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 28,1998
                                -----------------------------

                                       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    August  5, 1998
--------------------------------------------------------------------------------
Common Stock (Voting), $.01 par value                       5,942,582


<PAGE>


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


                                      Index
                                      -----

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

              Consolidated Balance Sheets -
              June 28, 1998 and December 31, 1997                        3

              Consolidated Statements of Operations -
              Three and Six Months Ended June 28, 1998
                and June 29, 1997                                        4

              Consolidated Statements of Cash Flows -
              Six Months ended June 28, 1998
                and June 29, 1997                                        5

              Notes to Consolidated Financial Statements                 6

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

              Exhibit 11 - Computation of Earnings Per Share            11

Part II.  Other Information                                             12
          -----------------                                           




                                  Page 2 of 13
<PAGE>


<TABLE>

                                                Part I - Financial Information
                                                      FARREL CORPORATION
                                                 CONSOLIDATED BALANCE SHEETS
                                              (In thousands, except share data)
<CAPTION>
                                                                             June 28,                December 31,
                                                                             --------                ------------
                                                                               1998                      1997
                                                                               ----                      ----
ASSETS                                                                     (Unaudited)               
    Current Assets:
       <S>                                                                      <C>                       <C>   
       Cash and cash equivalents                                                $4,338                    $1,447
       Accounts receivable, net of allowance for
           doubtful accounts of  $226 and $179, respectively                    12,350                    14,423
       Inventory                                                                20,442                    18,277
       Asset purchase agreement receivable                                       1,921
       Other current assets                                                      1,923                     2,957
                                                                         --------------        ------------------
                  Total current assets                                          40,974                    37,104
       
           Property, plant and equipment - net
           of accumulated depreciation of $10,802 and
           $9,786, respectively                                                 12,627                    12,416
       Goodwill                                                                  4,204                     5,295
       Other Assets                                                              1,965                     1,566
                                                                         --------------        ------------------
        Total Assets                                                           $59,770                   $56,381
                                                                         ==============        ==================
LIABILITIES & STOCKHOLDERS' EQUITY
    Current Liabilities:
           Accounts payable                                                    $10,063                    $8,317
           Accrued expenses & taxes payable                                      4,570                     4,753
           Advances from customers                                               8,568                     6,412
           Accrued installation & warranty costs                                 1,546                     1,326
           Dividend Payable                                                                                  951
           Short - term debt                                                     1,537                     1,527
                                                                         --------------        ------------------
                  Total current liabilities                                     26,284                    23,286
    
    Long - term debt                                                             4,985                     5,283
    Postretirement benefit obligation                                            1,190                     1,213
    Long-term pension obligation                                                   592                       592
    Deferred income taxes                                                          325                       225
    Commitments and contingencies                                                    -                         -
                                                                         --------------        ------------------
                  Total Liabilities                                             33,376                    30,599
                                                                         --------------        ------------------
    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, 199,524 shares at
           June 28, 1998 and December 31, 1997, respectively                      (984)                     (984)
           Retained earnings                                                     8,386                     7,776
           Accumulated other comprehensive expense                                (364)                     (366)
                                                                         --------------        ------------------
                  Total Stockholders' Equity                                    26,394                    25,782
                                                                         --------------        ------------------
Total Liabilities and Stockholders' Equity                                     $59,770                   $56,381
                                                                         ==============        ==================
           See Accompanying Notes to Consolidated Financial Statements
</TABLE>




                                  Page 3 of 13
<PAGE>



<TABLE>

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

                                              Three Months Ended                              Six Months Ended
                                              ------------------                              ----------------
                                       June 28,               June 29,                 June 28,              June 29,
                                         1998                   1997                     1998                  1997
                                         ----                   ----                     ----                  ----
                                                 (unaudited)                                     (unaudited)
<S>                                         <C>                    <C>                      <C>                   <C>    
Net Sales                                   $24,954                $26,183                  $40,930               $42,306

Cost of sales                                18,854                 20,839                   30,594                33,624
                                    ----------------      -----------------         ----------------      ----------------

Gross margin                                  6,100                  5,344                   10,336                 8,682

Operating expenses:

    Selling                                   1,946                  1,898                    3,678                 3,555

    General & administrative                  2,306                  1,873                    4,075                 3,636

    Research & development                      366                    383                      684                   773
                                    ----------------      -----------------         ----------------      ----------------

Total operating expenses                      4,618                  4,154                    8,437                 7,964
                                    ----------------      -----------------         ----------------      ----------------


Operating income                              1,482                  1,190                    1,899                   718

Interest income                                   6                     92                       58                   146

Interest expense                              (191)                   (60)                    (401)                  (70)

Other income/(expense), net                    (70)                    135                    (146)                   391
                                    ----------------      -----------------         ----------------      ----------------

Income before income taxes                    1,227                  1,357                    1,410                 1,185

Provision for income taxes                      490                    487                      563                   421
                                    ----------------      -----------------         ----------------      ----------------

Net income                                     $737                   $870                     $847                  $764
                                    ================      =================         ================      ================

Per share data:
Basic and Diluted income per
  common share                                $0.12                  $0.15                    $0.14                 $0.13
                                    ================      =================         ================      ================
Average shares outstanding:
  Basic                                   5,942,582              5,941,935                5,942,582             5,942,582
                                    ================      =================         ================      ================
  Diluted                                 5,947,388              5,943,207                5,966,836             5,983,841
                                    ================      =================         ================      ================
   Dividends per share                        $0.04                  $0.16                    $0.04                 $0.16
                                    ================      =================         ================      ================
           See Accompanying Notes to Consolidated Financial Statements
</TABLE>




                                  Page 4 of 13
<PAGE>



<TABLE>

                                                    FARREL CORPORATION
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                       (In thousands)
<CAPTION>
                                                                                     Six Months Ended
                                                                                     ----------------
                                                                             June 28,                 June 29,
                                                                             --------                 --------
                                                                               1998                     1997
                                                                               ----                     ----
                                                                            (Unaudited)             (Unaudited)
Cash flows from operating activities:
  <S>                                                                                  <C>                    <C> 
  Net Income                                                                           $847                   $764
  Adjustments to reconcile net income to
  net cash provided by/(used in) operating activities:
    Gain on disposal of fixed assets                                                   (137)                  (299)
    Depreciation and amortization                                                     1,175                    811
    Decrease in accounts receivable                                                   2,110                  7,751
    Increase in inventory                                                            (4,367)                (2,277)
    Increase(decrease) in accounts payable                                            1,669                 (2,002)
    Increase in customer advances                                                     2,133                    822
    Increase  in accrued expenses & taxes                                              (189)                    79
    Increase(decrease) in accrued installation and warranty costs                       215                   (533)
    Increase in deferred income taxes                                                   100                    168
    Other                                                                              (953)                   349
                                                                        --------------------      -----------------
    Total adjustments                                                                 1,756                  4,869
                                                                        --------------------      -----------------
    Net cash provided by operating activities                                         2,603                  5,633
                                                                        --------------------      -----------------
Cash flows from investing activities:
    Refund of Shaw asset purchase price                                               2,701
    Proceeds from disposal of fixed assets                                              160                    547
    Purchases of property, plant and equipment                                       (1,073)                  (262)
                                                                        --------------------      -----------------
    Net cash (used in) provided by investing activities                               1,788                    285

Cash flows from financing activities:
    Repayment of long-term borrowings                                                  (331)                  (102)
    Used for dividends paid                                                          (1,188)                  (953)
                                                                        --------------------      -----------------
    Net cash used by financing activities                                            (1,519)                (1,055)
Effect of foreign currency exchange rate changes on cash                                 19                     16
                                                                        --------------------      -----------------
Net increase in cash and cash equivalents                                             2,891                  4,879
    Cash and cash equivalents - Beginning of period                                   1,447                  3,832
                                                                        --------------------      -----------------
    Cash and cash equivalents - End of period                                        $4,338                 $8,711
                                                                        ====================      =================
Income taxes paid                                                                      $139                    $58
                                                                        ====================      =================
Interest paid                                                                          $311                     $1
                                                                        ====================      =================
           See Accompanying Notes to Consolidated Financial Statements
</TABLE>





                                  Page 5 of 13
<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  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 June 28, 1998,  the  consolidated
results of its  operations  for the three and  six-month  periods ended June 28,
1998 and June 29,  1997,  and its  consolidated  cash  flows  for the  six-month
periods ended June 28, 1998 and June 29, 1997. 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, 1997.

NOTE 2 - INVENTORY

         Inventory is comprised of the following:

                                              June 28,              December 31,
                                              --------              ------------
                                                1998                    1997
                                                ----                    ----
                                                       (In thousands)
         Stock and raw materials............   $11,849                  $9,459
         Work-in process....................     8,593                   8,818
                                             ---------                --------
         Total..............................   $20,442                 $18,277
                                               =======                 =======

NOTE 3 - ASSET PURCHASE

         On December  19,  1997,  the  Company  acquired  certain  assets of the
Francis Shaw Rubber Machinery operations ("Shaw") from EIS Group PLC ("EIS") for
approximately $10.9 million. The Asset Purchase Agreement ("Agreement") provided
for a  reduction  in the  purchase  price to the  extent  that the  value of the
closing date inventory was less than the contract amount.  During June 1998, the
Company and EIS agreed to a revised inventory valuation as of December 19, 1997.
The inventory  value, as per the Agreement,  was reduced by  approximately  $2.7
million  and a payment  in that  amount was  received  from EIS.  Subsequent  to
recording  the inventory  valuation in the  preliminary  purchase  accounting an
additional  inventory reduction of approximately $.9 million was recorded with a
corresponding increase in goodwill.

         In addition, if the acquired assets do not generate at least (pound)1.0
million  (approximately  $1.67  million)  of pre-tax  profit,  as  defined,  the
Agreement  provides  for a reduction in the  purchase  price.  Included in total
assets,  with a corresponding  reduction in goodwill,  is an amount due from the
seller  calculated  under the terms of the Agreement based upon the year to date
results.

         The results of  operations  of Shaw are  included  in the  consolidated
results of operations  of the Company for the 1998  periods.  The seller did not
maintain and the Company was not provided historical  financial  information for
the Shaw operations.  Therefore,  the proforma results for the six months ending
June 29, 1997 are not avaliable. Based on the limited information available, the
Company  estimates that the pro forma revenues and net income for the six months
ended June 29,  1997,  would not vary  materially  from the  historical  amounts
recorded in the consolidated statements of operations.

NOTE 4 -  COMPREHENSIVE INCOME

         As of  January  1,  1998,  the  Company  adopted  Financial  Accounting
Standard No. 130, "Reporting Comprehensive Income". Standard No. 130 establishes
new  rules  for the  reporting  and  display  of  comprehensive  income  and its
components;  however,  the  adoption  of  the  statement  had no  impact  on the
Company's net income or stockholders equity.


                                  Page 6 of 13
<PAGE>





         The components of other comprehensive income, for the six-month periods
ended are as follows:

                                                       June 28,         June 29,
                                                         1998             1997
                                                         ----             ----
                                                            (In thousands)
          Net income                                      $847            $764
          Foreign currency translation adjustments           2           ( 268)
                                                       -------           ------
          Other comprehensive income                      $849            $496
                                                         =====            ====

        The  components  of  accumulated  other  comprehensive  expense,  net of
related tax, are as follows:
                                                       June 28,     December 31,
                                                         1998           1997
                                                         ----           ----
                                                            (In thousands)
          Minimum pension liability                     $ (303)          $(303)
          Foreign currency translation adjustments         (61)            (63)
                                                        -------         -------
          Accumulated other comprehensive expense        $(364)          $(366)
                                                         ======          ======



                                  Page 7 of 13
<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 in 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;  changes in business
conditions,  in general, and, in particular,  in the businesses of the Company's
customers and competitors;  and other factors which might be described from time
to time in the Company's filings with the Securities and Exchange Commission.

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 28, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 29, 1997

         Year to date net sales in 1998 and 1997 were  $40.9  million  and $42.3
million,  respectively. The 1998 amount includes net sales of approximately $5.4
million by Farrel Shaw Limited ("Shaw") which was acquired on December 19, 1997.
Excluding Shaw sales,  net sales would have declined $6.8 million during the six
months ended June 28, 1998  compared to June 29, 1997.  This decrease is largely
due to the timing of when customer  orders shipped in each period were received.
A substantial  portion of the 1997 shipments reflect several  individually large
orders  received in 1996.  Management  believes the Company  operates in markets
which are extremely  competitive.  Many of our customers and markets  operate at
less than full capacity and certain markets, in particular, the Far East, remain
particularly competitive and difficult to penetrate.

         The Company  received $50.3 million in orders  including  approximately
$7.6 million from the newly acquired Shaw  operations  and several  individually
large  orders  during the first six  months of 1998  compared  to $35.0  million
during the same period of 1997. 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  fiscal  quarters.  In  addition,  the  cyclical  nature of
industry demand and, therefore, 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.
There can be no  assurance  that any such  improvement  will  lead to  increased
orders for the  Company's  products.  Firm  backlog  at June 28,  1998 was $56.3
million,  including $8.2 million at Shaw,  compared to $46.5 million at December
31, 1997 and $42.9 million at the end of the second quarter of 1997.  Backlog at
August 5, 1997 was $51.8 million.

         Year to date gross  margin in 1998 and 1997 was $10.3  million and $8.7
million,  respectively.  the  margin  percentage  increased  to 25.2% from 20.5%
largely due to the mix of products sold in the two periods.  The 1998  shipments
include a higher  relative  proportion of spare parts,  rebuild and repair sales
than in 1997 which  generate  higher  margins  than the new  machine  sales.  In
addition,  1997 included  several large new machine  shipments  with  relatively
lower gross margins.

         Year to date operating  expenses  increased $.4 million to $8.4 million
in 1998  compared to 1997.  The 1998  amount  includes  selling  expenses of $.3
million  and  general  and  administrative  expenses of $.6 million at the newly
acquired Shaw operations. Excluding the impact of the Shaw operations, operating
expenses  decreased by $.5 million to $7.5 million in the six month period ended
June 28, 1998.  The decrease is largely  attributed  to  reductions in marketing
programs,  professional  fees,  insurance  and  continuing  effects to  steadily
control expenses. The Company intends to consolidate the operations of Shaw into
manufacturing and administrative  facilities in Rochdale,  England.  The Company
expects the  consolidation  to be  accomplished  in the first half of 1999.  The
Company has reduced headcount at Shaw to 110 at June 28, 1998 compared to 218 at
December 31, 1997. Research and development costs declined primarily as a result
of reduced headcount.


                                  Page 8 of 13
<PAGE>




         Year to date  interest  expense at June 28, 1998,  was $.4 million,  an
increase of $.3 million from 1997. The increase is due to borrowings  associated
with the acquisition of the Shaw operations. Interest income was $.1 million for
the six month period ended June 28, 1998 and June 29, 1997.

         Other income, net of other expense,  includes approximately $.2 million
for the six month period ended June 28, 1998 from the disposal of machinery  and
equipment  the Company will no longer use and $.5 million for the same period in
1997. The impact of foreign currency on the  consolidated  results of operations
for 1998 compared to 1997 was not significant.

         The  effective  income  tax rate in 1998 and 1997 was 39.9% and  35.5%,
respectively.  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  differences in providing for income taxes for financial  reporting
and income tax purposes.

THREE MONTHS ENDED JUNE 28, 1998 COMPARED TO THREE MONTHS ENDED JUNE 29, 1997.

         Net sales for the second quarter of 1998 were $24.9  million,  compared
to the $26.2 million for the second quarter of 1997.  Order intake in the second
quarter of 1998 was $20.1 million including  approximately $1.6 million from the
Shaw operations, compared to $19.4 million in the second quarter of 1997. Sales,
orders and backlog levels varied when comparing the two quarters due to the same
reasons previously discussed.

         Gross margin in the second quarter of the current year was $6.1 million
compared to $5.3 million in the second quarter of 1997 and the margin percentage
increased to 24.4% from 20.4%, respectively.  These variations in margin dollars
and percentages are also attributed to the same reasons previously discussed.

         Total operating  expenses increased $.4 million from the second quarter
of 1997 to $4.6  million in the  second  quarter  of 1998.  The  second  quarter
includes  selling  expenses of $.2 million  and  administrative  expenses of $.4
million at the newly acquired Shaw facilities.  Excluding the impact of the Shaw
operations,  operating  expenses would have declined  approximately  $.2 million
during the second quarter of 1998. The changes in operating  expenses are due to
the reasons previously discussed.

         Interest  expense,  for the second  quarter of 1998, was $.2 million an
increase of $.2 million from the second  quarter of 1997. The increase is due to
borrowings associated with the acquisition of the Shaw operations.

         Other income,  net of other  expense in the second  quarter of 1998 and
1997 includes approximately $.2 million for the disposal of excess machinery and
equipment.  The  impact of  foreign  currency  on the  consolidated  results  of
operations for the second quarter of 1998 compared to 1997 was not significant.

         The tax rate in the  second  quarter  of 1998 and  1997 was  39.9%  and
35.9%, respectively.  The Company provides for income taxes in the jurisdictions
in which it pays for  income  taxes at the  statutory  rates in  effect  in each
jurisdiction  adjusted  for  differences  in  providing  for  income  taxes  for
financial reporting and income tax purposes.

MATERIAL CONTINGENCIES

         The  Company  and  The  Black  &  Decker  Corporation  entered  into  a
Settlement  Agreement  pursuant  to which  Black & Decker  agreed to assume full
responsibility  for the  investigation  and  remediation  of any  pre-May,  1986
environmental  contamination  at the Company's  Ansonia and Derby  facilities as
required by the  Connecticut  Department of  Environmental  Protection  (DEP). A
preliminary  environmental assessment of the Company's properties in Ansonia and
Derby,  Connecticut  has been  conducted by Black & Decker.  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  the  results  of  any  further
investigation which the DEP might require, by DEP's conclusions and requirements
based  upon  its  review  of  complete   information  when  such  is  available,
unanticipated  discoveries,  the possibility that new or different environmental
laws might be adopted and the  possibility  that  further  regulatory  review or
litigation might become necessary or appropriate.


                                  Page 9 of 13
<PAGE>




LIQUIDITY AND CAPITAL RESOURCES; CAPITAL EXPENDITURES

         Working  capital  and the working  capital  ratio at June 28, 1998 were
$14.7 million and 1.5 to 1, respectively, compared to $13.8 million and 1.6 to 1
at December 31,  1997,  respectively.  During the first six months of 1998,  the
Company  paid a dividend  of $.04 per share.  The  Company  has also  declared a
dividend  of $.04  per  share  to be paid in the  third  quarter  of  1998.  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  received a waiver from its bank with respect to dividends  paid between
April 23, 1997 through June 30, 1998.

         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,  with  progress
payments from customers and with  borrowings  under its bank credit  facilities.
The Company made capital  expenditures  of $1.1 and $.3 million during the first
six months of 1998 and 1997, respectively.

         The Company has a worldwide multi-currency credit facility with a major
U.S. bank in an amount of $25.0 million consisting of an $18.5 million revolving
credit facility for direct borrowings and letters of credit and up to (pound)3.0
million for foreign  exchange  contracts and a five year term loan. The facility
contains  limitations on direct  borrowings and letters of credit combined based
upon  stipulated  levels of accounts  receivable,  inventory  and  backlog.  The
facility also contains  covenants  specifying minimum and maximum thresholds for
operating  results and selected  financial  ratios.  There were $6.5 million and
$7.1 million in direct  borrowings  under this  facility at June 28,  1998,  and
December  31, 1997,  respectively.  There were $ 5.3 million and $6.0 million of
letters  of  credit  outstanding  at  June  28,  1998  and  December  31,  1997,
respectively.  The revolving  credit facility  expires on December 31, 1999, the
term note matures on December 31, 2002.

RECENT ACCOUNTING PRONOUNCEMENTS

         As of  January  1,  1998,  the  Company  adopted  Financial  Accounting
Standard No. 130, "Reporting Comprehensive Income". Standard No. 130 establishes
new  rules  for the  reporting  and  display  of  comprehensive  income  and its
components;  however,  the  adoption  of this  Statement  had no  impact  on the
Company's  net  income or  stockholder's  equity.  Statement  130  requires  the
Company's  foreign  currency  translation and minimum pension  liability  which,
prior to  adoption,  were  reported  separately  in  stockholders'  equity to be
included in other  comprehensive  income.  Prior year financial  statements have
been reclassified to conform to the requirements of Standard No. 130.

         For the six  months  ended  June 28,  1998 and  June  29,  1997,  total
comprehensive income amounted to $.8 million and $.5 million, respectively.


ITEM 2 -  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK - Not
applicable.


                                 Page 10 of 13
<PAGE>




<TABLE>

                                                                                                             EXHIBIT 11

                                                FARREL CORPORATION
                                                ------------------
                                   STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
                                   ----------------------------------------------
                                   (In thousands, except per share and share data)
                                   -----------------------------------------------
<CAPTION>
                                                            Three Months Ended                Six Months Ended
                                                    -------------------------------------------------------------------
                                                      June 28,          June 29,          June 28,         June 29,
                                                        1998              1997              1998             1997
                                                        ----              ----              ----             ----


Net income  applicable to
   <S>                                                       <C>               <C>               <C>              <C> 
   common stock                                              $737              $870              $847             $764
                                                    ==============   ===============   ===============   ==============
Weighted average number of common
shares outstanding -  Basic earnings per share          5,942,582         5,941,935         5,942,582        5,942,582

Effect of dilutive stock and purchase  options              4,806             1,272            24,254           41,259
                                                    --------------   ---------------   ---------------   --------------

Weighted average number of common
shares outstanding - Diluted earnings per share         5,947,388         5,943,207         5,966,836        5,983,841
                                                    ==============   ===============   ===============   ==============

Net income per common
  share - Basic                                             $0.12             $0.15             $0.14            $0.13
                                                    ==============   ===============   ===============   ==============
  share - Fully diluted                                     $0.12             $0.15             $0.14            $0.13
                                                    ==============   ===============   ===============   ==============
</TABLE>





                                 Page 11 of 13
<PAGE>





PART II - OTHER INFORMATION


ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

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

Exhibit 27          Financial Data Schedule

Reports on Form 8-K

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



                                 Page 12 of 13
<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: 8/3/98                                /s/ Rolf K. Liebergesell
     ------------------                     ------------------------------------
                                            ROLF K. LIEBERGESELL
                                            CHIEF EXECUTIVE OFFICER, PRESIDENT
                                            AND CHAIRMAN OF THE BOARD




DATE: 8/3/98                                /s/ Catherine M. Boisvert
     ------------------                     ------------------------------------
                                            CATHERINE M. BOISVERT
                                            VICE PRESIDENT AND CONTROLLER
                                            (CHIEF ACCOUNTING OFFICER)



                                 Page 13 of 13
<PAGE>