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  October 1, 2000
                                --------------------------------------------

                                       OR

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

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

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

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

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

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

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


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

Yes  X      No
    ---        ---

                      APPLICABLE ONLY TO CORPORATE ISSUERS:
                      -------------------------------------


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

             CLASS                       OUTSTANDING AT NOVEMBER  10, 2000
--------------------------------------------------------------------------------

       Common Stock (Voting), $.01 par value                      5,250,061
                                                                  ---------



<PAGE>


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

                                      Index
                                      -----

                                                                         Page
                                                                         ----

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

              Consolidated Balance Sheets -
              October 1, 2000 and December 31, 1999.......................  3

              Consolidated Statements of Operations -
              Three and Nine months ended October 1, 2000
              and October 3, 1999.........................................  4

              Consolidated Statements of Cash Flows -
              Nine months ended October 1, 2000
              and October 3, 1999.........................................  5

              Notes to Consolidated Financial Statement...................  6

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



Part II.      Other Information........................................... 14

              Exhibit 11 - Computation of Earnings Per Share.............. 15




                                  Page 2 of 16
<PAGE>





                         Part I - Financial Information

                               FARREL CORPORATION
                               ------------------
                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------
                        (In thousands, except share data)
<TABLE>
<CAPTION>

                                                                   October 1,   December 31,
                                                                   ----------   ------------
                                                                      2000          1999
                                                                      ----          ----
ASSETS                                                            (Unaudited)
Current Assets:
   <S>                                                              <C>          <C>
   Cash and cash equivalents ...................................    $    958     $  6,069
   Accounts receivable, net of allowance for
      doubtful accounts of $163 and $185,
      respectively .............................................      11,119       15,027
   Inventory ...................................................      14,852       11,975
   Other current assets ........................................       1,000        1,374
                                                                    --------     --------
                 Total current assets ..........................      27,929       34,445
   Property, plant and equipment - net
      of accumulated depreciation of $13,809 and
      $13,186, respectively ....................................       9,575       10,995
   Prepaid pension costs .......................................       3,342        2,881
   Other assets ................................................         389          541
                                                                    --------     --------
      Total assets .............................................    $ 41,235     $ 48,862
                                                                    ========     ========
LIABILITIES & STOCKHOLDERS' EQUITY
   Current Liabilities:
      Accounts payable .........................................    $  5,118     $  7,837
      Accrued expenses & taxes .................................         974        2,157
      Advances from customers ..................................       5,267        4,015
      Accrued installation & warranty costs ....................       1,289        1,629
      Short - term debt ........................................       1,180        1,292
                                                                    --------     --------
      Total current liabilities ................................      13,828       16,930
   Long - term debt ............................................       1,475        2,584
   Postretirement benefit obligation ...........................       1,123        1,138
   Long-term pension obligation ................................       1,003        1,030
   Deferred income taxes .......................................       1,290        1,316
   Commitments and contingencies ...............................        --           --
                                                                    --------     --------
      Total liabilities ........................................      18,719       22,998
                                                                    --------     --------
   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, 892,045 shares at
           October 1, 2000 and December 31, 1999 ...............      (2,513)      (2,513)
      Retained earnings ........................................       7,583        9,943
      Accumulated other comprehensive expense ..................      (1,910)        (922)
                                                                    --------     --------
           Total stockholders' equity ..........................      22,516       25,864
                                                                    --------     --------
      Total liabilities and stockholders' equity ...............    $ 41,235     $ 48,862
                                                                    ========     ========
</TABLE>

           See Accompanying Notes to Consolidated Financial Statements




                                  Page 3 of 16
<PAGE>





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

                                                          Three Months Ended              Nine Months Ended
                                                          ------------------              -----------------
                                                      October 1,      October 3,      October 1,      October 3,
                                                         2000            1999            2000            1999
                                                         ----            ----            ----            ----
                                                             (unaudited)                     (unaudited)
<S>                                                  <C>             <C>             <C>             <C>
Net Sales .......................................    $    16,887     $    20,091     $    44,000     $    50,667

Cost of sales ...................................         13,107          13,926          33,839          37,560
                                                     -----------     -----------     -----------     -----------

Gross margin ....................................          3,780           6,165          10,161          13,107

Operating expenses:

    Selling .....................................          1,670           1,689           5,169           5,072

    General & administrative ....................          1,982           2,210           6,013           6,629

    Research & development ......................            389             398           1,238           1,166
                                                     -----------     -----------     -----------     -----------

Total operating expenses ........................          4,041           4,297          12,420          12,867
                                                     -----------     -----------     -----------     -----------

Operating income (loss) .........................           (261)          1,868          (2,259)            240

Interest income .................................             37              34             185             341

Interest expense ................................            (64)            (92)           (208)           (364)

Gain from sale of real estate ...................           --              --              --             1,879

Other income (expense), net .....................            (76)           (116)           (172)           (122)
                                                     -----------     -----------     -----------     -----------

Income (loss) before income taxes ...............           (364)          1,694          (2,454)          1,974

Provision (benefit) for income taxes ............            (62)            598            (724)            713
                                                     -----------     -----------     -----------     -----------

Net income (loss) ...............................    ($      302)    $     1,096     ($    1,730)    $     1,261
                                                     ===========     ===========     ===========     ===========

Per share data:
Basic and Diluted  income (loss) per
  common share ..................................    ($     0.06)    $      0.20     ($     0.33)    $      0.23
                                                     ===========     ===========     ===========     ===========
Average shares outstanding:
  Basic .........................................      5,250,061       5,460,902       5,250,061       5,506,497
                                                     ===========     ===========     ===========     ===========
  Diluted .......................................      5,250,061       5,460,902       5,250,061       5,506,497
                                                     ===========     ===========     ===========     ===========
Dividends declared per share ....................    $      0.04     $      0.04     $      0.12     $      0.20
                                                     ===========     ===========     ===========     ===========
</TABLE>

           See Accompanying Notes to Consolidated Financial Statements




                                  Page 4 of 16
<PAGE>







                               FARREL CORPORATION
                               ------------------
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
                                 (In thousands)
<TABLE>
<CAPTION>

                                                                            Nine Months Ended
                                                                            -----------------
                                                                         October 1,   October 3,
                                                                         ----------   ----------
                                                                            2000        1999
                                                                            ----        ----
                                                                        (Unaudited)  (Unaudited)
Cash flows from operating activities:

  <S>                                                                     <C>         <C>
  Net Income (loss) ..................................................    ($1,730)    $ 1,261
  Adjustments to reconcile net income (loss) to
  net cash provided by (used in) operating activities:
    Loss/(gain) on disposal of fixed assets ..........................          8      (1,942)
    Depreciation and amortization ....................................      1,515       1,658
    Decrease in accounts receivable ..................................      3,517       7,152
    (Increase) in inventory ..........................................     (3,306)     (2,377)
    (Increase) in prepaid pension costs ..............................       (753)       --
    (Decrease) in accounts payable ...................................     (2,436)     (6,836)
    (Decrease) increase in customer advances .........................      1,410      (3,084)
    (Decrease) in accrued expenses & taxes ...........................     (1,081)     (1,674)
    (Decrease) increase in accrued installation and warranty costs ...       (290)        181
    Increase (decrease) in deferred income taxes .....................         (7)        181
    Other ............................................................        420        (286)
                                                                          -------     -------
    Total adjustments ................................................     (1,003)     (7,027)
                                                                          -------     -------
    Net cash (used in) provided by operating activities ..............     (2,733)     (5,766)
                                                                          -------     -------
Cash flows from investing activities:

    Refund of Shaw asset purchase price ..............................       --         4,405
    Proceeds from disposal of fixed assets ...........................          6       2,608
    Purchases of property, plant and equipment .......................       (605)       (835)
                                                                          -------     -------
    Net cash (used in) provided by investing activities ..............       (599)      6,178

Cash flows from financing activities:

    Repayment of long-term borrowings ................................       (930)       (647)
    Proceeds from short-term borrowings, net .........................       --         1,137
    Issuance of treasury stock .......................................       --             9
    Purchase of treasury stock .......................................       --        (1,511)
    Dividends paid ...................................................       (630)     (1,165)
                                                                          -------     -------
    Net cash (used in) provided by investing activities ..............     (1,560)     (2,177)
                                                                          -------     -------
Effect of foreign currency exchange rate changes on cash .............       (219)         19
                                                                          -------     -------
Net (decrease) in cash and cash equivalents ..........................     (5,111)     (1,746)
    Cash and cash equivalents - Beginning of period ..................      6,069       5,786
                                                                          -------     -------
    Cash and cash equivalents - End of period ........................    $   958     $ 4,040
                                                                          =======     =======
Income taxes paid ....................................................    $   210     $ 1,152
                                                                          =======     =======
Interest paid ........................................................    $   203     $   200
                                                                          =======     =======
</TABLE>

           See Accompanying Notes to Consolidated Financial Statements



                                  Page 5 of 16
<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 generally accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management, the accompanying unaudited consolidated financial statements contain
all adjustments,  consisting only of normal recurring adjustments,  necessary to
present fairly in accordance with generally accepted accounting principles,  the
consolidated   financial  position  of  Farrel  Corporation  ("Farrel"  or  "the
Company") as of October 1, 2000, and the consolidated  results of its operations
and its cash flows for the three and  nine-month  periods  ended October 1, 2000
and October 3, 1999. These results are not necessarily  indicative of results to
be  expected  for  the  full  fiscal  year.  The  statements  should  be read in
conjunction  with the financial  statements and notes  thereto,  included in the
Company's Annual Report and Form 10-K for the year ended December 31, 1999.

NOTE 2 - INVENTORY

         Inventory is comprised of the following:


                                                    October 1,      December 31,
                                                       2000             1999
                                                       ----             ----
                                                          (In thousands)
         Stock and raw materials............          $ 8,005         $ 7,934
         Work-in process....................            6,847           4,041
                                                      -------         -------
         Total..............................          $14,852         $11,975
                                                      =======         =======

NOTE 3 - COMPREHENSIVE INCOME (LOSS)

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

<TABLE>
<CAPTION>

                                                           Three Months Ended                 Nine Months Ended
                                                         October 1,   October 3,           October 1,    October 3,
                                                            2000         1999                 2000          1999
                                                            ----         ----                 ----          ----
                                                              (In thousands)                    (In thousands)

         <S>                                               <C>          <C>                 <C>            <C>
         Net income (loss)...........................      $(302)       $1,096              $(1,730)       $1,261
         Foreign currency translation adjustments....       (279)          619                 (988)            6
                                                           ------       ------              --------       ------
         Other comprehensive income (loss)...........      $(581)       $1,715              $(2,718)       $1,267
                                                           ======       ======              =========      ======
</TABLE>




                                  Page 6 of 16
<PAGE>





         The  components of  accumulated  other  comprehensive  expense,  net of
related tax, are as follows:

                                                      October 1,    December 31,
                                                         2000           1999
                                                         ----           ----
                                                           (In thousands)
         Minimum pension liability                     $ (613)        $ (613)
         Foreign currency translation adjustments      (1,297)          (309)
                                                       --------       -------
         Accumulated other comprehensive expense       $(1,910)       $ (922)
                                                       ========       =======

The foreign currency  translation  adjustment is a result of translating into US
dollars the financial statements of the Company's UK subsidiary.  Changes in the
exchange rate between the US dollar and the British pound sterling  generate the
change in this balance.  On December 31, 1999,  one British  pound  sterling was
equivalent  to $1.61.  On  October 1,  2000,  one  British  pound  sterling  was
equivalent to $1.47.

NOTE 4 - SEGMENT INFORMATION

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

NOTE 5 - GAIN FROM SALE OF REAL ESTATE

         During  January  1999,  the Company  completed  the sale of excess real
estate  held for sale for $2.4  million.  The  Company  recorded  a gain of $1.9
million from the sale.

NOTE 6 - IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

         In June  1998,  the FASB  issued  Statement  No.  133,  Accounting  for
Derivative  Instruments and Hedging Activities,  which must be adopted effective
January  1,  2001.  The  Statement  provides  a new  method  of  accounting  for
derivatives  and hedges.  The Company does not  anticipate  that the adoption of
this  Statement  will have a significant  effect on its results of operations or
financial position.

         In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, Revenue  Recognition in Financial  Statements
("SAB  101").  SAB 101  contains  the SEC staff's  views in  applying  generally
accepted  accounting  principles  related to revenue  recognition  in  financial
statements.  SAB 101 includes requirements for when shipments may be recorded as
revenue when the terms of the sale include customer acceptance  provisions or an
obligation of the seller to install the product. The provisions of this bulletin
are  effective  in the fourth  quarter of 2000.  The  Company is  reviewing  the
requirements  of SAB 101  which  could  create a timing  difference  in when the
Company recognizes revenue and has not yet determined the full impact of SAB 101
on  its  consolidated  financial  statements.  The  impact,  however,  could  be
material,  on both a quarterly and annual basis,  on the Company's  statement of
operations  should the Company  determine it needs to change its  accounting for
revenue  recognition.  Such a change could result in significant portions of its
revenue  being  recognized  in accounting  periods  significantly  later than it
historically would have been recognized.




                                  Page 7 of 16
<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,  in this  "Management's  Discussion and
Analysis  of  Financial  Condition  and  Results of  Operations"  may be forward
looking  and may be  subject to a variety  of risks and  uncertainties.  Various
factors could cause actual results to differ  materially from these  statements.
These  factors  include,   but  are  not  limited  to,  pricing  pressures  from
competitors and/or customers;  continued  economic and political  uncertainty in
certain of the Company's markets; the Company's ability to maintain and increase
gross margin  levels;  the  Company's  ability to generate  positive  cash flow;
changes  in  business  conditions,  in  general,  and,  in  particular,  in  the
businesses of the Company's  customers and competitors;  and other factors which
might  be  described  from  time to  time  in the  Company's  filings  with  the
Securities and Exchange Commission.

RESULTS OF OPERATIONS

NINE MONTHS ENDED  OCTOBER 1, 2000  COMPARED TO THE NINE MONTHS ENDED OCTOBER 3,
1999

         Net sales for the nine month  period  ended  October 1, 2000 were $44.0
million  compared to $50.7  million for the nine month period  ended  October 3,
1999, a decrease of $6.7 million.  The decrease in net sales is primarily due to
lower sales made by the Company's U.K. operations due to weak market conditions.
The timing of the Company's  sales,  particularly  new machines sales, is highly
dependent on when an order is received,  the amount of lead time from receipt of
order to delivery and specific  customer  requirements.  The Company operates in
markets  which are  extremely  competitive  with  cyclical  demand.  Many of the
Company's  customers  and  markets  operate at less than full  capacity  and the
European and Far East markets remain particularly competitive and are subject to
local economic events.

         Orders  received for the nine month  period ended  October 1, 2000 were
$44.8 million  compared to $51.8 million for the nine month period ended October
3, 1999.

         The Company's  products are  primarily  supplied to  manufacturers  and
represent capital commitments for new plants, expansion or modernization. In the
case of major  equipment  orders,  up to 12 months are  required to complete the
manufacturing  process.  Accordingly,  revenues  reported  in the  statement  of
operations  may  represent  orders  received in the current or previous  periods
during which time economic conditions in various geographic markets of the world
impact the Company's  level of order intake.  Many of the Company's  traditional
customers and markets are operating with excess  capacity  thereby  reducing the
number of  projects  for plant  expansion  and  modernization.  The  Company  is
experiencing  increased pricing pressures from competitors in an overall smaller
market. In addition, the decline in the value of the Euro versus the U.S. dollar
and British pound sterling is increasing pricing pressures. These conditions are
resulting in customer orders with lower margins. Further, the cyclical nature of
industry  demand  and,  therefore,  the  timing of order  intake  may affect 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.




                                  Page 8 of 16
<PAGE>




         The level of backlog  considered  firm by management at October 1, 2000
was $29.9  million  compared to $28.9  million at December 31,  1999,  and $34.2
million at October 3, 1999.

         Gross margin for the nine month period ended  October 1, 2000 was $10.2
million  compared to $13.1  million for the nine month period  ended  October 3,
1999 a decrease of $2.9  million.  The decrease in gross margin is primarily due
to lower sales. The margin percentage for the nine month period ended October 1,
2000,  was 23.1%  compared to 25.9% for the nine month period  ended  October 3,
1999.  The  decline in gross  margin as a percent of sales is  primarily  due to
changes in product mix.

         Operating expenses for the nine month period ended October 1, 2000 were
$12.4 million  compared to $12.9 million for the nine month period ended October
3,  1999,  a  decrease  of $0.5  million.  General  and  administrative  expense
decreased $0.6 million,  primarily due to lower payroll and related expenses and
lower professional fees.

         Interest  expense for the nine month period  ended  October 1, 2000 was
$0.2 million compared to $0.4 million for the nine month period ended October 3,
1999, a decrease of $0.2 million. The decrease is due to lower borrowings.

         The Company provides for income taxes in the  jurisdictions in which it
pays  income  taxes at the  statutory  rates  in  effect  in each  jurisdiction,
adjusted for permanent differences in determining income for financial reporting
and income tax purposes.  The  effective  income tax rate was 29.5% for the nine
month period ended October 1, 2000,  compared to 36.1% for the nine month period
ended October 3, 1999.  The decline in the effective tax rate is a result of the
change  in the  proportion  of  income  (loss)  generated  in  different  taxing
jurisdictions.

RESULTS OF OPERATIONS

THREE MONTHS ENDED OCTOBER 1, 2000 COMPARED TO THE THREE MONTHS ENDED OCTOBER 3,
1999

         Net sales for the three month  period ended  October 1, 2000 were $16.9
million  compared to $20.1  million for the three month period ended  October 3,
1999,  a decrease of $3.2  million.  Orders  received for the three month period
ended October 1, 2000 were $11.7 million compared to $19.6 million for the three
month period ended October 3,1999.

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

         Gross margin in the three month  period ended  October 1, 2000 was $3.8
million  compared to $6.2 million for the three month  period  ended  October 3,
1999, a decrease of $2.4 million.  The decrease in gross margin is primarily due
to lower sales.  The margin  percentage for the three month period ended October
1, 2000, was 22.4% compared to 30.7% for the three month period ended October 3,
1999.  The  decline in gross  margin as a percent of sales is  primarily  due to
changes in product mix.

         Operating  expenses for the three month  period  ended  October 1, 2000
were $4.0  million  compared to $4.3  million for the three month  period  ended
October 3, 1999, a decrease of $0.3 million.




                                  Page 9 of 16
<PAGE>




The decline is primarily a result of lower  general and  administrative  payroll
and related expenses and lower professional fees.

         Interest  expense for the three month periods ended October 1, 2000 and
October 3, 1999, was $0.1 million.

         The Company provides for income taxes in the  jurisdictions in which it
pays income taxes at the statutory rates in effect in each jurisdiction adjusted
for permanent  differences  in  determining  income for financial  reporting and
income tax purposes.  The  effective  income tax rate for the three month period
ended  October 1, 2000,  was 17%  compared to 35.3% for the three  month  period
ended October 3, 1999.  The decline in the effective tax rate is a result of the
change  in the  proportion  of  income  (loss)  generated  in  different  taxing
jurisdictions.

MATERIAL CONTINGENCIES

         In  February  1995,  the  Company  and  Black & Decker  entered  into a
Settlement  Agreement  pursuant  to which  Black & Decker  agreed to assume full
responsibility  for the  investigation  and  remediation of any pre-May 12, 1986
environmental  contamination  at the  Company's  Ansonia and Derby,  Connecticut
facilities,   as  required  by  the  Connecticut   Department  of  Environmental
Protection ("DEP").  As part of the settlement,  the Company transferred by quit
claim deed a vacant surfaced parking lot to the City of Ansonia.  As required by
the  Settlement  Agreement,  environmental  assessments of the Ansonia and Derby
properties are being conducted by Black & Decker.

         On January 19, 1999,  the Company  sold all of its Derby,  Connecticut,
real estate and facilities.  By the terms of that sale, the purchaser  committed
to cooperate  with Black & Decker in any additional  investigation  of the Derby
property and any remediation of that property that might be required by the DEP.
In addition,  the Company has been named an additional insured on a $5.0 million
environmental policy obtained by the purchaser and the purchaser is obligated to
name the  Company  an  additional  insured  on any and all  other  environmental
insurance policies obtained by the purchaser related to the Derby property.

         On the basis of the  preliminary  data now available there is no reason
to believe that any remediation  activities  which might be required as a result
of the findings of the assessment  will have a material  effect upon the capital
expenditures,  earnings or the competitive position of the Company. This forward
looking statement could, however, be influenced by any findings of environmental
contamination attributable to post-May 12, 1986 activities.

LIQUIDITY AND CAPITAL RESOURCES; CAPITAL EXPENDITURES

         Working  capital and the working  capital ratio at October 1, 2000 were
$14.1 million and 2.0 to 1, respectively, compared to $17.5 million and 2.0 to 1
at December 31,  1999,  respectively.  During the nine months  ended  October 1,
2000,  the  Company  paid  dividends  of $0.12 per share of  common  stock.  The
Company's  ability to pay dividends in the future is generally limited under its
credit facility described below to the aggregate of (a) 25% of net income during
the most recently  completed four fiscal quarters after deducting  distributions
previously  made and (b) purchases by the Company of its common stock during the
same period,  without the consent of and/or  waiver by the Company's  bank.  The
Company  has  received  waivers  from its bank  with  respect  to the  dividends
declared.




                                 Page 10 of 16
<PAGE>





         Due to the nature of the Company's business,  many sales are of a large
dollar  amount.  Consequently,  the timing of recording such sales may cause the
balances in accounts  receivable  and/or  inventory  to  fluctuate  dramatically
between quarters and may result in significant  fluctuations in cash provided by
operations.  Historically,  the Company has not experienced significant problems
regarding the collection of accounts receivable.  The Company has also generally
financed its operations  with cash generated by  operations,  progress  payments
from  customers  and  borrowings  under its bank credit  facilities.  Management
anticipates  that its cash balances,  operating cash flows and available  credit
line will be  adequate  to fund  anticipated  capital  commitments  and  working
capital  requirements  for at least the next twelve  months.  The  Company  made
capital  expenditures  of $0.6  million and $0.8  million  during the nine month
periods ended October 1, 2000 and October 3, 1999, respectively.

         The Company  has a worldwide  $14.5  million  multi-currency  revolving
credit  facility,  as amended,  with a major U.S.  bank.  The facility  contains
combined limits on direct  borrowings and letters of credit issuances based upon
stipulated  percentages  of accounts  receivable,  inventory  and  backlog.  The
facility  also  contains  covenants  specifying  minimum and  maximum  operating
thresholds for operating results and selected financial ratios.  There can be no
assurance  that the Company will achieve the required  thresholds in the future.
The agreement  contains  certain  restrictions on the making of investments,  on
borrowings and on the sale of assets.  At October 1, 2000, the amount  available
to the Company and subsidiaries for additional  revolver borrowing and/or letter
of credit issuances beyond those already  outstanding under the revolving credit
facility was $8.2  million.  There were $4.8 million and $3.8 million of letters
of credit outstanding at October 1, 2000 and December 31, 1999, respectively. At
October 1, 2000 and December 31, 1999, there were $2.7 million and $3.9 million,
respectively, outstanding under a term loan.

         On May 7, 1999,  the Company  received a cash  payment of $4.4  million
representing  settlement of its claim under the Profit Guaranty provision of the
Asset Purchase  Agreement for the purchase of the Francis Shaw Rubber  Machinery
Business.

         In fiscal 2000, new legal minimum funding  guidelines for U.K.  pension
plans became effective in the U.K. These guidelines are significantly  different
than prior  guidelines.  As a result,  the Company  expects it will need to make
approximately $950,000 of contributions to its U.K. pension plan in fiscal 2000.
Approximately $750,000 of contributions were made in the nine-month period ended
October  1,  2000,  with the  remaining  amount to be made in  monthly  payments
throughout  the remainder of the year. In recent years prior to fiscal 2000, the
Company was not required to and did not make  contributions  to its U.K. pension
plans.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

         In June  1998,  the FASB  issued  Statement  No.  133,  Accounting  for
Derivative  Instruments and Hedging Activities,  which must be adopted effective
January  1,  2001.  The  Statement  provides  a new  method  of  accounting  for
derivatives  and hedges.  The Company does not  anticipate  that the adoption of
this  Statement  will have a significant  effect on its results of operations or
financial position.

         In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, Revenue  Recognition in Financial  Statements
("SAB  101").  SAB 101  contains  the SEC staff's  views in  applying  generally
accepted  accounting  principles  related to revenue  recognition  in  financial
statements.  SAB 101 includes requirements for when shipments may be recorded as
revenue when the terms of the sale include customer acceptance  provisions or an
obligation of the seller to install the product. The provisions of this bulletin
are effective in the fourth quarter of 2000. The




                                 Page 11 of 16
<PAGE>




Company is  reviewing  the  requirements  of SAB 101 which could create a timing
difference in when the Company recognizes revenue and has not yet determined the
full impact of SAB 101 on its  consolidated  financial  statements.  The impact,
however,  could be  material,  on both a  quarterly  and  annual  basis,  on the
Company's  statement  of  operations  should the Company  determine  it needs to
change its  accounting  for revenue  recognition.  Such a change could result in
significant  portions of its revenue  being  recognized  in  accounting  periods
significantly later than it historically would have been recognized.




                                 Page 12 of 16
<PAGE>





ITEM 2 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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




                                 Page 13 of 16
<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

ITEM 5 - OTHER INFORMATION ..........................................     N/A

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

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

Exhibit 27 Financial Data Schedule ..................................   Attached

Reports on Form 8-K

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




                                 Page 14 of 16
<PAGE>






                                                                      Exhibit 11
                               FARREL CORPORATION
                               ------------------
                 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
                 ----------------------------------------------
                 (In thousands, except per share and share data)
                 -----------------------------------------------

<TABLE>
<CAPTION>

                                                            Three Months Ended           Nine Months Ended
                                                        --------------------------------------------------------
                                                          October 1,    October 3,    October 1,    October 3,
                                                             2000         1999          2000          1999
                                                             ----         ----          ----          ----



<S>                                                     <C>            <C>          <C>            <C>
Net income (loss) applicable to common stock ......     ($      302)   $    1,096   ($    1,730)   $    1,261
                                                          =========     =========     =========     =========
Weighted average number of common
shares outstanding -  Basic earnings per share ....       5,250,061     5,460,902     5,250,061     5,506,497

Effect of dilutive stock and purchase  options ....           --            --           --             --
                                                          ---------    ----------     ---------     ---------
Weighted average number of common
shares outstanding - Diluted earnings per share ...       5,250,061     5,460,902     5,250,061     5,506,497
                                                          =========     =========     =========     =========
Net income (loss) per common share
  Basic ...........................................     ($   0.06)     $   0.20     ($   0.33)     $   0.23
                                                          =========     =========     =========     =========
  Fully diluted ...................................     ($   0.06)     $   0.20     ($   0.33)     $   0.23
                                                          =========     =========     =========     =========
</TABLE>






                                 Page 15 of 16
<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:  11/13/00                             /s/ Rolf K. Liebergesell
     -------------------------------       -----------------------------------
                                           ROLF K. LIEBERGESELL
                                           CHIEF EXECUTIVE OFFICER,
                                           PRESIDENT AND CHAIRMAN OF THE BOARD

DATE:  11/13/00                             /s/ Walter C. Lazarcheck
     -------------------------------       -----------------------------------
                                           WALTER C. LAZARCHECK
                                           VICE PRESIDENT AND CHIEF FINANCIAL
                                           OFFICER
                                           (CHIEF ACCOUNTING OFFICER)



                                 Page 16 of 16