<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                For The Quarterly Period Ended September 28, 2001

                         Commission File Number 1-14182

                              TB WOOD'S CORPORATION
-------------------------------------------------------------------------------
             (Exact Name of registrant as specified in its charter)


             DELAWARE                               25-1771145
-------------------------------------------------------------------------------
  (State or other Jurisdiction of       (IRS Employer Identification Number)
  Incorporation of Organization)

    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 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
                                                    -----         -----

Number of shares outstanding of the issuer's Common Stock:

               Class                     Outstanding at September 28, 2001
               -----                     ---------------------------------
   Common Stock, $.01 par value                      5,209,603

<PAGE>

                                Table of Contents


Part I. - Financial Information                                        Page No.
-------------------------------                                        --------

Condensed Consolidated Balance Sheets -
      September 28, 2001 and December 29, 2000                            3

Condensed Consolidated Statements of Operations -
      For the Third Quarter and nine months Ended September 28, 2001
      and September 29, 2000                                              4

Condensed Consolidated Statements of Cash Flows -
      For the nine months Ended September 28, 2001
      and September 29, 2000                                              5

Notes to Condensed Consolidated Financial Statements                      6

Management's Discussion and Analysis of
      Financial Condition and Results of Operations                       8


Part II. - Other information                                             13
----------------------------






























                                       2
<PAGE>

Part I.-Financial Information
Item 1. Financial Statements

                     TB Wood's Corporation and Subsidiaries
                      Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                                                                   Unaudited
                                                                                   September     December 29,
(in thousands, except per share and share amounts)                                 28, 2001          2000
-------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>               <C>
ASSETS
Current Assets:
Cash and cash equivalents ...................................................      $     879        $     619
Accounts receivable, less allowances for doubtful accounts, discounts,
     and claims of $321 at September 28, 2001 and $410 at December
     29, 2000 ...............................................................         15,155           18,912
Inventories .................................................................         27,092           32,216
Other current assets ........................................................          2,356            1,908
                                                                                   --------------------------
     Total current assets ...................................................         45,482           53,655
                                                                                   --------------------------
Property, plant, and equipment ..............................................         64,923           70,777
Less accumulated depreciation ...............................................         31,916           37,060
                                                                                   --------------------------
    Net property, plant and equipment .......................................         33,007           33,717
                                                                                   --------------------------
Other Assets:
Deferred income taxes .......................................................          3,434            3,542
Goodwill, net of accumulated amortization of $1,296 at
     September 28, 2001 and $1,126 at December 29, 2000 .....................          9,376            9,546
Other .......................................................................          1,724            2,200
                                                                                   --------------------------
     Total other assets .....................................................         14,534           15,288
                                                                                   --------------------------
TOTAL ASSETS ................................................................      $  93,023        $ 102,660
                                                                                   ==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt ........................................      $      90        $     258
Accounts payable ............................................................          5,879            8,663
Checks outstanding ..........................................................          1,838            1,169
Accrued expenses ............................................................          8,955           10,995
Deferred income taxes .......................................................          1,313            1,398
                                                                                   --------------------------
     Total current liabilities ..............................................         18,075           22,483
                                                                                   --------------------------
Long-term debt, less current maturities .....................................         29,750           33,661
                                                                                   --------------------------
Postretirement benefit obligation, less current portion .....................         13,345           14,133
                                                                                   --------------------------
Equity of minority shareholders .............................................          3,153            2,291
                                                                                   --------------------------
Shareholders' Equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized,
     no shares issued or outstanding ........................................           --               --
Common stock, $.01 par value; 40,000,000 shares authorized,  5,887,698 shares
   issued and 5,209,603 and 5,400,908 shares outstanding at September 28, 2001
   and December 29, 2000 respectively .......................................             59               59
Treasury Stock, at cost .....................................................         (6,748)          (4,566)
Additional paid-in capital ..................................................         29,121           29,086
Retained Earnings ...........................................................          8,631            8,147
Other comprehensive income ..................................................         (2,363)          (2,634)
                                                                                   --------------------------
     Total shareholders' equity .............................................         28,700           30,092
                                                                                   --------------------------
  TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................................      $  93,023        $ 102,660
                                                                                   ==========================
</TABLE>
                  The accompanying notes are an integral part
                   of these consolidated financial statements.

                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                Unaudited                        Unaudited
                                                           Third Quarter Ended                  Year to Date
                                                       Sept. 28,         Sept. 29,         Sept. 28,        Sept. 29,
(in thousands, except per share amounts)                 2001              2000              2001             2000
---------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>               <C>               <C>               <C>
Net sales .........................................   $  26,045         $  32,409         $  84,331         $ 102,524

Cost of sales .....................................      17,687            21,140            55,782            65,637
                                                      ---------------------------------------------------------------

  Gross profit ....................................       8,358            11,269            28,549            36,887

Selling, general and administrative expenses ......       7,241             8,038            23,582            26,034
                                                      ---------------------------------------------------------------

   Operating income, before minority interest .....       1,117             3,231             4,967            10,853

Minority Interest .................................         256               388               927             1,242
                                                      ---------------------------------------------------------------

Operating income ..................................         861             2,843             4,040             9,611
                                                      ---------------------------------------------------------------

Other expense:
   Interest expense and other finance charges .....        (348)             (807)           (1,185)           (2,214)
   Other, net .....................................         (27)               87               532                38
                                                      ---------------------------------------------------------------

   Other income (expense), net ....................        (375)             (720)             (653)           (2,176)
                                                      ---------------------------------------------------------------

Income before provision for income taxes ..........         486             2,123             3,387             7,435

Provision for income taxes ........................         184               755             1,287             2,790
                                                      ---------------------------------------------------------------

Net income ........................................   $     302         $   1,368         $   2,100         $   4,645
                                                      ===============================================================

Per share of common stock:

Basic net income per common share .................   $    0.06         $    0.25         $    0.39         $    0.85
                                                      ---------------------------------------------------------------

Weighted average shares of common stock ...........       5,371             5,476             5,435             5,473
                                                      ===============================================================

Diluted net income per common share ...............   $    0.06         $    0.25         $    0.39         $    0.85
                                                      ===============================================================

Diluted weighted average shares of common stock
   and equivalents outstanding ....................       5,380             5,480             5,439             5,475
                                                      ===============================================================
</TABLE>

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

                                        4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                       Unaudited
                                                                                      Year to Date
                                                                                   Sept. 28,   Sept 29,
(in thousands)                                                                       2001       2000
-------------------------------------------------------------------------------------------------------
<S>                                                                                <C>         <C>
Cash Flows from Operating Activities:
Net income .....................................................................   $  2,100    $  4,645
                                                                                   --------------------
Adjustments to reconcile net income to net cash provided by operating
activities:
     Depreciation and amortization .............................................      4,194       4,043
     Change in deferred income taxes, net ......................................         23         187
     Stock option compensation and employee stock benefit expense ..............        381         298
     Minority interest .........................................................        927       1,242
     Net loss (gain) on sale of assets .........................................       (618)         23
 Changes in working capital:
          Accounts receivable, net .............................................      3,757         (31)
          Inventories, net .....................................................      5,124       1,849
          Other current assets .................................................       (448)       (226)
          Accounts payable .....................................................     (2,784)     (5,888)
          Accrued and other liabilities ........................................     (2,942)        346
                                                                                   --------------------
               Total adjustments ...............................................      7,614       1,843
                                                                                   --------------------
               Net cash provided by operating activities .......................      9,714       6,488
                                                                                   --------------------
Cash Flows from Investing Activities:
Capital expenditures ...........................................................     (2,761)     (5,518)
Proceeds from sale of fixed assets .............................................        745          10
Other, net .....................................................................       (141)        194
                                                                                   --------------------
     Net cash used in investing activities .....................................     (2,157)     (5,314)
                                                                                   --------------------
Cash Flows from Financing Activities:
Change in checks outstanding ...................................................        669       1,378
Distribution of Earnings to Minority Partner ...................................        (65)       --
Repayments of other long-term debt, net ........................................       (227)       (337)
Proceeds from new revolving credit facility ....................................     31,678      34,300
Repayments of new revolving credit facility ....................................    (35,529)    (33,400)
Payment of dividends ...........................................................     (1,466)     (1,475)
Purchase of shares through Tender Offer ........................................     (1,801)       --
Treasury Stock .................................................................       (697)       (312)
Other...........................................................................       (130)       (378)
                                                                                   --------------------
     Net cash used in financing activities .....................................     (7,568)       (224)
                                                                                   --------------------
Effect of changes in foreign exchange rates ....................................        271        (748)
                                                                                   --------------------
Net increase in cash and cash equivalents ......................................        260         202
Cash and cash equivalents at beginning of period ...............................        619       1,245
                                                                                   --------------------
Cash and cash equivalents at end of period .....................................   $    879    $  1,447
                                                                                   ====================
Income taxes paid ..............................................................   $  1,563    $  1,397
                                                                                   ====================
Interest paid ..................................................................   $  1,185    $  2,214
                                                                                   ====================
</TABLE>

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

                                       5
<PAGE>

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

1.   In the opinion of management, the accompanying unaudited condensed
     consolidated financial statements contain all adjustments necessary to
     present fairly the financial position of TB Wood's Corporation and
     Subsidiaries (the "Company") and the results of their operations and cash
     flows for the interim periods presented. Operating results for the interim
     periods presented are not necessarily indicative of the results that may be
     expected for the fiscal year ending December 28, 2001.

2.   The major classes of inventories at September 28, 2001 and December 29,
     2000 consisted of the following:

<TABLE>
<CAPTION>
                                                                                 Unaudited
                                                                        -----------------------------
                                                                        Sept. 28,        December 29,
                                                                          2001               2000
     ------------------------------------------------------------------------------------------------
<S>                                                                      <C>                  <C>
     Raw materials and supplies...................................       $ 6,310              $ 7,112
     Work in process..............................................         7,296                9,060
     Finished goods ..............................................        19,429               21,927
                                                                         ----------------------------
     Total at FIFO cost...........................................        33,035               38,099
     Excess of FIFO cost over LIFO cost...........................        (5,943)              (5,883)
                                                                         ----------------------------
     Total at LIFO cost...........................................       $27,092              $32,216
                                                                         ============================
</TABLE>

     Effective fiscal year 2001, the Company has changed its accounting for LIFO
     from the Double Extension method to the Link Chain method. The effect of
     this change was not material.

3.   On October 3, 2001, the Board of Directors declared a quarterly cash
     dividend of $0.09 per share payable October 31, 2001 to stockholders of
     record on October 17, 2001.

4.   In 1996, the Board of Directors authorized the Company to purchase up to
     200,000 of the Company's common shares. At the July 2000 and January 2001
     Board of Director's meetings, the directors of TB Wood's expanded this
     share repurchase program by authorizing the repurchase of up to an
     additional 100,000 and 200,000 shares, respectively, of TB Wood's stock.
     These purchases are subject to certain business and market conditions. At
     September 28, 2001 the cumulative number of treasury shares purchased under
     this authorization was 296,433. During third quarter of 2001, the number of
     treasury shares issued to employees under option and stock purchase plans
     was 3,043 and under the 401(k) profit-sharing plan was 4,489. In 2001, the
     Board of Directors authorized a self-tender "Modified Dutch Auction" for
     150,003 shares at a price not to exceed $11.50 per share and not lower than
     $8.50 per share. On August 3, 2001, the Company accepted 150,003 shares at
     $11.00 per share and incurred related costs. In addition, on September 5,
     2001, the Company repurchased in a private transaction, 50,000 shares at
     $11.00 per share. As of September 28, 2001, 678,095 shares were held in
     treasury at cost.

                                       6
<PAGE>

5.   Total comprehensive income for the year-to-date periods ended September 28,
     2001 and September 29, 2000 was as follows:

<TABLE>
<CAPTION>
                                                                      Unaudited           Unaudited
                                                                    ----------------------------------
                                                                    Sept 28, 2001        Sept 29, 2000
     -------------------------------------------------------------------------------------------------
<S>                                                                   <C>                   <C>
     Net Income ..............................................        $ 2,100               $ 4,645
     Other comprehensive income,
         Foreign currency translation adjustments ............            271                  (748)
                                                                      =============================
     Total comprehensive income ..............................        $ 2,371               $ 3,897
                                                                      =============================
</TABLE>

6.   Basic EPS is computed by dividing reported earnings available to common
     shareholders by weighted average shares outstanding. No dilution for any
     potentially dilutive securities is included in basic EPS. Diluted EPS is
     computed by dividing reported earnings available to common shareholders by
     weighted average shares and common equivalent shares outstanding, if
     dilutive. The computation of weighted average shares outstanding and net
     income per share are as follows:

<TABLE>
<CAPTION>
                                                        Third Quarter               Year to date
                                                    Sept. 28,     Sept. 29,    Sept. 28,      Sept. 29,
                                                      2001          2000         2001           2000
-------------------------------------------------------------------------------------------------------
<S>                                                  <C>           <C>         <C>             <C>
     Weighted average number of common shares
     outstanding .................................    5,371         5,476         5,435         5,473
     Shares issued upon assumed exercise of
     outstanding stock options ...................        9             4             4             2
                                                     ------------------------------------------------
     Weighted average number of common and
     common equivalent shares outstanding ........    5,380         5,480         5,439         5,475
                                                     ================================================
     Net Income ..................................   $  302        $1,368        $2,100        $4,645
                                                     ================================================
     Basic net income per common share ...........   $ 0.06        $ 0.25        $ 0.39        $ 0.85
                                                     ================================================
     Diluted net income per common share .........   $ 0.06        $ 0.25        $ 0.39        $ 0.85
                                                     ================================================
</TABLE>

     Total outstanding options to acquire 779 and 500 shares of common stock as
     of September 28, 2001 and September 29, 2000, respectively, are not
     included in the above calculation as their effect would be antidilutive.


                                       7
<PAGE>

7.   Segment Reporting

     The following table summarizes revenues, operating income, total assets and
     expenditures for long-lived assets by business segment for the period ended
     September 28, 2001.

<TABLE>
<CAPTION>
                                             Mechanical          Electronics
                                              Business             Business          Total
                                             -----------------------------------------------
<S>                                           <C>                  <C>               <C>
Revenues from external customers              $54,808              $29,523           $84,331

Year to date operating profit, after
     minority interest                          4,895                (855)             4,040


Depreciation and amortization                   2,667                1,527             4,194

Segment assets                                 50,917               32,985            83,902

Expenditures for long-lived assets              1,319                  899             2,218
</TABLE>

     The following table reconciles segment profit to consolidated income before
     income taxes as of September 28, 2001.

Total operating profit for reportable
   segments                                                $ 4,040

Interest, net                                               (1,185)

Other, net                                                     532
                                                           -------

Income before income taxes                                 $ 3,387
                                                           =======

8.   Effective July 2001, the Financial Accounting Standards Board Issued SFAS
     No. 141, "Business Combinations" and No. 142, "Goodwill and other
     Intangibles" effective the beginning of fiscal year 2002. SFAS No. 141
     requires all business combinations initiated after June 30, 2001 to be
     accounted for using the purchase method. SFAS No. 142 eliminates
     amortization of goodwill and requires acquired intangibles to be separately
     recognized. Goodwill will be subject to at least an annual assessment for
     impairment by applying a fair-value-based test. The Company is currently
     evaluating the impact of adoption of these statements.

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

Overview

         The general slowdown in the North American manufacturing sector
continued in the third quarter of 2001. The Company continued to initiate
measures to reduce costs in the third quarter that it believes will enable it to
more successfully operate in the current environment. These cost reduction
measures include, but are not limited to, continued strict cost controls on all
discretionary spending, the reduction or elimination of certain employees,
finding component vendors offering lower costs and shorter workweeks in specific
areas to match output to customer demands.

                                       8
<PAGE>

RESULTS OF OPERATIONS (in thousands, except per share amounts)

         The Company posted net sales for the third quarter 2001 of $26,045
compared to $32,409 for the third quarter 2000, a decrease of 19.6%. Year to
date net sales of the Company for 2001 were $84,331 which is $18,193 lower than
net sales for the same period in 2000. Mechanical Business net sales for the
third quarter of $16,674 were $3,277 lower than net sales of $19,951 in
comparable 2000. The sales decline mainly occurred in the belted drive product
lines, driven by the general industrial slowdown. Sales of large belted drives
for the energy sector and mining sector were strong at $450. For the first nine
months of 2001, Mechanical Business net sales were $54,808 compared to $62,974
for same period in 2000 or a reduction of 13.0%

         Electronics Business net sales were $9,371, a $3,087 decrease from net
sales of $12,458 in the third quarter of 2000. A large portion of sales for the
Electronics business is to original equipment manufacturers. Accordingly, the
slowdown of capital expenditures by firms in the semiconductor, wastewater
treatment, machine tool, and man-made fibers industries were the principal
reasons for the sales decline. For the first nine months of 2001, Electronics
Business net sales were $29,523 compared to $39,550 for same period in 2000, or
a reduction of 25.4%.

         Company cost of sales ("COS") in the third quarter 2001 was $17,687
compared to $21,140 for the same period last year. As a percent of sales, COS
was 67.9% for the third quarter 2001 an increase of 2.7 percentage points from
2000's third quarter COS of 65.2%. Year to date, COS for the Company was $55,782
or 66.1% of sales compared to $65,637 or 64.0% of sales for same period in 2000.
Mechanical Business COS of $11,419 in the third quarter 2001 was $1,522 lower
than COS of $12,941 in the third quarter 2000. As a percent of sales for the
third quarter 2001, Mechanical Business reported COS of 68.5%, an increase of
3.6 percentage points from 64.9% in the prior year. The increased COS percentage
to sales resulted from reduced fixed expense absorption from lower sales volume
and inventory reduction. COS increases were partially offset by the Company's
decisions to continue to reduce both headcount and discretionary spending. Year
to date, 2001 COS for Mechanical Business was $36,121 or 65.9% of sales compared
to $40,964 or 65.1% of sales for same period in 2000.

         Electronics Business COS for the third quarter 2001 was $6,268, a
$1,931 decrease from COS of $8,199 for the same quarter of 2000. As a percent of
sales for the third quarter 2001 versus the third quarter 2000, Electronics
Business reported COS of 66.9% for 2001, up 1.1 percentage points from 65.8% in
the prior year. The principal reasons for the higher COS percentage were the
lower absorption of fixed expenses caused by reduced sales volume and inventory
reduction. Year to date, 2001, COS for Electronics Business was $19,661 or 66.6%
of sales compared to $24,673 or 62.4% of sales for same period in 2000.

         Selling, general and administrative ("SG&A") expenses for the third
quarter 2001 were $7,241 compared to $8,038 for the third quarter 2000, a
decrease of $797, or 9.9%. SG&A, as a percent of sales, increased to 27.8% in
the third quarter 2001 from 24.8% in the third quarter 2000. The major reasons
for the change in absolute dollars were the reduced variable costs caused by the
lower sales volume, currency translation effect on European figures, and lower
headcount. Year over year inflation partially offset these actions. Year to
date, 2001, SG&A was $23,582 or 28.0% of sales compared to $26,034 or 25.4% of
sales for same period in 2000.

                                       9
<PAGE>

         Operating income for the Company was $861 for the third quarter 2001,
or 3.3% as a percent of sales, and $1,982 lower than third quarter 2000 income
from operations of $2,843, which was 8.8% of sales. This reduction was caused by
the decreased absorption of fixed expenses from the lower sales volume and
inventory reduction, and lower sales volume. After nine months of 2001,
operating income was $4,040 or 4.8% as a percent of sales compared to $9,611 or
9.4% as a percent of sales for same period of 2000. The principal reasons for
the year to year change were lower sales volume and reduced absorption of fixed
expenses from this lower sales volume and inventory reduction.

         Other expense, net for the third quarter 2001 was $375, compared to
other expense of $720 for the same period last year. Interest expense, a
component of other expense, for the Company was $348 in the third quarter of
2001, a $459 decrease from $807 of interest expense in the third quarter of
2000. The Company's lower debt levels and the Federal Reserve's reduction of
interest rates in the third quarter 2001 were the primary reasons for this lower
interest expense to the Company. Year to date 2001, other expense, net was $653
compared to $2,176 for same period of 2000. The principal reasons for the $1,523
improvement was lower interest expense and the gain from the sale of the Elk
Grove Village warehouse in 2001.

         Net income in the third quarter 2001 was $302, or $0.06 per diluted
share, $1,066 lower than the $1,368, or $0.25 per diluted share a year ago. Year
to date 2001, net income was $2,100, or $0.39 per diluted share, $2,545 lower
than the $4,645, or $0.85 per diluted share, for same period last year.


LIQUIDITY AND CAPITAL RESOURCES (in thousands, except per share amounts)

         Working Capital at September 28, 2001 was $27,407, 12.1% below $31,172
at December 29, 2000. The decrease was due primarily to decreases in accounts
receivable and inventory. Current ratio was at 2.5:1 at September 28, 2001
compared to 2.4:1 at December 29, 2000.

         Outstanding long-term debt decreased $3,911 to $29,750 at September 28,
2001 compared to $33,661 at year-end 2000. Debt was comprised of $5,285 in
tax-exempt revenue bonds, $23,900 in debt under the Company's $52,500 unsecured
revolving credit facility (the "Facility"), and $565 in other instruments. At
September 29, 2001, including $5,917 of outstanding standby letters of credit,
the Company had approximately $22,683 of available borrowing capacity under the
Facility. The Company's annual interest rate as of September 28, 2001 on the
Facility was 4.1%.

         In August 1998, the Company entered into an interest rate swap
agreement that effectively converted $10,000 of the underlying variable rate
debt in the unsecured revolving credit facility to fixed rate debt. The notional
principal amount of the swap agreement is $10,000 with an effective fixed rate
of 5.75%. The swap agreement is settled each month and expired in July 2001.
Based upon current interest rates, the Company did not renew this agreement.

         The Company's cash flows from operations in year to date 2001 were
$9,714, a $3,226 increase from the year to date 2000. 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 is
adequate to finance the Company's operations for the foreseeable future.

                                       10
<PAGE>

IMPACT OF ACCOUNTING STANDARDS

         In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
This statement establishes accounting and reporting standards for derivative
instruments and requires recognition of all derivatives as assets or liabilities
in the statement of financial position and measurement of those instruments at
fair value. Derivatives that are not hedges must be adjusted to fair value
through earnings. If the derivative is a hedge, depending on the nature of the
hedge, changes in fair value will be either offset against the change in fair
value of the hedged assets, liabilities, or firm commitments through earnings,
or recognized in earnings. TB Wood's adopted the standard as of December 30,
2000 and the Company recorded a $23 increase to accumulated other comprehensive
income for the fair value of the swap at the date of adoption.

         Effective fiscal year 2000, the Company adopted Emerging Issues Task
Force Issue No. 00-10, "Accounting for Shipping and Handling Fees and Costs."
Therefore, freight charged to customers is now included in sales ($348 and
$1,113 for the third quarter 2001 and for the period ended September 28, 2001,
respectively) rather than as an offset to freight expenses. All prior year
amounts ($465 and $1,393 for the third quarter 2000 and for the period ended
September 29, 2000, respectively) have been restated to conform to the current
presentation.

         Effective July 2001, the Financial Accounting Standards Board Issued
SFAS No. 141, "Business Combinations" and No. 142, "Goodwill and other
Intangibles" effective the beginning of fiscal year 2002. SFAS No. 141 requires
all business combinations initiated after June 30, 2001 to be accounted for
using the purchase method. SFAS No. 142 eliminates amortization of goodwill and
requires acquired intangibles to be separately recognized. Goodwill will be
subject to at least an annual assessment for impairment by applying a
fair-value-based test. The Company is currently evaluating the impact of
adoption of these statements.

Recent Developments

Self -Tender Offer

         On August 3, 2001, the Company announced the final results of its
"Modified Dutch Auction", which expired at 5:00 PM, New York City time, on July
30, 2001. Based upon a final count by American Stock Transfer & Trust Company,
the depository for the offer, a total of 530,959 shares were tendered at or
below $11.00 per share. Due to the over-subscription, shares tendered were
pro-rated. The Company purchased 150,003 shares at $11.00 per share, resulting
in a final pro-ration of 28.3%. The Company expected that the depositary had
issued payment for shares purchased in the offer on or about August 6, 2001.

SAFE HARBOR STATEMENT

         This quarterly report contains various forward-looking statements and
includes assumptions concerning the Company's operations, future results and
prospects. These forward-looking statements are based on current expectations
and are subject to risk and uncertainties. In connection with the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995, the Company
provides the following cautionary statement identifying important economic,
political and technology factors which, among others, could cause the actual
results or events to differ materially from those set forth in or implied by the
forward-looking statements and related assumptions.

                                       11
<PAGE>

         Such factors include the following: (i) changes in the current and
future business environment, including interest rates and capital and consumer
spending; (ii) competitive factors and competitor responses to the Company's
initiatives; (iii) successful development and market introductions of
anticipated new products; (iv) changes in government laws and regulations,
including taxes; and (v) favorable environment to make acquisitions, domestic
and foreign, including regulatory requirements and market value of candidates.


Item 3. Quantitative and Qualitative Disclosures About Market Risk
        ----------------------------------------------------------

         There have been no material changes in market risks since the 2000
Annual Report to Shareholders.






























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<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

         None

Item 5.  Other Information

         None

Item 6.  Exhibits and Reports on Form 8-K

a)       Exhibits

         99.1 Press release issued by the company on August 3, 2001

b)       Reports on Form 8-K
         None

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 October 31, 2001

                           TB WOOD'S CORPORATION



                           By:  /s/ Thomas F. Tatarczuch
                                -----------------------------------
                                THOMAS F. TATARCZUCH
                                Vice President-Finance
                                (Principal Financial Officer and
                                Principal Accounting Officer)



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