
                      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 July 1, 2001                       

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

For the transition period from                      to                     
Commission file number   0 -19703          

                               Farrel Corporation                        
             (Exact name of registrant as specified in its charter)

           Delaware                                         22-2689245          

(State or other jurisdiction of                  (I.R.S. Employer
 incorporation or organization)                   Identification No.)

                   25 Main Street, Ansonia, Connecticut, 06401
               (Address of principal executive offices) (Zip Code)

                                 (203) 736-5500
              (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         No     
                      APPLICABLE ONLY TO CORPORATE ISSUERS:

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

          CLASS                          OUTSTANDING AT AUGUST 10, 2001

    Common Stock (Voting), $.01 par value                5,228,461



                               Farrel Corporation


                                      Index

                                                                          Page

Part I.  Financial Information

              Consolidated Balance Sheets -
              July 1, 2001 and December 31, 2000                            3

              Consolidated Statements of Operations -
              Three and six months ended July 1, 2001
              and July 2, 2000                                              4

              Consolidated Statements of Cash Flows -
              Six months ended July 1, 2001
              and July 2, 2000                                              5

              Notes to Consolidated Financial Statements                    6

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



Part II.      Other Information                                            12

              Exhibit 11 - Computation of Earnings Per Share               13


                                  Page 2 of 14



                         Part I - Financial Information
                               FARREL CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)
                                                                                                      July 1,   December 31,
                                                                                                       2001         2000
ASSETS                                                                                             (Unaudited)
           Current Assets:
                 Cash and cash equivalents ......................................................    $  4,559     $  2,486
                 Accounts receivable, net of allowance for
                    doubtful accounts of  $98 and $139, respectively ............................       6,262       13,607
                 Inventory ......................................................................      14,187       12,411
                 Deferred income taxes ..........................................................         793          793
                 Other current assets ...........................................................       1,635        1,284
                                                                                                     --------     --------
                               Total current assets .............................................      27,436       30,581
                 Property, plant and equipment - net of accumulated
                    depreciation of  $14,510 and $14,037, respectively ..........................       8,578        9,538
                 Prepaid pension costs ..........................................................       3,589        3,514
                 Other assets ...................................................................         212          299
                                                                                                     --------     --------
                 Total Assets ...................................................................    $ 39,815     $ 43,932
                                                                                                     ========     ========
LIABILITIES & STOCKHOLDERS' EQUITY
           Current Liabilities:
                 Accounts payable ...............................................................    $  5,606     $  6,400
                 Accrued expenses & taxes payable ...............................................         870        1,660
                 Advances from customers ........................................................       5,746        5,948
                 Accrued warranty costs .........................................................         834        1,075
                 Short — term debt ..............................................................         661        1,194
                                                                                                     --------     --------
                                Total current liabilities .......................................      13,717       16,277
           Long — term debt .....................................................................       1,320        1,194
           Postretirement benefit obligation ....................................................       1,097        1,118
           Deferred income taxes ................................................................       1,391        1,380
           Commitments and contingencies ........................................................        --           --
                                                                                                     --------     --------
                                Total Liabilities ...............................................      17,525       19,969
                                                                                                     --------     --------
           Stockholders' Equity:
                 Preferred stock, par value $100, 1,000,000
                      shares authorized, no shares issued
                 Common stock, par value $.01,
                      10,000,000 shares authorized,
                      6,142,106 shares issued ...................................................          61           61
                 Paid in capital ................................................................      19,295       19,295
                 Treasury stock, 913,645 shares at
                    July 1, 2001 and 912,045 shares at December 31, 2000 ........................      (2,534)      (2,529)
                 Retained earnings ..............................................................       7,150        8,330
                 Accumulated other comprehensive expense ........................................      (1,682)      (1,194)
                                                                                                     --------     --------
                                Total Stockholders' Equity ......................................      22,290       23,963
                                                                                                     --------     --------
           Total Liabilities and Stockholders’ Equity ...........................................    $ 39,815     $ 43,932
                                                                                                     ========     ========
           See Accompanying Notes to Consolidated Financial Statements


                                  Page 3 of 14



                               FARREL CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In thousands, except per share and share data)

                                                  Three Months Ended               Six Months Ended
                                                July 1,         July 2,         July 1,         July 2,
                                                 2001            2000            2001            2000
                                                     (Unaudited)                     (Unaudited)
Net sales ...............................    $    12,355     $    15,270     $    23,435     $    26,825

Cost of sales ...........................          9,937          11,273          18,545          20,751
                                             -----------     -----------     -----------     -----------

Gross margin ............................          2,418           3,997           4,890           6,074

Operating expenses:

    Selling .............................          1,260           1,912           2,562           3,499

    General & administrative ............          1,611           1,939           3,322           4,071

    Research & development ..............            376             412             820             849
                                             -----------     -----------     -----------     -----------

Total operating expenses ................          3,247           4,263           6,704           8,419
                                             -----------     -----------     -----------     -----------

Operating  loss .........................           (829)           (266)         (1,814)         (2,345)

Interest income .........................             36              63              88             148

Interest expense ........................            (36)            (72)            (78)           (144)

Other income (expense), net .............            (68)             44             (49)            (56)
                                             -----------     -----------     -----------     -----------

Loss before income taxes ................           (897)           (231)         (1,853)         (2,397)

Benefit for income taxes ................           (324)            (99)           (673)           (785)
                                             -----------     -----------     -----------     -----------

Net loss ................................    $      (573)    $      (132)    $    (1,180)    $    (1,612)
                                             ===========     ===========     ===========     ===========

Per share data:

Basic and Diluted loss per
  common share ..........................    $     (0.11)    $     (0.03)    $     (0.23)    $     (0.31)
                                             ===========     ===========     ===========     ===========
Average shares outstanding:
  Basic .................................      5,228,563       5,250,061       5,229,251       5,250,061
                                             ===========     ===========     ===========     ===========
  Diluted ...............................      5,228,563       5,250,061       5,229,251       5,250,061
                                             ===========     ===========     ===========     ===========
  Dividends per share ...................    $      0.00     $      0.04     $      0.00     $      0.08
                                             ===========     ===========     ===========     ===========
           See Accompanying Notes to Consolidated Financial Statements


                                  Page 4 of 14



                               FARREL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                                                                Six Months Ended
                                                                                July 1,    July 2,
                                                                                 2001       2000
                                                                             (Unaudited) (Unaudited)
Cash flows from operating activities:
  Net loss ................................................................   $(1,180)    $(1,612)
  Adjustments to reconcile net loss to net
  cash provided by (used in) operating activities:
    Gain on disposal of fixed assets ......................................      (152)       --
    Depreciation and amortization .........................................       859       1,037
    Decrease  in accounts receivable ......................................     7,099       4,003
    (Increase) in inventory ...............................................    (2,088)     (6,078)
    (Increase) in prepaid pension costs ...................................      (227)       (621)
    (Decrease) in accounts payable ........................................      (625)       (934)
    (Decrease) increase  in customer advances .............................        (2)      3,793
    (Decrease) in accrued expenses & taxes ................................      (913)     (1,036)
    Increase (decrease) in accrued warranty costs .........................      (221)         20
    Increase (decrease) in deferred income taxes ..........................        71         (49)
    (Increase) decrease in other ..........................................      (264)        245
                                                                              -------     -------
    Total adjustments .....................................................     3,537         380
                                                                              -------     -------
    Net cash (used in) provided by operating activities ...................     2,357      (1,232)
                                                                              -------     -------
Cash flows from investing activities:
    Proceeds from disposal of fixed assets ................................       374        --
    Purchases of property, plant and equipment ............................      (290)       (306)
                                                                              -------     -------
    Net cash (used in) provided by investing activities ...................        84        (306)
Cash flows from financing activities:
    Repayment of long-term borrowings .....................................    (2,264)       (629)
    Bank borrowings .......................................................     1,981        --
    Purchase of treasury stock ............................................        (5)       --
    Dividends paid ........................................................      --          (420)
                                                                              -------     -------
    Net cash (used in) financing activities ...............................      (288)     (1,049)
Effect of foreign currency exchange rate changes on cash ..................       (80)       (199)
                                                                              -------     -------
Net increase (decrease) in cash and cash equivalents ......................     2,073      (2,786)
    Cash and cash equivalents — Beginning of period .......................     2,486       6,069
                                                                              -------     -------
    Cash and cash equivalents — End of period .............................   $ 4,559     $ 3,283
                                                                              =======     =======
Income taxes paid .........................................................   $    32     $    82
                                                                              =======     =======
Interest paid .............................................................   $    77     $   139
                                                                              =======     =======
           See Accompanying Notes to Consolidated Financial Statements


                                  Page 5 of 14



                               Farrel Corporation
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

Note 1 - Basis of Presentation

         In the opinion of management,  the accompanying  unaudited consolidated
financial  statements have been prepared in accordance  with generally  accepted
accounting   principles  for  interim   financial   information   and  with  the
instructions to Form 10-Q and Article 10 of regulation S-X. Accordingly, they do
not include all of the information and footnotes  required by generally accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management, the accompanying unaudited consolidated financial statements contain
all adjustments,  consisting only of normal recurring adjustments,  necessary to
present fairly in accordance with generally accepted accounting principles,  the
consolidated   financial  position  of  Farrel  Corporation  ("Farrel"  or  "the
Company") as of July 1, 2001, and the consolidated results of its operations and
its cash  flows for the three  and/or six month  periods  ended July 1, 2001 and
July 2, 2000.  These  results are not  necessarily  indicative  of results to be
expected for the full fiscal year. The statements  should be read in conjunction
with the  financial  statements  and notes  thereto,  included in the  Company’s
Annual Report and Form 10-K for the year ended December 31, 2000.

Note 2 - Inventory

         Inventory is comprised of the following:
                                                        July 1,   December 31,
                                                         2001         2000
                                                           (In thousands)
         Stock and raw materials.................       $ 7,776     $ 7,997
         Work-in process.........................         6,411       4,414
                                                        -------     -------
         Total...................................       $14,187     $12,411
                                                        =======     =======

Note 3 - Comprehensive Income (Expense)

         The components of other comprehensive income (expense) are as follows:

                                                    Three Months Ended     Six Months Ended
                                                     July 1,   July 2,    July 1,    July 2,
                                                      2001      2000       2001       2000
                                                                 (In thousands)

         Net loss ...............................    $ (573)   $ (132)   $(1,180)   $(1,612)
         Foreign currency translation adjustments        (1)     (538)      (488)      (709)
                                                     ------    ------    -------    -------
         Other comprehensive expense ............    $ (574)   $ (670)   $(1,668)   $(2,321)
                                                     ======    ======    =======    =======

         Accumulated  other  comprehensive  expense consists of foreign currency
translation adjustments at July 1, 2001 and December 31, 2000.

Note 4 - Segment Information

         The Company's  operations  are considered  one operating  segment.  The
Company’s  products  consist of new  machines,  aftermarket  and spare parts and
repair  related  services.  The  Company’s  products  and  services  are sold to
commercial   manufacturers   in  the   plastic   and  rubber   industries.   The
manufacturing,   assembly  and  distribution  of  the  Company’s   products  are
essentially the same.


                                  Page 6 of 14



Note 5 - Impact of Recently Issued Accounting Standards

         In June  1998,  the FASB  issued  Statement  No.  133,  Accounting  for
Derivative Instruments and Hedging Activities, which the Company was required to
adopt on January 1, 2001. The Statement  provides a new method of accounting for
derivatives  and  hedges.  The  adoption  of  this  Statement  did  not  have  a
significant effect on the Company’s results of operations or financial position.

         The Company has entered into foreign exchange  forward  contracts which
are  designated  as  fair  value  hedges  of  accounts   receivable  and  future
receivables  related to customer  orders in backlog.  The Company,  from time to
time,  enters into foreign  exchange  forward  contracts  to hedge  certain firm
commitments  which  are  denominated  in  currencies  other  than the  Company’s
operating currencies.

         As of July 1, 2001, all of the Company’s  foreign exchange forward
contracts  were  designated  as fair value  hedges.  There  were no  ineffective
portions,  as defined under FAS133, during the six months ended July 1, 2001. As
such,  there were no charges to the statement of operations  during the three or
six months ended July 1, 2001, related to these contracts.  At July 1, 2001, the
difference  between the spot rate and the contract rate for the foreign exchange
forwards was a net unrealized gain of $114,000.

Note 6 - Restatement of Prior Year Balances

         Prior year  balances  have been restated to reflect the adoption of SEC
Staff Accounting Bulletin 101 (“Revenue Recognition”) and EITF00-10 (“Accounting
for  Shipping  and  Handling  Costs”).  The Company was  required to adopt these
accounting  guidelines  in the fourth  quarter of 2000.  The  adoption  required
restatement of prior periods.

Note 7 - Bank Credit Arrangements

         In June 2001, the Company  entered into a new worldwide  multi-currency
credit  facility  with a major US bank.  This  facility  includes a $10  million
revolving  credit  facility  for direct  borrowings  and letters of credit.  The
facility  contains a  sub-limit  that caps the amount of direct  borrowings  the
Company can make at $5 million.  The revolving  credit facility  expires on June
15, 2003. The facility  contains  limits on direct  borrowings and issuance's of
letters of credit based upon stipulated  percentages of accounts  receivable and
inventory.  The facility  also  contains  covenants  specifying  minimum  and/or
maximum thresholds for operating results, selected financial ratios and backlog.
The agreement contains certain  restrictions on investments,  borrowings and the
sale of assets.  The  Company's  old credit  facility was  terminated  except in
relation to approximately $2.2 million of letters of credit which had previously
been posted under that facility and continue to be  outstanding on July 1, 2001.
The Company has approximately $900,000 of letters of credit posted under its new
facility on July 1, 2001.

         The  Company  also  entered  into a term  loan for  £1.4  million
(approximately $2 million) as part of this credit facility. The proceeds of this
loan were used to repay an existing  term loan of the same amount.  The new term
loan is repayable in monthly  installments of  £38,888  through June 2004.
The term loan has an intent rate of LIBOR plus 2.7%.


                                  Page 7 of 14



PART I - ITEM 2 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION & RESULTS OF OPERATIONS

Safe Harbor Statements Under Private Securities Litigation Reform Act of 1995

         Certain  statements   contained  in  the  Company’s  public  documents,
including this report and in particular,  in this  “Management’s  Discussion and
Analysis  of  Financial  Condition  and  Results of  Operations”  may be forward
looking  and may be  subject to a variety  of risks and  uncertainties.  Various
factors could cause actual results to differ  materially from these  statements.
These  factors  include,   but  are  not  limited  to,  pricing  pressures  from
competitors and/or customers;  continued  economic and political  uncertainty in
certain of the Company’s markets; the Company’s ability to maintain and increase
gross margin  levels;  the  Company’s  ability to generate  positive  cash flow;
changes  in  business  conditions,  in  general,  and,  in  particular,  in  the
businesses of the Company’s  customers and competitors;  and other factors which
might  be  described  from  time to  time  in the  Company’s  filings  with  the
Securities and Exchange Commission.

Results of Operations

Six  Months Ended July 1, 2001 Compared To The Six Months Ended July 2, 2000

         Net sales for the six month  period  ended  July 1,  2001,  were  $23.4
million compared to $26.8 million for the six month period ended July 2, 2000, a
decrease of $3.4  million.  The decrease is primarily a result of lower sales in
North  America of $6.8  million  partially  offset by an increase in new machine
sales in Europe.  The timing of the Company’s  sales,  particularly new machines
sales, is highly dependent on when an order is received, the amount of lead time
from  receipt of order to  delivery  and  specific  customer  requirements.  The
Company  operates  in markets  which are  extremely  competitive  with  cyclical
demand.  Many of the Company’s  customers and markets  operate at less than full
capacity and certain remain  particularly  competitive  and are subject to local
economic events.

         Orders received for the six month period ended July 1, 2001, were $23.0
million  compared to $33.7  million for the six month period ended July 2, 2000.
The decline in incoming  orders is due to weak  market  conditions  faced by the
Company.

         The Company’s  products are  primarily  supplied to  manufacturers  and
represent capital commitments for new plants, expansion or modernization. In the
case of major  equipment  orders,  up to 12 months are  required to complete the
manufacturing  process.  Accordingly,  revenues  reported  in the  statement  of
operations  may  represent  orders  received in the current or previous  periods
during which time economic conditions in various geographic markets of the world
impact the Company’s  level of order intake.  Many of the Company’s  traditional
customers and markets are operating with excess  capacity  thereby  reducing the
number of  projects  for plant  expansion  and  modernization.  The  Company  is
experiencing  increased pricing pressures from competitors in an overall smaller
market. In addition,  since its inception,  the decline in the value of the Euro
versus  the U.S.  dollar  and  British  pound  sterling  has  increased  pricing
pressures.  Over the longer term,  these  conditions  are  resulting in customer
orders with lower margins and lost  business.  Further,  the cyclical  nature of
industry  demand  and,  therefore,  the  timing of order  intake  may effect the
Company’s quarterly results of operations. The Company’s ability to maintain and
increase net sales depends upon a  strengthening  and stability in the Company’s
traditional  markets and its ability to control costs to effectively  compete in
its current markets.  There can be no assurance that the current level of orders
will continue,  that market  conditions will not worsen, or that improvements in
the  Company’s  traditional  markets  will  lead  to  increased  orders  for the
Company’s products.

         The level of backlog considered firm by management at July 1, 2001, was
$27.4 million  compared to $27.7 million at December 31, 2000, and $35.1 million
at July 2, 2000.


                                  Page 8 of 14



         Gross  margin for the six month  period  ended  July 1, 2001,  was $4.9
million  compared to $6.1 million for the six month period ended July 2, 2000, a
decrease of $1.2  million.  The  decrease  in gross  margin is a result of lower
sales.  The gross  margin as a percent of sales for the six month  period  ended
July 1, 2001, was 20.9% compared to 22.6% for the six month period ended July 2,
2000.  The decrease in gross margin as a percent of sales is primarily  due to a
change in sales mix  resulting  from  increased  new machine sales in Europe and
decreased sales in North America. The European new machine sales generated lower
gross profits  primarily due to pricing  pressures  resulting  from  competitive
market conditions and the relative weakness of the Euro versus the British pound
sterling.

         Operating  expenses for the six month  period ended July 1, 2001,  were
$6.7  million  compared to $8.4  million for the six month  period ended July 2,
2000, a decrease of $1.7 million  primarily due to lower  employee  compensation
and related  expenses of  approximately  $1.1 million,  travel  expenses of $0.3
million and advertising cost of $0.3 million.

         Interest  income  for the six month  period  ended  July 1,  2001,  was
$88,000  compared to $148,000  for the six month  period  ended July 2, 2000,  a
decrease of  $60,000.  The  decrease  is  primarily  due to lower  average  cash
balances available for investing and lower interest rates.

         Interest  expense  for the six month  period  ended July 1,  2001,  was
$78,000  compared to $144,000  for the six month  period  ended July 2, 2000,  a
decrease of $66,000. The decrease is primarily due to lower borrowings.

         The Company  provides for income taxes at the statutory rates in effect
in each tax  jurisdictions  in which  income  is  earned  or  losses  generated,
adjusted for permanent differences in determining income for financial reporting
and income tax purposes. The effective income tax rate was 36% for the six month
period  ended July 2, 2001,  compared to 33% for the six month period ended July
2, 2000.  The  effective  tax rate varies among periods due to the change in the
proportion  and  amount of income  and  losses  generated  in  different  taxing
jurisdictions.

 Three Months Ended July 1, 2001 Compared to The Three Months Ended July 2, 2000

         Net sales for the three months ended July 2, 2001,  were $12.4  million
compared  to $15.3  million  for the three month  period  ended July 2, 2000,  a
decrease of $2.9  million.  The decrease is primarily a result of lower sales in
North  America of $6.6  million  partially  offset by an increase in new machine
sales in Europe.

         Orders  received for the three month  period  ended July 1, 2001,  were
$13.4 million compared to $22.7 million for the three month period ended July 2,
2000.

         The Company’s  sales,  orders and backlog  levels varied when comparing
the two  quarters  due to market  conditions  and the nature of the  industry in
which the Company  operates as more fully discussed in the results of operations
for the six month period on page 8.

         Gross margin for the three month  period  ended July 1, 2001,  was $2.4
million  compared to $4.0 million for the three month period ended July 2, 2000,
a decrease of $1.6  million.  The  decrease in gross margin is a result of lower
sales.  The gross  margin as a percent of sales for the three month period ended
July 1, 2001,  was 19.6% compared to 26.2% for the three month period ended July
2, 2000. The decrease in the gross margin as a percent of sales is primarily due
to a change in sales mix  resulting  from  increased new machine sales in Europe
and decreased  sales in North America.  The European new machine sales generated
lower  gross  profits  primarily  due  to  pricing   pressures   resulting  from
competitive  market  conditions and the relative weakness of the Euro versus the
British pound sterling.

         Operating  expenses for the three month period ended July 2, 2001, were
$3.2  million  compared to $4.3 million for the three month period ended July 2,
2000,  a decrease  of $1.0  primarily  due to lower  employee  compensation  and
benefit  costs of  approximately  $0.6  million,  and lower travel  expenses and
advertising costs.


                                  Page 9 of 14



         Interest  income for the three  month  period  ended July 2, 2001,  was
$36,000 compared  to $63,000 for the three  month  period  ended July 1, 2000, a
decrease of $27,000. The decrease is primarily due to lower interest rates.

         Interest  expense for the three month periods  ended July 1, 2001,  and
July 2, 2000, was $36,000 and $72,000,  respectively.  The decrease is primarily
due to lower borrowings.

         The Company  provides for income taxes at the statutory rates in effect
in each tax  jurisdiction  in which  income is earned or losses  are  generated,
adjusted for permanent differences in determining income for financial reporting
and income tax  purposes.  The  effective  income tax rate was 36% for the three
month  periods  ended July 1, 2001,  compared to 43% for the three  months ended
July 2, 2000.  The  effective tax rate varies among periods due to the change in
the  proportion  and amount of income  and losses  generated  in  different  tax
jurisdictions.

Material Contingencies

         In February  1995, the Company and Black & Decker  Corporation  (“Black
and  Decker”)  entered  into a  Settlement  Agreement  pursuant to which Black &
Decker  agreed  to  assume  full   responsibility   for  the  investigation  and
remediation of any pre-May 12, 1986 environmental contamination at the Company’s
Ansonia  and Derby,  Connecticut  facilities,  as  required  by the  Connecticut
Department of  Environmental  Protection  (“DEP”).  A preliminary  environmental
assessment of the Company’s  properties  in Ansonia and Derby,  Connecticut  has
been  conducted  by Black &  Decker.  Although  the  assessment  is still  being
evaluated by the DEP, on the basis of the  preliminary  data now available there
is no reason to believe that any remediation  activities which might be required
as a result of the findings of the assessment  will have a material  effect upon
the capital  expenditures,  results of operations or the competitive position of
the Company.

Liquidity and Capital Resources; Capital Expenditures

         Working  capital  and the  working  capital  ratio at July 1, 2001 were
$13.7 million and 2.0 to 1, respectively, compared to $14.3 million and 1.9 to 1
at December  31, 2000,  respectively.  During the six months ended July 1, 2001,
the Company paid no dividends.

         Due to the nature of the Company's business,  many sales are of a large
dollar  amount.  Consequently,  the timing of recording such sales may cause the
balances in accounts  receivable  and/or  inventory  to  fluctuate  dramatically
between quarters and may result in significant  fluctuations in cash provided by
operations.  Historically,  the Company has not experienced significant problems
regarding the collection of accounts receivable.  The Company has also generally
financed its operations  with cash generated by  operations,  progress  payments
from  customers  and  borrowings  under its bank credit  facilities.  Management
anticipates  that its cash balances,  operating cash flows and available  credit
line will be  adequate  to fund  anticipated  capital  commitments  and  working
capital  requirements  for at least the next twelve  months.  The  Company  made
capital expenditures of $290,000 and $306,000 during the six month periods ended
July 1, 2001 and July 2, 2000, respectively.

         In June 2001, the Company  entered into a new worldwide  multi-currency
credit  facility  with a major US bank.  This  facility  includes a $10  million
revolving  credit  facility  for direct  borrowings  and letters of credit.  The
facility  contains a  sub-limit  that caps the amount of direct  borrowings  the
Company can make at $5 million.  The revolving  credit facility  expires on June
15, 2003. The facility  contains  limits on direct  borrowings and issuance's of
letters of credit based upon stipulated  percentages of accounts  receivable and
inventory.  The facility  also  contains  covenants  specifying  minimum  and/or
maximum thresholds for operating results, selected financial ratios and backlog.
The agreement contains certain  restrictions on investments,  borrowings and the
sale of assets.  Dividend declarations or payments are allowed under this credit
facility as long as there exists  under the credit  facility no Event of Default
(as defined in the credit facility) or no condition which, upon giving of notice
or lapse of time or both,  would become an Event of Default.  The  Company's old
credit facility was terminated except in relation to approximately  $2.2 million
of letters of credit which had  previously  been posted under that  facility and
continue to be


                                 Page 10 of 14



outstanding on July 1, 2001. The Company has  approximately  $900,000 of letters
of credit posted under its new facility on July 1, 2001.

         The  Company  also  entered  into a term  loan for  £1.4  million
(approximately $2 million) as part of this credit facility. The proceeds of this
loan were used to repay an existing  term loan of the same amount.  The new term
loan is repayable in monthly  installments of  £38,888  through July 2004.
The term  loan has an  interest  rate of LIBOR  plus  2.7%.  At July 1, 2001 and
December  31,  2000,  there were $2.0  million and $2.4  million,  respectively,
outstanding under a term loan.

Impact of Recently Issued Accounting Standards

         In June  1998,  the FASB  issued  Statement  No.  133,  Accounting  for
Derivative Instruments and Hedging Activities, which the Company was required to
adopt on January 1, 2001. The Statement  provides a new method of accounting for
derivatives  and  hedges.  The  adoption  of  this  Statement  did  not  have  a
significant effect on the Company’s results of operations or financial position.

Item 2 - Quantitative and Qualitative Disclosures About Market Risk

         The Company is exposed to market risk from changes in foreign  currency
and interest rates. The Company manufactures many of its products and components
in the  United  Kingdom  and  purchases  many  components  in  foreign  markets.
Approximately  50% of the Company's  revenue is generated from foreign  markets.
The Company  manages its risk to foreign  currency  rate changes by  maintaining
foreign  currency bank  accounts in  currencies in which it regularly  transacts
business and the use of foreign exchange forward contracts. The Company does not
enter into derivative contracts for trading or speculative purposes.

         The Company's  cash  equivalents  and  short-term  investments  and its
outstanding debt bear variable  interest rates. The rates are adjusted to market
conditions.  Changes in  the market rate affect  interest earned and paid by the
Company. The Company does not use derivative  instruments to offset the exposure
to changes in interest  rates.  Changes in the interest  rates  related to these
items are not  expected to have a material  impact on the  Company's  results of
operations.


                                 Page 11 of 14



PART II - OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS                                                             None

ITEM 2 – CHANGES IN SECURITIES                                                         N/A

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES                                               N/A

ITEM 4 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

   a) Election of Directors:
      Glenn J. Angiolillo:      votes for 4,997,132, votes withheld 135,325
      Charles S. Jones:         votes for 4,864,937, votes withheld 267,520
      Albert Shaio:             votes for 4,994,965, votes withheld 137,492

   b) Ratification  of the  selection  of  Ernst  &  Young  LLP  as  independent
      accountants for the Company for the fiscal year ending December 31, 2001:

      votes for 5,041,478, votes against 80,727, votes abstained 10,252

ITEM 5 – OTHER INFORMATION                                                             N/A

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

Exhibit 4-A   Amendment to Credit  Agreement  and Waiver for the Amended and
              Restated  Credit  Agreement  between Farrel  Corporation and Chase
              Manhattan Bank Dated January 23, 1998.                                   Attached

Exhibit 4-B   Revolving  and Term Loan Credit Agreement dated June 15, 2001,
              Between  Farrel  Corporation,   Farrel  Limited  and  First  Union
              National Bank.                                                           Attached

Exhibit 4-C   Revolving  Promissory Note dated June 18, 2001, between Farrel
              Corporation,   Farrel  Limited  and  First  Union  National  Bank.       Attached

Exhibit 4-D   Term  Promissory  Noted dated June 18,  2001,  between  Farrel
              Limited and First Union National Bank.                                   Attached

Exhibit 11 (Regulation S-K) Computation of Earnings Per Share.                         Attached

Reports on Form 8-K

     No  Reports  on Form 8-K were filed by the  registrant  during the  periods
covered by this report.


                                 Page 12 of 14



                                                                      Exhibit 11

                               FARREL CORPORATION
                 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
                 (In thousands, except per share and share data)

                                                       Three Months Ended            Six Months Ended
                                                      July 1,        July 2,       July 1,        July 2,
                                                       2001           2000          2001           2000

Net loss applicable to common stock ...........    $     (573)    $     (132)    $   (1,180)    $   (1,612)
                                                   ==========     ==========     ==========     ==========
Weighted average number of common
shares outstanding -  Basic earnings per share      5,228,563      5,250,061      5,229,251      5,250,061

Effect of dilutive stock and purchase options             --            --             --             --
                                                   ----------     ----------     ----------     ----------

Weighted average number of common
shares outstanding - Diluted earnings per share     5,228,563      5,250,061      5,229,251      5,250,061
                                                   ==========     ==========     ==========     ==========

Net loss per common
  share — Basic ...............................    $    (0.11)    $    (0.03)    $    (0.23)    $    (0.31)
                                                   ==========     ==========     ==========     ==========
  share — Fully diluted .......................    $    (0.11)    $    (0.03)    $    (0.23)    $    (0.31)
                                                   ==========     ==========     ==========     ==========



                                 Page 13 of 14







                                   SIGNATURES


PURSUANT  TO THE  REQUIREMENTS  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.


                               FARREL CORPORATION
                               REGISTRANT




DATE:      8/13/01                          /s/Rolf K. Liebergesell             
                                            ROLF K. LIEBERGESELL
                                            CHIEF EXECUTIVE OFFICER,
                                            PRESIDENT AND CHAIRMAN OF THE BOARD





DATE:      8/13/01                          /s/Walter C. Lazarcheck             
                                            WALTER C. LAZARCHECK
                                            VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
                                            (CHIEF ACCOUNTING OFFICER)


                                 Page 14 of 14

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 September 30, 2001

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

For the transition period from to
Commission file number 0 -19703

Farrel Corporation
(Exact name of registrant as specified in its charter)

	DELAWARE	22-2689245
	(State or other jurisdiction of	(I.R.S. Employer
	incorporation or organization)	Identification No.)

25 Main Street, Ansonia, Connecticut, 06401
(Address of principal executive offices) (Zip Code)

(203) 736-5500
(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

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

CLASS OUTSTANDING AT NOVEMBER 9, 2001

Common Stock (Voting), $.01 par value 5,228,461

                               Farrel Corporation
                               ------------------

                                      Index
                                      -----

                                                                       Page
                                                                       ----


Part I.   Financial Information
          ---------------------

           Consolidated Balance Sheets -
           September 30, 2001 and December 31, 2000                      3

           Consolidated Statements of Operations -
           Three and nine months ended September 30, 2001
           and October 1, 2000                                           4

           Consolidated Statements of Cash Flows -
           Nine months ended September 30, 2001
           and October 1, 2000                                           5

           Notes to Consolidated Financial Statements                    6

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



Part II.   Other Information                                            12

           Exhibit 11 - Computation of Earnings Per Share               13

Page 2 of 14

                         Part I - Financial Information
                               FARREL CORPORATION
                               ------------------
                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------
                        (In thousands, except share data)
                        ---------------------------------

                                                                      September 30,  December 31,
                                                                      -------------  ------------
                                                                          2001           2000
                                                                          ----           ----
ASSETS                                                                 (Unaudited)
        Current Assets:
              Cash and cash equivalents ...........................     $  6,138      $  2,486
              Accounts receivable, net of allowance for
                 doubtful accounts of  $194 and $139, respectively         6,124        13,607
              Inventory ...........................................       14,443        12,411
              Deferred income taxes ...............................          793           793
              Other current assets ................................        1,219         1,284
                                                                        --------      --------
                            Total current assets ..................       28,717        30,581
              Property, plant and equipment - net of accumulated
                 depreciation of  $14,775 and $14,037, respectively        8,355         9,538
              Prepaid pension costs ...............................        3,855         3,514
              Other assets ........................................          184           299
                                                                        --------      --------
              Total Assets ........................................     $ 41,111      $ 43,932
                                                                        ========      ========
LIABILITIES & STOCKHOLDERS' EQUITY
        Current Liabilities:
              Accounts payable ....................................     $  6,563      $  6,400
              Accrued expenses & taxes payable ....................        1,362         1,660
              Advances from customers .............................        4,449         5,948
              Accrued warranty costs ..............................          767         1,075
              Short - term debt ...................................          688         1,194
                                                                        --------      --------
                             Total current liabilities ............       13,829        16,277
        Long - term debt ..........................................        1,204         1,194
        Postretirement benefit obligation .........................        1,087         1,118
        Deferred income taxes .....................................        1,404         1,380
        Commitments and contingencies .............................         --            --
                                                                        --------      --------
                             Total Liabilities ....................       17,524        19,969
                                                                        --------      --------
        Stockholders' Equity:
              Preferred stock, par value $100, 1,000,000
                   shares authorized, no shares issued
              Common stock, par value $.01,
                   10,000,000 shares authorized,
                   6,142,106 shares issued ........................           61            61
              Paid in capital .....................................       19,295        19,295
              Treasury stock, 913,645 shares at
                 September 30, 2001 and 912,045 shares at December
                 31, 2000 .........................................       (2,534)       (2,529)
              Retained earnings ...................................        8,073         8,330
              Accumulated other comprehensive expense .............       (1,308)       (1,194)
                                                                        --------      --------
                             Total Stockholders' Equity ...........       23,587        23,963
                                                                        --------      --------
        Total Liabilities and Stockholders' Equity ................     $ 41,111      $ 43,932
                                                                        ========      ========
           See Accompanying Notes to Consolidated Financial Statements

Page 3 of 14

                               FARREL CORPORATION
                               ------------------
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      -------------------------------------
                 (In thousands, except per share and share data)
                 -----------------------------------------------

                                               Three Months Ended             Nine Months Ended
                                               ------------------             -----------------
                                           September 30,    October 1,   September 30,   October 1,
                                               2001           2000            2001          2000
                                               ----           ----            ----          ----
                                                   (Unaudited)                   (Unaudited)
Net sales ...............................  $    15,847    $    17,488    $    39,282    $    44,313

Cost of sales ...........................       11,422         13,422         29,967         34,173
                                           -----------    -----------    -----------    -----------

Gross margin ............................        4,425          4,066          9,315         10,140

Operating expenses:

    Selling .............................        1,030          1,670          3,592          5,169

    General & administrative ............        1,634          1,993          4,956          6,064

    Research & development ..............          265            389          1,085          1,238
                                           -----------    -----------    -----------    -----------

Total operating expenses ................        2,929          4,052          9,633         12,471
                                           -----------    -----------    -----------    -----------

Operating  income (loss) ................        1,496             14           (318)        (2,331)

Interest income .........................           36             37            124            185

Interest expense ........................          (39)           (64)          (117)          (208)

Other income (expense), net .............          (63)           (65)          (112)          (121)
                                            -----------    -----------    -----------    -----------

Income (loss)  before income taxes ......        1,430            (78)          (423)        (2,475)

Provision (benefit)  for income taxes ...          507             55           (166)          (730)
                                            -----------    -----------    -----------    -----------

Net income (loss) .......................   $      923     $     (133)    $     (257)    $   (1,745)
                                            ===========    ===========    ===========    ===========

Per share data:

Basic and Diluted income (loss) per
  common share ..........................   $      0.18    $     (0.03)   $     (0.05)   $     (0.33)
                                            ===========    ===========    ===========    ===========
Average shares outstanding:
  Basic .................................     5,228,461      5,250,061      5,228,999      5,250,061
                                            ===========    ===========    ===========    ===========
  Diluted ...............................     5,228,461      5,250,061      5,228,999      5,250,061
                                            ===========    ===========    ===========    ===========
  Dividends per share ...................   $      0.00    $      0.04    $      0.00    $      0.12
                                            ===========    ===========    ===========    ===========
           See Accompanying Notes to Consolidated Financial Statements

Page 4 of 14

                               FARREL CORPORATION
                               ------------------
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
                                 (In thousands)
                                                                                   Nine Months Ended
                                                                                   -----------------
                                                                               September 30,  October 1,
                                                                               -------------  ----------
                                                                                   2001          2000
                                                                                   ----          ----
                                                                               (Unaudited)   (Unaudited)
Cash flows from operating activities:
  Net loss ..................................................................   ($  257)      ($1,745)
  Adjustments to reconcile net loss to
  net cash provided by (used in) operating activities:
    Loss (gain) on disposal of fixed assets .................................      (182)            8
    Depreciation and amortization ...........................................     1,272         1,515
    Decrease in accounts receivable .........................................     7,352         3,630
    (Increase) in inventory .................................................    (2,042)       (3,398)
    (Increase) in prepaid pension costs .....................................      (367)         (753)
    Increase (decrease) in accounts payable .................................       160        (2,436)
    Increase (decrease) increase in customer advances .......................    (1,406)        1,410
    (Decrease) in accrued expenses & taxes ..................................      (452)       (1,087)
    (Decrease)  in accrued warranty costs ...................................      (305)         (290)
    Increase (decrease) in deferred income taxes ............................        39            (7)
    Other ...................................................................       210           420
                                                                                -------       -------
    Total adjustments .......................................................     4,279          (988)
                                                                                -------       -------
    Net cash (used in) provided by operating activities .....................     4,022        (2,733)
                                                                                -------       -------
Cash flows from investing activities:
    Proceeds from disposal of fixed assets ..................................       484             6
    Purchases of property, plant and equipment ..............................      (358)         (605)
                                                                                -------       -------
    Net cash (used in) provided by investing activities .....................       126          (599)
Cash flows from financing activities:
    Repayment of long-term borrowings .......................................    (2,264)         (930)
    Proceeds from borrowings, net of repayments of short-term borrowings ....     1,817          --
    Purchase of treasury stock ..............................................        (5)         --
    Dividends paid ..........................................................      --            (630)
                                                                                -------       -------
    Net cash (used in) financing activities .................................      (452)       (1,560)
                                                                                -------       -------
Effect of foreign currency exchange rate changes on cash ....................       (44)         (219)
                                                                                -------       -------
Net increase (decrease) in cash and cash equivalents ........................     3,652        (5,111)
    Cash and cash equivalents - Beginning of period .........................     2,486         6,069
                                                                                -------       -------
    Cash and cash equivalents - End of period ...............................   $ 6,138       $   958
                                                                                =======       =======
Income taxes paid ...........................................................   $    33       $   210
                                                                                =======       =======
Interest paid ...............................................................   $   118       $   203
                                                                                =======       =======
           See Accompanying Notes to Consolidated Financial Statements

Page 5 of 14

Farrel Corporation
Notes to Consolidated Financial Statements
(Unaudited)

Note 1 - Basis of Presentation

In the opinion of management, the accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly in accordance with generally accepted accounting principles, the consolidated financial position of Farrel Corporation ("Farrel" or "the Company") as of September 30, 2001, and the consolidated results of its operations and its cash flows for the three and/or nine month periods ended September 30, 2001 and October 1, 2000. These results are not necessarily indicative of results to be expected for the full fiscal year. The statements should be read in conjunction with the financial statements and notes thereto, included in the Company's Annual Report and Form 10-K for the year ended December 31, 2000.

Note 2 - Inventory

     Inventory is comprised of the following:
                                               September 30,      December 31,
                                               -------------      ------------
                                                    2001               2000
                                                    ----               ----
                                                        (In thousands)
     Stock and raw materials.............         $ 7,465           $ 7,997
     Work-in process.....................           6,978             4,414
                                                  -------           -------
     Total...............................         $14,443           $12,411
                                                  =======           =======

Note 3 - Comprehensive Income (Expense)

The components of other comprehensive income (expense) are as follows:

                                          Three Months Ended                  Nine Months Ended
                                       September 30,   October 1,       September 30,     October 1,
                                           2001           2000              2001             2000
                                           ----           ----              ----             ----
                                                              (In thousands)

     Net income (loss)                   $  923          $(133)            $(257)         $(1,745)
     Foreign currency translation
        adjustments                         374           (279)             (114)            (988)
                                         ------          ------            ------         --------
     Other comprehensive (income)
        expense                          $1,297          $(412)            $(371)         $(2,733)
                                         ======          ======            ======         ========

Accumulated other comprehensive expense consists of foreign currency translation adjustments at September 30, 2001 and December 31, 2000.

Note 4 - Segment Information

The Company's operations are considered one operating segment. The Company's products consist of new machines, aftermarket and spare parts and repair related services. The Company's products and services are sold to commercial manufacturers in the plastic and rubber industries. The manufacturing, assembly and distribution of the Company's products are essentially the same.

Page 6 of 14

Note 5 - Impact of Recently Issued Accounting Standards

In June 1998, the FASB issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, which the Company was required to adopt on January 1, 2001. The Statement provides a new method of accounting for derivatives and hedges. The adoption of this Statement did not have a significant effect on the Company's results of operations or financial position.

The Company has entered into foreign exchange forward contracts which are designated as fair value hedges of accounts receivable and future receivables related to customer orders in backlog. The Company, from time to time, enters into foreign exchange forward contracts to hedge certain firm commitments which are denominated in currencies other than the Company's operating currencies.

As of September 30, 2001, all of the Company's foreign exchange forward contracts were designated as fair value hedges. As such, there were no charges to the statement of operations during the three or nine months ended September 30, 2001, related to these contracts. At September 30, 2001, the difference between the spot rate and the contract rate for the foreign exchange forwards was a net unrealized gain of $13,000.

Note 6 - Restatement of Prior Year Balances

Prior year balances have been restated to reflect the adoption of SEC Staff Accounting Bulletin 101 ("Revenue Recognition") and EITF00-10 ("Accounting for Shipping and Handling Costs"). The Company was required to adopt these accounting guidelines in the fourth quarter of 2000. The adoption required restatement of prior periods. The net effect of the restatement on the net loss for the nine months ended October 1, 2000, was not material.

Note 7 - Bank Credit Arrangements

In June 2001, the Company entered into a new worldwide multi-currency credit facility with a major US bank. This facility includes a $10 million revolving credit facility for direct borrowings and letters of credit. The facility contains a sub-limit that caps the amount of direct borrowings the Company can make at $5 million. The revolving credit facility expires on June 15, 2003. The facility contains limits on direct borrowings and issuance's of letters of credit based upon stipulated percentages of accounts receivable and inventory. The facility also contains covenants specifying minimum and/or maximum thresholds for operating results, selected financial ratios and backlog. There can be no assurance that the Company will achieve the required thresholds in the future. The agreement contains certain restrictions on investments, borrowings and the sale of assets. Dividend declarations or payments are allowed under this credit facility as long as there exists under the credit facility no Event of Default (as defined in the credit facility) or no condition which upon giving notice or lapse of time or both, would become an Event of Default. The Company's old credit facility was terminated except in relation to approximately $0.8 million of letters of credit which had previously been posted under that facility and continue to be outstanding on September 30, 2001. The Company has approximately $2.0 million of letters of credit posted under its new facility on September 30, 2001.

The Company also entered into a term loan for £1.4 million (approximately $2 million) as part of this credit facility. The proceeds of this loan were used to repay an existing term loan of the same amount. The new term loan is repayable in monthly installments of £38,888 through June 2004. The term loan has an interest rate of LIBOR plus 2.7%.

Page 7 of 14

PART I - ITEM 2 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION & RESULTS OF OPERATIONS

Safe Harbor Statements Under Private Securities Litigation Reform Act of 1995

Certain statements contained in the Company's public documents, including this report and in particular, in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" may be forward looking and may be subject to a variety of risks and uncertainties. Various factors could cause actual results to differ materially from these statements. These factors include, but are not limited to, pricing pressures from competitors and/or customers; continued economic and political uncertainty in certain of the Company's markets; the Company's ability to maintain and increase gross margin levels; the Company's ability to generate positive cash flow; changes in business conditions, in general, and, in particular, in the businesses of the Company's customers and competitors; and other factors which might be described from time to time in the Company's filings with the Securities and Exchange Commission.

Results of Operations

Nine Months Ended September 30, 2001 Compared To The Nine Months Ended October 1, 2000

Net sales for the nine month period ended September 30, 2001, were $39.3 million compared to $44.3 million for the nine month period ended October 1, 2000, a decrease of $5.0 million. The decrease is primarily a result of lower sales in North America of $12.9 million partially offset by an increase in new machine sales in Europe. The timing of the Company's sales, particularly new machines sales, is highly dependent on when an order is received, the amount of lead time from receipt of order to delivery and specific customer requirements. The Company operates in markets which are extremely competitive with cyclical demand. Many of the Company's customers and markets operate at less than full capacity and certain remain particularly competitive and are subject to local economic events.

Orders received for the nine month period ended September 30, 2001, were $34.0 million compared to $44.8 million for the nine month period ended October 1, 2000. The decline in incoming orders is due to weak market conditions faced by the Company.

The Company's products are primarily supplied to manufacturers and represent capital commitments for new plants, expansion or modernization. In the case of major equipment orders, up to 12 months are required to complete the manufacturing process. Accordingly, revenues reported in the statement of operations may represent orders received in the current or previous periods during which time economic conditions in various geographic markets of the world impact the Company's level of order intake. Many of the Company's traditional customers and markets are operating with excess capacity thereby reducing the number of projects for plant expansion and modernization. The Company is experiencing increased pricing pressures from competitors in an overall smaller market. In addition, since its inception, the decline in the value of the Euro versus the U.S. dollar and British pound sterling has increased pricing pressures. Over the longer term, these conditions are resulting in customer orders with lower margins and lost business. Further, the cyclical nature of industry demand and, therefore, the timing of order intake may effect the Company's quarterly results of operations. The Company's ability to maintain and increase net sales depends upon a strengthening and stability in the Company's traditional markets and its ability to control costs to effectively compete in its current markets. There can be no assurance that the current level of orders will continue, that market conditions will not worsen, or that improvements in the Company's traditional markets will lead to increased orders for the Company's products.

The level of backlog considered firm by management at September 30, 2001, was $22.5 million compared to $27.7 million at December 31, 2000, and $29.9 million at October 1, 2000. Of the $22.5 million in backlog as of September 30, 2001, approximately $16 million is scheduled to be shipped by December 31, 2001. Such shipments are subject to various factors, such as customer requests for changes or manufacturing delays, which could result in shipments being delayed beyond December 31, 2001.

Page 8 of 14

Gross margin for the nine month period ended September 30, 2001, was $9.3 million compared to $10.1 million for the nine month period ended October 1, 2000, a decrease of $0.8 million. The decrease in gross margin is a result of lower sales. The gross margin as a percent of sales for the nine month period ended September 30, 2001, was 23.7% compared to 22.9% for the nine month period ended October 1, 2000. The increase in gross margin as a percent of sales is primarily due to a change in sales mix.

Operating expenses for the nine month period ended September 30, 2001, were $9.6 million compared to $12.5 million for the nine month period ended October 1, 2000, a decrease of $2.8 million primarily due to lower employee compensation and related expenses of approximately $1.9 million, travel expenses of $0.4 million and professional fees of $0.5 million.

Interest income for the nine month period ended September 30, 2001, was $124,000 compared to $185,000 for the nine month period ended October 1, 2000, a decrease of $61,000. The decrease is primarily due to lower average cash balances available for investing and lower interest rates.

Interest expense for the nine month period ended September 30, 2001, was $117,000 compared to $208,000 for the nine month period ended October 1, 2000, a decrease of $91,000. The decrease is primarily due to lower borrowings.

The Company provides for income taxes at the statutory rates in effect in each tax jurisdiction in which income is earned or losses generated, adjusted for permanent differences in determining income for financial reporting and income tax purposes. The effective income tax benefit was 39% for the nine month period ended September 30, 2001, compared to 30% for the nine month period ended October 1, 2000. The effective tax rate varies among periods due to the change in the proportion and amount of income and losses generated in different taxing jurisdictions.

Three Months Ended September 30, 2001 Compared to The Three Months Ended October 1, 2000

Net sales for the three months ended September 30, 2001, were $15.8 million compared to $17.5 million for the three month period ended October 1, 2000, a decrease of $1.6 million. The decrease is primarily a result of lower sales in North America of $6.1 million partially offset by an increase in new machine sales in Europe.

Orders received for the three month period ended September 30, 2001, were $10.9 million compared to $11.7 million for the three month period ended October 1, 2000.

The Company's sales, orders and backlog levels varied when comparing the two quarters due to market conditions and the nature of the industry in which the Company operates as more fully discussed in the results of operations for the nine month period on page 8.

Gross margin for the three month period ended September 30, 2001, was $4.4 million compared to $4.1 million for the three month period ended October 1, 2000, an increase of $0.4 million. The increase in gross margin is a result of a change in sales mix and lower manufacturing related overhead costs. The gross margin as a percent of sales for the three month period ended September 30, 2001, was 27.9% compared to 23.3% for the three month period ended October 1, 2000. The increase in the gross margin as a percent of sales is primarily due to a change in sales mix and lower manufacturing related overhead costs.

Operating expenses for the three month period ended October 1, 2001, were $2.9 million compared to $4.1 million for the three month period ended October 1, 2000, a decrease of $1.1 million primarily due to lower employee compensation and benefit costs of approximately $0.8 million, and lower travel expenses and professional fees.

Interest income for the three month period ended September 30, 2001, was $36,000 compared to $37,000 for the three month period ended October 1, 2000.

Page 9 of 14

Interest expense for the three month period ended September 30, 2001, was $39,000 compared to $64,000 for the three months ended October 1, 2000. The decrease is primarily due to lower borrowings.

The Company provides for income taxes at the statutory rates in effect in each tax jurisdiction in which income is earned or losses are generated, adjusted for permanent differences in determining income for financial reporting and income tax purposes. The effective income tax rate was 35% for the three month period ended September 30, 2001, compared to (71%) for the three month period ended October 1, 2000. The effective tax rate varies among periods due to the change in the proportion and amount of income and losses generated in different tax jurisdictions.

Material Contingencies

In February 1995, the Company and Black & Decker Corporation ("Black & Decker") entered into a Settlement Agreement pursuant to which Black & Decker agreed to assume full responsibility for the investigation and remediation of any pre-May 12, 1986 environmental contamination at the Company's Ansonia and Derby, Connecticut facilities, as required by the Connecticut Department of Environmental Protection ("DEP"). A preliminary environmental assessment of the Company's properties in Ansonia and Derby, Connecticut has been conducted by Black & Decker. Although the assessment is still being evaluated by the DEP, on the basis of the preliminary data now available there is no reason to believe that any remediation activities which might be required as a result of the findings of the assessment will have a material effect upon the capital expenditures, results of operations or the competitive position of the Company.

Liquidity and Capital Resources; Capital Expenditures

Working capital and the working capital ratio at September 30, 2001 were $14.9 million and 2.1 to 1, respectively, compared to $14.3 million and 1.9 to 1 at December 31, 2000, respectively. During the nine months ended September 30, 2001, the Company paid no dividends.

Due to the nature of the Company's business, many sales are of a large dollar amount. Consequently, the timing of recording such sales may cause the balances in accounts receivable and/or inventory to fluctuate dramatically between quarters and may result in significant fluctuations in cash provided by operations. Historically, the Company has not experienced significant problems regarding the collection of accounts receivable. The Company has also generally financed its operations with cash generated by operations, progress payments from customers and borrowings under its bank credit facilities. Management anticipates that its cash balances, operating cash flows and available credit line will be adequate to fund anticipated capital commitments and working capital requirements for at least the next twelve months. The Company made capital expenditures of $358,000 and $605,000 during the nine month periods ended September 30, 2001 and October 1, 2000, respectively.

In June 2001, the Company entered into a new worldwide multi-currency credit facility with a major US bank. This facility includes a $10 million revolving credit facility for direct borrowings and letters of credit. The facility contains a sub-limit that caps the amount of direct borrowings the Company can make at $5 million. The revolving credit facility expires on June 15, 2003. The facility contains limits on direct borrowings and issuance's of letters of credit based upon stipulated percentages of accounts receivable and inventory. The facility also contains covenants specifying minimum and/or maximum thresholds for operating results, selected financial ratios and backlog. There can be no assurance that the Company will achieve the required thresholds in the future. The agreement contains certain restrictions on investments, borrowings and the sale of assets. Dividend declarations or payments are allowed under this credit facility as long as there exists under the credit facility no Event of Default (as defined in the credit facility) or no condition which, upon giving of notice or lapse of time or both, would become an Event of Default. The Company's old credit facility was terminated except in relation to approximately $0.8 million of letters of credit which had previously been posted under that facility and continue to be outstanding on September 30, 2001. The Company has approximately $2.0 million of letters of credit posted under its new facility on September 30, 2001.

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The Company also entered into a term loan for £1.4 million (approximately $2 million) as part of this credit facility. The proceeds of this loan were used to repay an existing term loan of the same amount. The new term loan is repayable in monthly installments of £38,888 through October 2004. The term loan has an interest rate of LIBOR plus 2.7%. At September 30, 2001 and December 31, 2000, there were $1.9 million and $2.4 million, respectively, outstanding under a term loan.

Impact of Recently Issued Accounting Standards

Item 2 - Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk from changes in foreign currency and interest rates. The Company manufactures many of its products and components in the United Kingdom and purchases many components in foreign markets. Approximately 50% of the Company's revenue is generated from foreign markets. The Company manages its risk to foreign currency rate changes by maintaining foreign currency bank accounts in currencies in which it regularly transacts business and the use of foreign exchange forward contracts. The Company does not enter into derivative contracts for trading or speculative purposes.

The Company's cash equivalents and short-term investments and its outstanding debt bear variable interest rates. The rates are adjusted to market conditions. Changes in the market rate effects interest earned and paid by the Company. The Company does not use derivative instruments to offset the exposure to changes in interest rates. Changes in the interest rates related to these items are not expected to have a material impact on the Company's results of operations.

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PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS	None
ITEM 2 - CHANGES IN SECURITIES	N/A
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES	N/A
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	N/A
ITEM 5 - OTHER INFORMATION	N/A
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 11 (Regulation S-K) Computation of Earnings Per Share.	Attached
Reports on Form 8-K

No Reports on Form 8-K were filed by the registrant during the periods covered by this report.

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Exhibit 11

                               FARREL CORPORATION
                               ------------------
                 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
                 ----------------------------------------------
                 (In thousands, except per share and share data)
                 ----------------------------------------------

                                                    Three Months Ended          Nine Months Ended
                                                    ------------------          -----------------
                                                 September 30, October 1,   September 30,  October 1,
                                                     2001         2000          2001          2000
                                                     ----         ----          ----          ----

Net income (loss) applicable to common stock ..  $       923  $      (133)  $      (257)  $    (1,745)
                                                 ===========  ===========   ===========   ===========
Weighted average number of common
shares outstanding -  Basic earnings per share     5,228,461    5,250,061     5,228,999     5,250,061

Effect of dilutive stock and purchase options          --           --            --            --
                                                 -----------  -----------   -----------   -----------

Weighted average number of common
shares outstanding - Diluted earnings per share    5,228,461    5,250,061     5,228,999     5,250,061
                                                 ===========  ===========   ===========   ===========

Net income (loss) per common share-
  Basic .......................................  $      0.18  $     (0.03)  $     (0.05)  $     (0.33)
                                                 ===========  ===========   ===========   ===========
  Fully diluted ...............................  $      0.18  $     (0.03)  $     (0.05)  $     (0.33)
                                                 ===========  ===========   ===========   ===========

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SIGNATURES

PURSUANT TO THE REQUIREMENTS 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.

FARREL CORPORATION
REGISTRANT

DATE: 11/13/01	/s/ Rolf K. Liebergesell
	ROLF K. LIEBERGESELL
	CHIEF EXECUTIVE OFFICER,
	PRESIDENT AND CHAIRMAN OF THE BOARD
DATE: 11/13/01	/s/ Walter C. Lazarcheck
	WALTER C. LAZARCHECK
	VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
	(CHIEF ACCOUNTING OFFICER)

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SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

Filing Compare · FARREL CORP