<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

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


For the quarterly period ended DECEMBER 30, 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:          33-80701



                                 AAF-MCQUAY INC.
--------------------------------------------------------------------------------
             (Exact name of Registrant as Specified in Its Charter)


            DELAWARE                                    41-0404230
------------------------------------       -----------------------------------
(State or Other Jurisdiction of            (I.R.S. Employer Identification No.)
Incorporation or Organization)


10300 ORMSBY PARK PL. STE 600, LOUISVILLE, KENTUCKY               40223
---------------------------------------------------              --------
(Address of Principal Executive Offices)                        (Zip Code)


Registrant's telephone number, including area code   (502) 637-0011
                                                     ------------------


                             NOT APPLICABLE
-------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report.

Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes   X   No
                                       -----    -----

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 2,497 shares of Common Stock,
par value $100.00 per share, were outstanding as of January 28, 2000.


<PAGE>


                                      INDEX

                        AAF-MCQUAY INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                                                   PAGE
                                                                                                   ----
<S>                                                                                                <C>

PART I -         Financial Information..................................................             3

Item 1.          Financial Statements (unaudited).......................................             3

                 Condensed Consolidated Balance Sheets as of -
                 December 31, 2000 and June 30, 2000....................................             3


                 Consolidated Statements of Operations -
                 Three and Six Months Ended December 31, 2000 and 1999..................             4

                 Condensed Consolidated Statements of Cash Flows -
                 Six Months Ended December 31, 2000 and 1999............................             5

                 Consolidated Statements of Comprehensive Income -
                 Three and Six Months Ended December 31, 2000 and 1999..................             6

                 Notes to the Consolidated Financial Statements.........................             7

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

Item 3.          Quantitative and Qualitative Disclosures about Market Risk.............            13

PART II -        Other Information......................................................            15

Item 1.          Legal Proceedings......................................................            15

Item 6(b).       Reports on Form 8-K....................................................            15

                 Signatures.............................................................            16

</TABLE>

                                       2

<PAGE>



PART I:           FINANCIAL INFORMATION

         ITEM 1.  FINANCIAL STATEMENTS

                        AAF-MCQUAY INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (unaudited)
                    (dollars in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                     DECEMBER 31,         JUNE 30,
                                                                                         2000               2000
                                                                                   ----------------    --------------
<S>                                                                                <C>               <C>
                                      ASSETS
Current assets:
         Cash and cash equivalents.................................................      $ 10,001          $ 11,522
         Accounts receivable.......................................................       193,862           204,523
         Inventories...............................................................       105,115           103,835
         Other current assets......................................................         8,871             8,216
                                                                                   ----------------    --------------
                Total current assets...............................................       317,849           328,096

Property, plant and equipment, net.................................................       119,366           124,998
Cost in excess of net assets acquired and other identifiable intangibles, net......       208,537           214,311
Other assets and deferred charges..................................................        16,618            17,995
                                                                                   ----------------    --------------
                Total assets.......................................................      $662,370          $685,400
                                                                                   ================    ==============

                       LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
         Short-term borrowings.....................................................      $ 49,737          $ 57,859
         Current maturities of long-term debt......................................         6,040             7,319
         Accounts payable, trade...................................................       102,030           105,637
         Accrued warranty..........................................................        19,586            18,743
         Accrued employee compensation.............................................        26,738            29,784
         Other accrued liabilities.................................................        49,109            47,610
                                                                                   ----------------    --------------
                Total current liabilities..........................................       253,240           266,952

Long-term debt.....................................................................       145,560           153,676
Deferred income taxes..............................................................        33,772            34,911
Other liabilities..................................................................        44,242            46,353
                                                                                   ----------------    --------------
                Total liabilities..................................................       476,814           501,892

Stockholders' equity:
         Preferred stock ($1 par value; 1,000 shares authorized, none issued)......            --                --
         Common stock ($100 par value; 8,000 shares authorized, 2,497 shares
                 issued and outstanding)...........................................           250               250
         Additional paid-in capital................................................       179,915           179,915
         Retained earnings.........................................................        21,081            17,864
         Accumulated other comprehensive loss......................................      (15,690)          (14,521)
                                                                                   ----------------    --------------
                Total stockholders' equity.........................................       185,556           183,508
                                                                                   ----------------    --------------
Total liabilities and stockholders' equity.........................................      $662,370          $685,400
                                                                                   ================    ==============
</TABLE>

                                       3

<PAGE>



                        AAF-MCQUAY INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED              SIX MONTHS ENDED
                                               DECEMBER 31,                   DECEMBER 31,
                                        ---------------------------   -----------------------------
                                             2000          1999            2000            1999
                                        -------------  ------------   -------------   -------------
<S>                                     <C>          <C>             <C>             <C>
Net sales............................       $211,877     $ 202,188       $ 426,886       $ 427,315
Cost of sales........................        159,212       151,659         315,873         316,812
                                        -------------  ------------   -------------   -------------
Gross profit.........................         52,665        50,529         111,013         110,503
Operating expenses:
     Selling, general and
       administrative................         42,687        44,333          87,410          94,201
      Restructuring..................          3,041            --           6,547             178
     Amortization of intangible assets         2,759         2,777           5,517           5,606
                                        -------------  ------------   -------------   -------------
                                              48,487        47,110          99,474          99,985
                                        -------------  ------------   -------------   -------------
Income from operations...............          4,178         3,419          11,539          10,518
Interest expense, net................          5,072         5,546          10,295          11,419
Gain on sale of property.............         (4,538)          ---          (4,538)            ---
Other (income) expense, net..........           (366)         (220)           (462)          1,862
                                        -------------  ------------   -------------   -------------
Income (loss) before income taxes....          4,010        (1,907)          6,244          (2,763)
Minority interest loss...............            (27)          (72)            (92)           (136)
Provision (benefit) for income taxes.          1,797          (294)          2,936            (731)
                                        -------------  ------------   -------------   -------------
Net income (loss)....................        $ 2,186     $  (1,685)       $  3,216       $  (2,168)
                                        =============  ============   =============   =============

</TABLE>



                                       4

<PAGE>



                        AAF-MCQUAY INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                 SIX MONTHS ENDED
                                                                    DECEMBER 31,
                                                              -----------------------
                                                                 2000         1999
                                                              ---------    ----------
<S>                                                           <C>          <C>
Cash flows from operating activities:
      Net income (loss) ....................................   $  3,216    $ (2,168)
      Adjustments to reconcile to cash from
           operating activities:
      Restructuring charges ................................      6,547         178
      Depreciation and amortization ........................     14,668      15,121
      Loss on sale of business .............................       --         1,331
      Gain on sale of property .............................     (4,538)       --
      Other non-cash items, net ............................       (511)        228
      Changes in operating assets and liabilities ..........     (2,914)      9,339
                                                               --------    --------

Net cash from operating activities .........................     16,468      24,029

Cash flows from investing activities:
      Capital expenditures, net ............................     (6,944)     (3,277)
      Proceeds from sale of business .......................       --        12,996
      Proceeds from sale of property .......................      6,922        --
                                                               --------    --------
Net cash from investing activities .........................        (22)      9,719

Cash flows from financing activities:
      Net repayments under short-term borrowing arrangements     (8,122)    (18,620)
      Payments on long-term debt ...........................     (4,633)    (39,995)
      Proceeds from issuance of long-term debt .............        238      30,000
      Repurchase of senior notes ...........................     (4,500)       --
      Payments of debt issuance costs ......................       --        (1,334)
                                                               --------    --------
Net cash from financing activities .........................    (17,017)    (29,949)

Effect of exchange rate changes on cash ....................       (950)        214
                                                               --------    --------
Net increase (decrease) in cash and cash equivalents .......     (1,521)      4,013
Cash and cash equivalents at beginning of period ...........     11,522       9,168
                                                               --------    --------

Cash and cash equivalents at end of period .................   $ 10,001    $ 13,181
                                                               ========    ========
</TABLE>


                                       5

<PAGE>



                        AAF-MCQUAY INC. AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                                   (unaudited)
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED     SIX MONTHS ENDED
                                                     DECEMBER 31,         DECEMBER 31,
                                                  -----------------    ------------------
                                                    2000      1999       2000      1999
                                                  -------   -------    -------   --------
<S>                                               <C>       <C>        <C>        <C>
Net income (loss)..............................   $ 2,186   $(1,685)   $ 3,216    $(2,168)
Other comprehensive income (loss):
    Foreign currency translation adjustments ..     1,016    (1,771)    (1,169)        21
    Write off of accumulated foreign currency
         translation adjustments due to sale of
         business .............................      --         829       --          829
                                                  -------   -------    -------    -------
Comprehensive income (loss) ...................   $ 3,202   $(2,627)   $ 2,046    $(1,318)
                                                  =======   =======    =======    =======
</TABLE>



                                       6

<PAGE>



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.  BASIS OF PRESENTATION

         The consolidated financial statements include the accounts of the
Company and all of its wholly-owned subsidiaries. All inter-company transactions
have been eliminated. The accompanying unaudited consolidated financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States for interim reporting and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
have been omitted. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K (the "Annual Report") for the year ended June 30, 2000. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.

         The operating results for the six months ended December 31, 2000 are
not necessarily indicative of the operating results that may be expected for the
full year ending June 30, 2001. The Company's period end is the Saturday closest
to December 31. For clarity in presentation all periods presented herein are
shown to end on the last calendar day of the month. Certain reclassifications of
amounts in the consolidated financial statements have been made to reflect
comparability.

RECENT ACCOUNTING PRONOUNCEMENTS

         In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which was
amended by Statement Nos. 137 and 138, in June 1999 and June 2000, respectively.
The Statement requires the Company to recognize all derivatives on the balance
sheet at fair value. Derivatives that do not receive hedge accounting treatment
are adjusted to fair value through income. If a derivative is a hedge, depending
on the nature of the hedge, changes in the fair value of the derivative are
either offset against the change in fair value of assets, liabilities, or firm
commitments through earnings or recognized in other comprehensive income until
the hedged item is recognized in earnings. The adoption of Statement No. 133, as
amended, on July 1, 2000 resulted in no cumulative effect of an accounting
change being recognized in the consolidated statements of operations or
comprehensive income.

         In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 REVENUE RECOGNITION IN FINANCIAL STATEMENTS ("SAB
101"). SAB 101 provides guidance on the recognition, presentation and disclosure
of revenue in financial statements. The Company has not completed its evaluation
of the impact that SAB 101 will have on its earnings or financial position. The
Company is required to adopt SAB 101 in the fourth quarter of fiscal 2001.

2.  INVENTORIES

<TABLE>
<CAPTION>
Inventories consist of the following:                     DECEMBER 31,          JUNE 30,
                                                              2000               2000
                                                       -----------------    ---------------
                                                              (DOLLARS IN THOUSANDS)
<S>                                                    <C>                  <C>
      FIFO cost:
            Raw materials.............................        $ 42,827           $ 42,278
            Work-in-process...........................          17,954             19,313
            Finished goods............................          45,250             42,325
                                                       -----------------    ---------------
                                                               106,031            103,916
            LIFO adjustment..........................             (916)               (81)
                                                       -----------------    ---------------
                                                              $105,115          $ 103,835
                                                       =================    ===============
</TABLE>




                                       7

<PAGE>


3. OTHER (INCOME) EXPENSE

GAIN ON SALE OF PROPERTY

In October 2000, the Company completed the sale of property in Dartford, United
Kingdom associated with its industrial refrigeration business resulting in a
gain of $4.5 million before taxes. Proceeds from the sale of approximately $6.9
million were used to reduce debt.

OTHER (INCOME) EXPENSE, NET

         Year-to-date the Company had other income of $0.5 million as compared
to other expense of $1.9 million for the same period in fiscal 2000. The
year-to-date increase is primarily related to events that occurred in the first
quarters of fiscal 2001and 2000. In the second quarter of fiscal 2001, the
Company repurchased $5 million of its Senior Notes at a discount resulting in a
net gain of approximately $0.4 million before taxes. See Note 5 for further
discussion. During the first quarter of fiscal 2000, the Company accrued a $1.3
million loss related to the sale of the commercial air conditioning and
refrigeration operation in France. Additionally, in conjunction with the
Company's refinancing the Company wrote off certain unamortized income and debt
issuance costs resulting in a charge of $0.3 million in the first quarter of
fiscal 2000.

4.  PROVISION FOR INCOME TAXES

         The tax provisions for the three months and six month periods ended
December 31, 2000 and 1999 are based on the estimated effective tax rates
applicable for the full years, and after giving effect to significant unusual
items related specifically to the interim periods. The difference between the
Company's reported tax provision, for the three months and six month periods
ended December 31, 2000 and 1999, and the tax provision computed based on U.S.
statutory rates is primarily attributable to nondeductible goodwill amortization
and unbenefitted foreign losses. Additionally, the Company's effective tax rate
for the three- month and six-month period ended December 31, 1999 reflects the
effect of the sale of a foreign subsidiary.

5.  DEBT AND FINANCIAL INSTRUMENTS

         In December 2000, the Company repurchased $5 million of its Senior
Notes at a discount, resulting in a gain of approximately $0.4 million after
write off of associated debt issuance costs. The Company plans to hold these
repurchased notes until their maturity in February 2003. The balance of Senior
Notes held outside the Company after the repurchase and included in the
Company's long-term debt at December 31, 2000 was $120 million.

         In September 2000, the Company sold an interest rate floor with a
notional amount of $30 million, which requires the Company to make payments if
3-month LIBOR falls below a certain level. Measurement dates and the maturity
date match those contained in the January 2000 swap transaction described below.
The Company received a payment of $165,000 as selling price for the floor. In
January 2000, the Company entered into an interest rate swap transaction whereby
the Company receives a fixed rate and pays a floating rate on the basis of
3-month LIBOR. The January 2000 swap has a three year term and a notional amount
of $30 million and effectively converts a portion of the Company's fixed rate
borrowings to a floating rate. Measurement dates and the maturity date of the
swap match interest payment dates and maturity date of the Company's Senior
Notes. The Company records its swap and floor at fair market value. The net
result of these positions recognized in operations for the six months ended
December 31, 2000 was $0.3 million.



                                       8

<PAGE>


6.  RESTRUCTURING CHARGES

         During the second quarter of fiscal 2001, the Company approved and
commenced additional restructuring actions in its United Kingdom Commercial Air
Conditioning and Refrigeration Group, recording reserves of approximately $3.0
million. The $3.0 million reserve primarily represents severance accruals
related to the elimination of approximately 110 employees in its air handling,
plate freezer, and compressor manufacturing units. The Company has spent
approximately $1.7 million of the recorded reserve through December 31, 2000.

         During the first quarter of fiscal 2001, the Company approved and
commenced restructuring actions in its Commercial Air Conditioning and
Refrigeration and Filtration Products groups, recording reserves of $3.5
million. In July 2000, the Company announced its intention to close its
manufacturing facility in Scottsboro, Alabama. Related to this closure, the
Company recorded a restructuring reserve of $2.0 million primarily representing
severance accruals related to the elimination of approximately 330 employees. In
addition, the Company also recognized severance accruals approximating $1.5
million related to the elimination of approximately 60 employees in the
Commercial Air Conditioning and Refrigeration Group in the United Kingdom and
approximately 10 employees in the Filtration Products Group in Germany. Through
December 31, 2000, the Company has spent approximately $1.6 million of the $3.5
million of reserves recorded in the first quarter of fiscal 2001.

         As described in Note 9 of the Annual Report, the Company implemented
several restructuring plans throughout fiscal 2000 in both the Commercial Air
Conditioning and Refrigeration and Filtration Products groups. Through December
31, 2000, the Company has spent $3.1 million of the $3.5 million restructuring
reserves recorded in fiscal 2000 primarily for severance arrangements.

All these restructuring efforts are expected to be completed by the end of
fiscal 2001.

7.  COMMITMENTS AND CONTINGENCIES

         PURCHASE COMMITMENTS- The Company secures pricing on a portion of its
copper requirements through forward contracts executed with certain suppliers.
At December 31, 2000, contracts for 2.3 million pounds of copper were in place.
These contracts have various expiration dates through September 30, 2001.

         ENVIRONMENTAL MATTERS - The Company is subject to potential liability
under the Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended (CERCLA), and other federal, state and local statutes and
regulations governing the discharge of pollutants into the environment and the
handling and disposal of hazardous substances and waste. These statutes and
regulations, among other things, impose potential liability on the Company for
the cost of remediation of contamination arising from the Company's past and
present operations and from former operations of other entities at sites later
acquired and now owned by the Company. Many of the Company's facilities have
operated for many years, and substances which are or might be considered
hazardous were generated, used, and disposed of at some locations, both on- and
off-site. Therefore, it is possible that environmental liabilities in addition
to those described in Note 15 of the Annual Report may arise in the future. The
Company records liabilities if, in management's judgment, environmental
assessments or remedial efforts are probable and the costs can be reasonably
estimated. These accrued liabilities are not discounted. Such estimates are
adjusted if necessary based upon the completion of a formal study or the
Company's commitment to a formal plan of action.

         LITIGATION - The Company is involved in various lawsuits in the
ordinary course of business. These lawsuits primarily involve claims for damages
arising out of the use of the Company's products. The Company is also involved
in litigation and administrative proceedings involving employment matters and
commercial disputes. Some of these lawsuits include claims for punitive as well
as compensatory damages. The Company is insured for product liability claims for
amounts in excess of established deductibles and accrues for the estimated
liability on a case-by-case basis up to the limits of the deductibles. All other
claims and lawsuits are also handled on a case-by-case basis.

         The Company does not believe that the potential liability from the
ultimate outcome of environmental and litigation matters will have a material
adverse effect.

                                       9

<PAGE>

8. BUSINESS SEGMENTS INFORMATION

         The Company serves the global commercial heating, ventilation, air
conditioning and refrigeration ("HVAC&R") industry with two industry segments:
Commercial Air Conditioning and Refrigeration, the manufacture, sale and
distribution of heating, ventilating, air conditioning, industrial refrigeration
products, and Filtration Products, the manufacture and sale of air filtration
products and systems. Information relating to operations in each industry
segment is as follows as of and for the three and six months ended December 31,
2000 and 1999:

<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED           SIX MONTHS ENDED
                                                          DECEMBER 31,                DECEMBER 31,
                CLASSIFIED BY INDUSTRY                 2000         1999           2000         1999
                ----------------------                 ----         ----           ----         ----
                                                                        (DOLLARS IN THOUSANDS)
<S>                                                  <C>          <C>          <C>          <C>
Net Sales:
     Commercial Air Conditioning and Refrigeration   $ 128,547    $ 121,555    $ 263,820    $ 269,455
     Filtration Products .........................      84,410       80,996      164,520      158,733
     Eliminations ................................      (1,080)      (1,454)        (363)        (873)
                                                     ---------    ---------    ---------    ---------
             Total ...............................   $ 211,877    $ 202,188    $ 426,886    $ 427,315
                                                     =========    =========    =========    =========
Operating Income (Loss):
     Commercial Air Conditioning and Refrigeration   $     336    $  (1,579)   $   4,002    $     594
     Filtration Products .........................       4,293        4,988        8,492       10,290
     Corporate ...................................        (451)          10         (956)        (366)
                                                     ---------    ---------    ---------    ---------
             Total ...............................   $   4,178    $   3,419    $  11,539    $  10,518
                                                     =========    =========    =========    =========
Depreciation/Amortization:
     Commercial Air Conditioning and Refrigeration   $   5,039    $   4,957    $  10,062    $  10,155
     Filtration Products .........................       2,303        2,447        4,594        4,944
     Corporate ...................................           6            8           12           22
                                                     ---------    ---------    ---------    ---------
             Total ...............................   $   7,348    $   7,412    $  14,668    $  15,121
                                                     =========    =========    =========    =========
Capital Expenditures:
     Commercial Air Conditioning and Refrigeration   $   1,672    $     402    $   5,119    $   1,845
     Filtration Products .........................         880          597        1,825        1,432
                                                     ---------    ---------    ---------    ---------
                  Total ..........................   $   2,552    $     999    $   6,944    $   3,277
                                                     =========    =========    =========    =========
</TABLE>

         The Company estimates corporate expenses and determines fixed
allocations of these expenses for each business segment at the beginning of the
fiscal year. Any over or under allocation of actual expenses incurred results in
income or expense reported at the corporate level. A reconciliation of segment
profit to the Company's earnings before taxes for each quarter is as follows:

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED       SIX MONTHS ENDED
                                                     DECEMBER 31,           DECEMBER 31,
                                                  2000         1999       2000         1999
                                                  ----         ----       ----         ----
                                                            (DOLLARS IN THOUSANDS)
<S>                                             <C>         <C>         <C>         <C>
Operating income from business segments .....   $  4,629    $  3,409    $ 12,495    $ 10,884
Over (under) allocation of corporate expenses       (451)         10        (956)       (366)
Interest expense, net .......................      5,072       5,546      10,295      11,419
Other (income) expense, net .................     (4,904)       (220)     (5,000)      1,862
                                                --------    --------    --------    --------
Income (loss) before income taxes ...........   $  4,010    $ (1,907)   $  6,244    $ (2,763)
                                                ========    ========    ========    ========
</TABLE>

                                       10

<PAGE>



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

         RESULTS OF OPERATIONS

         NET SALES were $211.9 million in the three months ended December 31,
2000, which represents an increase of $9.7 million, or 4.8%, as compared to
$202.2 million for the same period in the prior year. Net sales decreased $0.4
million, or 0.1% to $426.9 million from $427.3 million for the six months ended
December 31, 2000 and 1999, respectively. In October 1999, the Company sold its
commercial air conditioning operation in France, which had sales of $11.6
million in the first six months of fiscal 2000. Additionally, the Company
estimates that sales have decreased by approximately $10.3 million and $18.3
million for the three months and six months ending December 31, 2000,
respectively, due to the impact of unfavorable currency trends in translating
European sales. Excluding the net sales attributable to the operation in France
for fiscal 2000 and currency impact, net sales for the three months and six
months ended December 31, 2000 increased $20.0 million or 9.9% and $29.5 million
or 6.9%, respectively, as compared to the corresponding period of the prior
year.

         COMMERCIAL AIR CONDITIONING AND REFRIGERATION GROUP net sales for the
three months ended December 31, 2000 increased $7.0 million, or 5.8%, to $128.5
million as compared to $121.5 million for the three months ended December 31,
1999. Additionally, the Company estimates that sales have decreased by
approximately $4.6 million for the three months ended December 31, 2000 due to
the impact of unfavorable currency trends in translating European sales.
Excluding the currency impact, net sales increased $11.6 million or 9.5%. This
increase is the result of an 11.0% increase in domestic sales, and a 5.9%
increase in international sales. The domestic sales increase is primarily
attributable to increased applied air handling product demand in the quarter
(principally rooftop and self-contained) and increased service revenue. Applied
air handling sales increased 10.4% from the prior quarter while service revenues
increased 20.1%. The increase in international sales is primarily the result of
consolidation of the Company's Spanish operation, which became a wholly owned
subsidiary in July 2000.

         Year-to-date sales decreased $5.6 million, or 2.1%, to $263.8 million
from $269.4 million. This decrease is primarily attributable to the sale of the
commercial air conditioning and refrigeration operation in France in October
1999. Additionally, the Company estimates that approximately $8.0 million of the
decrease is due to the impact of unfavorable currency trends in translating
European sales. Excluding these two items, net sales increased $14.0 million, or
5.4%. This increase is the result of a 5.8% increase in domestic sales and a
4.3% increase in international sales. The increase in domestic sales is
primarily attributable to increased applied air handling product demand
(principally rooftop and self-contained) and increased service revenue. Applied
air handling sales increased 13% from the prior year, while service revenues
increased 17.3%. The increase in international sales is primarily the result of
consolidation of the Company's Spanish operation, which became a wholly owned
subsidiary in July 2000.

         Backlog for the Commercial Air Conditioning and Refrigeration Group was
$116 million at December 31, 2000 as compared to $124 million and $100 million
at June 30, 2000 and December 31, 1999, respectively.

         FILTRATION PRODUCTS GROUP net sales for the three months ended December
31, 2000 increased $3.4 million, or 4.2%, to $84.4 million as compared to $81.0
million for the three months ended December 31, 1999. The Company estimates that
sales have decreased by approximately $5.7 million for the second quarter of
fiscal 2001 due to the impact of unfavorable currency trends in translating
European sales. Excluding the currency impact, net sales increased $9.1 million
or 11.3%. This increase is the result of a 4.2% increase in domestic sales, and
a 16.5% increase in international sales. The increase in domestic sales is
primarily attributable to continued strong clean room market demand and
Machinery Filtration and Acoustical Systems "MFAS" activity. The increase in
international sales is primarily due to improving market conditions in Asia,
strong air pollution control "APC" sales in Europe, and increased APC projects
in Latin America this quarter versus the prior year.

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<PAGE>

         Year-to-date sales increased $5.8 million, or 3.6%, to $164.5 million
from $158.7 million for the six months ended December 31, 1999. The Company
estimates that sales have decreased by approximately $10.3 million for the first
six months of fiscal 2001 due to the impact of unfavorable currency trends in
translating European sales. Excluding the currency impact, net sales increased
$16.1 million or 10.1% for the six months ended December 31, 2000 versus 1999.
Domestic sales increased 4.1%, while international sales increased 13.5%. The
increase in domestic sales is primarily attributable to strong clean room demand
and MFAS activity, while the increase in international sales is attributable to
improving market conditions in Asia across all product lines, and strong APC
sales in Europe.

         GROSS PROFIT increased to $52.7 million, or 24.9% of sales, for the
three months ended December 31, 2000 as compared to $50.5 million, or 25.0% of
sales, for the three months ended December 31, 1999. Year-to-date gross profit
increased slightly to $111.0 million, or 26.0% of sales, from $110.5 million,
representing 25.9% of sales, for the six months ended December 31, 1999. In the
Commercial Air Conditioning and Refrigeration Group, year-to-date gross profit
as a percentage of sales was 25.1% as compared to 23.6% for the same period in
fiscal 2000. This increase in gross margin resulted primarily from improved
manufacturing efficiency in the domestic chiller business unit. The Filtration
Products Group's year-to-date gross profit as a percentage of sales decreased
from 29.5% in fiscal 2000 to 27.3% for the same period in fiscal 2001. This
decrease is primarily the result of competitive pricing pressures in North
America and Europe in the replacement filter business.

         OPERATING EXPENSES were $48.5 million, or 22.9% of sales, for the
second quarter of fiscal 2001 versus $47.1 million, or 23.3% of sales, for the
second quarter of fiscal 2000. For the first six months of fiscal years 2001 and
2000, operating expenses were $99.5 million, or 23.3% of sales, versus $100.0
million, or 23.4% of sales, respectively. Excluding amortization and
restructuring charges, year-to-date operating expenses were $87.4 million, or
20.5% of sales, versus $94.2 million, or 22.0% of sales. The decrease from the
first six months of fiscal 2000 compared to the first six months of fiscal 2001
is primarily attributable to lower commissions due to favorable sales mix and
continued focus on cost control.

         INCOME FROM OPERATIONS for the second quarter of fiscal 2001 and
year-to-date increased as compared to the same periods in fiscal 2000. For the
second quarter income from operations increased to $4.2 million, or 2.0% of
sales, as compared to $3.4 million, or 1.7% of sales, in the second quarter of
fiscal 2000. Year-to-date income from operations increased to $11.5 million, or
2.7% of sales, as compared to $10.5 million, or 2.5% of sales in fiscal 2000.
Excluding amortization and restructuring charges, year-to-date income from
operations increased to $23.6 million, or 5.5% of sales, compared to $16.3
million, or 3.8% of sales in the corresponding period of the prior year.

         The Commercial Air Conditioning and Refrigeration Group's income from
operations improved in the second quarter of fiscal 2001 to $5.0 million, or
3.9% of sales, as compared to breakeven in the second quarter of fiscal 2000,
excluding amortization and restructuring charges. Year-to-date income from
operations, excluding amortization and restructuring charges, increased from
$3.9 million, or 1.5% of sales, to $13.2 million, or 5.0% of sales, for the
first six months of fiscal 2000 as compared to the first six months of fiscal
2001, respectively.

         The Filtration Products Group income from operations, excluding
amortization and restructuring charges, for the second quarter of fiscal 2001
decreased from $6.1 million, or 7.6% of sales, in fiscal 2000 to $5.5 million,
or 6.5% of sales. Year-to-date income from operations, excluding amortization
and restructuring charges, decreased from $12.6 million, or 7.9% of sales,
during the first six months of fiscal 2000 to $11.4 million, or 6.9% of sales,
for the first six months of fiscal 2001.

         NET INTEREST EXPENSE decreased to $5.1 million and $10.3 million during
the second quarter and six months ended December 31, 2000 from $5.5 million and
$11.4 million for the comparable periods ended December 31, 1999. Decrease in
interest expense is attributable to lower debt levels.

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<PAGE>



         NET OTHER (INCOME) EXPENSE for the second quarter of fiscal 2001 was
income of $0.4 million compared to $0.2 million in the second quarter of fiscal
2000. Year-to-date the Company had income of $0.5 million as compared to expense
of $1.9 million for the same period in fiscal 2000. See Note 3 to the unaudited
condensed financial statements for further discussion.

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity needs are provided by cash generated from operating
activities and supplemented when necessary by short-term credit facilities.
During the first six months of fiscal 2001, funds generated by operating
activities were $16.5 million as compared to $24.0 million of funds generated in
the prior fiscal year for the comparable period. Excluding the cash flow impact
from the sale of the operation in France in October 1999, net cash flows from
operations for fiscal 2000 were $19.5 million. During the first six months of
fiscal 2001, net cash from investing activities is comprised of $6.9 million in
capital expenditures, fully offset by $6.9 million in cash proceeds from the
sale of property in the United Kingdom. Capital spending for the first six
months increased from $3.3 million in the prior year to $6.9 million this year
due to the relocation of the Scottsboro, Alabama operation to the consolidated
air handling operation in Minnesota and new product development.

         On September 30, 1999, the Company refinanced its U.S. bank credit
facilities with a Term Loan of $30 million and a Revolving Credit Facility of
$90 million (" Bank Credit Agreement"). The Bank Credit Agreement has a
three-year term, was used to retire all obligations under the previous bank
agreement and is designed to provide added flexibility and borrowing
availability. At December 31, 2000, remaining borrowing availability under the
Revolving Credit portion of the Bank Credit Agreement was $47.6 million.
Payments on long-term debt for the first six months of fiscal 2001were $4.6
million. In addition, as more fully discussed in Note 5 to the unaudited
financial statements, the Company used cash of $4.5 million to repurchase $5.0
million in Senior Notes. Short-term borrowings decreased by $8.1 million during
the six-month period.

         A short-term credit facility provided to a subsidiary of the Company is
supported by a (pound)11.5 million letter of credit from the Company's parent,
O.Y.L. Industries Berhad (OYL), which expires on June 30, 2001. Approximately
(pound)5.0 million of this facility was utilized at December 31, 2000. This
support arrangement may be extended for additional time periods with the consent
of OYL and the bank providing the facilities.

         Management believes, based upon current levels of operations and
forecasted earnings, that cash flows from operations, together with borrowings
under the Bank Credit Agreement and other short-term credit facilities, will be
adequate to make payments of principal and interest on debt, to permit
anticipated capital expenditures and to fund working capital requirements and
other cash needs. Nevertheless, the Company will remain leveraged to a
significant extent and its debt service obligations will continue to be
substantial. If the Company's sources of funds were to fail to satisfy the
Company's requirements, the Company may need to refinance its existing debt or
obtain additional financing. There is no assurance that any such new financing
alternatives would be available, and, in any case, such new financing (if
available) would be expected to be more costly and burdensome than the debt
agreements currently in place.

EURO CONVERSION

         Management has developed a plan for the effect of the Euro and is
currently modifying and testing its systems in preparation for converting to the
Euro effective July 1, 2001. The Euro conversion is not expected to have a
material effect on the Company's operating results or competitive position. The
Company will continue to investigate opportunities for European-wide system
infrastructures.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         There have been no material changes in the reported market risks since
the end of the most recent fiscal year. See Note 5 to the Consolidated Financial
Statements (unaudited) for disclosures of additional financial instruments that
have been entered into by the Company since the end of the most recent fiscal
year.

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<PAGE>


FORWARD-LOOKING STATEMENTS

         When used in this report the words "believes," "anticipates,"
"estimates", "plans" and "expects" and similar expressions are intended to
identify forward-looking statements. These forward-looking statements are
intended to provide management's current expectations or plans for the future
operating and financial performance of the Company, based on assumptions
currently believed to be valid. Readers are cautioned not to place undue
reliance on them. A variety of factors could cause actual results to differ
materially from those anticipated in the Company's forward-looking
statements, some of which include risk factors previously discussed in this
and other SEC reports filed by the Company. These risk factors include, but
are not limited to, general economic conditions, environmental laws and
regulations, risks associated with currency fluctuations, a weakening in
Latin America and Asian markets, unforeseen competitive pressures, warranty
expenses, market acceptance of new products, unseasonably cool spring or
summer weather, the inability to meet debt covenants, unforeseen difficulties
in maintaining mutually beneficial relationships with strategic partnerships
and alliances, and the results of restructuring activities. Forward-looking
statements speak only as of the date on which those statements are made. The
Company undertakes no obligation to update any forward-looking statements to
reflect unanticipated events or circumstances occurring after that date.


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<PAGE>



PART II: OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     Not applicable.



ITEM 6(B).  REPORTS ON FORM 8-K

     There were no reports filed on Form 8-K during the period.






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<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.



                                          AAF-MCQUAY INC.





DATE   FEBRUARY 9, 2001               By: /s/ BRUCE D. KRUEGER
     ----------------------               ----------------------------
                                          Bruce D. Krueger
                                          Vice President of Finance
                                          (Principal Financial and Chief
                                          Accounting Officer)



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