<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, 2003
                               ------------------------------------------------

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

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

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

            Delaware                                              22-2689245
---------------------------------                            ------------------

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


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

                                 (203)736-5500
                              -------------------
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

Yes  X    No
   ------   -------

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes      No X
                                               ------  ------

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of

common stock, as of the latest practicable date.

                  CLASS                           OUTSTANDING AT AUGUST 1, 2003
-------------------------------------------------------------------------------
Common Stock (Voting), $.01 par value                                 5,235,128
                                                                      ---------



<PAGE>

<TABLE>
<CAPTION>
                                          FARREL CORPORATION


                                                 INDEX

                                                                                           PAGE

Part I.  FINANCIAL INFORMATION
<S>                                                                                          <C>
         Item 1. Financial Statements

                  Consolidated Balance Sheets -
                  June 29, 2003 and December 31, 2002                                         3

                  Consolidated Statements of Operations -
                  Three and six months ended June 29, 2003
                  and June 30, 2002                                                           4

                  Consolidated Statements of Cash Flows -
                  Six months ended June 29, 2003
                  and June 30, 2002                                                           5

                  Notes to Consolidated Financial Statements                                  6

         Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                                        11

         Item 3 - Quantitative and Qualitative Disclosures About Market Risk                 17

         Item 4 - Controls and Procedures                                                    17

Part II. OTHER INFORMATION                                                                   18

          Signatures                                                                         19

          Exhibits -

          Exhibit 11 - Statement re computation of per share earnings

          Exhibit 31.1 Certification pursuant to section 10A of the Securities
                       and Exchange Act of 1934, as adopted pursuant to section
                       302 of the Sarbanes-Oxley Act of 2002.                                Attached

          Exhibit 31.2 Certification pursuant to section 10A of the Securities
                       and Exchange Act of 1934, as adopted pursuant to section
                       302 of the Sarbanes-Oxley Act of 2002.                                Attached

          Exhibit 32.1 Certification pursuant to 18 U.S.C. Section 1350, as
                       adopted pursuant to section 906 of the Sarbanes-Oxley Act
                       of 2002                                                               Attached

          Exhibit 32.2 Certification pursuant to 18 U.S.C. Section 1350, as
                       adopted pursuant to section 906 of the Sarbanes-Oxley Act
                       of 2002                                                               Attached

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

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


                                                                       June 29,             December 31,
                                                                         2003                   2002
                                                                         ----                   ----
ASSETS                                                                 (Unaudited)
<S>                                                                        <C>                  <C>
    Current Assets:
          Cash and cash equivalents                                         $6,403               $5,863
          Accounts receivable, net of allowance for
             doubtful accounts of  $88 and $96, respectively                 8,285               10,848
          Inventory                                                         11,449               10,631
          Deferred income taxes                                                538                  538
          Other current assets                                               1,131                1,170
                                                                    ---------------      ---------------
                        Total current assets                                27,806               29,050
          Property, plant and equipment - net of accumulated
             depreciation of  $17,896 and $17,034, respectively              6,646                7,166
          Deferred income taxes                                              1,357                1,339
          Other assets                                                         431                  373
                                                                    ---------------      ---------------
    Total Assets                                                           $36,240              $37,928
                                                                    ===============      ===============
LIABILITIES & STOCKHOLDERS' EQUITY
    Current Liabilities:
          Accounts payable                                                  $4,510               $4,009
          Accrued expenses & taxes payable                                   1,242                2,309
          Advances from customers                                            4,070                4,102
          Accrued warranty costs                                               879                  842
          Current portion of long - term debt                                  770                  752
                                                                    ---------------      ---------------
                         Total current liabilities                          11,471               12,014
    Long-term debt                                                             ---                  375
    Post-retirement benefit obligation                                       1,048                1,055
    Minimum pension liability                                               10,602                9,961
    Commitments and contingencies                                              ---                  ---
                                                                    ---------------      ---------------
                         Total Liabilities                                  23,121               23,405
                                                                    ---------------      ---------------
    Stockholders' Equity:
          Preferred stock, par value $100, 1,000,000
               shares authorized, no shares issued                             ---                  ---
          Common stock, par value $.01,
               10,000,000 shares authorized,
               6,142,106 shares issued                                          61                   61
          Paid in capital                                                   19,295               19,295
          Treasury stock, 906,978 and 913,645 shares, respectively         (2,490)              (2,530)
          Retained earnings                                                  8,474                9,879
          Accumulated other comprehensive loss                            (12,221)             (12,182)
                                                                    ---------------      ---------------
                         Total Stockholders' Equity                         13,119               14,523
                                                                    ---------------      ---------------
    Total Liabilities and Stockholders' Equity                             $36,240              $37,928
                                                                    ===============      ===============

                         See Accompanying Notes to Consolidated Financial Statements

                                                                                                       3
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

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

                                                 Three Months Ended                           Six Months Ended
                                                 ------------------                           ----------------
                                            June 29,             June 30,               June 29,            June 30,
                                             2003                 2002                   2003                2002
                                             ----                 ----                   ----                ----
                                                     (Unaudited)                                (Unaudited)
<S>                                           <C>                   <C>                <C>                  <C>
Net sales                                       $14,182                $9,175            $23,881              $17,020

Cost of sales                                    10,555                 6,957             18,464               12,950
                                          --------------     -----------------    ---------------     ----------------

Gross margin                                      3,627                 2,218              5,417                4,070

Operating expenses:

    Selling                                       1,243                 1,000              2,401                1,968

    General and administrative                    1,916                 1,669              3,888                3,561

    Research and development                        256                   281                503                  530
                                          --------------     -----------------    ---------------     ----------------

Total operating expenses                          3,415                 2,950              6,792                6,059
                                          --------------     -----------------    ---------------     ----------------

Operating income (loss)                             212                 (732)            (1,375)              (1,989)

Interest income                                      16                    30                 31                   56

Interest expense, including                        (30)                  (49)               (63)                 (85)
amortization of deferred credit
facility costs

Other income (expense), net                         217                    36                132                  217
                                          --------------     -----------------    ---------------     ----------------

Income (loss) before income taxes                   415                 (715)            (1,275)              (1,801)

Provision (benefit) for income taxes                275                 (248)              (166)                (574)
                                          --------------     -----------------    ---------------     ----------------

Net income (loss)                                  $140                $(467)           $(1,109)             $(1,227)
                                          ==============     =================    ===============     ================

Per share data:

Basic and Diluted earnings (loss) per
  common share                                    $0.03               $(0.09)            $(0.21)              $(0.23)
                                          ==============     =================    ===============     ================
Average shares outstanding:
  Basic                                       5,232,930             5,228,461          5,230,708            5,228,461
                                          ==============     =================    ===============     ================
  Diluted                                     5,258,946             5,228,461          5,230,708            5,228,461
                                          ==============     =================    ===============     ================
  Dividends per share                             $0.05                 $0.04              $0.05                $0.04
                                          ==============     =================    ===============     ================

                              See Accompanying Notes to Consolidated Financial Statements
                                                                                                                     4

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                                FARREL CORPORATION
                                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (In thousands)
                                                                                           SIX MONTHS ENDED
                                                                                   June 29,                 June 30,
                                                                                    2003                      2002
                                                                                 (Unaudited)               (Unaudited)
Cash flows from operating activities:
<S>                                                                                      <C>                    <C>
  Net loss                                                                               $(1,109)               $(1,227)
  Adjustments to reconcile net loss to
  net cash provided by (used in) operating activities:
    Depreciation                                                                              661                    736
    Amortization                                                                               53                     59
    (Gain) on sale of property, plant and equipment                                         (167)                    ---
    Decrease in accounts receivable                                                         2,642                  3,420
    Decrease in other current assets                                                           57                     16
    (Increase) in inventory                                                                 (418)                (2,499)
    Decrease in prepaid pension costs                                                         413                    104
    Increase (decrease) in accounts payable                                                   430                  (592)
    (Decrease) increase in customer advances                                                (487)                  3,511
    (Decrease) in accrued expenses & taxes                                                (1,070)                  (694)
    Increase (decrease)  in accrued warranty costs                                             30                   (78)
    (Decrease) in post retirement benefit obligation                                          (7)                   (12)
    Other                                                                                      18                      4
                                                                              -------------------      -----------------
    Total adjustments                                                                       2,155                  3,975
                                                                              -------------------      -----------------
    Net cash provided by operating activities                                               1,046                 2,748
                                                                              -------------------      -----------------
Cash flows from investing activities:
    Proceeds from the sale of property, plant and equipment                                   172                    ---
    Purchases of property, plant and equipment                                               (55)                   (61)
                                                                              -------------------      -----------------
    Net cash provided by (used in) investing activities                                       117                   (61)
                                                                              -------------------      -----------------
Cash flows from financing activities:
    Sale of common stock via stock option exercise                                              5                    ---
    Dividends paid                                                                          (261)                  (209)
    Repayment of long-term borrowings                                                       (374)                  (280)
                                                                              -------------------      -----------------
    Net cash (used in) financing activities                                                 (630)                  (489)
                                                                              -------------------      -----------------
Effect of foreign currency exchange rate changes on cash                                        7                   (36)
                                                                              -------------------      -----------------
Net increase in cash and cash equivalents                                                     540                  2,162
    Cash and cash equivalents - Beginning of period                                         5,863                  5,579
                                                                              -------------------      -----------------
    Cash and cash equivalents - End of period                                              $6,403                 $7,741
                                                                              ===================      =================
Income taxes paid                                                                             $13                    $40
                                                                              ===================      =================
Interest paid                                                                                 $14                    $53
                                                                              ===================      =================
                               See Accompanying Notes to Consolidated Financial Statements
                                                                                                                       5

</TABLE>

<PAGE>

                               FARREL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

     In the opinion of management, the accompanying unaudited consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of regulation S-X. Accordingly, they do
not include all of the information and footnotes required by accounting
principles generally accepted in the U.S. for complete financial statements. In
the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly in accordance with accounting
principles generally accepted in the U.S., the consolidated financial position
of Farrel Corporation ("Farrel" or "the Company") as of June 29, 2003, and the
consolidated results of its operations and its cash flows for the three and/or
six month periods ended June 29, 2003 and June 30, 2002. These results are not
necessarily indicative of results to be expected for the full fiscal year. These
statements should be read in conjunction with the financial statements and notes
thereto, included in the Company's Annual Report and Form 10-K for the year
ended December 31, 2002.

NOTE 2 - STOCK OPTIONS

     The Company accounts for stock options under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and not
the fair value method as provided by Statement of Financial Accounting Standard
No. 123 ("Statement No. 123"), Accounting and Disclosure of Stock-Based
Compensation. The Company's Stock Option Plan requires options to be granted at
the market price of the Company's common stock on the date the options are
granted, and as a result, under APB 25 no compensation expense is recognized.
Pro forma information regarding net income (loss) and earnings (loss) per share
is required by Statement No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of
Statement No. 123. The fair value for these options was estimated at the date of
grant using the Black-Scholes option pricing model, one of the allowable
valuation models under Statement No. 123. For purposes of pro forma disclosures,
the estimated fair value of the options is amortized to expense over the options
vesting period. The current pro forma net loss will not necessarily be
representative of pro forma net income (loss) in future years.

         The Company's pro forma information is as follows:
<TABLE>
<CAPTION>

                                                        Three Months Ended             Six Months Ended
<S>                                                     <C>          <C>           <C>           <C>
                                                       June 29,       June 30,       June 29,     June 30,
                                                        2003           2002           2003         2002
                                                        ----           ----           ----         ----
                                                               (In thousands, except per share data)

   Net income (loss)                                    $140         $(467)        $(1,109)     $(1,227)
   Effect of stock options, net of taxes                 (4)            (4)             (8)          (7)
                                                          --            ---             ---          ---
   Pro forma net income (loss)                         $ 136         $(471)        $(1,117)     $(1,234)
                                                       =====        =======        ========     ========
   Pro forma income (loss) per share -
        basic and diluted                              $0.03        $(0.09)         $(0.21)      $(0.24)
                                                       =====        =======         =======      =======

</TABLE>

                                                                               6

<PAGE>

NOTE 3 - INVENTORY

         Inventory is comprised of the following:
<TABLE>
<CAPTION>

                                                        June 29,        December 31,
                                                          2003               2002
                                                          ----               ----
                                                              (In thousands)
<S>                                                      <C>               <C>
         Stock and raw materials.....................    $5,891            $6,733
         Work-in process.............................     5,558             3,898
                                                          -----             -----
         Total.......................................   $11,449           $10,631
                                                        =======           =======
</TABLE>

NOTE 4 - COMPREHENSIVE INCOME (LOSS)

The components of other comprehensive income (loss) are as follows:
<TABLE>
<CAPTION>

                                                        Three Months Ended             Six Months Ended
                                                       June 29,       June 30,       June 29,     June 30,
                                                        2003           2002            2003         2002
                                                        ----           ----            ----         ----
                                                                          (In thousands)

<S>                                                     <C>          <C>            <C>          <C>
         Net income (loss)                              $140         $(467)         $(1,109)     $(1,227)
         Foreign currency translation adjustments        436            633              224         430
                                                         ---            ---              ---     -------
         Other comprehensive income (loss)              $576           $166           $(885)      $(797)
                                                        ====           ====           ======      ======

</TABLE>

         Accumulated other comprehensive income (loss) consists of the
following:
<TABLE>
<CAPTION>

                                                                           June 29,       December 31,
                                                                            2003               2002
                                                                            ----               ----
                                                                                (In thousands)
<S>                                                                         <C>               <C>
         Foreign currency translation adjustments....                       $(243)            $(467)
         Minimum pension liability...................                     (11,978)          (11,715)
                                                                          --------          --------
         Accumulated other comprehensive loss........                    $(12,221)         $(12,182)
                                                                         =========         =========
</TABLE>

NOTE 5 - SEGMENT INFORMATION

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

NOTE 6 - IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In June 2001, the Financial Accounting Standards Board issued Statements
No. 142 (Goodwill and Other Intangible Assets) and No. 143 (Accounting for Asset
Retirement Obligations). Statement No. 142 was adopted by the Company in January
2002 and Statement No. 143 was adopted by the Company in January 2003. Statement
No. 142 changes the accounting for other intangible assets, such that those
assets whose life is determined to be indefinite are not subject to
amortization. These assets and goodwill shall be tested for impairment at least
annually, and the value will need to be written down if the fair value is less
than the carrying value. Statement No. 143 requires that a liability must be
recognized for an asset retirement obligation related to long lived tangible
assets. The liability shall be recorded at fair value. The adoption of
Statements No. 142 and 143 did not have a significant effect on the Company's
financial position or results of operations.

     In August 2001, the Financial Accounting Standards Board issued Statement
No. 144 (Accounting for the Impairment or Disposals of Long-lived Assets).
Statement No. 144 was adopted by the Company in January 2002. This statement
requires an impairment loss to be recognized if the carrying value of a
long-lived asset (asset group) is not recoverable and exceeds its fair value.
Long-lived

                                                                               7

<PAGE>

assets (asset group) shall be tested for impairment whenever events
or changes in circumstances indicate that its carrying amount may not be
recoverable. The adoption of this statement did not have a significant effect on
the Company's financial position or results of operations.

     In December 2002, the Financial Accounting Standards Board issued Statement
No. 148 (Accounting for Stock-Based Compensation - Transition and Disclosures).
Statement No. 148 amends the accounting for stock-based compensation by
providing alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. In
addition, Statement No. 148 amends the disclosure requirements to require
prominent disclosures in both annual and interim financial statements of the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The Company adopted Statement 148 in December
2002. The Company does not anticipate changing to the fair value based method of
accounting for stock-based compensation; therefore, the adoption only impacted
disclosures.

NOTE 7 - FOREIGN CURRENCY CONTRACTS

     The Company, from time to time, enters into foreign exchange contracts for
non-trading purposes, exclusively to minimize its exposure to currency
fluctuations on trade receivables, firm commitments and payables. As a result,
changes in the values of foreign currency contracts offset changes in the values
of the underlying assets and liabilities due to changes in foreign exchange
rates, effectively deferring cash gains and losses on trade receivables, firm
commitments and payables and the related hedges until the date the transactions
are settled in cash. The Company is exposed to loss in the event of
nonperformance by the Company's bank, the other party to the foreign exchange
contracts. The Company does not anticipate nonperformance by its bank.

     As of June 29, 2003, all of the Company's then existing foreign exchange
forward contracts were designated as fair value hedges. As such, there were no
charges to the statement of operations related to these contracts. At June 29,
2003, the net difference between the spot rate and the contract rate for the
foreign exchange forwards was an unrealized loss of approximately $21,000. At
June 29, 2003 the Company is committed to provide 933,000 EURO's in exchange for
British Pound Sterling under forward contracts expiring thru March 2004.

NOTE 8 - BANK CREDIT ARRANGEMENTS

     The Company has a worldwide multi-currency credit facility, as amended,
with a major U.S. bank, which includes a $10 million revolving credit facility
for direct borrowings and letters of credit. The facility contains a sub-limit
that caps the amount of direct borrowings the Company can make at $5 million.
The facility contains limits on direct borrowings and issuances of letters of
credit based upon stipulated percentages of accounts receivable and inventory.
The revolving credit facility expires on June 15, 2004. Interest varies based
upon prevailing market interest rates. The revolving credit facility requires
payment to the bank of a fee equal to 0.375% per annum of the average daily
unused principal under the facility.

     This credit facility also includes a term loan which the Company borrowed
in June 2001. The term loan is repayable in monthly principle installments of
(pound)38,888 (approximately $64,000) through June 2004. The term loan has an
interest rate of LIBOR plus 2.7% (3.8% at June 29, 2003). The proceeds of this
term loan were used to repay an existing term loan. At June 29, 2003, there was
$770,000 outstanding under the term loan.

     The credit facility contains certain restrictions on investments,
borrowings and sale of assets. Dividend declarations or payments are allowed
under this credit facility as long as there exists under the credit facility no
Event of Default (as defined in the credit facility) or no condition which upon
given notice or lapse of time or both, would become an Event of Default. The
credit facility, as amended on March 25, 2003, contains covenants specifying
minimum and/or maximum thresholds for operating results, selected financial
ratios and backlog. The backlog covenant requires that end of month backlog will
not be less than $20 million for more than two consecutive months. The Company
did not achieve the backlog covenant as of the end of January and February 2002;
however, the bank waived the non-compliance. The Company's ability to meet the
credit facility's covenants in the future may be affected by events beyond its
control, including prevailing economic, financial and market conditions and
there can be no assurance that the Company will achieve the required thresholds
in the future.

                                                                               8

<PAGE>

     In addition to the term loan outstanding under the credit facility, the
facility is primarily utilized for the issuance of letters of credit. The
letters of credit are issued primarily in connection with bids on foreign orders
and to back up the Company's obligations under certain foreign orders for which
it receives customer progress payments. The Company has approximately $2.7
million of letters of credit posted under its credit facility on June 29, 2003.

     The current credit facility expires on June 15, 2004. Management
anticipates that it will be able to obtain an extension of the existing facility
or an adequate replacement credit facility upon the expiration of the current
bank credit facility; however, there is no assurance that an extension or
adequate replacement facility will be obtained. Assuming the Company, upon the
current facility's expiration, is able to obtain a new credit facility which
provides letter of credit and borrowing availability comparable to the current
facility, management anticipates that the Company's cash balances, operating
cash flows and such new credit facility would be adequate to fund anticipated
capital commitments and working capital requirements for at least the next
twelve months.

     Should the Company not be able to extend its current facility upon its
expiration, the Company would be required on June 15, 2004, to repay any
borrowings then outstanding and to replace or secure with cash any then
outstanding letters of credit. As of June 29, 2003, the Company had $6.4 million
of cash, a term loan of $770,000 and issuances of letters of credit of $2.7
million. Due to many factors, including prevailing economic, financial and
market conditions, the Company cannot predict with certainty that it would have
adequate liquidity without a credit facility. Thus, without a credit facility
the possibility exists that the Company could have a shortage of working capital
which could be material and could have a material adverse effect on the
Company's ability to continue as a going concern.

NOTE 9 - WARRANTY OBLIGATIONS AND CONTINGENCIES

(a) Warranty Obligations:

     Equipment sold is generally covered by a warranty of one to three years.
The Company's estimate of costs to service its warranty obligations is based on
historical experience and expectations of future conditions. To the extent the
Company experiences increased warranty claim activity, or increased costs in
servicing those claims, its warranty accrual will increase, resulting in
decreased gross profit.

         The change in the warranty reserve was as follows:
<TABLE>
<CAPTION>

                                                           Three Months Ended          Six Months Ended
                                                            June 29,   June 30,       June 29,  June 30,
                                                              2003      2002            2003      2002
                                                              ----      ----            ----      ----
                                                                           (In thousands)
<S>                                                           <C>        <C>            <C>     <C>
         Warranty reserve, beginning of period.......         $794       $956           $842    $1,004
         Charges to costs & expenses.................          213        123            346       227
         Foreign currency translation adjustment.....           16         23              9        16
         Deductions for actual expenditures..........        (144)      (159)          (318)     (304)
                                                             -----      -----          -----     -----
         Warranty reserve, end of period.............         $879       $943           $879      $943
                                                             =====      =====          =====     =====
</TABLE>

(b) Contingencies:

     The Company is a defendant in certain lawsuits arising in the ordinary
course of business, primarily related to product liability claims involving
machinery manufactured by the Company or its predecessors. While the outcome of
lawsuits or other proceedings against the Company cannot be predicted with
certainty, the Company does not expect that these matters will have a material
adverse effect on the Company's financial position or results of operations.

NOTE 10 - INCOME TAXES

     The Company provides for income taxes at the statutory rates in effect in
each tax jurisdiction in which income is earned or losses are generated,
adjusted for permanent differences in determining

                                                                               9

<PAGE>

income for financial reporting and income tax purposes. The effective
income tax rate was 66% for the three month period ended June 29, 2003, compared
to an effective income tax benefit rate of 35% for the three month period ended
June 30, 2002. The effective income tax benefit rate was 13% for the six month
period ended June 29, 2003, compared to 32% for the six month period ended June
30, 2002. The effective tax rate varies among periods due to the change in the
proportion and amount of income and losses generated in different tax
jurisdictions. In addition, $233,000 of deferred tax benefits (of which $117,000
relates to the quarter ended June 29, 2003) in the six month period ended June
29, 2003 related to the Company's U.K. operations have not been recognized since
these deferred tax benefits have been deemed not to meet the accounting
requirements for realization as an asset.


NOTE 11 - RECLASSIFICATIONS

     Certain amounts in prior year financial statements have been reclassified
to conform with the current year presentation.












                                                                              10

<PAGE>

PART I - ITEM 2 -

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION & RESULTS OF OPERATIONS

SAFE HARBOR STATEMENTS UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

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

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 29, 2003 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2002

     Net sales for the six month period ended June 29, 2003, were $23.9 million
compared to $17.0 million for the six month period ended June 30, 2002, an
increase of $6.9 million. The increase is primarily a result of higher sales of
new machines. The timing of the Company's sales, particularly new machines
sales, is highly dependent on when an order is received, the amount of lead time
from receipt of order to delivery and specific customer requirements. The
Company operates in markets that are extremely competitive with cyclical demand.
Many of the Company's customers and markets operate at less than full capacity
and certain remain particularly competitive and are subject to local economic
events.

     Orders received for the six month period ended June 29, 2003, were $25.6
million compared to $29.4 million for the six month period ended June 30, 2002.

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

     The level of backlog considered firm by management at June 29, 2003, was
$23.4 million compared to $21.3 million at December 31, 2002, and $31.3 million
at June 30, 2002. Backlog at June 29, 2003 is 25% less than backlog at June 30,
2002. Substantially all the backlog as of June 29, 2003, is scheduled to be
shipped within the next 12 months. Such shipments are subject to various
factors, such as customer requests for changes or manufacturing delays, which
could result in shipments being delayed.

                                                                              11

<PAGE>

     Gross margin for the six month period ended June 29, 2003, was $5.4 million
compared to $4.1 million for the six month period ended June 30, 2002, an
increase of $1.3 million. The increase in gross margin is a result of higher
sales. The gross margin as a percent of sales for the six month period ended
June 29, 2003, was 22.7% compared to 23.9% for the six month period ended June
30, 2002. This decline is due lower margins generated on sales of new machines
offset somewhat by increased margins on repair and spare part sales. The Company
has a varied portfolio of products that tend to have different ranges of profit
margins. As a result, sales mix can make the gross margin as a percent of sales
vary between periods. In addition, competitive conditions that exist at the time
a customer order is received impacts the margin earned by the Company.

     Operating expenses for the six month period ended June 29, 2003, were $6.8
million compared to $6.1 million for the six month period ended June 30, 2002,
an increase of $0.7 million. This amount includes increased (i) selling expenses
of approximately $0.4 million primarily due to higher employee compensation and
related expenses and trade show expenses, and (ii) administrative expenses of
$0.3 million primarily due to higher pension costs.

     Interest income for the six month period ended June 29, 2003, was $31,000
compared to $56,000 for the six month period ended June 30, 2002.

     Interest expense for the six month period ended June 29, 2003, was $63,000
compared to $85,000 for the six months ended June 30, 2002.

     Other income (expense), net for the six month period ended June 30, 2003,
was income of $132,000 compared to income of $217,000 for the six month period
ended June 30, 2002. Other income for the period ended June 29, 2003 includes a
gain on the sale of property of $167,000. Other income for the period ended June
30, 2002 includes approximately $167,000 received by the Company as a result of
the demutualization of an insurance provider used by the Company.

     The Company provides for income taxes at the statutory rates in effect in
each tax jurisdiction in which income is earned or losses are generated,
adjusted for permanent differences in determining income for financial reporting
and income tax purposes. The effective income tax benefit rate was 13% for the
six month period ended June 29, 2003, compared to 32% for the six month period
ended June 30, 2002. The effective tax rate varies among periods due to the
change in the proportion and amount of income and losses generated in different
tax jurisdictions. In addition, $233,000 of deferred tax benefits in the six
month period ended June 29, 2003 related to the Company's U.K. operations have
not been recognized since these deferred tax benefits have been deemed not to
meet the accounting requirements for realization as an asset.

                        THREE MONTHS ENDED JUNE 29, 2003
                COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2002

     Net sales for the three months ended June 29, 2003, were $14.2 million
compared to $9.2 million for the three month period ended June 30, 2002, an
increase of $5.0 million. The increase is primarily a result of higher sales of
new machines.

     Orders received for the three month period ended June 29, 2003, were $13.0
million compared to $15.2 million for the three month period ended June 30,
2002.

     The Company's sales, orders and backlog levels varied when comparing the
two quarters due to market conditions and the nature of the industry in which
the Company operates as more fully discussed in the results of operations for
the six month period on page 11.

     Gross margin for the three month period ended June 29, 2003, was $3.6
million compared to $2.2 million for the three month period ended June 30, 2002,
an increase of $1.4 million. The increase in gross margin is a result of higher
sales. The gross margin as a percent of sales for the three month period ended
June 29, 2003, was 25.6% compared to 24.2% for the three month period ended June
30, 2002. The increase in the gross margin as a percent of sales is primarily
due to higher margins generated on sales of new machines. The Company has a
varied portfolio of products that tend to have different ranges of profit
margins. As a result, sales mix can make the gross margin as a percent of sales
vary

                                                                              12

<PAGE>

between periods. In addition, competitive conditions that exist at the time
a customer order is received impacts the margin earned by the Company.

     Operating expenses for the three month period ended June 29, 2003, were
$3.4 million compared to $3.0 million for the three month period ended June 30,
2002, an increase of $0.4. This amount includes increased (i) selling expenses
of approximately $0.2 million primarily due to higher employee compensation and
related expenses and trade show expenses, and (ii) administrative expenses of
$0.2 million primarily due to higher pension costs.

     Interest income for the three month period ended June 29, 2003, was $16,000
compared to $30,000 for the three month period ended June 30, 2002, a decrease
of $14,000.

     Interest expense for the three month periods ended June 29, 2003, was
$30,000 compared to $49,000 for the three month period ended June 30, 2002, a
decrease of $19,000.

     Other income, net for the three month period ended June 29, 2003, was
$217,000 compared to other income of $36,000 for the three month period ended
June 30, 2002. Other income for the period ended June 29, 2003 includes a gain
on the sale of property of $167,000.

     The Company provides for income taxes at the statutory rates in effect in
each tax jurisdiction in which income is earned or losses are generated,
adjusted for permanent differences in determining income for financial reporting
and income tax purposes. The effective income tax rate was 66% for the three
month period ended June 29, 2003, compared to an effective income tax benefit
rate of 35% for the three month period ended June 30, 2002. The effective tax
rate varies among periods due to the change in the proportion and amount of
income and losses generated in different tax jurisdictions. In addition,
$117,000 of deferred tax benefits in the three month period ended June 29, 2003
related to the Company's U.K. operations have not been recognized since these
deferred tax benefits have been deemed not to meet the accounting requirements
for realization as an asset.

MATERIAL CONTINGENCIES

     Pursuant to a settlement agreement entered into in 1995 between the Company
and Black & Decker Corporation ("Black & Decker"), Black & Decker agreed to
assume full responsibility for the investigation and remediation of any pre-May
12, 1986 environmental contamination at the Company's Ansonia and former Derby,
Connecticut facilities, as required by the Connecticut Department of
Environmental Protection ("DEP"). Black & Decker has conducted a preliminary
environmental assessment of the facilities, has undertaken certain remedial
actions and has proposed certain additional remedial actions. On the basis of
the preliminary data now available there is no reason to believe that any
activities which might be required as a result of the findings of the assessment
will have a material effect upon the capital expenditures, results of
operations, financial position or the competitive position of the Company.

LIQUIDITY AND CAPITAL RESOURCES; CAPITAL EXPENDITURES

     Working capital and the working capital ratio at June 29, 2003 were $16.3
million and 2.4 to 1, respectively, compared to $17.0 million and 2.4 to 1 at
December 31, 2002, respectively. During the six months ended June 29, 2003, the
Company declared a dividend of $0.05 per share that was paid on April 25, 2003
to shareholders of record as of April 11, 2003.

     Due to the nature of the Company's business, many sales are of a large
dollar amount. Consequently, the timing of recording such sales may cause the
balances in accounts receivable and/or inventory to fluctuate dramatically
between quarters and may result in significant fluctuations in cash provided by
operations. Historically, the Company has not experienced significant problems
regarding the collection of accounts receivable. The Company also generally has
financed its operations with cash generated by operations, progress payments
from customers and borrowings under its bank credit facilities. The Company made
capital expenditures of $55,000 and $61,000 during the six month periods ended
June 29, 2003 and June 30, 2002, respectively.

                                                                              13

<PAGE>

     The Company has a worldwide multi-currency credit facility, as amended,
with a major U.S. bank, which includes a $10 million revolving credit facility
for direct borrowings and letters of credit. The facility contains a sub-limit
that caps the amount of direct borrowings the Company can make at $5 million.
The facility contains limits on direct borrowings and issuances of letters of
credit based upon stipulated percentages of accounts receivable and inventory.
The revolving credit facility expires on June 15, 2004. Interest varies based
upon prevailing market interest rates. The revolving credit facility requires
payment to the bank of a fee equal to 0.375% per annum of the average daily
unused principal under the facility.

     This credit facility also includes a term loan which the Company borrowed
in June 2001. The term loan is repayable in monthly principle installments of
(pound)38,888 (approximately $64,000) through June 2004. The term loan has an
interest rate of LIBOR plus 2.7% (3.8% at June 29, 2003). The proceeds of this
term loan were used to repay an existing term loan. At June 29, 2003, there was
$770,000 outstanding under the term loan.

     The credit facility contains certain restrictions on investments,
borrowings and sale of assets. Dividend declarations or payments are allowed
under this credit facility as long as there exists under the credit facility no
Event of Default (as defined in the credit facility) or no condition which upon
given notice or lapse of time or both, would become an Event of Default. The
credit facility, as amended on March 25, 2003, contains covenants specifying
minimum and/or maximum thresholds for operating results, selected financial
ratios and backlog. The backlog covenant requires that end of month backlog will
not be less than $20 million for more than two consecutive months. The Company
did not achieve the backlog covenant as of the end of January and February 2002;
however, the bank waived the non-compliance. The Company's ability to meet the
credit facility's covenants in the future may be affected by events beyond its
control, including prevailing economic, financial and market conditions and
there can be no assurance that the Company will achieve the required thresholds
in the future.

     In addition to the term loan outstanding under the credit facility, the
facility is primarily utilized for the issuance of letters of credit. The
letters of credit are issued primarily in connection with bids on foreign orders
and to back up the Company's obligations under certain foreign orders for which
it receives customer progress payments. The Company has approximately $2.7
million of letters of credit posted under its credit facility on June 29, 2003.

     The current credit facility expires on June 15, 2004. Management
anticipates that it will be able to obtain an extension of the existing facility
or an adequate replacement credit facility upon the expiration of the current
bank credit facility; however, there is no assurance that an extension or
adequate replacement facility will be obtained. Assuming the Company, upon the
current facilities expiration, is able to obtain a new credit facility which
provides letter of credit and borrowing availability comparable to the current
facility, management anticipates that the Company's cash balances, operating
cash flows and such new credit facility would be adequate to fund anticipated
capital commitments and working capital requirements for at least the next
twelve months.

     Should the Company not be able to extend its current facility upon its
expiration, the Company would be required on June 15, 2004, to repay any
borrowings then outstanding and to replace or secure with cash any then
outstanding letters of credit. As of June 29, 2003, the Company had $6.4 million
of cash, a term loan of $770,000 and issuances of letters of credit of $2.7
million. Due to many factors, including prevailing economic, financial and
market conditions, the Company cannot predict with certainty that it would have
adequate liquidity without a credit facility. Thus, without a credit facility
the possibility exists that the Company could have a shortage of working
capital, which could be material and could have a material adverse effect on the
Company's ability to continue as a going concern.

     In fiscal 2000, new minimum funding guidelines for pension plans became
effective in the U.K. which are significantly different than the prior
guidelines. Based upon the new guidelines the Company is required to make
significant cash contributions to the Company's U.K. pension plan. Prior to
2000, the Company was not required to make substantial contributions to the U.K.
pension plans. In fiscal 2002, 2001 and 2000, the Company contributed
approximately $723,000, $799,000 and $946,000, respectively, to the U.K. pension
plan.

     For the years ended December 31, 2002, 2001 and 2000, the assets of the
plan generated a negative return (lost value) of $2.2 million, $2.4 million and
$0.6 million, respectively. The majority of

                                                                              14

<PAGE>

2002 loss was incurred in June 2002 as a result of the decline in the stock
market. As described in the Financial Position section that follows, these
losses have contributed to a substantial reduction in the Company's
stockholders' equity. At June 29, 2003, total assets in the plan were
approximately $22 million, which significantly exceed the historical benefits
paid for the past few years. The trustees of the plan moved the plan assets out
of equities in July 2002. After reviewing the long-term investment strategy of
the plan, the trustees began investing a portion of the assets in equities in
May 2003. As of June 29, 2003, the assets of the plan consisted of corporate and
government bonds, equities and cash. In addition, in January 2002, the U.K.
subsidiary officially informed the plan trustees that effective the end of the
first quarter of 2002, the U.K. employees would no longer accrue additional
benefits under this pension plan for future service. Beginning in 2002, the U.K.
subsidiary, as required under U.K. law, offered a defined contribution plan to
its employees.

     In July 2002, the Company, the plan trustees and the plan's actuary began
discussing the appropriate means of ensuring the long term funding of the plan,
including among other things an assessment of the U.K. subsidiary's business
prospects and cash position, the securitization of the U.K. subsidiary's assets,
a parent company guarantee, increasing contributions to the plan, or other
assurances, in order to avoid a determination by the actuary that the trustees
should wind up the plan. Under the rules of the plan, the trustees are to wind
up the plan if they receive actuarial advice that the actual and expected
Company contributions are so low as to prejudice seriously the long-term
financial position of the plan. On a wind up basis the amount of underfunding of
the plan is computed differently than, and would be substantially greater than,
the amount reflected in the financial statements. Additionally, on a wind up
basis, the underfunding must be paid down within a short time period. In
February 2003, the Company, the plan trustees and the plan's actuary agreed upon
an increased contribution schedule which provides for the Company to contribute
(pound)50,600 (approximately $83,000) a month to the plan plus the costs of
administering the plan, which are estimated to be $100,000 annually. The
contribution schedule was based on an April 2002 actuarial computation and must
be reviewed for adequacy by the actuary at least annually or, if deemed
necessary by the actuary, on a more periodic basis.

FINANCIAL POSITION

     The Accumulated Other Comprehensive Loss section of stockholders' equity
reflects a cumulative charge of $12 million related to the Company's pension
plans. This cumulative charge was required in order to reflect a minimum pension
liability on the balance sheet for the pension plans. Of this amount, $11
million relates to the Company's U.K. pension plan. The U.K. plan experienced a
significant decline in the value of its assets during 2002 and 2001. In
addition, in December 2002, revised mortality tables were used in the
determination of the pension liability for accounting in order to reflect
updated mortality data. The change in the mortality tables along with the
declines in the value of the pension assets, were the primary reasons for the
cumulative charge to stockholders' equity for the U.K. plan.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

     In June 2001, the Financial Accounting Standards Board issued statements
No. 142 (Goodwill and Other Intangible Assets) and No. 143 (Accounting for Asset
Retirement Obligations). Statement No. 142 was adopted by the Company in January
2002 and statement No. 143 was adopted by the Company in January 2003. Statement
No. 142 changes the accounting for other intangible assets, such that those
assets whose life is determined to be indefinite are not subject to
amortization. These assets and goodwill shall be tested for impairment at least
annually, and the value will need to be written down if the fair value is less
than the carrying value. Statement No. 143 requires that a liability must be
recognized for an asset retirement obligation related to long lived tangible
assets. The liability shall be recorded at fair value. The adoption of
statements No. 142 and 143 did not have a significant effect on the Company's
financial position or results of operations.

         In August 2001, the Financial Accounting Standards Board issued
statement No. 144 (Accounting for the Impairment or Disposals of Long-lived
Assets). Statement No. 144 was adopted by the Company in January 2002. This
statement requires an impairment loss to be recognized if the carrying value of
a long-lived asset (asset group) is not recoverable and exceeds its fair value.
Long-lived assets (asset group) shall be tested for impairment whenever events
or changes in circumstances indicate that its

                                                                              15
<PAGE>

carrying amount may not be recoverable. The adoption of this statement did
not have a significant effect on the Company's financial position or results of
operations.

     In December 2002, the Financial Accounting Standards Board issued statement
No. 148 (Accounting for Stock-Based Compensation - Transition and Disclosures).
Statement No. 148 amends the accounting for stock-based compensation by
providing alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. In
addition, statement No. 148 amends the disclosure requirements to require
prominent disclosures in both annual and interim financial statements of the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The Company adopted statement No. 148 in
December 2002. The Company does not anticipate changing to the fair value based
method of accounting for stock-based compensation; therefore, the adoption only
impacted disclosures.















                                                                              16

<PAGE>

PART 1 - ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

PART 1 - ITEM 4 - CONTROLS AND PROCEDURES

     The Company's management, with the participation of the CEO and CFO, have
evaluated the effectiveness of the design and operation of the Company's
disclosure controls and procedures as of June 29, 2003. Based on that
evaluation, the Company's management, including the CEO and CFO, concluded that
the Company's disclosure controls and procedures were effective as of June 29,
2003. Additionally during the past quarter, there have been no changes in the
Company's internal controls over financial reporting that have materially
affected, or would be reasonably likely to materially affect, the Company's
internal control over financial reporting.





                                                                              17

<PAGE>

PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS                                                  None

ITEM 2 - CHANGES IN SECURITIES                                               N/A

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES                                     N/A

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                 N/A

     a)   Election of Directors:

          Glenn J Angiolillo: votes for 4,955,332, votes withheld 195,756
          Charles S Jones: votes for 4,862,663, votes withheld 288,425
          Alberto Shaio: votes for 4,951,467, votes withheld 199,621

     b)   Ratification of the selection of Ernst & Young LLP as independent
          accountants for the Company for the fiscal year ending December 31,
          2003:

          votes for 5,101,171, votes against 41,885, votes abstained 8,032

ITEM 5 - OTHER INFORMATION                                                   N/A

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

     a)   Exhibits:

<TABLE>

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

          Exhibit 31.1 Certification pursuant to section 10A of the Securities
                       and Exchange Act of 1934, as adopted pursuant to section
                       302 of the Sarbanes-Oxley Act of 2002.                                Attached

          Exhibit 31.2 Certification pursuant to section 10A of the Securities
                       and Exchange Act of 1934, as adopted pursuant to section
                       302 of the Sarbanes-Oxley Act of 2002.                                Attached

          Exhibit 32.1 Certification pursuant to 18 U.S.C. Section 1350, as
                       adopted pursuant to section 906 of the Sarbanes-Oxley Act
                       of 2002                                                               Attached

          Exhibit 32.2 Certification pursuant to 18 U.S.C. Section 1350, as
                       adopted pursuant to section 906 of the Sarbanes-Oxley Act
                       of 2002                                                               Attached

</TABLE>

     b)   Reports on Form 8-K:

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

                                                                              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.


                               FARREL CORPORATION
                               ------------------
                               REGISTRANT




DATE:          8/11/03                /s/Rolf K. Liebergesell
     ------------------------         ------------------------------------------
                                      ROLF K. LIEBERGESELL
                                      CHIEF EXECUTIVE OFFICER,
                                      PRESIDENT AND CHAIRMAN OF THE BOARD




DATE:          8/11/03                /s/Walter C. Lazarcheck
     -----------------------          ------------------------------------------
                                      WALTER C. LAZARCHECK
                                      VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
                                      (CHIEF ACCOUNTING OFFICER)








                                                                              19