<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

|X|      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                             EXCHANGE ACT OF 1934
                   For the quarterly period ended MARCH 31, 2006

                                       OR

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

            For the transition period from ____________ to ____________

                         Commission file number: 1-14182
                             TB WOODS'S CORPORATION
             (Exact name of registrant as specified in its charter)

                 DELAWARE                             25-1771145
     (State or other jurisdiction of              (I.R.S. Employer
      incorporation or organization)              Identification 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)

                                     [NONE]
     (Former name, former address and former fiscal year, if changed since
                                  last report)

          Securities registered pursuant to Section 12(b) of the Act:

 Title of each class            Name of each exchange on which registered
-----------------------        --------------------------------------------
        None

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $.01 par value



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


    Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]   Accelerated filer  [ ]  Non-accelerated filer [X]

<PAGE>

    Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).   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                              April 25, 2006
--------------------------------------       ---------------------------------
Common Stock, $.01 par value per share             3,729,138 shares












                                       2
<PAGE>


                              TB WOOD'S CORPORATION
                                FORM 10-Q - INDEX
                                 MARCH 31, 2006

Part 1. - Financial Information                                        Page No.

Item 1.    Financial Statements (unaudited):

                 Condensed Consolidated Statements of
                    Operations - for the three months ended
                    March 31, 2006 and April 1, 2005                          4

                 Condensed Consolidated Balance Sheets -
                    March 31, 2006 and December 31, 2005                      5

                 Condensed Consolidated Statements of Cash
                    Flows - for the three months ended
                    March 31, 2006 and April 1, 2005                          6

                 Notes to Condensed Consolidated
                    Financial Statements                                      7

Item 2.   Management's Discussion and Analysis of
              Financial Condition and Results of Operations                  10

Item 3.   Quantitative and Qualitative Disclosures
              about Market Risk                                              15

Item 4.   Controls and Procedures                                            15

Part II - Other Information                                                  16

Item 6    Exhibits

Signatures                                                                   16


Exhibit 31.1 Certification pursuant to Section 302 of
                 the Sarbanes Oxley Act of 2002                              17
Exhibit 31.2 Certification pursuant to Section 302 of the
                 Sarbanes Oxley Act of 2002                                  18
Exhibit 32    Statement Pursuant to 18 U.S.C. Section 1350
                 as required by Section 906 of the
                 Sarbanes Oxley Act of 2002                                  19



                                       3
<PAGE>


PART 1. - FINANCIAL INFORMATION
Item 1 Financial Statements



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



<TABLE>
<CAPTION>
                                                                                            First Quarter Ended
                                                                                      --------------------------------
                                                                                         March 31,          April 1,
(in thousands, except per share amounts)                                                   2006               2005
                                                                                      ------------        ------------
<S>                                                                                   <C>                 <C>
Net sales                                                                             $     29,419        $     27,711
Cost of goods sold                                                                          20,315              19,558
                                                                                      ------------        ------------

Gross profit                                                                                 9,104               8,153

Selling, general and administrative expense                                                  7,301               6,860
                                                                                      ------------        ------------

Operating income                                                                             1,803               1,293

Interest expense and other finance charges                                                     845                 616
                                                                                      ------------        ------------

Income before provision for income taxes                                                       958                 677

Provision for income taxes                                                                     316                 305
                                                                                      ------------        ------------

Net income                                                                            $        642        $        372
                                                                                      ------------        ------------

PER SHARE AMOUNTS - BASIC AND DILUTED:

   Basic net income per common share                                                  $       0.17        $       0.07
                                                                                      ------------        ------------

   Diluted net income per common share                                                $       0.17        $       0.07
                                                                                      ------------        ------------

   Basic weighted average shares of common stock and equivalents outstanding                 3,714               5,177
                                                                                      ------------        ------------

   Diluted weighted average shares of common stock and equivalents outstanding               3,817               5,177
                                                                                      ------------        ------------
</TABLE>

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



                                       4
<PAGE>

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



<TABLE>
<CAPTION>
                                                                                      March 31,           December 31,
(in thousands, except per share amounts)                                                2006                  2005
                                                                                    -------------         -------------
<S>                                                                                 <C>                   <C>
ASSETS
Current Assets:
   Cash and cash equivalents                                                        $       1,436         $       3,419
   Accounts receivable less allowances of $521 at March 31, 2006
            and $495 at December 31, 2005                                                  17,181                14,827
   Inventories--Note 2                                                                     16,453                15,579
   Other current assets                                                                     3,265                 3,061
                                                                                    -------------         -------------
      Total current assets                                                                 38,335                36,886

Property, plant and equipment                                                              81,057                80,416
   Less accumulated depreciation                                                           58,216                57,361
                                                                                    -------------         -------------
       Net property, plant and equipment                                                   22,841                23,055
Other Assets:
   Goodwill                                                                                 5,711                 5,676
   Loan issue costs, net of amortization                                                    1,481                 1,564
  Deferred income taxes                                                                        15
   Other                                                                                      280                   572
                                                                                    -------------         -------------
      Total other assets                                                                    7,487                 7,812
                                                                                    -------------         -------------

TOTAL ASSETS                                                                        $      68,663         $      67,753
                                                                                    =============         =============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
    Current maturities of long-term debt                                            $       6,090         $       4,138
    Accounts payable                                                                        7,420                 8,465
    Accrued expenses                                                                        6,415                 6,996
    Deferred income taxes                                                                     702                   716
                                                                                    -------------         -------------
        Total current liabilities                                                          20,627                20,315

Long-term debt, less current maturities                                                    25,558                25,829
Deferred income taxes                                                                                                91

Shareholders' Equity:
    Preferred stock, $.01 par value, 100 shares authorized; no shares issued
    Common stock, $.01 par value, 10,000,000 shares authorized; 5,639,798
      issued;  3,724,082 and 3,703,386 outstanding at March 31, 2006 and
      December 31, 2005                                                                        57                    57
    Additional paid-in-capital                                                             28,259                28,153
    Retained earnings                                                                       9,785                 9,216
    Accumulated other comprehensive loss                                                      (35)                 (151)
    Treasury stock at cost                                                                (15,588)              (15,757)
                                                                                    -------------         -------------
          Total shareholders' equity                                                       22,478                21,518
                                                                                    -------------         -------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                          $      68,663         $      67,753
                                                                                    =============         =============
</TABLE>

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


                                       5
<PAGE>

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



<TABLE>
<CAPTION>
                                                                                         First Quarter Ended
                                                                                    -----------------------------
                                                                                       March 31       April 1,
(in thousands)                                                                           2006           2005
                                                                                    -------------    -------------
<S>                                                                                 <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income                                                                          $         642    $         372
Adjustments to reconcile net income to net cash provided by operating activities:
     Depreciation and amortization                                                          1,095            1,259
     Change in deferred income taxes, net                                                      24             (165)
     Stock options and employee stock benefit expense                                         153               84
     Other                                                                                     11                1
     Changes in operating assets and liabilities:
         Accounts receivable                                                               (2,354)          (2,467)
         Inventories                                                                         (874)           1,086
         Other current assets                                                                (204)             469
         Accounts payable                                                                  (1,045)             721
         Accrued and other liabilities                                                       (596)              61
                                                                                    -------------    -------------
Net cash (used in) provided by operating activities                                        (3,148)           1,421

CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures                                                                     (653)            (451)
    Other                                                                                      14             (377)
                                                                                    -------------    -------------
Net cash used in investing activities                                                        (639)            (828)

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from revolving credit facilities                                              27,404           29,993
    Repayments of revolving credit facilities                                             (25,452)         (42,035)
    Proceeds from long-term debt                                                               15           13,000
    Repayments of long-term debt                                                             (315)            (645)
    Issuance of treasury stock                                                                 64               13
                                                                                    -------------    -------------
Net cash provided by financing activities                                                   1,716              326

Effect of changes in foreign exchange rates                                                    88             (129)
                                                                                    -------------    -------------
Net (decrease) increase in cash and cash equivalents                                       (1,983)             790
Cash and cash equivalents at beginning of period                                            3,419              556
                                                                                    -------------    -------------
Cash and cash equivalents at end of period                                          $       1,436    $       1,346
                                                                                    =============    =============

Income taxes paid                                                                   $         797    $         110
                                                                                    =============    =============

Interest paid                                                                       $         790    $         554
                                                                                    =============    =============
</TABLE>

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





                                       6
<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 of America 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 2005 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.

        The Company utilizes a calendar year as the annual period for reporting
        its financial results. However, interim periods consist of four quarters
        of 13 weeks each, except for the fourth quarter that ends on December
        31.

2.      Inventories and Cost of Goods Sold

        The Company uses the last-in, first-out ("LIFO") method for inventories
        located in the United States, which represents approximately 70% and 71%
        of inventories at March 31, 2006 and December 31, 2005 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, valued
        principally using the LIFO method, consisted of the following:

                                               March 31       December 31
                                                 2006            2005
                                            -------------- ----------------
        Finished goods                          $11,801        $11,159
        Work in process                           3,512          3,452
        Raw materials                             7,327          7,009
                                            -------------- ----------------
                                                 22,640         21,620
           Less: LIFO Reserve                    (6,187)        (6,041)
                                            -------------- ----------------
        Inventory value at LIFO                 $16,453        $15,579
                                            ============== ================

        During the first quarter of 2006, the LIFO reserve was increased by
        $146, while in the first quarter of 2005 the LIFO reserve decreased by
        $170. Had the Company utilized the FIFO method of accounting for all of
        its inventories, costs of goods sold would have been lower in 2006 and
        higher in 2005 by the respective amounts of the aforementioned changes
        in LIFO reserve.

                                       7
<PAGE>

        Shipping and handling costs incurred by the Company to deliver
        manufactured goods to its customers are not included in costs of goods
        sold but are presented as an element of selling, general and
        administrative expense. The Company incurred $1,720 and $1,637 of
        shipping and handling costs in the first quarters ended March 31, 2006
        and April 1, 2005, respectively.

3.      Shareholders' Equity

        During the first quarter of 2006 the Company issued 6,868 treasury
        shares to participants in Company sponsored employee stock purchase and
        401(k) retirement plans, and 13,828 treasury shares were issued on
        exercise of vested stock options.

        On January 13, 2006, the Company granted options for the purchase of
        87,000 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
        January 13, 2016. The Company adopted Financial Accounting Standards
        Board (FASB) Statement of Accounting Financial Standard (SFAS) No. 123,
        as amended by SFAS No. 148, to account for stock based compensation cost
        using the fair value method. During each of the quarters presented, the
        value of stock based compensation cost has been accounted for using the
        fair value method at an after tax cost of $72 and $34 for 2006 and 2005
        respectively.

4.      Other Comprehensive Income

        Total comprehensive income (loss) was as follows:

                                                         Quarter Ended
                                                    March 31,      April 1,
                                                     2006           2005
                                                 ------------   ------------
        Net income                                   $ 642        $ 372
        Other comprehensive income (loss):
          Foreign currency translation
             adjustments                               116         (129)
                                                 ------------   ------------
        Total comprehensive income                   $ 758        $ 243
                                                 ============   ============


        Accumulated other comprehensive (loss), net of income tax, is comprised
        of aggregate currency translation adjustments of $(35) and $(151) as of
        March 31, 2006 and December 31, 2005, respectively.

5.      Earnings Per Share

        Basic earnings per share is computed by dividing net income by the
        weighted average shares outstanding. Diluted earnings per share is
        computed by dividing net income by the weighted average shares and
        common equivalent shares if dilutive. The computation of weighted
        average shares outstanding is as follows:
                                                            Quarter Ended
                                                       March 31,       April 1,
                                                         2006           2005
                                                     ----------      ---------
        Basic weighted average number of
          common shares outstanding                       3,714          5,177
        Shares issueable upon assumed
          exercise of outstanding stock options              85             --
                                                     ----------      ---------
        Diluted weighted average number of common
           and common equivalent shares outstanding       3,799          5,177
                                                     ==========      =========



                                       8
<PAGE>

        Total outstanding options to purchase 340,817 and 726,951 shares of
        common stock as of March 31, 2006 and April 1, 2005, respectively, are
        not included in the above calculation as their effect would be
        anti-dilutive.


6.      Business Segment Information

        The Company's reportable segments are business units that manufacture
        and market separate and distinct products and are managed separately
        because each business requires different processes, technologies and
        marketing strategies.
                                                        Quarter Ended
                                                 ----------------------------
                                                   March 31,      April 1,
                                                     2006           2005
                                                 ------------- --------------
        Sales:
           Mechanical Segment                       $20,115        $18,153
           Electronics Segment                        9,304          9,558
                                                 ------------- --------------
                                                    $29,419        $27,711
                                                 ============= ==============

        Operating income (loss):
           Mechanical Segment                        $1,876           $961
           Electronics Segment                          (73)           332
                                                 ------------- --------------
                                                     $1,803         $1,293
                                                 ============= ==============

        Depreciation and amortization:
           Mechanical Segment                        $  560         $  677
           Electronics Segment                          269            306
           Corporate                                    266            276
                                                 ------------- --------------
                                                     $1,095         $1,259
                                                 ============= ==============

        Expenditures for long-lived assets:
           Mechanical Segment                          $451           $168
           Electronics Segment                          158            221
           Corporate                                     44             62
                                                 ------------- --------------
                                                       $653           $451
                                                 ============= ==============


                                                   March 31,    December 31,
                                                     2006           2005
                                                 ------------- --------------
        Assets:
           Mechanical Segment                       $42,931        $42,097
           Electronics Segment                       21,030         20,760
           Corporate                                  4,702          4,896
                                                 ------------- --------------
                                                    $68,663        $67,753
                                                 ============= ==============

        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.



                                       9
<PAGE>



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

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

<TABLE>
<CAPTION>
                                                            2006        2005      Dollar Change     % Change
                                                         ------------ ---------- ---------------- -------------
<S>                                                      <C>          <C>        <C>             <C>
        Sales
           Mechanical Segment                                $20,115    $18,153       $1,962            10.8%
           Electronics Segment                                 9,304      9,558         (254)           (2.7%)
                                                         ------------ ---------- ----------------
               Total Sales                                   $29,419    $27,711       $1,708             6.2%
                                                         ============ ========== ================

        Cost of Sales
           Mechanical Segment                                $14,235    $13,373       $  862             6.4%
           Electronics Segment                                 6,080      6,185         (105)           (1.7%)
                                                         ------------ ---------- ----------------
               Total Cost of Sales                           $20,315    $19,558       $  757             3.9%
                                                         ============ ========== ================

        Gross Profit

           Mechanical Segment                                $ 5,880    $ 4,780       $1,100            23.0%
           Electronics Segment                                 3,224      3,373         (149)           (4.4%)
                                                         ------------ ---------- ----------------
               Total Gross Profit                            $ 9,104    $ 8,153         $951            11.7%
                                                         ============ ========== ================

        Selling, General and Administrative Expense          $ 7,301    $ 6,860       $  441             6.4%
                                                         ============ ========== ================

        Sales
           Mechanical Segment                                 68.4%      65.5%
           Electronics Segment                                31.6%      34.5%
                                                         ------------ ----------
               Total Sales                                   100.0%     100.0%
                                                         ============ ==========

        Cost of Sales as a Percentage of Sales
           Mechanical Segment                                 70.8%      73.7%
           Electronics Segment                                65.3%      64.7%
               Total Cost of Sales                            69.1%      70.6%

        Gross Profit as a Percentage of Sales
           Mechanical Segment                                 29.2%      26.3%
           Electronics Segment                                34.7%      35.3%
               Total Gross Profit                             30.9%      29.4%

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

First quarter 2006 revenues continued to reflect the effects of a strong economy
with total sales increasing by $1.7 million, or 6.2% over prior year's first
quarter. Approximately half of this increase came from higher sales to the
Company's largest distributor, who bought $0.9 million or 17.8% more as compared
to the same quarter last year.

Mechanical business sales grew approximately $2.0 million or 10.8% over the
prior year's first quarter. Higher volume accounted for $1.4 million of the
increase, $0.4 million came from a Fall 2005 price increase, with the remaining
attributable to a favorable currency impact, principally a 6% increase in the
Canadian dollar. Electronics segment sales fell by $0.3 million or 2.7%. A
marginal increase in volume and flat pricing were offset by a $0.3 million
unfavorable currency impact, largely due to an 8% decline in the Euro.

                                       10
<PAGE>

Total company gross profit increased by $1.0 million to $9.1 million. Stated as
a percent of net sales, gross profit margins increased to 30.9% of sales from
29.4% in the prior year's first quarter. The Company's Mechanical Division
contributed $5.9 million of gross profit in the first quarter of 2006, or 65% of
the Company's gross profit. Mechanical Business margins also increased to 29.2%
from 26.3% in the same quarter of last year, resulting in $1.1 million of higher
gross profit. Higher volumes contributed $0.7 million and higher prices
increased gross profit by $0.4 million. Favorable currency impacts on sales in
Canada and Mexico were negated by adverse currency impact of manufacturing
product in Mexico. Gross profit in the first quarter of 2005 was $0.3 million
lower while excess inventory was being depleted, and labor and overhead costs
previously absorbed in this inventory were recognized in 2005. The positive
comparative impact of this in 2006, when inventories were increased in the first
quarter of this year, was offset by an increase in LIFO reserves during the
first quarter of 2006.

The Company's Electronics Division contributed $3.2 million of gross profit, or
35% of consolidated gross profit. This represented a decline of $0.2 million
from the same quarter of last year, primarily due to the adverse currency impact
of the Euro, as approximately 40% of the Company's electronic products are
produced and sold in Europe. The remaining decline in profit resulted from
inventory and LIFO adjustments.

Selling, general and administrative expenses held steady at 24.8% of sales in
2006, increasing by $0.4 million in total, principally from higher bonus
accrual, salary and stock option costs in the current first quarter. In
addition, the 2005 first-quarter included a $0.3 million favorable adjustment
relating to changes in the terms of the former CEO's post-employment payments.

Interest expense was approximately $0.8 million in the first quarter of 2006
compared to $0.6 million for the same period in 2005. This increase was caused
by higher interest rates incurred under the terms of the Company's new senior
secured and senior subordinated debt arrangements finalized in January and
October of 2005, respectively, including amortization of the related costs.
Interest expense was also higher due to increasing interest rates experienced in
capital markets through 2005, which continued in 2006. Income taxes approximate
statutory rates.

As a result of the above, net income in the first quarter of 2006 compared to
the same quarter in the preceding year increased to $0.6 million from $0.4
million. Net income per share in the first quarter of 2006 was $0.17 per share,
compared to a net income per share of $0.07 in 2005.


Liquidity and Capital Resources:

At March 31, 2006 current and long-term debt totaled $31.6 million, compared to
$30.3 million at December 31, 2005, and was comprised of $3.0 million and $8.5
million in revolving and term debt, respectively, under the senior secured
credit facility; $5.3 million in tax-exempt revenue bonds; $0.5 million of
principally foreign revolving and term debt, and $14.3 million of unsecured
subordinated term debt. The Company's effective borrowing rates at March 31,
2006 and December 31, 2005 for its long-term obligations were approximately
11.01% and 9.49% respectively.

                                       11
<PAGE>

On January 7, 2005, the Company entered into a new senior secured loan and
security agreement (the "Loan Agreement") that provided for up to an $18.3
million revolving line of credit and two term loans totaling $13.0 million (Term
Loan A--$10.0 million and Term Loan B--$3.0 million). The proceeds were used to
retire amounts outstanding under the Company's outstanding revolving line of
credit. In addition, the Loan Agreement secures 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 borrowings
under the Loan Agreement 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 Loan Agreement was amended on
July 29, 2005 to extend the term for an additional two years through April 2009
and permit the Company to borrow up to $15.0 million to fund the purchase of up
to 1.5 million shares of outstanding common stock and repay Term Loan B, the
outstanding balance of which was approximately $2.0 million.

All borrowings under the Loan Agreement bear variable interest of a margin plus
LIBOR or U.S. Prime Rate, and the remaining Term Loan A is repayable in monthly
principal installments totaling $0.13 million. The average borrowing rates for
the Company's short-term borrowings under the Loan Agreement at March 31, 2006
and December 31, 2005 were 8.75% and 7.97% respectively. At March 31, 2006 the
Company had remaining borrowing capacity of $7.7 million.

The Loan 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, and meeting certain specified
leverage and operating ratios, all as defined in the Loan Agreement. The Loan
Agreement also contains other restrictive covenants that restrict outside
investments, capital expenditures, and dividends. The Company was in compliance
with the debt covenants at March 31, 2006, including compliance with covenants
that could otherwise restrict the payment of a dividend at the discretion of the
Company's Board of Directors.

On October 20, 2005 the Company entered into a Securities Purchase Agreement in
exchange for the issuance of $15.0 million of senior subordinated notes valued
at $14.24 million and detachable warrants, valued at $0.76 million, to purchase
174,000 shares of the company's common stock. The senior subordinated notes have
a stated rate of 12% (effective rate of 12.97%), are due on October 12, 2012,
and contain customary financial covenants similar to, but less restrictive than,
the covenants in the Loan Agreement. The proceeds from the sale of the notes and
detachable warrants were used to acquire 1.5 million shares of the Company's
common stock at a purchase price of $11.25 million, repay approximately $2.0
million of term debt under the Loan Agreement, pay $1.0 million of transaction
costs related to the stock purchase and related financing transaction, with the
balance providing additional working capital.

The Company used $2.0 million of its cash balance for the three months ended
March 31, 2006 compared to generating $0.8 million of cash for the same period
in fiscal 2005. Operating activities used $3.1 million of cash during the first
quarter of 2006 compared to a cash generation of $1.4 million for the same
quarter in 2005. In 2005 the Company reduced inventory by $1.1 million in the
first quarter, compared to an increase by $0.9 million in the same period this
year in the face of higher demand. In addition, the Company reduced accrued
expenses in 2006, compared to an increase in 2005, principally for tax payments
attributable to 2005 results of operation.

Total non-operating investments approximated $0.6 million in the first quarter
of 2006, compared to $0.8 million in 2005. Capital expenditures were $0.7
million in the first quarter of 2006 compared to $0.5 million in 2005. The
Company has a capital budget of $5.0 in 2006 million compared to $3.1 million of
capital expenditures in 2005. This planned increase is primarily to support
upgrading the Company's mechanical products manufacturing capabilities and fund
certain facility improvements.

Based upon our current level of operations, the Company believes that the
combination of cash generated by operations and available borrowing capacity
under its borrowing agreements described above, is adequate to finance the
Company's operations for the foreseeable future.


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<PAGE>

Accounting Policies:

Management's discussion and analysis of the Company's financial statements and
results of operations are based upon the Company's Consolidated Financial
Statements included as part of this document. The preparation of these
Consolidated 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, 2005 Consolidated Financial Statements included in the Company's 2005 annual
report on Form 10-K. Certain of our accounting policies require the application
of significant judgement 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 judgements 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:

Allowance for Doubtful Accounts: The majority of the Company's accounts
receivable are due from selected authorized industrial distributors who resell
the Company's products to OEMs and end users for replacement parts. Accounts
receivable potentially subject the Company to concentrations of credit risk.
Credit is extended based on evaluation of a customer's financial condition and,
generally, collateral is not required. Accounts receivable are generally due
within 30 days and are stated at amounts due from the customers net of an
allowance for doubtful accounts. Accounts receivable outstanding longer than the
contractual payment terms are considered past due. The Company determines its
allowance considering a number of factors, including the length of time trade
accounts receivable are past due, the Company's previous loss history, the
customer's current ability to pay its obligations to the Company, and the
condition of the general economy and the industry as a whole. The Company writes
off accounts receivable when they become uncollectible, and payments
subsequently received on such receivables are credited to the allowances for
doubtful accounts.

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 obsolete or otherwise 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.



                                       13
<PAGE>

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.

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. Management judgment is
required in determining the Company's provision for income taxes, deferred tax
assets and liabilities, which, if actual experience varies, could result in
material adjustments to deferred tax assets and liabilities.


Recent Accounting Pronouncements

In December 2004, the FASB issued Statement of Accounting Standards No. 123
(revised 2004) "Share-Based Payment", a revision of FASB Statement No. 123
"Accounting for Stock Based Compensation" which the Company adopted in the third
quarter of 2005. As the Company had already adopted FASB Statement No. 123 in
2003 the only effects of the revised Statement No. 123 upon the Company are
expanded disclosure related to its stock based compensation plan.

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) which the Company is
required to adopt for the fiscal year ending December 31, 2006. 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 does not expect this
statement to have any significant effect upon its 2006 consolidated financial
statements based on current operating and product demand levels.




                                       14
<PAGE>

Safe Harbor Statement

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


Item 3  Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in market risks since the 2005 Annual Report
to Shareholders.


Item 4.  Controls and Procedures

(a) Evaluation of disclosure controls and procedures: As of March 31, 2006, 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.

(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.


                                       15
<PAGE>




PART II - OTHER INFORMATION


Item 6.  Exhibits

          10.1    TB Wood's Corporation 2006 Stock-Based Incentive Compensation
                  Plan

          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

Signatures


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Borough of
Chambersburg and Commonwealth of Pennsylvania, on May 5, 2006

Date May 5, 2006           TB WOOD'S CORPORATION

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


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