiscal
        reporting periods.

2.      Inventories and Cost of Goods Sold

        The Company uses the last-in, first-out ("LIFO") method for inventories
        located in the United States, which represents approximately 70% and 74%
        of inventories at April 1, 2005 and December 31, 2004 respectively.
        Inventories for foreign operations are stated at the lower of cost or
        market using the first-in, first-out ("FIFO") method. An actual
        valuation of inventory under the LIFO method can only be made at the end
        of each year based upon the inventory levels and costs at that time.
        Accordingly, interim LIFO inventory determinations must necessarily be
        based on management's estimates of expected year-end inventory levels
        and costs. Because these are subject to many forces beyond management's
        control, interim results are subject to final year-end LIFO inventory
        valuation adjustments. The major classes of inventories are valued
        principally using the "last in first out" (LIFO) method consisted of the
        following:

                                                       April 1     December 31
                                                        2005          2004
                                                     ----------   ------------
        Finished goods                               $   12,795   $     14,296
        Work in process                                   4,026          3,714
        Raw materials                                     8,423          8,490
        LIFO reserve                                     (5,912)        (6,082)
                                                     ----------   ------------
        Inventory value at LIFO                      $   19,332   $     20,418
                                                     ==========   ============

        During the first quarter of 2005, the LIFO reserve was decreased by
        $170, while in the first quarter of 2004 the LIFO reserve increased by
        $37. Had the Company utilized the FIFO method of accounting for all of
        its inventories, costs of goods sold would have been higher in 2005 and
        lower in 2004 by the respective amounts of the aforementioned changes in
        LIFO reserve.

                                        6
<PAGE>

        Shipping and handling costs incurred by the Company to deliver
        manufactured goods to its customers are not included in costs of goods
        sold but are presented as an element of selling, general and
        administrative expense. The Company incurred $1,637 and $1,626 of
        shipping and handling costs in the first quarters ended April 1, 2005
        and April 2, 2004, respectively.

3.      Shareholders' Equity

        During the first quarter of 2005 the company issued 6,944 treasury
        shares to participants in Company sponsored employee stock purchase and
        401(k) retirement plans.

        On February 11, 2005, the Company granted options for the purchase of
        146,500 shares of the common stock to employees and directors at
        exercise prices equal to or in excess of market price on the date of
        grant. These options vest over three years following the grant date and
        expire on February 11, 2015. The Company adopted Financial Accounting
        Standards Board (FASB) Statement of Accounting Financial Standard (SFAS)
        No. 123, as amended by SFAS No. 148, to account for stock based
        compensation cost using the fair value method. During each of the
        quarters presented, the value of stock based compensation cost has been
        accounted for using the fair value method at an after tax cost of $34
        and $24 for 2005 and 2004 respectively.

4.      Other Comprehensive Income

        Total comprehensive income (loss) was as follows:

                                                          Quarter Ended
                                                     -----------------------
                                                      April 1,      April 2,
                                                        2005         2004
                                                     ----------   ----------
        Net income                                   $      372   $      134
        Other comprehensive (loss):
          Foreign currency translation adjustments         (129)         (92)
                                                     ----------   ----------
        Total comprehensive income                   $      243   $       42
                                                     ==========   ==========

        The components of accumulated other comprehensive income, net of income
        tax are as follows at the dates indicated:

                                                      April 1     December 31,
                                                        2005         2004
                                                     ----------   ------------
        Aggregate currency translation adjustment    $       29   $        158
                                                     ==========   ============

5.      Earnings Per Share

        Basic earnings per share is computed by dividing net income (loss) by
        the weighted average shares outstanding. Diluted earnings per share is
        computed by dividing net income (loss) by the weighted average shares
        and common equivalent shares if dilutive. The computation of weighted
        average shares outstanding is as follows:

                                                          Quarter Ended
                                                     -----------------------
                                                      April 1,     April 2,
                                                        2005         2004
                                                     ----------   ----------
        Basic weighted average number of common
         shares outstanding                               5,177        5,157
        Shares issueable upon assumed exercise of
         outstanding stock options                           --           10
                                                     ----------   ----------
        Diluted weighted average number of common
         and common equivalent shares outstanding         5,177        5,167
                                                     ==========   ==========

                                        7
<PAGE>

        Total outstanding options to purchase 726,951 and 597,051 shares of
        common stock as of April 1, 2005 and April 2, 2004, respectively, are
        not included in the above calculation as their effect would be
        anti-dilutive.

6.      Postretirement Benefit

        In 2004, the Company terminated its post-retirement healthcare benefit
        program. Accordingly, amounts associated with post-retirement benefit
        obligations are not material in 2005. In the first quarter of 2004, the
        Company recognized a net periodic benefit of $194 principally as a
        result of amortization of prior service benefit and actuarial gains.
        Future contributions to post-retirement benefit programs are not
        expected to be material.

7.      Business Segment Information

        The Company's reportable segments are business units that manufacture
        and market separate and distinct products and are managed separately
        because each business requires different processes, technologies and
        marketing strategies.

                                                          Quarter Ended
                                                     -----------------------
                                                      April 1,     April 2,
                                                        2005         2004
                                                     ----------   ----------
        Sales:
          Mechanical Segment                         $   18,153   $   16,262
          Electronics Segment                             9,558        9,819
                                                     ----------   ----------
                                                     $   27,711   $   26,081
                                                     ==========   ==========
        Operating income (loss):
          Mechanical Segment                         $      961   $      793
          Electronics Segment                               332          (69)
                                                     ----------   ----------
                                                     $    1,293   $      724
                                                     ==========   ==========
        Depreciation and amortization:
          Mechanical Segment                         $      677   $      724
          Electronics Segment                               306          360
          Corporate                                         276          267
                                                     ----------   ----------
                                                     $    1,259   $    1,351
                                                     ==========   ==========
        Assets:
          Mechanical Segment                         $   44,071   $   46,304
          Electronics Segment                            22,452       27,288
          Corporate                                       4,115        5,376
                                                     ----------   ----------
                                                     $   70,638   $   78,968
                                                     ==========   ==========
        Expenditures for long-lived assets:
          Mechanical Segment                         $      168   $      321
          Electronics Segment                               221           28
          Corporate                                          62           24
                                                     ----------   ----------
                                                     $      451   $      373
                                                     ==========   ==========

        The Company measures its business segments at the operating income
        level, and therefore does not allocate interest and other finance costs
        to determine pre-tax income on an operating segment basis.

                                        8
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operation

The Company is a worldwide manufacturer of mechanical and electronic products
used in the process of power transmission for industrial and other commercial
applications. The following table, derived from the Company's condensed
consolidated financial statements, presents selected elements of the Company's
operating results, and the changes thereto, for the first quarter of the current
and the immediately preceding year. Amounts presented in Item 2 are in thousands
of dollars, unless otherwise indicated.

<TABLE>
<CAPTION>
                                                         2005          2004       Dollar Change    % Change
                                                      ----------    ----------    -------------    --------
        <S>                                           <C>           <C>           <C>                 <C>
        Sales
          Mechanical Segment                          $   18,153    $   16,262    $       1,891        11.6%
          Electronics Segment                              9,558         9,819             (261)       -2.7%
                                                      ----------    ----------    -------------
            Total Sales                               $   27,711    $   26,081    $       1,630         6.2%
                                                      ==========    ==========    =============
        Cost of Sales
          Mechanical Segment                          $   13,373    $   11,983    $       1,390        11.6%
          Electronics Segment                              6,185         6,584             (399)       -6.1%
                                                      ----------    ----------    -------------
            Total Cost of Sales                       $   19,558    $   18,567    $         991         5.3%
                                                      ==========    ==========    =============
        Gross Profit
          Mechanical Segment                          $    4,780    $    4,279    $         501        11.7%
          Electronics Segment                              3,373         3,235              138         4.3%
                                                      ----------    ----------    -------------
            Total Gross Profit                        $    8,153    $    7,514    $         639         8.5%
                                                      ==========    ==========    =============
        Selling, General and Administrative Expense   $    6,859    $    6,790    $          69         1.0%
                                                      ==========    ==========    =============
        Sales
          Mechanical Segment                                65.5%         62.4%
          Electronics Segment                               34.5%         37.6%
                                                      ----------    ----------
            Total Sales                                    100.0%        100.0%
                                                      ==========    ==========
        Cost of Sales as a Percentage of Sales
          Mechanical Segment                                73.7%         73.7%
          Electronics Segment                               64.7%         67.1%
            Total Cost of Sales                             70.6%         71.2%

        Gross Profit as a Percentage of Sales

          Mechanical Segment                                26.3%         26.3%
          Electronics Segment                               35.3%         32.9%
            Total Gross Profit                              29.4%         28.8%

        SG&A Expenses as a Percentage of Sales              24.8%         26.0%
</TABLE>

First quarter 2005 revenues continued to reflect the improved economy, as
revenues grew $1.6 million, or 6.2% over the prior year's first quarter.
Contributing significantly to this increase was marked volume increases with the
Company's largest distributor, where first quarter sales increased year over
year by $0.7 million, or 18.6%. We believe that inventory levels at this
customer have been reduced to near targeted levels, and that this improvement
should continue throughout 2005 if the overall economy sustains its current
pace.

Mechanical Business sales grew $1.9 million, or 11.6% over the prior year's
first quarter. Increased volume accounted for approximately one-half of this
gain, while increased pricing and product mix changes principally

                                        9
<PAGE>

accounted for the remaining growth. Electronic Business sales volume declined by
almost 5%, however this was offset by favorable currency translations equivalent
to 2% of sales.

Total company gross profit increased by $0.6 million to $8.2 million. Stated as
a percent of net sales, gross profit margins increased to 29.4% of sales from
28.8% in the prior year's first quarter. The Company's Mechanical Division
contributed $4.8 million of gross profit in the first quarter of 2005, or 59% of
the Company's gross profit. Mechanical Business margins remained steady at 26.3%
of sales in the first quarter of 2005. Increased pricing helped offset continued
metal cost increases, which remained up 30% over the previous year but showed
signs of moderating compared to the doubling of costs experienced throughout
2004. Volume gains approximating 2% of sales provided incremental margin that
was offset by less fixed cost absorption on slightly lower production levels as
the Company better utilized working capital through inventory reduction.

The Company's Electronics Division contributed $3.4 million of gross profit, or
41% of consolidated gross profit. Despite a revenue decline of 2.6%, the
Electronics business was able to increase gross margin dollars by 4%. The
primary reason for this improvement was better overhead cost control resulting
from a workforce reduction at the Company's North American manufacturing
facility in the second half of 2004. In addition, favorable currency
translations contributed one percentage point to improved margins.

Selling, general and administrative expenses declined to 24.8% of sales in 2005
compared to 26.0% in 2004 principally due to the fixed nature of such costs
relative to the increased revenue levels. Actual selling, general and
administrative expenses declined approximately $0.1 million, or 1% in the
quarter ended April 1, 2005 after taking into consideration the elimination of a
$0.2 million quarterly amortization benefit associated with the company's
post-retirement healthcare plan that was terminated in the fourth quarter of
2004.

Interest expense is the primary component of other expenses and was $0.6 million
in the first quarter of 2005 compared to $0.4 million for the same period in
2003. This increase was caused by higher interest rates incurred by the Company
under the terms of its new borrowing agreement, including amortization of the
related costs, together with increasing interest rates experienced in capital
markets throughout 2004 and continuing in 2005. Income taxes remain at rates
higher than statutory rates primarily due to operating losses at the Company's
Mexico operations that do not yield any tax benefits.

As a result of the above, net income in the first quarter of 2005 compared to
the same quarter in the preceding year increased to $0.4 million from $0.1
million. Net income per share in the first quarter of 2005 was $0.07 per share,
compared to a net income per share of $0.03 in 2004.

Liquidity and Capital Resources:

At April 1, 2005 current and long-term debt of the Company totaled $24.6
million, compared to $24.3 million at December 31, 2004. Borrowings at April 1,
2005 include $6.0 million of revolving credit and $12.4 million of term debt
under the terms of a $31.3 million secured revolving credit and term loan
facility (the "Facility"). In addition, the Company owes $5.3 million of revenue
bonds and approximately $0.9 million of other revolving and term borrowings.

On January 7, 2005, the Company entered into a Loan and Security Agreement (the
"Agreement") that provides for up to an $18.3 million revolving line of credit
and two term loans (Term Loan A and Term Loan B) totaling $13.0 million. The
proceeds were used to retire amounts outstanding under the Company's previous
credit agreement, as well as fund existing letters of credit that support $5.3
million of industrial revenue bonds and certain obligations under various
self-insured workers compensation insurance policies. The term of the Facility
is two years and the loans are secured by substantially all of the Company's
domestic assets and pledges of 65% of the outstanding stock of the Company's
Canadian, German and Mexican subsidiaries. The revolving credit portion of the
Agreement is governed by a borrowing base formula and bears a variable interest
of LIBOR plus

                                       10
<PAGE>

3.5%. The Term Loans, which are repayable in monthly principal installments
totaling $0.2 million, bear interest at a variable rate of LIBOR plus 4.5%.

The amounts owed under the revenue bonds, together with $1.7 million of
obligations for workers compensation coverage, are secured by letters of credit
backed by the Facility. At April 1, 2005, the Company had approximately $5.3
million of unused borrowing capacity under the terms of the Facility. Had the
Facility been in place at December 31, 2004, the remaining borrowing capacity
available to the Company would have been approximately $2.4 million, after
taking into consideration the costs of the transaction.

The Facility contains restrictive financial covenants that require the Company
to comply with certain financial tests including, among other things,
maintaining minimum tangible net worth, having a minimum earnings before
interest, taxes and depreciation and amortization ("EBITDA"), and meeting
certain specified leverage and operating ratios, all as defined in the
Agreement. The Agreement also contains other restrictive covenants that restrict
outside investments, capital expenditures, and dividends. While the Company was
in compliance with the debt covenants at April 1, 2005, the limitation on
dividends is such that the third quarter dividend for 2005 would be the earliest
dividend that could be declared unless otherwise agreed to by the lenders.

The Company generated net cash flow of $790 for the three months ended April 1,
2005 compared to $336 for the same period in fiscal 2004. Operating activities
generated $1.4 million of cash during the first quarter of 2005 compared to
using $0.7 million for the same quarter in 2004. The principal reasons for this
change were $0.2 million of additional funds from improved operating results,
$1.4 million related to a reduction of inventories in 2005 compared to the 2004
inventory build, and collections of certain foreign tax deposits. The Company's
working capital, exclusive of funded debt, improved to $24.7 million at April 1,
2005, compared to $23.8 million at December 31, 2004.

Total non-operating investments approximated $0.8 million in the first quarter
of 2005, compared to $0.5 million in 2004. Capital expenditures in 2005 were
$0.5 million in quarter one 2005 compared to $0.4 million in 2004.The cash flows
from operating activities were sufficient to fund the slightly increased capital
expenditure needs, while the Company utilized its borrowing facility principally
to fund the costs of its new borrowing agreement.

The Company did not pay any dividends in the first quarter of 2005 compared to
the prior period when it paid a dividend of $0.5 million. As stated above, the
Company's ongoing ability to declare and pay dividends is dependent upon its
ability to continue to operate at profitable levels and demonstrate compliance
with the terms of its revolving and term loan credit agreement.

Based upon our current level of operations, the Company believes that the
combination of cash generated by operations, available borrowing capacity and
the Company's ability to obtain additional long-term indebtedness in the current
state of the secured lending markets, is adequate to finance the Company's
operations for the foreseeable future.

Accounting Policies:

Management's discussion and analysis of the Company's financial position and
results of operations are based upon the Company's Condensed Consolidated
Financial Statements included as part of this document. The preparation of these
financial statements requires management to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses and
related disclosures of contingent assets and liabilities. On an ongoing basis,
the Company evaluates these estimates, including those related to bad debts,
inventories, intangible assets, post-retirement benefits, income taxes, and
contingencies and litigation. The Company bases these estimates on historical
experiences and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the

                                       11
<PAGE>

carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.

The Company believes the following critical accounting policies affect
management's more significant judgments and estimates used in the preparation of
its Consolidated Financial Statements. For a detailed discussion on the
application of these and other accounting policies see Note 2 in the December
31, 2004 Consolidated Financial Statements included in the Company's 2004 annual
report on Form 10-K. Certain of our accounting policies require the application
of significant judgment by management in selecting the appropriate assumptions
for calculating financial estimates. By their nature, these judgments are
subject to an inherent degree of uncertainty and actual results could differ
from these estimates. These judgments are based on our historical experience,
terms of existing contracts, current economic trends in the industry,
information provided by our customers, and information available from outside
sources, as appropriate. Our critical accounting policies include:

Product Warranty: In the ordinary course of business, the Company warrants its
products against defect in design, materials, and workmanship over various time
periods. Warranty reserve and allowance for product returns is established based
upon management's best estimates of amounts necessary to settle future and
existing claims on products sold as of the balance sheet date. The warranty
reserve and allowance for product returns is not significant to the financial
position of the Company for all periods presented.

Inventory: Inventories are valued at the lower of cost or market. Cost is
determined on the last-in first-out basis for a majority of US inventories and
the first-in first-out method for all remaining inventories. The Company has
recorded a reserve for obsolescence or unmarketable inventory equal to the
difference between the cost of inventory and the estimated market value based
upon assumptions about future demand and market conditions. If actual market
conditions are less favorable than those projected by management, additional
inventory write-downs may be required.

Impairment of Goodwill and Long Lived Assets: The Company periodically evaluates
the realizable value of long-lived assets including property, plant and
equipment, relying on a number of factors including operating results, budgets,
economic projections and anticipated future cash flows. The Company's past
business acquisitions resulted in the recognition of goodwill, which may result
in future impairment expenses. The Company's other intangible assets which
primarily consist of product application software, affects the amount of future
period amortization expense. The determination of the value of such intangible
assets requires management to make estimates and assumptions that affect the
Company's Consolidated Financial Statements.

Revenue Recognition: The Company's revenue recognition policies are in
compliance with Staff Accounting Bulletin No. 104 "Revenue Recognition in
Financial Statements" issued by the Securities and Exchange Commission. Revenue
is recognized at the time product is shipped and title passes pursuant to the
terms of the agreement with the customer, the amount due from the customer is
fixed and collectibility of the related receivable is reasonably assured. The
Company establishes allowances to cover anticipated doubtful accounts, sales
discounts, product warranty, and returns based upon historical experience.
Shipping and handling costs charged to customers are included as a component of
net sales.

Postretirement Benefit Obligation: The Company, in consultation with an
actuarial firm specializing in the valuation of postretirement benefit
obligations, selects certain actuarial assumptions to base the actuarial
valuation of such obligations on, such as the discount rate (interest rate used
to determine present value of obligations payable in the future), initial health
care cost trend rate, the ultimate cost care trend rate, and mortality tables to
determine the expected future mortality of plan participants. To the extent that
the actual rates and mortality vary from the assumptions used to determine the
present actuarial valuation of these postretirement benefits, additional
provision for expense may be necessary.

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Income Taxes: Under the requirements of SFAS No. 109, "Accounting for Income
Taxes," we record deferred tax assets and liabilities for the future tax
consequences attributable to differences between financial statements carrying
amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The Company has not
recognized any income tax benefit related to the income tax losses incurred by
its Mexican subsidiary currently because there is uncertainty as to whether that
subsidiary will realize those benefits in the future. As the Mexican subsidiary
realizes these income tax benefits in the future, a reduction of income taxes
will be recognized. Management judgment is required in determining the Company's
provision for income taxes, including recognition of amounts related to changes
in deferred tax assets and liabilities, which, if actual experience varies,
could result in material adjustments to deferred tax assets and liabilities.

Recent Accounting Pronouncements

In December 2004, the FASB issued Staff Position (FSP) FAS 109-1 "Application of
FASB Statement 109, Accounting for Income Taxes, to the Tax Deduction on
Qualifying Production Activities Provided by the American Job Creations Act of
2004" effective upon issuance. This FSP provides guidance on the application of
FASB Statement No. 109 to the provision within the American Job Creations Act of
2004 (the "Act") that provides tax relief to eligible U.S. domestic
manufacturers. The FSP states that the manufacturers' deduction provided for
under the Act should be accounted for as a special deduction in accordance with
Statement 109 and not as a tax rate reduction. This FSP had no effect upon the
Company's condensed consolidated financial statements in the first quarter of
2005 and the Company is not yet able to determine the effect it will have in
future periods because the effect is dependent upon the Company qualifying for
this deduction.

In December 2004, the FASB issued Staff Position (FS) FAS 109-2 "Accounting and
Disclosure Guidance for the Foreign Earnings Repatriation Provision within the
American Job Creations Act of 2004" effective upon issuance. This FSP provides
guidance on the application of a special limited-time dividends received
deduction on the repatriation of certain foreign earnings to a U.S. taxpayer.
Because of the effective foreign income tax rates of countries from which
foreign earnings might be repatriated, this provision is not expected to provide
any benefit to the Company and as a result the Company does not believe it will
have any effect upon its consolidated financial statements.

In December 2004, the FASB issued Statement of Accounting Standards No. 123R
(revised 2004) "Share-Based Payment" a revision of FASB Statement No. 123
"Accounting for Stock Based Compensation." The effective date of this revised
accounting standard is for the first annual reporting period that begins after
June 15, 2005. In fiscal 2003 the Company adopted FASB Statement No. 123 to
account for stock-based compensation cost using the fair value method and
therefore believes the only effects of the revised Statement No. 123 upon the
Company will be expanded disclosure related to its stock based compensation
plan. The Company intends to adopt the revised Statement No. 123 effective for
its 2006 financial statements.

In November 2004, the FASB issued Statement of Accounting Standards No. 151
"Inventory Costs, an amendment of Accounting Research Bulletin No. 43, Chapter
4" to clarify the accounting for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage). This Statement is
effective for inventory cost incurred during fiscal years beginning after June
15, 2005 with earlier application permitted for costs incurred during fiscal
years beginning after the date of the issuance of this Statement. The Statement
introduces the concept of "normal capacity" and requires the allocation of fixed
production overheads to inventory based upon the normal capacity of the
production facilities. Unallocated overheads must be recognized as an expense in
the period in which they are incurred. The Company is not yet able to determine
the effect of this Statement upon its consolidated financial statements because
the impact is dependent upon production levels attained during a given financial
reporting period compared to the normal production levels

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that could have been attained if there was sufficient customer demand. The
Company intends to adopt this statement in fiscal 2006.

In January 2004, the FASB issued Staff Position (FSP) FAS 106-1, "Accounting and
Disclosure Requirements Related to the Medicare Prescription Drug, Improvement
and Modernization Act of 2003" (the "Act"). As the Company terminated its
post-retirement healthcare benefit plan in December 2004, the Company does not
believe that the Act will have any impact on its financial statements.

Safe Harbor Statement

Certain information included or incorporated by reference in this document may
be deemed to be "forward looking statements" within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act. All statements other
than statements of historical facts, that address activities, events or
developments that the Company intends, expects, projects, believes or
anticipates will or may occur in the future are forward looking statements. Such
statements are characterized by terminology such as "believe," "anticipate,"
"should," "intend," "plan," "will," "expects," "estimates," "projects,"
"positioned," "strategy," and similar expressions. These statements are based on
assumptions and assessments made by the Company's management in light of its
experience and its perception of historical trends, current conditions, expected
future developments and other factors it believes to be appropriate. These
forward looking statements are subject to a number of risks and uncertainties,
including but not limited to continuation of the Company's longstanding
relationships with major customers, the Company's ability to integrate acquired
businesses into its operations and realize planned synergies, the extent to
which acquired businesses are able to meet the Company's expectations and
operate profitably, the ability to obtain third party financing, changes in
regulations that could affect demand for products and unanticipated developments
that could occur with respect to contingencies such as environmental matters and
litigation. In addition, the Company is subject to risks and uncertainties that
affect the manufacturing sector generally, including, but not limited to,
economic, competitive, governmental, and technological factors affecting the
Company's operations, markets, products, services and prices. Any such forward
looking statements are not guarantees of future performances and actual results,
developments and business decisions may differ from those envisaged by such
forward looking statements. The Company disclaims any duty to update any
forward-looking statements, all of which are expressly qualified by the
foregoing.

Item 3  Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in market risks since the 2004 Annual Report
to Shareholders.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures: As of April 1, 2005, the
Company carried out an evaluation, under the supervision and with the
participation of the Company's Principal Executive Officer and Principal
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. "Disclosure controls and
procedures" are defined in Exchange Act Rule 13a-15. Based upon this evaluation,
our Principal Executive Officer and Principal Financial Officer concluded that
the Company's disclosure controls and procedures are effective in timely
alerting them to material information required to be disclosed in the Company's
periodic reports filed with the SEC. It should be noted that the design of any
system of controls is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in the achieving the stated goals under all potential future conditions,
regardless of how remote.

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(b) Changes in internal controls: There were no significant changes in the
Company's internal control over financial reporting that occurred during the
period covered by this report that have materially affected or are reasonably
likely to materially affect, the Company's internal control over financial
reporting subsequent to the date of their last evaluation.

PART II - OTHER INFORMATION

Item 1.   Legal Proceedings

          None

Item 2.   Changes in Securities

          None

Item 3.   Defaults Upon Senior Securities

          None

Item 4.   Submission of Matters to a Vote of Security Holders

          None

Item 5.   Other Information

          None

Item 6.  Exhibits

            31.1  Certification of Principal Executive Officer required by
                  13a-14(a)

            31.2  Certification of Principal Financial Officer required by
                  13a-14(a)

            32    Section 1350 Certification of Principal Executive Officer
                  and Principal Financial Officer

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Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Borough of
Chambersburg and Commonwealth of Pennsylvania, on May 10, 2005

Date  May 10, 2005                TB WOOD'S CORPORATION

                                  By: /s/Joseph C. Horvath
                                      ------------------------------------------
                                      JOSEPH C. HORVATH
                                      Vice-President and Chief Financial Officer
                                      (Principal Financial Officer and
                                       Principal Accounting Officer)

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