<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                   FORM 10-Q/A
                                (AMENDMENT NO. 1)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 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 by check mark whether the Registrant is a shell company (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 September 14, 2005
----------------------------                   ---------------------------------
Common Stock, $.01 par value                               5,195,826



<PAGE>



                              TB WOOD'S CORPORATION

                           FORM 10-Q QUARTERLY REPORT



                                EXPLANATORY NOTE




This Form 10-Q/A is being filed to amend and restate certain disclosure items
related to the accounting by TB Wood's Corporation (the "Company") for
post-employment healthcare benefit obligations in the Form 10-Q for the quarter
ended July 1, 2005 (the "Second Quarter 2005 Form 10-Q"), which was originally
filed with the Securities and Exchange Commission (the "SEC") on August 22,
2005. As disclosed in a Current Report on Form 8-K filed with the SEC on
September 27, 2005, the Company announced that after extensive review of its
accounting for post-employment healthcare benefit obligations in response to a
comment letter the Company received from the Staff of the SEC during the second
quarter of 2005 directed to such accounting matter with respect to its 2004 Form
10-K, the Company has concluded that its original accounting treatment of its
post-employment healthcare benefit obligations complied with GAAP.


On August 19, 2005, the Company filed a report on Form 8-K announcing that the
Company had concluded that it would need to amend and restate its previously
issued financial statements and other financial information for the fiscal year
and quarter to date periods in each of the three years in the period ended
December 31, 2004, as presented in the Company's annual report on Form 10-K for
the year ended December 31, 2004, and in the quarter ended March 31, 2005, as
presented in the company's quarterly report on Form 10Q for that period, with
respect to our accounting for post-employment healthcare benefit obligations.


The Company's original determination to amend and restate its previously issued
financial statements was based upon its receipt of a comment letter from the
Staff of the Securities and Exchange Commission, internal discussions with its
Audit Committee and ongoing discussions with its independent accountants, Grant
Thornton LLP, and the Staff of the SEC. During these ongoing discussions, the
Company had filed its quarterly report on Form 10-Q for the second quarter of
2005 to reflect anticipated adjustments relative to its post-employment
healthcare benefit obligation accounting for periods ending prior to 2005 based
on the progress of discussions with the Staff of the SEC at the time of filing.
In the Second Quarter 2005 Form 10-Q, these anticipated adjustments had the
effect of reallocating a portion of the approximately $9.3 million pre-tax gain,
originally recognized in the fourth quarter of 2004, to earlier periods in 2004


The Company, along with the Staff, has now completed its review of this matter
and has determined that its original treatment of the issues raised in the SEC
comment letter complied with GAAP. As a result of concluding its evaluation of
this matter, the Company is hereby amending its disclosure relating to the
accounting for post-employment healthcare benefit obligations and restating the
condensed consolidated financial statements for the three months and six month
periods ended July 2, 2004 that had previously been restated in order to
preserve the original accounting treatment afforded this matter when such
interim financial statements were presented in the original filings of the
quarterly reports on Form 10-Q during the applicable periods in the fiscal year
ended December 31, 2004.


                                       2
<PAGE>

This amendment presents the Quarterly Report on Form 10-Q for the quarter ended
July 1, 2005, as amended to reflect the changes discussed above, in its
entirety, and also reflects certain financial statement reclassifications to
conform the 2004 periods with the financial statement presentation of the
corresponding periods in 2005, but does not modify or update the disclosure in
the Company's annual report on Form 10-K for the year ended December 31, 2004 in
any way. Accordingly, the previously issued financial statements and other
financial information contained in our and our Form 10-K for the fiscal year
ended December 31, 2004 and in our quarterly reports on Form 10-Qs for such
quarters may continue to be relied upon. However, because the Company had
restated its accounting treatment of its retiree healthcare plans in its Second
Quarter 2005 Form 10-Q to account for the issues raised at that time by the
Staff of the SEC, the Company determined that it needs to restate its financial
statements contained in this report to reflect the continuation of the Company's
original accounting treatment. As a result this Form 10-Q/A (Amendment No.1) for
the quarter ended July 1, 2005, is being filed. The restatements reported in
this Form 10-Q/A have no effect on our past, current or future revenues or cash
flows.


Background

The Company sponsors an unfunded group medical insurance plan for its active
employees and for retirees and their dependents that retired before January 1,
2002. Prior to that date, active employees were eligible for post-employment
healthcare benefits; however, the Company curtailed those benefits in their
entirety for all active employees effective December 31, 2001. In December 2004,
the Company announced to those retirees still participating in the plan that the
Company would only provide coverage through age 65, and that the retiree share
of the cost would effectively be 100% of the Company's cost, together with an
administrative fee.

Following this announcement, approximately 90% of the retiree participants
irrevocably withdrew from further plan participation in December 2004, at no
cost to the Company. Accordingly, management concluded that the plan was
effectively terminated, and applied plan termination accounting that resulted in
recognition of an aggregate pre-tax gain of approximately $9.3 million,
equivalent to (i) the reduction in the accumulated plan benefit obligation to
the extent that retirees irrevocably withdrew from the plan; (ii) the reduction
of all unamortized prior service cost credit relating to the action of
curtailing benefits for active employees in 2001, and (iii) all unamortized
gains and losses remaining under the plan since its inception.

As previously disclosed, the Company received a comment letter from the Staff of
the SEC during the second quarter of 2005 with respect to its 2004 Form 10-K
regarding its accounting treatment of its terminated post-employment healthcare
benefit obligations that resulted in the Company recognizing a non-recurring,
non-cash pre-tax gain of approximately $9.3 million in its income statement with
respect to its terminated post-employment healthcare benefit obligations in the
fourth quarter of 2004. This communication and subsequent review of this matter
called into question whether the Company should have recognized at the time of
the full curtailment of benefits for active employees in 2001, a no cost
settlement of the prior service costs and other unamortized gains and losses
attributable to the then active employees whose benefits were fully curtailed in
order to reflect that there would be no future service period against which the
amortization of such deferred credits could be matched.


                                       3
<PAGE>


Upon finalization of its discussions with the Staff of the SEC and upon further
review of these events, the Company has determined that its original accounting
treatment of not immediately applying settlement accounting, and instead
deferring the recognition of the prior service costs and other actuarial gains
associated with the healthcare benefit obligations attributable to the active
employees whose benefits were curtailed in 2001, and amortize the same over the
estimated lives of the remaining plan participants, comprised solely of inactive
plan participants, was in accordance with Statement of Financial Accounting
Standards No. 106, and that the Company does not need to do a restatement.

The determination that the Company (a) does not need to restate the consolidated
financial statements for the fiscal year ended December 31, 2004 and the fiscal
quarter ended March 31, 2005 and (b) needs to restate the consolidated financial
statements for the fiscal quarter ended July 1, 2005 was approved by the Audit
Committee of the Company's Board of Directors upon the recommendation of TB
Wood's senior management. The Audit Committee of the Board has discussed the
determinations described in this Form 10-Q/A with Grant Thornton LLP, its
independent accountant.








                                       4
<PAGE>






                              TB WOOD'S CORPORATION
                               FORM 10-Q/A - INDEX
                                  JULY 1, 2005
<TABLE>
<CAPTION>

<S>                                                                                             <C>
Part 1. - Financial Information                                                                 Page No.

Item 1.    Financial Statements (unaudited):

                 Condensed Consolidated Statements of Operations - for the
                   Second Quarter and Six Months ended July 1, 2005 and July 2, 2004                6

                 Condensed Consolidated Balance Sheets -
                    July 1, 2005 and December 31, 2004                                              7

                 Condensed Consolidated Statements of Cash Flows - for the Second Quarter
                   and Six Months ended July 1, 2005 and July 2, 2004                               8

                 Notes to Condensed Consolidated Financial Statements                               9

Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations    16

Item 3.   Quantitative and Qualitative Disclosures about Market Risk                               23

Item 4.   Controls and Procedures                                                                  23

Part II - Other Information                                                                        24

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                                                                                         25

Exhibit 31.1 Certification pursuant to Section 302 of the Sarbanes Oxley Act of 2002               26
Exhibit 31.2 Certification pursuant to Section 302 of the Sarbanes Oxley Act of 2002               27
Exhibit 32   Statement Pursuant to 18 U.S.C. Section 1350 as required by Section 906
               of the Sarbanes Oxley Act of 2002                                                   28
</TABLE>

                                       5
<PAGE>


PART 1. - FINANCIAL INFORMATION
Item 1 Financial Statements


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


<TABLE>
<CAPTION>


                                                            Second quarter ended        Six months ended
                                                            ----------------------------------------------
                                                            July 1,      July 2,      July 1,      July 2,
(in thousands, except per share amounts)                     2005         2004         2005         2004
----------------------------------------------------------------------------------------------------------
                                                                       (Restated)                 (Restated)

<S>                                                         <C>          <C>          <C>          <C>
Net sales                                                   $27,844      $25,459      $55,555      $51,540
Cost of goods sold                                           19,568       17,511       39,126       36,078
                                                            ----------------------------------------------

Gross profit                                                  8,276        7,948       16,429       15,462

Selling, general and administrative expense                   6,874        7,300       13,734       14,090
                                                            ----------------------------------------------

Operating income                                              1,402          648        2,695        1,372

Interest expense and other finance charges                      524          378        1,140          747
                                                            ----------------------------------------------

Income before provision for income taxes                        878          270        1,555          625

Provision for income taxes                                      381          175          686          396
                                                            ----------------------------------------------

Net income                                                  $   497      $    95      $   869      $   229
                                                            ==============================================

PER SHARE AMOUNTS - BASIC AND DILUTED:

   Basic net income per common share                        $  0.10      $  0.02      $  0.17      $  0.04
                                                            ==============================================

   Diluted net income per common share                      $  0.10      $  0.02      $  0.17      $  0.04
                                                            ==============================================

   Basic weighted average shares of common stock and
     equivalents outstanding                                  5,183        5,161        5,181        5,161
                                                            ==============================================

   Diluted weighted average shares of common stock and
     equivalents outstanding                                  5,183        5,165        5,181        5,165
                                                            ==============================================
</TABLE>

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


                                       6
<PAGE>



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


<TABLE>
<CAPTION>

                                                                                               July 1,      December 31,
(in thousands, except per share amounts)                                                        2005            2004
                                                                                              ------------------------
                                                                                             (Restated)      (Restated)
ASSETS
Current Assets:
<S>                                                                                           <C>             <C>
   Cash and cash equivalents                                                                  $  2,008        $    556
   Accounts receivable less allowances of $938 at July 1, 2005
            and $880 at December 31, 2004                                                       15,042          13,353
   Inventories--Note 2                                                                          17,710          20,418
   Other current assets                                                                          3,115           3,742
                                                                                              ------------------------
      Total current assets                                                                      37,875          38,069

Property, plant and equipment                                                                   80,223          82,125
   Less accumulated depreciation                                                                56,815          57,666
                                                                                              ------------------------
       Net property, plant and equipment                                                        23,408          24,459
Other Assets:
   Goodwill                                                                                      5,649           5,902
   Other                                                                                         1,177             940
                                                                                              ------------------------
      Total other assets                                                                         6,826           6,842
                                                                                              ------------------------

TOTAL ASSETS                                                                                  $ 68,109        $ 69,370
                                                                                              ========================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
    Current maturities of long-term debt                                                      $  9,012        $  7,605
    Accounts payable                                                                             7,105           7,803
    Accrued expenses                                                                             6,103           6,343
    Deferred income taxes                                                                          278             134
                                                                                              ------------------------
        Total current liabilities                                                               22,498          21,885

Long-term debt, less current maturities                                                         14,484          16,708
Postretirement benefit obligation, less current portion                                            100             235
Deferred income taxes                                                                              561             807

Shareholders' Equity:
    Preferred stock, $.01 par value, 100 shares authorized at July 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;
     5,187,498 and 5,172,690 outstanding at July 1, 2005 and December 31, 2004                      57              57
    Additional paid-in-capital                                                                  27,206          27,095
    Retained earnings                                                                            7,760           6,943
    Accumulated other comprehensive income (loss)                                                 (182)            158
    Treasury stock at cost                                                                      (4,375)         (4,518)
                                                                                              ------------------------
          Total shareholders' equity                                                            30,466          29,735
                                                                                              ------------------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                    $ 68,109        $ 69,370
                                                                                              ========================
</TABLE>

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



                                       7
<PAGE>

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


<TABLE>
<CAPTION>


                                                              Second quarter ended      Six months ended
                                                              --------------------------------------------
                                                              July 1,      July 2,     July 1,     July 2,
(in thousands, except per share amounts)                       2005         2004        2005        2004
----------------------------------------------------------------------------------------------------------
                                                                         (Restated)             (Restated)


CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                           <C>         <C>         <C>         <C>
Net Income                                                    $    497    $     95    $    869    $    229
Adjustments to reconcile net income to net cash provided by
operating activities:
     Depreciation and amortization                               1,212       1,329       2,471       2,680
     Change in deferred income taxes, net                           63         (55)       (102)       (110)
     Other                                                         (34)         70          50         136
     Changes in operating assets and liabilities:
         Accounts receivable                                       778         185      (1,689)     (2,358)
         Inventories                                             1,622      (1,098)      2,708      (1,378)
         Other current assets                                      158         121         627         (87)
         Accounts payable                                       (1,419)       (230)       (698)        597
         Accrued and other liabilities                            (435)       (284)       (374)       (322)
                                                              --------------------------------------------
     Total adjustments                                           1,945          38       2,993        (842)
                                                              --------------------------------------------
Net cash provided by (used in) operating activities              2,442         133       3,862        (613)

CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures                                          (898)       (834)     (1,349)     (1,207)
    Other                                                          444         191          67          15
                                                              --------------------------------------------
Net cash used in investing activities                             (454)       (643)     (1,282)     (1,192)

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from long-term debt                                  --            18      13,000          18
    Repayments of long-term debt                                (1,053)        (22)     (1,698)        (42)
    Proceeds from revolving credit facilities                   27,554       9,380      57,547      20,444
    Repayments of revolving credit facilities                  (27,632)     (8,801)    (69,666)    (17,671)
    Payments of dividends                                         --          (465)       --          (929)
    Issuance of treasury stock                                      16          14          29          27
                                                              --------------------------------------------
Net cash provided by financing activities                       (1,115)        124        (788)      1,847

Effect of changes in foreign exchange rates                       (211)         50        (340)        (42)
                                                              --------------------------------------------
Net increase in cash and cash equivalents                          662        (336)      1,452        --
Cash and cash equivalents at beginning of period                 1,346       1,117         556         781
                                                              --------------------------------------------
Cash and cash equivalents at end of period                    $  2,008    $    781    $  2,008    $    781
                                                              ============================================

Income taxes paid (refunded)                                  $    125    $     29    $    235    $   (310)
                                                              ============================================

Interest paid                                                 $    693    $    394    $  1,247    $    774
                                                              ============================================
</TABLE>

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


                                       8
<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.

         As stated above, on August 19, 2005, the Company filed a report on Form
         8-K announcing that it had concluded that it would need to amend and
         restate its previously issued financial statements and other financial
         information for the fiscal year and quarter to date periods in each of
         the three years in the period ended December 31, 2004, as presented in
         the Company's annual report on Form 10-K for the year ended December
         31, 2004, and in the quarter ended March 31, 2005, as presented in the
         company's quarterly report on Form 10Q for that period, with respect to
         our accounting for post-employment healthcare benefit obligations.

         The Company's original determination to amend and restate its
         previously issued financial statements was based upon its receipt of a
         comment letter from the Staff of the Securities and Exchange Commission
         ("SEC"), internal discussions of its Audit Committee and ongoing
         discussions with its independent accountants, Grant Thornton LLP, and
         the Staff of the SEC. The Company, along with the Staff, has now
         completed its review of this matter and has determined that its
         original treatment of the issues raised in the SEC comment letter
         complied with GAAP.

         As a result the previously issued financial statements and other
         financial information contained in our Form 10-Qs for such quarters and
         our Form 10-K for the fiscal year ended December 31, 2004 may continue
         to be relied upon. However, because the Company had restated its
         accounting treatment of its retiree healthcare plans in its report on
         Form 10-Q for the quarter ended July 1, 2005 to account for the issues
         raised at that time by the Staff of the SEC, the Company is filing this
         Form 10-Q/A to restate its financial statements contained in Form
         original 10-Q report, to reflect the continuation of the Company's
         original accounting treatment. The table below shows the impact of
         these restatements, and certain reclassifications, on the Condensed
         Consolidated Statements of Operations for the quarter and six months
         ended July 2, 2004 included in the previously filed Form 10-Q:




                                       9
<PAGE>
<TABLE>
<CAPTION>



                                                                                       IMPACT OF      IMPACT OF   AS PREVIOUSLY
                                                                       AS ADJUSTED    RESTATEMENT  RECLASSIFICATION   FILED
                                                                     ----------------------------------------------------------
           Quarter ended July 2, 2004
           --------------------------
<S>                                                                    <C>                               <C>          <C>
           Cost of goods sold                                          $  17,511                         $ 300        $17,211
           Gross profit                                                    7,948                          (300)         8,248
           Selling, general, and administrative expenses                   7,300        $  (137)          (300)         7,737
           Operating income                                                  648            137                           511
           Income (loss) before income taxes                                 270            137                           133
           Provision for income taxes                                        175             53                           122
                                                                     ----------------------------------------------------------
           Net income (loss)                                           $      95        $    84                     $      11
                                                                     ==========================================================

           Six months ended July 2, 2004
           -----------------------------
           Cost of goods sold                                          $  36,078                         $ 300        $35,778
           Gross profit                                                   15,462                          (300)        15,762
           Selling, general, and administrative expenses                  14,090        $  (274)          (300)        14,664
           Operating income                                                1,372            274                         1,098
           Income (loss) before income taxes                                 625            274                           351
           Provision for income taxes                                        396            107                           289
                                                                     ----------------------------------------------------------
           Net income (loss)                                           $     229        $   167                      $     62
                                                                     ==========================================================

</TABLE>

         The changes in the Condensed Consolidated Balance Sheets as of July 1,
         2005, and December 31, 2004 due to these restatements is shown in the
         following table:
<TABLE>
<CAPTION>

                                                                            BALANCE SHEET                  BALANCE SHEET
                                                                          AS OF JULY 1, 2005          AS OF DECEMBER 31, 2005
                                                                    -------------------------------------------------------------
                                                                          AS      AS PREVIOUSLY          AS        AS PREVIOUSLY
                                                                       RESTATED      REPORTED         RESTATED        REPORTED
                                                                    -------------------------------------------------------------
       Liabilities:
<S>                                                                    <C>           <C>             <C>             <C>
           Postretirement benefit obligation, less current portion     $     100     $     407       $     235       $     542
           Deferred income taxes, non-current                                561           441             807             687

       Shareholders' equity
          Retained earnings                                                7,760         7,573           6,943           6,756
            Total shareholders' equity                                    30,466        30,279          29,735          29,548
                                                                    -------------------------------------------------------------
             Total Liabilities and Stockholders' Equity                  $68,109       $68,109         $69,370         $69,370
                                                                    -------------------------------------------------------------

</TABLE>


         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.



                                       10
<PAGE>

2.       Inventories and Cost of Goods Sold

         The Company uses the last-in, first-out ("LIFO") method for a majority
         of inventories located in the United States, which represents
         approximately 72% and 74% of inventories at July 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, and consisted of the following:

                                             July 1          December 31
                                              2005               2004
                                        -------------------------------------
          Finished goods                      $11,771           $14,296
          Work in process                       4,047             3,714
          Raw materials                         8,027             8,490
          LIFO reserve                         (6,135)           (6,082)
                                        -------------------------------------
          Inventory value at LIFO             $17,710           $20,418
                                        -------------------------------------

          During the second quarter of 2005, the LIFO reserve was increased by
          $223, while in the second quarter of 2004 the LIFO reserve remained
          unchanged. For the first six months of 2005, the LIFO reserve was
          increased by $53, while during the similar period 2004 it was
          increased by $37. Had the Company utilized the FIFO method of
          accounting for all of its inventories, costs of goods sold would have
          been lower in 2005 and 2004 by the respective amounts of the
          aforementioned changes in LIFO reserve.

          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 $1,593 and $1,669 of
          shipping and handling costs in the second quarters ended July 1, 2005
          and July 2, 2004, respectively. The corresponding year to date amounts
          were $3,230 and $3,295, respectively.

3.       Shareholders' Equity

         During the first six months of 2005 the Company issued 14,808 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 follows Financial Accounting
         Standards Board (FASB) Statement of Financial Accounting Standards
         (SFAS) No. 123, as amended by SFAS No. 148, to account for stock based
         compensation cost using the fair value method. Stock based compensation
         cost, recorded as an after tax cost, was $35 and $29 for the second
         quarter of 2005 and 2004 respectively, and $69 and $53 for the first
         six months of 2005 and 2004, respectively.

                                       11
<PAGE>

4.       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
         outstanding and common equivalent shares if dilutive. The computation
         of weighted average shares outstanding is as follows:
<TABLE>
<CAPTION>

                                                                         Second quarter ended             Six months ended
                                                                       July 1,         July 2,         July 1,        July 2,
                                                                        2005            2004            2005           2004
                                                                  -------------------------------------------------------------
<S>                                                                 <C>               <C>          <C>              <C>
          Basic  weighted  average number of common shares
              outstanding                                               5,183           5,161           5,181           5,161
          Shares   issuable   upon  assumed   exercise  of
              outstanding stock options                                    --               4              --               4
                                                                  -------------------------------------------------------------
          Diluted   weighted   average  number  of  common
              shares outstanding                                        5,183           5,165           5,181           5,165
                                                                  =============================================================
</TABLE>

         Total outstanding options to purchase 629,451 and 712,567 shares of
         common stock as of July 1, 2005 and July 2, 2004, respectively, are not
         included in the above calculation as their effect would be
         anti-dilutive.

5.       Other Comprehensive Income

         Total comprehensive income (loss) was as follows:

<TABLE>
<CAPTION>

                                                                         Second quarter ended             Six months ended
                                                                       July 1,         July 2,         July 1,        July 2,
                                                                        2005            2004            2005           2004
                                                                  -------------------------------------------------------------
                                                                                     (Restated)                     (Restated)
<S>                                                                 <C>               <C>          <C>              <C>
          Net income                                                   $  497          $   95          $  869          $  229
          Other comprehensive (loss):
            Foreign currency translation adjustments                     (211)             50            (340)            (42)
                                                                  -------------------------------------------------------------
          Total comprehensive income                                   $  286          $  145          $  529          $  187
                                                                  =============================================================
</TABLE>

          Accumulated other comprehensive income (loss), net of income tax, is
          comprised of aggregate currency translation adjustments of $(182) and
          $158 as of July 1, 2005 and December 31, 2004, respectively.

6.       Postretirement Benefit

          In the second quarter of 2005, the Company announced to employees that
          it was discontinuing its sponsorship of an unfunded defined benefit
          post employment group term life insurance plan that provided life
          insurance coverage for active employees and retirees. As a result the
          Company recognized a non-recurring gain of $270 from the termination
          of this benefit program. In this Form 10-Q/A, this gain has been
          reclassified as a reduction of selling, general and administrative
          expense.



                                       12
<PAGE>

          The Company sponsors an unfunded group medical insurance plan for its
          active employees and for retirees and their dependents that retired
          before January 1, 2002. Prior to that date, active employees were
          eligible for post-employment healthcare benefits; however, the Company
          curtailed those benefits in their entirety for all active employees
          effective December 31, 2001. In December 2004, the Company announced
          to those retirees still participating in the plan that the Company
          would only provide coverage through age 65, and that the retiree share
          of the cost would effectively be 100% of the Company's cost, together
          with an administrative fee.

          Following this announcement, approximately 90% of the retiree
          participants irrevocably withdrew from further plan participation in
          December 2004, at no cost to the Company. Accordingly, management
          concluded that the plan was effectively terminated, and applied plan
          termination accounting that resulted in recognition of an aggregate
          pre-tax gain of approximately $9.3 million, equivalent to (i) the
          reduction in the accumulated plan benefit obligation to the extent
          that retirees irrevocably withdrew from the plan; (ii) the reduction
          of all unamortized prior service cost credit relating to the action of
          curtailing benefits for active employees in 2001, and (iii) all
          unamortized gains and losses remaining under the plan since its
          inception.

          As described in Note 1, the Company received a comment letter from the
          Staff of the SEC during the second quarter of 2005 with respect to its
          2004 Form 10-K regarding its accounting treatment of its terminated
          post-employment healthcare benefit obligations that resulted in the
          Company recognizing a non-recurring, non-cash pre-tax gain of
          approximately $9.3 million in its income statement with respect to its
          terminated post-employment healthcare benefit obligations in the
          fourth quarter of 2004. This communication and subsequent review of
          this matter called into question whether the Company should have
          recognized at the time of the full curtailment of benefits for active
          employees in 2001, a no cost settlement of the prior service costs and
          other unamortized gains and losses attributable to the then active
          employees whose benefits were fully curtailed in order to reflect that
          there would be no future service period against which the amortization
          of such deferred credits could be matched.

          Upon finalization of its discussions with the Staff of the SEC and
          upon further review of these events, the Company has determined that
          its original accounting treatment of not immediately applying
          settlement accounting, and instead deferring the recognition of the
          prior service costs and other actuarial gains associated with the
          healthcare benefit obligations attributable to the active employees
          whose benefits were curtailed in 2001, and amortize the same over the
          estimated lives of the remaining plan participants, comprised solely
          of inactive plan participants, was in accordance with Statement of
          Financial Accounting Standards No. 106, and that the Company does not
          need to do a restatement.

          The determination that the Company (a) does not need to restate the
          consolidated financial statements for the fiscal year ended December
          31, 2004 and the fiscal quarter ended March 31, 2005 and (b) needs to
          restate the consolidated financial statements for the fiscal quarter
          ended July 1, 2005 was approved by the Audit Committee of the
          Company's Board of Directors upon the recommendation of TB Wood's
          senior management. The Audit Committee of the Board has discussed the
          determinations described in this Form 10-Q/A with Grant Thornton LLP,
          its independent accountant.


                                       13
<PAGE>



7.       Business Segment Information

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

<TABLE>
<CAPTION>

                                                                         Second quarter ended             Six months ended
                                                                       July 1,         July 2,         July 1,        July 2,
                                                                        2005            2004            2005           2004
                                                                    -----------------------------------------------------------
                                                                                     (Restated)                     (Restated)
<S>                                                                 <C>               <C>          <C>              <C>
          Sales:
             Mechanical Segment                                       $18,283         $16,263         $36,436         $32,525
             Electronics Segment                                        9,561           9,196          19,119          19,015
                                                                ---------------------------------------------------------------
                                                                      $27,844         $25,459         $55,555         $51,540
                                                                ---------------------------------------------------------------
          Operating income (loss):
             Mechanical Segment                                        $1,287          $1,245          $2,248          $2,038
             Electronics Segment                                          115            (597)            447            (666)
                                                                ---------------------------------------------------------------
                                                                       $1,402            $648          $2,695          $1,372
                                                                ---------------------------------------------------------------
          Depreciation and amortization:
             Mechanical Segment                                        $  660          $  722        $  1,337        $  1,446
             Electronics Segment                                          286             344             592             704
             Corporate                                                    266             263             542             530
                                                                ---------------------------------------------------------------
                                                                       $1,212          $1,329          $2,471          $2,680
                                                                ---------------------------------------------------------------
          Expenditures for long-lived assets:
             Mechanical Segment                                          $173            $716            $341          $1,037
             Electronics Segment                                          499              90             720             118
             Corporate                                                    226              28             288              52
                                                                ---------------------------------------------------------------
                                                                         $898            $834          $1,349          $1,207
                                                                ---------------------------------------------------------------

          Assets:                                                   July 1,       December 31,
                                                                      2005            2004
                                                                -------------------------------

             Mechanical Segment                                       $42,869         $43,541
             Electronics Segment                                       21,034          22,136
             Corporate                                                  4,206           3,693
                                                                -------------------------------
                                                                      $68,109         $69,370
                                                                -------------------------------
</TABLE>

         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.



                                       14
<PAGE>

8.       Subsequent Events

          On August 9, 2005, the Company offered to purchase up to 750,000
          shares of its common stock at a price not greater than $7.50 nor less
          than $5.00 per share through a modified "Dutch Auction" procedure. On
          September 28, 2005 the Company amended the offer to provide for the
          purchase of up to 1,500,000 shares. Under the terms of the offer, the
          Company will select the lowest purchase price that will allow it to
          buy 1,500,000 shares of common stock or, if a lesser number of shares
          of common stock are properly tendered and subject to satisfaction of
          the Minimum Share Condition described below, all shares of common
          stock that are properly tendered and not withdrawn. All shares of
          common stock acquired in the Offer will be acquired at the same
          purchase price regardless of whether the shareholder tendered at a
          lower price.

          The offer is subject to a number of conditions, including (i)
          shareholders tendering and not withdrawing before the expiration time
          in the aggregate a minimum of 500,000 shares (the "minimum share
          condition") and (ii) the receipt by the Company of subordinated debt
          financing on terms and conditions satisfactory to it, in its
          reasonable judgment, in an amount expected to be $15 million, to fund
          these share purchases and other transactions described below.

          Based upon shares submitted pursuant to the tender offer to date, the
          Company expects that is will acquire the full 1,500,000 shares at a
          purchase price of $7.50, as permitted under the terms and conditions
          of the amended offer, resulting in an aggregate price of $11.25
          million. The Company also plans to repay a portion of its senior bank
          debt and expects that funding required for the partial repayment and
          amendment of the Company's senior bank term debt will be approximately
          $2.0 million and that the fees and expenses owed to the senior bank in
          connection with a two year extension of our senior bank debt in
          addition to the fees and expenses of this Offer and borrowing under
          its proposed new subordinated debt facility will be approximately $1.0
          million. Any remaining proceeds are expected to be used to provide
          additional working capital.

          In connection with this subordinated debt financing, the Company
          expects that the creditor will be granted a warrant to purchase shares
          of its common stock equal to up to 4.0% of its shares (on a fully
          diluted basis) at a price of $5.30 per share, based upon the average
          trading price for the twenty trading days prior to the Company
          initiating this Offer. The Company expects borrowings under the
          subordinated debt facility to have a coupon interest rate of 12% per
          annum and to have a maturity date seven years following initial
          borrowings there under.





                                       15
<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 tables, derived from the Company's condensed
consolidated financial statements, presents selected elements of the Company's
operating results, and the changes thereto, for the second quarter and six
months year to date of the current and the immediately preceding year. Amounts
presented in Item 2 are in thousands of dollars, unless otherwise indicated.

<TABLE>
<CAPTION>

                                                                                      Second quarter ended
                                                                  ---------------------------------------------------------
                                                                     July 1,         July 2,        Dollar             %
                                                                       2005            2004         Change          Change
                                                                  ---------------------------------------------------------
                                                                                  (Restated)
          Sales
<S>                                                                     <C>             <C>              <C>          <C>
             Mechanical Segment                                         $18,283         $16,263          $2,020       12.4%
             Electronics Segment                                          9,561           9,196             365        4.0%
                                                                  -----------------------------------------------
                 Total Sales                                            $27,844         $25,459          $2,385        9.4%
                                                                  -----------------------------------------------

          Cost of Sales
             Mechanical Segment                                         $13,218         $11,139          $2,079       18.7%
             Electronics Segment                                          6,350           6,372             (22)      (0.3%)
                                                                  --------------- --------------- ---------------
                 Total Cost of Sales                                    $19,568         $17,511          $2,057       11.7%
                                                                  -----------------------------------------------

          Gross Profit
             Mechanical Segment                                          $5,065          $5,124           $ (59)      (1.2%)
             Electronics Segment                                          3,211           2,824             387       13.7%
                                                                  -----------------------------------------------
                 Total Gross Profit                                      $8,276          $7,948            $328        4.1%
                                                                  -----------------------------------------------
          Selling, General and Administrative Expense                    $6,874          $7,300           $(426)      (5.8%)
                                                                  -----------------------------------------------
          Sales
             Mechanical Segment                                            65.7%           63.9%
             Electronics Segment                                           34.3%           36.1%
                                                                  ----------------------------------
                 Total Sales                                              100.0%          100.0%
                                                                  ----------------------------------

          Cost of Sales as a Percentage of Sales
             Mechanical Segment                                            72.3%           68.5%
             Electronics Segment                                           66.4%           69.3%
                 Total Cost of Sales                                       70.3%           68.8%

          Gross Profit as a Percentage of Sales
             Mechanical Segment                                            27.7%           31.5%
             Electronics Segment                                           33.6%           30.7%
                 Total Gross Profit                                        29.7%           31.2%

          SG&A Expenses as a Percentage of Sales                           24.7%           28.7%

</TABLE>


                                       16
<PAGE>

<TABLE>
<CAPTION>

                                                                                        Six months ended
                                                                  ---------------------------------------------------------
                                                                     July 1,         July 2,        Dollar             %
                                                                       2005            2004         Change          Change
                                                                  ---------------------------------------------------------
                                                                                  (Restated)
          Sales
<S>                                                                     <C>             <C>              <C>          <C>
             Mechanical Segment                                         $36,436         $32,525          $3,911       12.0%
             Electronics Segment                                         19,119          19,015             104        0.5%
                                                                  -----------------------------------------------
                 Total Sales                                            $55,555         $51,540          $4,015        7.8%
                                                                  -----------------------------------------------
          Cost of Sales
             Mechanical Segment                                         $26,591         $23,122          $3,469       15.0%
             Electronics Segment                                         12,535          12,956            (421)      (3.2%)
                                                                  -----------------------------------------------
                 Total Cost of Sales                                    $39,126         $36,078          $3,048        8.4%
                                                                  -----------------------------------------------
          Gross Profit
             Mechanical Segment                                         $ 9,845         $ 9,403          $  442        4.7%
             Electronics Segment                                          6,584           6,059             525        8.7%
                                                                  -----------------------------------------------
                 Total Gross Profit                                     $16,429         $15,462            $967        6.3%
                                                                  -----------------------------------------------
          Selling, General and Administrative Expense
                                                                        $13,734         $14,090           $(356)      (2.5%)
                                                                  -----------------------------------------------
          Sales
             Mechanical Segment                                            65.6%           63.1%
             Electronics Segment                                           34.4%           36.9%
                                                                  ------------------ ---------------
                 Total Sales                                              100.0%          100.0%

          Cost of Sales as a Percentage of Sales
             Mechanical Segment                                            73.0%           71.1%
             Electronics Segment                                           65.6%           68.1%
                 Total Cost of Sales                                       70.4%           70.0%

          Gross Profit as a Percentage of Sales
             Mechanical Segment                                            27.0%           28.9%
             Electronics Segment                                           34.4%           31.9%
                 Total Gross Profit                                        29.6%           30.0%

          SG&A Expenses as a Percentage of Sales                           24.7%           27.3%

</TABLE>

Second quarter 2005 revenues grew $2.4 million, or 9.4% over similar quarter in
2004. Major contribution to this gain came from the Company's largest
distributor, where second quarter sales increased $1.0 million or 24.7% over
same period in 2004. The Company believes that inventory levels at this customer
have been reduced to near targeted levels, and that this improvement should
continue through the remainder of the year if the overall economy sustains its
current pace. 5% points of the Company's sales gain was driven by volume
increase, 2.7% points by favorable pricing with the rest of the gain being a
favorable currency effect. Mechanical business sales increased $2.0 million,
with approximately half of this gain attributable to volume increase, $0.7
million due to price increment, and the remainder resulting from a weaker
dollar. Electronic Business sales grew $0.4 million, with half the gain coming
from higher volume and the other half from favorable currency effect.

                                       17
<PAGE>

Year to date revenues increased $4.0 million or 7.8%. Sales volume increased by
$1.7 million, pricing and product mix accounted for $1.5 million, and currency
gain contributed $0.8 million. As in the second quarter, this gain was largely
due to Mechanical Business whose sales increased 12.0% or $3.9 million. $2.0
million of this gain was attributable to volume and $1.7 million to pricing.
Electronic Business revenue was largely flat, with a 1.4% drop in volume being
compensated by favorable currency effect.

Second quarter 2005 total Company gross profit rose by 0.3 million to $8.3
million. Stated as a percent of net sales, the gross profit margin fell from
31.2% to 29.7% as the sales rose 9.4% versus a 4.0 % rise in gross profit.
Mechanical Business gross profit was $5.1 million or 61.2% of the total margin
for the Company, and compared to second quarter 2004, this segment's gross
profit was flat. Increased margins due to higher volume, prices and weaker
dollar were offset by higher production costs and lower absorption of fixed
manufacturing costs. Metal cost escalation on a year-over-year basis was the
main driver of higher production costs, however metal cost prices have continued
to trend downward in the quarter from high levels at December 2004. As the sales
revenue was higher in the quarter compared to 2004, gross profit margin as a
percent of net sales fell from 31.5% to 27.7%. Electronics Business reported
$0.4 million increase in gross profit, principally due to lower production costs
and favorable currency changes.

On a year-to-date basis, the Company's gross profit increased by $1.0 million to
$16.4 million. Since sales increased at a slightly higher rate, gross margin
expressed as a percent of net sales fell marginally from 30.0% to 29.6%.
Mechanical Business contributed $0.4 million or 45.7% of this gross profit
increase, largely as a result of passing on higher metal costs to customers, and
to a lesser extent via higher volume sales and favorable currency effect. In
addition, higher production levels in 2004 associated with plans to close the
Company's Trenton, Tennessee facility resulted in increase in the prior year
absorption of fixed costs and margin improvement. Electronic Business
contributed $0.5 million increase due to second half 2004 workforce reductions.
Favorable currency effect and production efficiencies countered flat pricing and
a slightly lower volume.

For the second quarter 2005, selling, general and administrative expenses
declined by $0.4 million. This, combined with the rise in sales, resulted in the
fall of their percent to net sales from 28.7% to 24.7%. Mechanical Business cost
went down $0.1 million, mainly due to reduction in US administrative costs.
Electronic Business shed $0.3 million of selling, general and administrative
costs, principally in the US due to a reorganization that took place in the
third quarter of 2004.

Year-to-date selling, general and administrative costs also declined $0.4
million, with a reduction as a percent of net sales from 27.3% to 24.7%.
Mechanical Business costs increased $0.2 million largely due to higher employee
bonus accruals and lower gains associated with post-employment healthcare plans.
Conversely, similar increases in Electronics Business were overshadowed by
reductions in its US and European costs, resulting in $0.6 million reduction in
selling, general and administrative costs.

Interest expense and other finance charges increased $0.1 million in second
quarter to $0.5 million compared to the prior year. This increase was caused by
higher interest rates incurred by the Company under the terms of its new senior
secured borrowing facility, including amortization of the related costs,
together with increasing interest rates experienced in capital markets. Income
taxes remain at rates higher than statutory rates primarily due to operating
losses at the Company's Mexico operations that have not yet yielded any tax
benefits. For the year to date, interest expense and other finance charges were
$0.4 million higher at $1.1 million, and provision for incomes taxes was $0.3
million higher at $0.7 million.

                                       18
<PAGE>

As a result of the above, net income in the second quarter of 2005 compared to
the same quarter in the preceding year increased to $0.5 million from $0.1
million. Net income per share in the second quarter of 2005 was $0.10 per share,
compared to a net income per share of $0.02 in 2004. Year to date 2005 net
income was $0.9 million, or $0.17 per share compared to net income of $0.2
million, or $0.04 per share for the corresponding period in 2004.

Liquidity and Capital Resources:

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. At July
1, 2005 current and long-term debt of the Company totaled $23.5 million,
compared to $24.6 million at April 1, 2005, and $24.3 million at December 31,
2004. Borrowings at July 1, 2005 include $6.0 million of revolving credit and
$11.4 million of term debt under the terms of the Agreement. In addition, the
Company owes $5.3 million of revenue bonds and approximately $0.8 million of
other revolving and term borrowings.


The proceeds from the Agreement 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 Agreement 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 the Term Loans are repayable in monthly principal installments
totaling $0.2 million. All borrowings under the Agreement bear variable interest
of a margin plus LIBOR or US Prime Rate.

The amounts owed under the revenue bonds, together with $1.6 million of
obligations for workers compensation coverage, are secured by letters of credit
backed by the Agreement. The Company's unused borrowing capacity under the terms
of the Facility was $4.2 million and $5.3 million as at July 1, 2005, and April
1, 2005, respectively. Had the Agreement 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 Agreement 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 July 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 $0.7 million in 2005 second quarter
versus a net cash depletion of $0.3 million in the same quarter last year.
Operating activities generated $2.4 million cash compared to $0.1 million for
the same period in 2004. This change largely resulted from $0.4 million
increased net income, and $2.1 million reduced investment in receivables and
inventories, net of trade credit. Capital expenditures of $0.9 million were
partially funded by $0.4 million sale proceeds from Trenton, Tennessee plant
idled in the third quarter of 2004. Cash from operating activities was more than
sufficient to fund the remaining capital expenditures, pay down $1.1 million of
long-term debt, and increase cash balances by $0.7 million.

                                       19
<PAGE>

Year to date, the Company generated $1.5 million cash versus zero cash
generation in the same period of 2004. Operating activities provided $3.9
million versus a $0.6 million use of cash for the corresponding period of 2004.
Net income of $0.9 million and inventory reduction of $2.7 million were the
principal drivers for the 2005 year to date increase. During the first half of
2004, the Company invested in inventory to create safety stock as it transferred
production from the idled Trenton facility to other production facilities. Since
that time, considerable reductions in inventory quantities have occurred through
the implementation of lean manufacturing processes. Capital expenditures of $1.3
million in the first six months of 2005 were comparable to prior year levels.
Financing activities used $0.8 million of the Company's positive cash flow,
largely to fund $0.2 million monthly principal repayments associated with the
new Term Loans.

The Company did not pay any dividends either in the second quarter 2005 or in
the first half of 2005 compared to payments of $0.5 million and $0.9 million
during the corresponding periods of 2004 respectively. 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 senior secured credit facility.

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 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:

                                       20
<PAGE>

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.

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.

                                       21
<PAGE>

Recent Accounting Pronouncements

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

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.

                                       22
<PAGE>

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 July 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.

Restatement. On August 19, 2005, in response to a comment raised by the Staff of
the Securities and Exchange Commission ("SEC") concerning the Company's
accounting for post-retirement healthcare benefit obligations, the Audit
Committee of the Board of Directors and management of the Company initially
concluded that the Company's financial statements for each of the years in the
three year period ended December 31, 2004 that were previously reported in the
Company's 2004 Annual Report on Form 10-K should be restated and such financial
statements should no longer be relied upon. The restatement revised the
accounting for the post-employment healthcare benefit obligations included in
the aforementioned financial statements. The Company's determination to amend
and restate its previously issued financial statements was based upon internal
discussions of its Audit Committee and ongoing discussions with its independent
accountants, Grant Thornton LLP, and the SEC following the receipt of its
letter. The Company and the SEC have since completed discussions, and the
Company has now completed its review of this matter and has determined that its
original treatment of the issues raised in the SEC comment letter complied with
GAAP. However, because the Company had restated its accounting treatment of its
retiree healthcare plans in its report on Form 10-Q for the quarter ended July
1, 2005 to account for the issues raised at that time by the Staff of the SEC,
the Company is filing this Form 10-Q/A to restate its financial statements
contained in Form original 10-Q report, to reflect the continuation of the
Company's original accounting treatment. This restatement had no effect on the
revenues or cash flows of the Company.


(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.


                                       23
<PAGE>




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

          a)  The Company held its Annual Meeting of Shareholders on April 28,
              2005.

          b)  The following individuals were nominated and elected to serve as
              directors of TB Wood's Corporation: Thomas C. Foley and Frank D.
              Osborn.

          c)  The Shareholders voted as follows on the following matters:

              1.  Election of Directors. The voting result for each nominee is
                  as follows:

                  Name                          Votes for        Votes Withheld
                  Thomas C. Foley               4,321,274            220,148
                  Frank D. Osborn               4,533,714              7,178

              2.  To ratify the Audit Committee's selection of Grant Thornton
                  LLP as the Company's independent public accountants was
                  approved by a count of 4,536,105 votes for, 2,050 votes
                  against, 3,266 votes abstaining and zero broker non-vote.


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



<PAGE>



Signatures



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


Date  September 28, 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)