<PAGE>

================================================================================

                       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 28, 2001

                                       OR

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



                        Commission File Number 333-43089

                               The GSI Group, Inc.
             (Exact name of registrant as specified in its charter)

              Delaware                                     37-0856587
    (State or other jurisdiction                       (I.R.S. Employer
 of incorporation or organization)                    Identification No.)

 1004 E. Illinois Street, Assumption, Illinois                62510
   (Address of principal executive offices)                (Zip 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 [_]

     Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. Common stock, par
value $0.01 per share, 1,575,000 shares outstanding of voting and 200,000 shares
outstanding of nonvoting as of November 12, 2001.

================================================================================


                                        1

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                       Page
                                                                                                       ----
<S>                                                                                                    <C>
PART I - Financial Information
      Item 1.    Financial Statements
                      Balance Sheets .............................................................       3
                      Statements of Operations ...................................................       4
                      Statements of Cash Flows ...................................................       5
                      Notes to Financial Statements ..............................................       6
      Item 2.    Management's Discussion and Analysis of Financial Condition and Results of
                 Operations ......................................................................      14
      Item 3.    Quantitative and Qualitative Disclosure About Market Risk .......................      17

PART II - Other Information

      Item 1.    Legal Proceedings ...............................................................      18
      Item 2.    Changes in Securities and Use of Proceeds .......................................       *
      Item 3.    Defaults Upon Senior Securities .................................................       *
      Item 4.    Submission of Matters to a Vote of Security Holders .............................       *
      Item 5.    Other Information ...............................................................       *
      Item 6.    Exhibits and Reports on Form 8-K ................................................      18
</TABLE>


_______________________

* No response to this item is included herein for the reason that it is
inapplicable.


                                        2

<PAGE>

                         PART I - FINANCIAL INFORMATION

                          ITEM 1 - FINANCIAL STATEMENTS

                      THE GSI GROUP, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                 (In thousands, except share and per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                   September 28,  December 31,
                                Assets                                                                 2001          2000
     -------------------------------------------------------------------                               -----         ----
<S>                                                                                                <C>            <C>
Current Assets:
    Cash and cash equivalents ....................................................................    $   3,393    $   2,679
    Accounts receivable, net .....................................................................       39,819       29,120
    Inventories, net .............................................................................       56,941       55,780
    Prepaids .....................................................................................          943        2,344
    Other ........................................................................................        4,002        3,817
                                                                                                      ---------    ---------
          Total current assets ...................................................................      105,098       93,740
                                                                                                      ---------    ---------
Notes Receivable .................................................................................           59           59
                                                                                                      ---------    ---------
Property, Plant and Equipment, net ...............................................................       43,559       47,063
                                                                                                      ---------    ---------
Other Assets:
    Goodwill and other intangible assets, net ....................................................       15,252       15,983
    Other ........................................................................................        5,633        7,278
                                                                                                      ---------    ---------
          Total other assets .....................................................................       20,885       23,261
                                                                                                      ---------    ---------
          Total assets ...........................................................................    $ 169,601    $ 164,123
                                                                                                      =========    =========

                   Liabilities and Stockholders' Deficit
     -------------------------------------------------------------------
Current Liabilities:
    Accounts payable .............................................................................    $  17,263    $  15,687
    Accrued interest .............................................................................        4,741        2,105
    Other accrued expenses .......................................................................       10,997       13,101
    Customer deposits ............................................................................        4,526        7,018
    Current maturities of long-term debt .........................................................        3,947        6,074
                                                                                                      ---------    ---------
          Total current liabilities ..............................................................       41,474       43,985
                                                                                                      ---------    ---------
Long-Term Debt, less current maturities ..........................................................      139,839      130,870
                                                                                                      ---------    ---------
Deferred Income Taxes ............................................................................        1,880        1,736
                                                                                                      ---------    ---------
Commitments and Contingencies
Stockholders' Deficit:
    Common stock, $.01 par value, voting (authorized 6,900,000 shares;
       issued 6,633,652 shares; outstanding 1,575,000 shares) ....................................           16           16
    Common stock, $.01 par value, nonvoting (authorized 1,100,000 shares;
       issued 1,059,316 shares; outstanding 200,000 shares) ......................................            2            2
    Paid-in capital ..............................................................................        3,006        3,006
    Accumulated other comprehensive loss (cumulative currency  translation
       adjustment) ...............................................................................      (11,451)      (8,105)
    Retained earnings ............................................................................        21,794       19,572
    Treasury stock, at cost, voting (5,058,652 shares) ...........................................      (26,950)     (26,950)
    Treasury stock, at cost, nonvoting (859,316 shares) ..........................................           (9)          (9)
                                                                                                      ---------    ---------
          Total stockholders' deficit ............................................................      (13,592)     (12,468)
                                                                                                      ---------    ---------
          Total liabilities and stockholders' deficit ............................................    $ 169,601    $ 164,123
                                                                                                      =========    =========
</TABLE>


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


                                        3

<PAGE>

                      THE GSI GROUP, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In thousands, except share and per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                         Three Fiscal Months      Nine Fiscal Months
                                                                                Ended                   Ended
                                                                      --------------------------  ---------------------------
                                                                       Sept. 28,     Sept. 29,     Sept. 28,      Sept. 29,
                                                                         2001           2000          2001           2000
                                                                         ----           ----          ----           ----
<S>                                                                <C>            <C>            <C>            <C>
Sales ...........................................................    $    71,834    $    83,391    $   182,301    $   198,464

Cost of sales ...................................................         52,850         59,384        136,909        149,009

           Gross profit .........................................         18,984         24,007         45,392         49,455

Selling, general and administrative expenses.....................         10,167         10,061         29,672         27,851
Amortization expense ............................................            396            449          1,307          1,176
                                                                     -----------    -----------    -----------    -----------
      Total operating expenses ..................................         10,563         10,510         30,979         29,027

Operating income ................................................          8,421         13,497         14,413         20,428

Other income (expense):
      Interest expense ..........................................         (3,664)        (3,855)       (11,015)       (11,254)
      Other, net ................................................             68            (42)            99            81
                                                                     -----------    -----------    -----------    -----------
           Income before income taxes ...........................          4,825          9,600          3,497          9,255
                                                                     -----------    -----------    -----------    -----------

Income tax expense ..............................................            208            558            117            449
                                                                     -----------    -----------    -----------    -----------

           Net income ...........................................    $     4,617    $     9,042    $     3,380    $     8,806
                                                                     -----------    -----------    -----------    -----------

Basic and diluted net income per share ..........................    $      2.60    $      5.09    $      1.90    $      4.62
                                                                     -----------    -----------    -----------    -----------

Weighted average common shares outstanding ......................      1,775,000      1,775,000      1,775,000      1,905,699
                                                                     ===========    ===========    ===========    ===========
</TABLE>



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


                                        4

<PAGE>

                      THE GSI GROUP, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                         Nine Fiscal Months Ended
                                                                        --------------------------
                                                                           Sept. 28,    Sept. 29,
                                                                            2001           2000
                                                                            ----           ----
<S>                                                                     <C>           <C>
Cash Flows From Operating Activities:
   Depreciation and amortization expense ..............................     6,933         6,754
   Other ..............................................................    (6,976)         (168)
                                                                         --------      --------
           Net cash flows provided by(used in) operating activities....       (43)        6,586
                                                                         --------      --------


Cash Flows From Investing Activities:
   Capital expenditures ...............................................    (3,671)       (5,881)
   Proceeds from sale of fixed assets .................................       486           290
   Other ..............................................................      (660)          312
                                                                         --------      --------
           Net cash flows used in investing activities ................    (3,845)       (5,279)
                                                                         --------      --------

Cash Flows From Investing Activities:
    Proceeds from shareholder loan ....................................     1,017         1,540
    Payments on shareholder loan ......................................    (1,868)           --
    Payments on long-term debt ........................................    (2,518)       (3,417)
    Net borrowings under line-of-credit agreement .....................    10,420         3,606
    Contributed capital ...............................................        --            65
    Dividends .........................................................    (1,159)       (1,862)
   Purchase of treasury stock .........................................        --        (1,426)
   Other ..............................................................      (827)          250
                                                                         --------      --------
           Net cash flows provided by (used in) financing activities...     5,065        (1,244)
                                                                         --------      --------

Effect of Exchange Rate Changes on Cash ...............................      (463)          (41)

Increase In Cash and Cash Equivalents .................................  $    714      $     22
Cash and Cash Equivalents, beginning of period ........................     2,679         3,240
                                                                         --------      --------
Cash and Cash Equivalents, end of period ..............................  $  3,393      $  3,262
                                                                         ========      ========
</TABLE>


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


                                        5

<PAGE>

                      THE GSI GROUP, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

   The financial statements have been prepared by The GSI Group, Inc. (the
"Company"), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information not misleading. These financial statements
should be read in conjunction with the financial statements and related notes
contained in the Company's December 31, 2000 Form 10-K as filed with the
Securities and Exchange Commission. Other than as indicated herein, there have
been no significant changes from the data presented in said 10-K.

    In the opinion of management, the financial statements contain all
adjustments necessary to present fairly the financial position of the Company as
of September 28, 2001 and the results of operations for the nine months ended
September 28, 2001 and cash flows for the nine months ended September 28, 2001.
Certain prior year amounts have been reclassified to be consistent with the
current year presentation.

    The results of operations for the nine-month period ended September 28,
2001 are not necessarily indicative of the operating results for the full year.

2. Acquisition

   On January 2, 2001, the Company purchased certain assets including
inventory, specialized equipment, patents, trademarks, goodwill and customer
lists of the FFI Corporation ("FFI") for approximately $6.2 million. FFI was a
manufacturer of grain drying equipment located in Indianapolis, Indiana. The
transaction was recorded in accordance with the purchase method of accounting
and, accordingly, the acquired assets have been recorded at their estimated fair
market values at the date of acquisition. The intangible assets totaling $1.4
million, including patents, trademarks, goodwill and customer lists, are being
amortized on a straight line basis over the assets estimated useful life ranging
from 10-20 years. The purchase price allocation is based on a preliminary
estimate of fair values.

3. New Accounting Pronouncements

   On June 30, 2001, the Financial Accounting Standards Board issued Statement
No. 141, "Business Combinations" ("Statement No. 141"). Under Statement No. 141,
all business combinations initiated after June 30, 2001 must be accounted for
using the purchase method of accounting. Use of the pooling-of-interests method
will be prohibited. Additionally, Statement No. 141 requires that certain
intangible assets that can be identified and named be recognized as assets apart
from goodwill. Statement No. 141 is effective for all business combinations
initiated after June 30, 2001.

   On June 30, 2001, the Financial Accounting Standards Board issued
Statement No. 142, "Goodwill and Other Intangible Assets" ("Statement No. 142").
Under Statement No. 142, goodwill and intangible assets that have indefinite
useful lives will not be amortized but rather will be tested at least annually
for impairment. Intangible assets that have finite useful lives will continue to
be amortized over their useful lives. The Company will adopt Statement 142 as of
January 1, 2002. As of September 28, 2001, goodwill, net of accumulated
amortization, is $15.3 million and amortization expense for the nine months
ended September 28, 2001 is $1.3 million. The Company has not yet determined the
impact that the adoption of Statement No. 142 will have on the Company's
financial condition or results of operations.

   In August 2001, the Financial Accounting Standards Board issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which
supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of". SFAS No. 144 created one accounting
model for long-lived assets to be disposed of by sale that applies to all
long-lived assets, including discontinued operations, and replaces the
provisions of APB Opinion No. 30, "Reporting Results of Operations--Reporting
the Effects of

                                        6

<PAGE>

Disposal of a Segment of a Business", for the disposal of segments of a
business. SFAS No. 144 requires that those long-lived assets be measured at the
lower of carrying amount or fair value less cost to sell, whether reporting in
continuing operations or in discontinued operations. Discontinued operations
will no longer include amounts for operating losses that have not yet occurred.
SFAS No. 144 also broadens the reporting of discontinued operations to include
all components of an entity with operations that can be distinguished from the
rest of the entity and that will be eliminated from the ongoing operations of
the entity in a disposal transaction. The provisions of SFAS No. 144 are
effective for financial statements issued for fiscal years beginning after
December 15, 2001 and, generally are to be applied prospectively. The Company
has not yet recognized the impact of SFAS No. 144.

4. Comprehensive Loss

     The components of comprehensive loss for the periods presented are as
follows (in thousands):

                                                    Nine Fiscal Months Ended
                                                 ------------------------------
                                                   Sept. 28,          Sept. 29,
                                                     2001              2000
                                                 -------------      -----------
          Net income .........................   $       3,380      $     8,806
          Cumulative currency translation
          adjustment .........................          (3,346)            (203)
                                                 -------------      -----------
               Comprehensive income ..........   $          34      $     8,603
                                                 =============      ===========

5. Detail Of Certain Assets

                                                    Sept 28,        December 31,
                                                      2001             2000
                                                 -------------      ------------
                                                          (In thousands)

Inventories

                    Raw materials ............   $      19,098      $    20,615
                    Work-in-process ..........          16,843           18,094
                    Finished goods ...........          21,082           17,153
                                                 -------------      -----------
                                                        57,023           55,862
                    LIFO Reserve .............             (82)             (82)
                                                 -------------      -----------
                         Total ...............   $      56,941      $    55,780
                                                 =============      ===========

6. Supplemental Cash Flow Information

   The Company paid approximately $7.6 million and $7.7 million in interest
during the nine fiscal months ended September 28, 2001 and September 29, 2000,
respectively. The Company paid income taxes of $0.1 million during the nine
months ended September 28, 2001 and September 29, 2000.

7. Long-Term Debt

   The indenture governing the Company's senior subordinated notes provides
for certain restrictive covenants. The more significant of the covenants
restrict the ability of the Company to dispose of assets, incur additional
indebtedness, pay dividends or make distributions and other payments affecting
subsidiaries. The Company was in compliance with the covenants under the
indenture as of September 28, 2001.

   On July 25, 2001, LaSalle Bank National Association and the Company amended
the Company's credit facility (the "Credit Facility") to provide for revolving
loans up to a maximum of $43.1 million (limited based on a

                                        7

<PAGE>

borrowing base which includes accounts receivable, inventory, and principal
reductions of the LaSalle Bank National Association term loan, letters of credit
and certain guaranteed debt) and a $16.9 million term loan. The borrowings bear
interest at a floating rate per annum equal to (at the Company's option) 1.75%
to 3.25% over LIBOR or 0.25% to 0.75% over the bank's floating rate, both based
on the senior debt to EBITDA ratio of the Company. The term loan is payable in
quarterly principal installments of $0.6 million plus interest over three years
and matures on July 25, 2004. As the principal amount outstanding on the term
loan, letters of credit, and certain guaranteed debt is reduced, the
availability on the revolving loan is increased maintaining a total commitment
of $60.0 million under the Credit Facility. In addition, the Credit Facility
provided for a $5.0 million borrowing base over-advance which expired on
September 1, 2001 and bore an interest rate of LIBOR plus 3.5%. The Credit
Facility requires the Company to maintain a certain senior debt to EBITDA ratio,
fixed charge coverage ratio, tangible net worth and certain levels of EBITDA and
capital expenditures. In addition, the Credit Facility requires that a
percentage of Excess Cash, as defined, be used to pay down the term loan on an
annual basis. The Company was in compliance with the covenants under the Credit
Facility as of September 28, 2001. Borrowings under the Credit Facility are
secured by substantially all of the assets of the Company, including the capital
stock of any existing or future subsidiaries.

8.  Commitments and Contingencies

     Sales of agricultural equipment are seasonal, with farmers traditionally
purchasing grain storage bins and grain drying and handling equipment in the
summer and fall in conjunction with the harvesting season, and swine and poultry
producers purchasing equipment during prime construction periods in the spring,
summer and fall. The Company's sales and net income have historically been lower
during the first and fourth fiscal quarters as compared to the second and third
quarters.

     The Company has two contracts with the Syrian government and one with the
Yemen Company for Industrial Development to manufacture and supervise the
assembly of grain handling systems. Other current assets and other assets
include $3.0 million of retainage withheld until completion of the projects and
the meeting of certain performance criteria. These receivables are secured by
letters of credit totaling $3.0 million and are expected to be collected through
the year 2002.

     The Company has an operating lease agreement that requires the Company to
maintain a certain senior debt to EBITDA ratio, tangible net worth and certain
levels of capital expenditures and EBITDA. The Company was in compliance with
these covenants under the operating lease agreement as of September 28, 2001.
Certain lease agreements are collateralized by a letter of credit of $2.0
million, which was renewed for another year, expiring on October 15, 2002.

9.  Risks and Uncertainties

     During 2001, the Brazilian Real experienced a devaluation (1.9501 Brazilian
Reals/U.S. Dollar at December 31, 2000 as compared to 2.6650 Brazilian
Reals/U.S. Dollar at September 28, 2001). Any further deterioration in Brazil's
economy could have an adverse effect on the Company's results of operations and
financial condition.

10. Restructuring Charges

     During the third quarter of 2001, the Company incurred restructuring
charges of approximately $1.0 million related to work force reductions. The
charges associated with the reduction in work force are primarily severance
costs of several employees, which have been included in operating expenses in
the accompanying condensed consolidated statements of operations. None of these
costs have been paid as of September 28, 2001.


                                        8

<PAGE>

11. Business Segment

     The Company has no separately reportable segments in accordance with
Statement of Financial Accounting Standard ("SFAS") No. 131, "Disclosure about
Segments of an Enterprise and Related Information." Under the enterprise wide
disclosure requirements of SFAS 131, the Company reports sales by each product
line. Amounts for the first three quarters of 2001 and 2000 are as shown in the
table below (in thousands).

                                          Sept. 28,     Sept. 29,
                                            2001          2000
                                            ----          ----
              Grain product line ......  $ 105,409     $ 125,505
              Swine product line ......     38,818        30,224
              Poultry product line ....     38,074        42,735
                                         ---------     ---------
                   Sales ..............  $ 182,301     $ 198,464
                                         =========     =========

     For the first three quarters of 2001 and 2000, sales in Brazil were $12.2
million and $15.6 million, respectively. Long-lived assets in Brazil were $2.8
million at September 28, 2001.

12. Guarantor Subsidiaries

     The Company's payment obligation under both the Credit Facility and the
senior subordinated notes are fully and unconditionally guaranteed on a joint
and several basis by David Manufacturing Company, GSI/Cumberland de Mexico S. de
R.L. de C.V., GSI/Cumberland BV, GSI/Cumberland SA (Pty) Ltd., GSI/Cumberland
Sdn. Bhd., Agromarau Industria e Comercio Ltda., GSI Agricultural Equipment
Shanghai co. Ltd., and The GSI Group (Canada) Inc. (the "Guarantor
Subsidiaries"). The Guarantor Subsidiaries are direct wholly-owned subsidiaries
of the Company. The obligations of the Guarantor Subsidiaries under their
guarantees are subordinated to such subsidiaries' obligations under their
guarantee of the Credit Facility.

     Presented below is unaudited condensed consolidating financial information
for The GSI Group, Inc. ("Parent Company") and the Guarantor Subsidiaries. In
the Company's opinion, separate financial statements and other disclosures
concerning the Guarantor Subsidiaries would not provide additional information
that is material to investors.

     Investments in subsidiaries are accounted for by the Parent Company using
the equity method of accounting. Earnings of subsidiaries are, therefore,
reflected in the Parent Company's investments in and advances to/from
subsidiaries' accounts and earnings. The elimination entries eliminate
investments in subsidiaries and intercompany balances and transactions.


                                        9

<PAGE>

12. Guarantor Subsidiaries (Continued)

               SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
                               SEPTEMBER 28, 2001
                                 (In thousands)

<TABLE>
<CAPTION>
                                                             Parent         Guarantor
                                                            Company       Subsidiaries       Eliminations    Consolidated
                                                            -------       ------------       ------------    ------------
<S>                                                        <C>            <C>                <C>             <C>
                                                            ASSETS
Current assets:
      Cash and cash equivalents .......................    $     118        $   3,275          $     --         $   3,393
      Accounts receivable, net ........................       32,236           13,093            (5,510)           39,819
      Inventories, net ................................       43,425           13,246               270            56,941
      Other current assets ............................        3,468            1,477                --             4,945
                                                           ---------        ---------          --------         ---------

      Total current assets ............................       79,247           31,091            (5,240)          105,098

Property, plant and equipment, net ....................       34,366            9,193                --            43,559
Goodwill and other intangible assets, net .............        2,965           12,287                --            15,252
Investment in and advances to/from
      Subsidiaries ....................................       48,569           (8,929)          (39,640)               --
Other long-term assets ................................        5,668               24               --              5,692
                                                           ---------        ---------          --------         ---------

      Total assets ....................................    $ 170,815        $  43,666          $(44,880)        $ 169,601
                                                           =========        =========          ========         =========

                                      LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)

Current liabilities:
      Current portion of long-term debt ...............     $  2,937        $   1,010          $     --         $   3,947
      Accounts payable ................................       15,654            7,119            (5,510)           17,263
      Accrued liabilities .............................       17,299            2,965                --            20,264
                                                           ---------        ---------          ---------        ---------

      Total current liabilities .......................       35,890           11,094            (5,510)           41,474

Long-term debt ........................................      136,924           11,816            (8,901)          139,839
Other long-term liabilities ...........................          142            1,738                --             1,880
                                                           ---------        ---------          --------         ---------

      Total liabilities ...............................      172,956           24,648           (14,411)          183,193

Stockholders' equity (deficit):
      Common stock ....................................           18           23,539           (23,539)               18
      Additional paid-in capital ......................        3,006              305              (305)            3,006
      Accumulated other comprehensive loss ............           --          (11,451)               --           (11,451)
      Retained earnings (deficit) .....................       21,794            6,625            (6,625)           21,794
      Treasury stock, at cost .........................      (26,959)              --                --           (26,959)
                                                           ---------        ---------          ---------        ---------

      Total stockholders' equity (deficit) ............       (2,141)          19,018           (30,469)          (13,592)
                                                           ---------        ---------          --------         ---------

Total liabilities and stockholders' equity (deficit) ..    $ 170,815        $  43,666          $(44,880)        $ 169,601
                                                           =========        =========          ========         =========
</TABLE>


                                       10

<PAGE>

12.  Guarantor Subsidiaries (Continued)

          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                  THREE FISCAL MONTHS ENDED SEPTEMBER 28, 2001
                                 (In thousands)

<TABLE>
<CAPTION>
                                                   Parent    Guarantor
                                                  Company   Subsidiaries  Eliminations   Consolidated
                                                  -------   ------------  ------------   ------------
<S>                                              <C>        <C>           <C>            <C>
Sales .........................................  $ 57,611     $ 18,414      $ (4,191)      $ 71,834
Cost of sales .................................    43,009       13,833        (3,992)        52,850
                                                 --------     --------      --------       --------

    Gross profit ..............................    14,602        4,581          (199)        18,984

Selling, general and administrative expenses...     6,997        3,566            --         10,563
                                                 --------     --------      --------       --------

    Operating income ..........................     7,605        1,015          (199)         8,421

Interest (expense) income .....................    (3,914)         250            --         (3,664)
Other income (expense) ........................      (476)         544            --             68
                                                 --------     --------      --------       --------

Income before income taxes ....................     3,215        1,809          (199)         4,825
Provision (benefit) for income taxes ..........      (130)         338            --            208
                                                 --------     --------      --------       --------
Income before equity in income of
    Consolidated subsidiaries .................     3,345        1,471          (199)         4,617
Equity in income of consolidated subsidiaries..     1,471           --        (1,471)            --
                                                 --------     --------      --------       --------

Net income ....................................  $  4,816     $  1,471      $ (1,670)      $  4,617
                                                 ========     ========      ========       ========
</TABLE>

                                       11

<PAGE>

12.  Guarantor Subsidiaries (Continued)

          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                   NINE FISCAL MONTHS ENDED SEPTEMBER 28, 2001
                                 (In thousands)

<TABLE>
<CAPTION>
                                                     Parent    Guarantor
                                                    Company   Subsidiaries  Eliminations   Consolidated
                                                    -------   ------------  ------------   ------------
<S>                                                <C>        <C>           <C>            <C>
Sales ..........................................   $ 149,690    $  46,400    $ (13,789)     $ 182,301
Cost of sales ..................................     115,250       35,520      (13,861)       136,909
                                                   ---------    ---------    ---------      ---------

    Gross profit ...............................      34,440       10,880           72         45,392

Selling, general and administrative expenses....      20,759       10,220           --         30,979
                                                   ---------    ---------    ---------      ---------

    Operating income ...........................      13,681          660           72         14,413

Interest (expense) income ......................     (11,045)          30           --        (11,015)
Other income (expense) .........................        (607)         706           --             99
                                                   ---------    ---------    ---------      ---------

Income before income taxes .....................       2,029        1,396           72          3,497
Provision (benefit) for income taxes ...........        (103)         220           --            117
                                                   ---------    ---------    ---------      ---------
Income before equity in income of
    Consolidated subsidiaries ..................       2,132        1,176           72          3,380
Equity in income of consolidated subsidiaries...       1,176           --       (1,176)            --
                                                   ---------    ---------    ---------      ---------

Net income .....................................   $   3,308    $   1,176    $  (1,104)     $   3,380
                                                   =========    =========    =========      =========
</TABLE>

                                       12

<PAGE>

12.  Guarantor Subsidiaries (Continued)

           SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                   NINE FISCAL MONTHS ENDED SEPTEMBER 28, 2001
                                 (In thousands)

<TABLE>
<CAPTION>
                                                      Parent    Guarantor
                                                     Company   Subsidiaries  Eliminations   Consolidated
                                                     -------   ------------  ------------   ------------
<S>                                                  <C>       <C>           <C>            <C>
Cash flows provided by (used in) operating
activities.........................................  $(2,573)     $ 2,530       $    --       $   (43)
                                                     -------      -------       -------       -------

Cash flows from investing activities:
    Capital expenditures and proceeds from
    sales of fixed assets .........................   (3,385)        (286)           --        (3,671)
    Other .........................................      823         (997)           --          (174)
                                                     -------      -------       -------       -------
    Net cash used in investing Activities .........   (2,562)      (1,283)           --        (3,845)
                                                     -------      -------       -------       -------
Cash flows from financing activities:
    Net borrowings (payments) on debt .............    8,073       (1,022)           --         7,051
    Other .........................................   (2,840)         854            --        (1,986)
                                                     -------      -------       -------       -------
    Net cash provided by (used in) financing
    Activities ....................................    5,233         (168)           --         5,065
                                                     -------      -------       -------       -------

Effect of exchange rate changes on cash ...........       --         (463)           --          (463)

Change in cash and cash equivalents ...............       98          616            --           714

Cash and cash equivalents, beginning of period ....       20        2,659            --         2,679
                                                     -------      -------       -------       -------
Cash and cash equivalents, end of period ..........  $   118      $ 3,275            --       $ 3,393
                                                     =======      =======       =======       =======
</TABLE>

                                       13

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS.

     The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Consolidated
Financial Statements and the notes included in Item 1 hereof.

General

     The Company is a leading manufacturer and supplier of agricultural
equipment and services worldwide. The Company's grain, swine and poultry
products are used by producers and purchasers of grain, and by producers of
swine and poultry. Fluctuations in grain and feed prices directly impact sales
of the Company's grain equipment. Because the primary cost of producing swine
and poultry is the cost of the feed grain consumed by animals, fluctuations in
the supply and cost of grain to users of the Company's products in the past has
impacted sales of the Company's swine and poultry equipment. The Company
believes, however, that its diversified product offerings mitigate some of the
effects of fluctuations in the price of grain since the demand for grain
storage, drying and handling equipment tends to increase during periods of
higher grain prices, which somewhat offsets the reduction in demand during such
periods for the Company's products by producers of swine and poultry. The
Company expects to continue to experience weakening demand in the U.S. and South
American poultry equipment markets due to over capacity and uncertain economic
conditions, which the Company believes could negatively impact its results in
the foreseeable future. In addition, the Company expects to experience weakening
demand in the U.S. grain equipment market for the remainder of 2001. In response
to this weakening demand, the Company initiated cost-cutting measures. These
measures include workforce reductions as well as consolidation of manufacturing
and sales facilities.

     Sales of agricultural equipment are seasonal, with farmers traditionally
purchasing grain storage bins and grain drying and handling equipment in the
summer and fall in conjunction with the harvesting season, and swine and poultry
producers purchasing equipment during prime construction periods in the spring,
summer and fall. The Company's net sales and net income have historically been
lower during the first and fourth fiscal quarters as compared to the second and
third quarters.

     Although the Company's sales are primarily denominated in U.S. dollars and
are not generally affected by currency fluctuations (except for the Company's
Brazilian operation), the production costs, profit margins and competitive
position of the Company are affected by the strength of the U.S. dollar relative
to the strength of the currencies in countries where its products are sold.

     The Company's international sales have historically comprised a significant
portion of sales. In the first three quarters of 2001 and 2000, the Company's
international sales accounted for 26% and 27% of sales, respectively.
International operations generally are subject to various risks that are not
present in domestic operations, including restrictions on dividends,
restrictions on repatriation of funds, unexpected changes in tariffs and other
trade barriers, difficulties in staffing and managing foreign operations,
political and economic instability, fluctuations in currency exchange rates,
reduced protection for intellectual property rights in some countries, seasonal
reductions in business activity and potentially adverse tax consequences, any of
which could adversely impact the Company's international operations.

     The Company currently operates as a subchapter S corporation and,
accordingly, is not subject to federal income taxation for the periods for which
financial information has been presented herein. Because the Company's
stockholders are subject to tax liabilities based on their pro rata shares of
the Company's income, the Company's policy is to make periodic distributions to
its stockholders in amounts equal to such tax liabilities.

                                       14

<PAGE>

Results of Operations

Three Months Ended September 28, 2001 Compared to Three Months Ended September
29, 2000

     Sales decreased 13.9% or $11.6 million to $71.8 million in the third
quarter of 2001 compared to $83.4 million in the third quarter of 2000. This
decrease was driven by a weaker domestic and Brazilian poultry market, as well
as reduced grain storage and conditioning equipment demand in U.S. markets.

     Gross profit decreased to $19.0 million in the third quarter of 2001 or
26.4% of sales from $24.0 million or 28.8% of sales in the same period of 2000.
This decrease was primarily the result of decreased sales and accompanying
reduction in fixed cost absorption.

     Operating expenses increased 0.5% or $0.1 million to $10.6 million in the
third quarter of 2001 from $10.5 million in the same period of 2000. This
increase was the result of restructuring charges related to workforce reductions
offset by cost reduction efforts.

     Operating income decreased 37.6% to $8.4 million in the third quarter of
2001 from $13.5 million in the third quarter of 2000. This decrease was
primarily attributable to the decrease in sales and increased operating
expenses.

     Interest expense was essentially flat for the third quarter of 2001 as
compared to the third quarter of 2000.

     Net income decreased $4.4 million to income of $4.6 million for the third
quarter of 2001 from $9.0 million in the same period of 2000.

Nine Months Ended September 28, 2001 Compared to Nine Months Ended September 29,
2000

     Sales decreased 8.1% or $16.2 million to $182.3 million in the first three
quarters of 2001 compared to $198.5 million in the first three quarters of 2000.
This decrease was primarily driven by a weaker domestic and Brazilian poultry
market. Grain equipment sales were also lower due to an early winter promotional
program that shifted sales to the fourth quarter of 2000, as well as reduced
demand for grain storage and conditioning equipment in the U.S. during the first
three quarters of 2001.

     Gross profit decreased to $45.4 million in the first three-quarters of 2001
or 24.9% of sales from $49.5 million or 24.9% of sales in the same period of
2000. This decrease was primarily a result of decreased sales.

     Operating expenses increased 6.7% or $2.0 million to $31.0 million in the
first three-quarters of 2001 from $29.0 million in the same period of 2000. This
increase was primarily the result of integration costs necessary to support the
sales volume resulting from the FFI acquisition. These integration costs
included the establishment of a FFI sales office and sales force in
Indianapolis. Restructuring charges incurred in the third quarter were offset by
cost reduction efforts.

     Operating income decreased 29.4% to $14.4 million in the first three
quarters of 2001 from $20.4 million in the first three quarters of 2000. This
decrease was attributable to the decrease in sales and an increase in operating
expenses.

     Interest expense was essentially flat for the first three quarters of 2001
as compared to the first three quarters of 2000.

     Net income decreased $5.4 million to $3.4 million for the first
three-quarters of 2001 from $8.8 million in the same period of 2000.

                                       15

<PAGE>

Liquidity and Capital Resources

     The Company has historically funded capital expenditures, working capital
requirements, debt service and stockholder dividends from cash flow from its
operations, augmented by borrowings made under various credit agreements and the
sale of the Company's 10 1/4% senior subordinated notes.

     As of September 28, 2001, the Company had $63.6 million of working capital,
an increase of $13.9 million from working capital as of December 31, 2000. The
increase in working capital was primarily due to an increase in accounts
receivable and a decrease in customer deposits.

     Operating activities provided $0.0 million and $6.6 million in cash flow in
the first three-quarters of 2001 and 2000, respectively. This $6.6 million
decrease in cash provided was primarily the result of a decrease in net income
and other assets, compared to the first three quarters of 2000.

     Investing activities used $3.8 million and $5.3 million in cash flow in the
first three-quarters of 2001 and 2000, respectively. The cash was used primarily
for machinery and equipment purchases. The $1.5 million decrease in cash used in
investing activities was a result of a decrease in the amount of equipment
purchased in the first three-quarters of 2001 compared to the first
three-quarters of 2000.

     Financing activities provided $5.1 million and used $1.2 million in cash
flow in the first three-quarters of 2001 and 2000, respectively. The cash was
provided primarily from borrowings under the Credit Facility, partially offset
by payments on long-term debt.

     The Company believes that existing cash, cash flow from operations and
available borrowings under the Credit Facility will be sufficient to support its
working capital, capital expenditures, debt service, and stockholder dividend
requirements for the foreseeable future.

Inflation

     The Company believes that inflation has not had a material effect on its
results of operations or financial condition during recent periods.

Forward-Looking Statements

     Certain statements contained in this Report are "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are statements other than historical information or
statements of current condition. Some forward-looking statements may be
identified by use of terms such as "believes," "anticipates," "intends," or
"expects." Forward-looking statements are subject to risks, uncertainties and
other factors that could cause actual results to differ materially from future
results expressed or implied by such statements, and such statements should not
be regarded as a representation the stated objectives will be achieved.

                                       16

<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company is subject to market risk associated with adverse changes in
interest rates and foreign currency exchange rates. The Company does not hold
any market risk sensitive instruments for trading purposes. At September 28,
2001, principal exposed to interest rate risk was limited to $41.6 million in
variable rate debt. The Company measures its interest rate risk by estimating
the net amount by which potential future net earnings would be impacted by
hypothetical changes in market interest rates related to all interest rate
sensitive assets and liabilities. A 1% change in interest rates would have a
$0.4 million impact on the Company's results of operations.

     At September 28, 2001, approximately 13% of net sales were derived from
international operations with exposure to foreign currency exchange rate risk.
The Company mitigates its foreign currency exchange rate risk principally by
establishing local production facilities in the markets it serves and by
invoicing customers in the same currency as the source of the products. The
Company also monitors its foreign currency exposure in each country and
implements strategies to respond to changing economic and political
environments. The Company's exposure to foreign currency exchange rate risk
relates primarily to the financial position and the results of operations of its
Brazilian subsidiary. The Company's exposure to such exchange rate risk as it
relates to the Company's financial position and results of operations would be
adversely impacted by further devaluation of the Brazilian Real per U.S. dollar.
These amounts are difficult to accurately estimate due to factors such as the
inherent fluctuation of inter-company account balances, balance sheet accounts
and the existing economic uncertainty and future economic conditions in the
international marketplace.

                                       17

<PAGE>

                                     PART II
                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

     There are no legal proceedings pending against the Company, which, in the
opinion of management, would have a material adverse affect on the Company's
business, financial position or results of operations.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

     (a)  Exhibits:

          A list of the exhibits included as part of this Form 10-Q is set forth
in the Index to Exhibits that immediately precedes such exhibits, which is
incorporated herein by reference.

     (b)  Reports on Form 8-K:

          In a Current Report filed on Form 8-K dated September 7, 2001 the
          Company reported information pursuant to "Item 5. Other Events".

                                       18

<PAGE>

                                   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.

                                 The GSI Group, Inc.

                                 By:      /s/ Russell C. Mello
                                     -------------------------------------------
                                     Senior Vice-President - Finance,
                                     Secretary and Treasurer (Authorized
                                     Signatory and Principal Financial Officer)

                             Date: November 9, 2001


                                       19

<PAGE>

                                INDEX TO EXHIBITS

Exhibit
  No.                             Document Description
-------                           --------------------

  3.1       By-Laws of The GSI Group, Inc., as amended, filed as Exhibit 3.1 to
            the Company's June 29, 2001 Form 10-Q and incorporated herein by
            reference.

 10.1       Amended and Restated Stock Restriction and Buy Sell Agreement -
            Non Voting, dated as of March 3, 2001, by and among The GSI Group,
            Inc., John C. Sloan, Jorge Andrade, and Howard Buffett and the
            nonvoting shareholders of The GSI Group, Inc. filed as Exhibit 10.1
            to the Company's June 29, 2001 Form 10-Q and incorporated herein by
            reference.

 10.2       Amended and Restated Stock Restriction and Buy Sell Agreement -
            Voting, dated as of March 3, 2001, by and among John C. Sloan,
            Jorge Andrade, and Howard Buffett and The GSI Group, Inc. filed
            as Exhibit 10.2 to the Company's June 29, 2001 Form 10-Q and
            incorporated herein by reference.

 10.3       Fifth Amended and Restated Loan and Security Agreement, dated July
            25, 2001, between The GSI Group, Inc., as borrower, and LaSalle
            National Bank, as lender filed as Exhibit 10.3 to the Company's
            June 29, 2001 Form 10-Q and incorporated herein by reference.

 10.4       Indemnification Agreement, dated July 1, 2001, by and among The GSI
            Group, Inc. and John C. Sloan, Howard Buffett, Jorge Andrade, and
            Russell C. Mello filed as Exhibit 10.4 to the Company's June 29,
            2001 Form 10-Q and incorporated herein by reference.

 10.5       Asset Purchase Agreement, dated December 19, 2000, between The GSI
            Group, Inc. and FFI Corporation filed as Exhibit 10.5 to the
            Company's June 29, 2001 Form 10-Q and incorporated herein by
            reference.

 10.6       Separation Agreement, dated August 30, 2001, by and among The GSI
            Group, Inc. and Howard Buffett.

 10.7       Separation Agreement, dated August 30, 2001, by and among The GSI
            Group, Inc. and Jorge Andrade.

___________

                                       20