<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 June 29, 2001

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



                        Commission File Number 333-43089




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

<S>                                                                     <C>
            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)
</TABLE>




  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 August 3, 2001.


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

                                       1
<PAGE>

<TABLE>
<CAPTION>
                                         TABLE OF CONTENTS
                                                                                             Page
                                                                                          ----------
PART I - Financial Information
   Item 1.  Financial Statements
<S>       <C>          <C>                                                                       <C>
                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...............................................................          13

   Item 3.  Quantitative and Qualitative Disclosure About Market Risk...................          16

PART II - Other Information
   Item 1.  Legal Proceedings...........................................................          17
   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............................................          17
</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>
                                                                      June 29,         December 31,
                           Assets                                       2001               2000
------------------------------------------------------------          --------           --------
<S>                                                                  <C>                <C>
Current Assets:
 Cash and cash equivalents..................................          $  3,223           $  2,679
 Accounts receivable, net...................................            34,983             29,120
 Inventories, net...........................................            62,796             55,780
 Prepaids...................................................               816              2,344
 Other......................................................             2,869              3,817
                                                                      --------           --------
   Total current assets.....................................           104,687             93,740
                                                                      --------           --------
Notes Receivable............................................                59                 59
                                                                      --------           --------
Property, Plant and Equipment, net..........................            45,423             47,063
                                                                      --------           --------
Other Assets:
 Goodwill and other intangible assets, net..................            15,908             15,983
 Other......................................................             5,980              7,278
                                                                      --------           --------
   Total other assets.......................................            21,888             23,261
                                                                      --------           --------
   Total assets.............................................          $172,057           $164,123
                                                                      ========           ========

        Liabilities and  Stockholders' Deficit
------------------------------------------------------------
Current Liabilities:
 Accounts payable...........................................          $ 16,478           $ 15,687
 Accrued interest...........................................             2,193              2,105
 Other accrued expenses.....................................            10,963             13,101
 Customer deposits..........................................             6,648              7,018
 Current maturities of long-term debt.......................             4,241              6,074
                                                                      --------           --------
   Total current liabilities................................            40,523             43,985
                                                                      --------           --------
Long-Term Debt, less current maturities.....................           146,365            130,870
                                                                      --------           --------
Deferred Income Taxes.......................................             1,794              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
  transaction adjustment)...................................            (9,866)            (8,105)
 Retained earnings..........................................            17,176             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..............................           (16,625)           (12,468)
                                                                      --------           --------
   Total liabilities and stockholders' deficit..............          $172,057           $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 Ended      Six Fiscal Months Ended
                                                  --------------------------------------------------------
                                                    June 29,       June 30,       June 29,       June 30,
                                                      2001           2000           2001           2000
                                                   ----------     ----------     ----------     ----------
<S>                                               <C>            <C>            <C>            <C>
Sales..........................................    $   65,498     $   66,057     $  110,467     $  115,073

Cost of sales..................................        50,344         50,959         84,059         89,625

      Gross profit.............................        15,154         15,098         26,408         25,448

Selling, general and administrative expenses...         9,690          9,000         19,505         17,790
Amortization expense...........................           473            392            911            727
                                                   ----------     ----------     ----------     ----------
   Total operating expenses....................        10,163          9,392         20,416         18,517

Operating income...............................         4,991          5,706          5,992          6,931

Other income (expense):
   Interest expense............................        (3,672)        (3,819)        (7,351)        (7,399)
   Other, net..................................           (88)            29             31            123
                                                   ----------     ----------     ----------     ----------

      Income (loss) before income taxes........         1,231          1,916         (1,328)          (345)
                                                   ----------     ----------     ----------     ----------

Income tax expense (benefit)...................            98              2            (91)          (109)
                                                   ----------     ----------     ----------     ----------

      Net income (loss)........................    $    1,133     $    1,914     $   (1,237)    $     (236)
                                                   ----------     ----------     ----------     ----------

Basic and diluted net income (loss) per share..    $     0.64     $     0.96     $    (0.70)    $    (0.12)
                                                   ----------     ----------     ----------     ----------

Weighted average common shares outstanding.....     1,775,000      2,000,000      1,775,000      2,000,000
                                                   ==========     ==========     ==========     ==========
</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>
                                                                                      Six Fiscal Months Ended
                                                                                ----------------------------------
                                                                                      June 29,          June 30,
                                                                                        2001              2000
                                                                                     --------          --------
<S>                                                                             <C>                    <C>
Cash Flows From Operating Activities:
 Depreciation and amortization expense......................................            4,356             4,630
 Other......................................................................          (12,165)          (12,520)
                                                                                     --------          --------
      Net cash flows used in operating activities...........................           (7,809)           (7,890)
                                                                                     --------          --------


Cash Flows From Investing Activities:
 Capital expenditures.......................................................           (3,363)           (4,481)
 Proceeds from sale of fixed assets.........................................              429               194
 Other......................................................................             (561)               11
                                                                                     --------          --------
      Net cash flows used in investing activities...........................           (3,495)           (4,276)
                                                                                     --------          --------

Cash Flows From Financing Activities:
    Proceeds from shareholder loan..........................................              559             1,000
    Payments on shareholder loan............................................           (1,173)               --
 Payments on long-term debt.................................................           (2,298)           (2,651)
 Net borrowings under line-of-credit agreement..............................           16,700            14,838
    Contributed capital.....................................................               --                65
    Dividends...............................................................           (1,159)               --
 Purchase of treasury stock.................................................               --            (1,426)
 Other......................................................................             (519)              150
                                                                                     --------          --------
      Net cash flows provided by  financing activities......................           12,110            11,976
                                                                                     --------          --------

Effect of Exchange Rate Changes on Cash.....................................             (262)             (189)

Increase (Decrease) In Cash and Cash Equivalents............................         $    544          $   (379)
Cash and Cash Equivalents, beginning of period..............................            2,679             3,240
                                                                                     --------          --------
Cash and Cash Equivalents, end of period....................................         $  3,223          $  2,861
                                                                                     ========          ========
</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 June 29, 2001 and the results of operations for the six months ended June 29,
2001 and cash flows for the six months ended June 29, 2001. Certain prior year
amounts have been reclassified to be consistent with the current year
presentation.

     The results of operations for the six-month period ended June 29, 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 $1.3
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 June 29, 2001, goodwill, net of accumulated amortization,
is $15.7 million and amortization expense for the six months ended June 29, 2001
is $0.9 million. The Company has not yet determined the impact that Statement
No. 142 will have on the Company's financial condition or results of operations.


4.  Comprehensive Loss

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

                                       6
<PAGE>

<TABLE>
<CAPTION>
                                                                Six Fiscal Months Ended
                                                         -------------------------------------
                                                             June 29,              June 30,
                                                               2001                  2000
                                                         ---------------       ---------------
<S>                                                      <C>                   <C>
Net loss...........................................            $  (1,237)              $  (236)
Cumulative currency translation adjustment.........
                                                                  (1,761)                 (189)
                                                         ---------------       ---------------
  Comprehensive loss...............................            $  (2,998)              $  (425)
                                                         ===============       ===============
</TABLE>


5.  Detail Of Certain Assets
<TABLE>
<CAPTION>
                                                                   June 29,           December 31,
                                                                      2001                2000
                                                                 -----------          -----------
                                                                          (In thousands)
<S>               <C>                                            <C>               <C>
Inventories
                  Raw materials................................      $19,492              $20,615
                  Work-in-process..............................       10,689               18,094
                  Finished goods...............................       32,697               17,153
                                                                 -----------          -----------

                                                                      62,878               55,862
                  LIFO Reserve                                           (82)                 (82)
                                                                 -----------          -----------
                  Total........................................      $62,796              $55,780
                                                                 ===========          ===========
</TABLE>


6.  Supplemental Cash Flow Information

     The Company paid approximately $6.8 million and $6.2 million in interest
during the six fiscal months ended June 29, 2001 and June 30, 2000,
respectively. The Company paid income taxes of $0.1 million both during the
first half of 2001 and 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 June 29, 2001.

     On July 25, 2001, LaSalle Bank National Association and the Company amended
the existing credit facility (the "Credit Facility") to provide for revolving
loans up to a maximum of $43.1 million (limited based on a 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 banks floating rate 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 provides for a $5.0
million borrowing base over-advance which expires on September 1, 2001 and bears
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 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 June 29, 2001.
Borrowings under the Credit Facility are secured by substantially all of the

                                       7
<PAGE>

assets of the Company, including the capital stock of any existing or future
subsidiaries.  The Credit Facility expires on July 25, 2004.


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 $3.3 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 $3.3 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 June 29, 2001. Certain
lease agreements are collateralized by a letter of credit of $2.0 million that
expires on October 15, 2001.


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 2.3055 Brazilian
Reals/U.S. Dollar at June 29, 2001). Any further deterioration in Brazil's
economy could have an adverse effect on the Company's results of operations and
financial condition.



10.  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 two quarters of 2001 and 2000 are as shown in the
table below (in thousands).

<TABLE>
<CAPTION>
                                                June 29,       June 30,
                                                  2001           2000
                                                --------       --------
<S>                                           <C>            <C>
Grain product line.......................       $ 62,587       $ 67,890
Swine product line.......................         23,192         18,897
Poultry product line.....................         24,688         28,286
                                                --------       --------
     Sales...............................       $110,467       $115,073
                                                ========       ========
</TABLE>

     For the first two quarters of 2001 and 2000, sales in Brazil were $7.5
million and $10.7 million, respectively. Long-lived assets in Brazil were $3.3
million at June 29, 2001.

                                       8
<PAGE>

11.  Guarantor Subsidiaries

     The Company's payment obligation under 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>

11.  Guarantor Subsidiaries (Continued)

<TABLE>
<CAPTION>
                                        SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
                                                           JUNE 29, 2001
                                                          (In thousands)


                                                        Parent       Guarantor
                                                        Company     Subsidiaries       Eliminations     Consolidated
                                                        -------     ------------       ------------     ------------
                                                       ASSETS
<S>                                                   <C>           <C>                <C>             <C>
Current assets:
     Cash and cash equivalents......................   $     27          $ 3,196           $     --          $  3,223
     Accounts receivable, net.......................     29,434           11,442             (5,893)           34,983
     Inventories, net...............................     45,410           17,249                137            62,796
     Other current assets...........................      2,383            1,302                 --             3,685
                                                       --------          -------           --------          --------

     Total current assets...........................     77,254           33,189             (5,756)          104,687

Property, plant and equipment, net..................     35,429            9,994                 --            45,423
Goodwill and other intangible assets, net...........      2,987           12,921                 --            15,908
Investment in and advances to/from
     Subsidiaries...................................     47,368           (7,744)           (39,624)               --
Other long-term assets..............................      5,967               72                 --             6,039
                                                       --------          -------           --------          --------

     Total assets...................................   $169,005          $48,432           $(45,380)         $172,057
                                                       ========          =======           ========          ========

                                           LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
     Current portion of long-term debt..............   $  3,173          $ 1,068           $     --          $  4,241
     Accounts payable...............................     14,291            8,080             (5,893)           16,478
     Accrued liabilities............................     15,859            3,945                 --            19,804
                                                       --------          -------           --------          --------

     Total current liabilities......................     33,323           13,093             (5,893)           40,523


Long-term debt......................................    142,299           13,097             (9,031)          146,365
Other long-term liabilities.........................        142            1,652                 --             1,794
                                                       --------          -------           --------          --------

     Total liabilities..............................    175,764           27,842            (14,924)          188,682


Stockholders' equity (deficit):
     Common stock...................................         18           23,526            (23,526)               18
     Additional paid-in capital.....................      3,006              305               (305)            3,006
     Accumulated other comprehensive loss...........         --           (9,866)                --            (9,866)
     Retained earnings (deficit)....................     17,176            6,625             (6,625)           17,176
     Treasury stock, at cost........................    (26,959)              --                 --           (26,959)
                                                       --------          -------           --------         --------


     Total stockholders' equity (deficit)...........     (6,759)          20,590            (30,456)          (16,625)
                                                       --------          -------           --------          --------

Total liabilities and stockholders' equity (deficit)   $169,005          $48,432           $(45,380)         $172,057
                                                       ========          =======           ========          ========
</TABLE>

                                       10
<PAGE>

11.  Guarantor Subsidiaries (Continued)

         SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                     SIX FISCAL MONTHS ENDED JUNE 29, 2001
                                (In thousands)

<TABLE>
<CAPTION>
                                                    Parent       Guarantor
                                                    Company     Subsidiaries     Eliminations     Consolidated
                                                    -------     ------------     ------------     ------------
<S>                                                 <C>         <C>              <C>              <C>
Sales..........................................     $92,079       $27,986           $(9,598)        $110,467
Cost of sales..................................      72,241        21,687            (9,869)          84,059
                                                    -------       -------           -------         --------
  Gross profit.................................      19,838         6,299               271           26,408
Selling, general and administrative expenses...      13,762         6,654                --           20,416
                                                    -------       -------           -------         --------
  Operating income (loss)......................       6,076          (355)              271            5,992
Interest expense...............................      (7,131)         (220)               --           (7,351)
Other income (expense).........................        (131)          162                --               31
                                                    -------       -------           -------         --------
Loss before income taxes.......................      (1,186)         (413)              271           (1,328)
Provision (benefit) for income taxes...........          27          (118)               --              (91)
                                                    -------       -------           -------         --------
Loss before equity in income of
   Consolidated subsidiaries...................      (1,213)         (295)              271           (1,237)
Equity in loss of consolidated subsidiaries....        (295)           --               295               --
                                                    -------       -------           -------         --------
Net loss.......................................     $(1,508)      $  (295)          $   566         $ (1,237)
                                                    =======       =======           =======         ========
</TABLE>


                                       11
<PAGE>

11.  Guarantor Subsidiaries (Continued)

          SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                     SIX FISCAL MONTHS ENDED JUNE 29, 2001
                                (In thousands)

<TABLE>
<CAPTION>
                                                        Parent        Guarantor
                                                        Company     Subsidiaries    Eliminations     Consolidated
                                                        -------     ------------    ------------     ------------
<S>                                                     <C>         <C>             <C>              <C>
Cash flows used in operating activities............     $(7,771)      $   (38)      $         --       $(7,809)
                                                        -------       -------       ------------       -------
Cash flows from investing activities:
   Capital expenditures and proceeds from sales
   of fixed assets.................................      (3,627)          264                 --        (3,363)
   Other...........................................        (368)          236                 --          (132)
                                                        -------       -------       ------------       -------
   Net cash provided by (used in) investing
   Activities......................................      (3,995)          500                 --        (3,495)
                                                        -------       -------       ------------       -------
Cash flows from financing activities:
   Net borrowings on debt..........................      13,471           317                 --        13,788
   Other...........................................      (1,525)         (153)                --        (1,678)
                                                        -------       -------       ------------       -------
   Net cash provided by financing
   Activities......................................      11,946           164                 --        12,110
                                                        -------       -------       ------------       -------
Effect of exchange rate changes on cash............          --          (262)                --          (262)
Change in cash and cash equivalents................         180           364                 --           544
Cash and cash equivalents, beginning of period.....          20         2,659                 --         2,679
                                                        -------       -------       ------------       -------
Cash and cash equivalents, end of period...........     $   200       $ 3,023                 --       $ 3,223
                                                        =======       =======       ============       =======
</TABLE>

                                      12
<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.

     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 net sales. In the first half of 2001 and 2000, the Company's
international sales accounted for 30% and 32% of net 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 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.

                                       13
<PAGE>

Results of Operations

Three Months Ended June 29, 2001 Compared to Three Months Ended June 30, 2000

     Net sales decreased 0.8% or $0.6 million to $65.5 million in the second
quarter of 2001 compared to $66.1 million in the second quarter of 2000. This
decrease was driven by a weaker domestic and Brazilian poultry market, as well
as reduced grain storage demand in U.S. markets.

     Gross profit increased to $15.2 million in the second quarter of 2001 or
23.1% of net sales from $15.1 million or 22.9% of net sales in the same period
of 2000. This increase was a result of decreased product costs.

     Operating expenses increased 8.2% or $0.8 million to $10.2 million in the
second quarter of 2001 from $9.4 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 anticipated to occur during the
third quarter of 2001. These integration costs included the establishment of a
FFI sales office and sales force in Indianapolis.

     Operating income decreased 12.5% to $5.0 million in the second quarter of
2001 from $5.7 million in the second quarter of 2000. This decrease was
attributable to the decrease in sales and an increase in operating expenses.

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

     Net income decreased $0.8 million to income of $1.1 million for the second
quarter of 2001 from $1.9 million in the same period of 2000.



Six Months Ended June 29, 2001 Compared to Six Months Ended June 30, 2000

     Net sales decreased 4.0% or $4.6 million to $110.5 million in the first
half of 2001 compared to $115.1 million in the first half of 2000. This decrease
was 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
in the U.S. during the first half of 2001.

     Gross profit increased to $26.4 million in the first half of 2001 or 23.9%
of net sales from $25.4 million or 22.1% of net sales in the same period of
2000. This increase was a result of decreased product costs.

     Operating expenses increased 10.3% or $1.9 million to $20.4 million in the
first half of 2001 from $18.5 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 anticipated to occur during the third
quarter of 2001. These integration costs included the establishment of a FFI
sales office and sales force in Indianapolis.

     Operating income decreased 13.5% to $6.0 million in the first half of 2001
from $6.9 million in the first half 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 half of 2001 as
compared to the first half of 2000.

     Net loss increased $1.0 million to a loss of $1.2 million for the first
half of 2001 from a loss of $0.2 million in the same period of 2000.


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.

                                       14
<PAGE>

     As of June 29, 2001, the Company had $64.2 million of working capital, an
increase of $14.4 million from working capital as of December 31, 2000. The
increase in working capital was primarily due to increases in inventory and
accounts receivable, partially offset by an increase in accounts payable.

     Operating activities used $7.8 million and $7.9 million in cash flow in the
first half of 2001 and 2000, respectively. This $0.1 million decrease in cash
used was primarily the result of a decrease in accounts receivable and
inventory, and an increase in accounts payable, compared to the first half of
2000.

     Investing activities used $3.5 million and $4.3 million in cash flow in the
first half of 2001 and 2000, respectively. The cash was used primarily for
machinery and equipment purchases. The $0.8 million decrease in cash used in
investing activities was a result of a decrease in the amount of equipment
purchased in the first half of 2001 compared to the first half of 2000.

     Financing activities provided $12.1 million and $12.0 million in cash flow
in the first half 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. In
particular, the Company's statement concerning anticipated sales volume
resulting from the FFI acquisition is a forward-looking statement and actual
results could differ materially from such statement due to the Company's failure
to realize anticipated benefits from the acquisition or adverse economic
developments.

                                       15
<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 June 29, 2001,
principal exposed to interest rate risk was limited to $48.8 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 $0.5 million impact
on the Company's results of operations.

     At June 29, 2001, approximately 15% 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.

                                       16
<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:

     The GSI Group, Inc. did not file any Current Reports on Form 8-K during its
fiscal quarter ended June 29, 2001.

                                       17
<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:  August 3, 2001

                                       18
<PAGE>

                               INDEX TO EXHIBITS
<TABLE>
<CAPTION>
 Exhibit
   No.                                          Document Description
--------    ---------------------------------------------------------------------------------------------
<S>         <C>
   3.1      By-Laws of The GSI Group, Inc., as amended.

   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.

   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.

   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.

   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.
</TABLE>
____________

                                       19