<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 MARCH 31, 2001
                               --------------


                                       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 April 27, 2001.


<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 -
              March 31, 2001 and June 30, 2000.........................................................   3

              Consolidated Statements of Operations -
              Three and Nine Months Ended March 31, 2001 and 2000......................................   4

              Condensed Consolidated Statements of Cash Flows -
              Nine Months Ended March 31, 2001 and 2000................................................   5

              Consolidated Statements of Comprehensive Income (Loss) -
              Three and Nine Months Ended March 31, 2001 and 2000......................................   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>

                                                                                      March 31,          June 30,
                                                                                        2001               2000
                                                                                   ----------------    --------------
<S>                                                                                <C>                 <C>
                                      ASSETS

Current assets:
         Cash and cash equivalents.................................................      $  9,433          $ 11,522
         Accounts receivable.......................................................       187,658           204,523
         Inventories...............................................................       108,641           103,835
         Other current assets......................................................         7,856             8,216
                                                                                   ----------------    --------------

                Total current assets...............................................       313,588           328,096

Property, plant and equipment, net.................................................       118,256           124,998
Cost in excess of net assets acquired and other identifiable intangibles, net......       205,868           214,311
Other assets and deferred charges..................................................        17,155            17,995
                                                                                   ----------------    --------------
                Total assets.......................................................      $654,867          $685,400
                                                                                   ================    ==============

                       LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
         Short-term borrowings.....................................................      $ 60,367          $ 57,859
         Current maturities of long-term debt......................................         6,048             7,319
         Accounts payable, trade...................................................        98,078           105,637
         Accrued warranty..........................................................        20,992            18,743
         Accrued employee compensation.............................................        27,514            29,784
         Other accrued liabilities.................................................        40,252            47,610
                                                                                   ----------------    --------------
                Total current liabilities..........................................       253,251           266,952

Long-term debt.                                                                           140,862           153,676
Deferred income taxes..............................................................        33,772            34,911
Other liabilities..................................................................        42,613            46,353
                                                                                   ----------------    --------------
                Total liabilities..................................................       470,498           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.........................................................        21,980            17,864
         Accumulated other comprehensive loss......................................      (17,776)          (14,521)
                                                                                   ----------------    --------------
                Total stockholders' equity.........................................       184,369           183,508
                                                                                   ----------------    --------------
Total liabilities and stockholders' equity.........................................      $654,867          $685,400
                                                                                   ================    ==============
</TABLE>


               See Notes to the Consolidated Financial Statements


                                       3

<PAGE>




                        AAF-MCQUAY INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (unaudited)

                             (dollars in thousands)


<TABLE>
<CAPTION>

                                            Three Months Ended             Nine Months Ended
                                                March 31,                      March 31,
                                        ---------------------------   -----------------------------
                                            2001          2000            2001            2000
                                        -------------  ------------   -------------   -------------
<S>                                     <C>            <C>            <C>             <C>
Net sales............................       $210,997     $ 215,060        $637,883       $ 642,375
Cost of sales........................        156,056       161,086         471,930         477,898
                                        -------------  ------------   -------------   -------------
Gross profit.........................         54,941        53,974         165,953         164,477
Operating expenses:
     Selling, general and
      administrative.................         45,089        45,791         132,499         139,992
      Restructuring..................            631         1,669           7,177           1,847
      Amortization of intangible assets        2,758         2,774           8,276           8,380
                                        -------------  ------------   -------------   -------------
                                              48,478        50,234         147,952         150,219
                                        -------------  ------------   -------------   -------------
Income from operations...............          6,463         3,740          18,002          14,258
Interest expense, net................          4,663         5,421          14,958          16,840
Gain on sale of property.............            ---           ---         (4,538)             ---
Other (income) expense, net.........              42          (23)           (419)           1,839
                                        -------------  ------------   -------------   -------------
Income (loss) before income taxes....          1,758       (1,658)           8,001         (4,421)
Minority interest loss ..............            (32)         (99)           (124)           (235)

Provision (benefit) for income taxes.            827           710           3,762            (21)
                                        -------------  ------------   -------------   -------------
Net income (loss)....................         $  899     $ (2,467)       $   4,115       $ (4,635)
                                        =============  ============   =============   =============
</TABLE>


               See Notes to the Consolidated Financial Statements


                                       4

<PAGE>




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


<TABLE>
<CAPTION>

                                                                     Nine Months Ended
                                                                         March 31,
                                                                -----------------------------
                                                                   2001             2000
                                                                ------------    -------------
<S>                                                             <C>             <C>
Cash flows from operating activities:

      Net income (loss) ....................................      $  4,115         $ (4,635)
      Adjustments to reconcile to cash from
           operating activities:
      Restructuring charges ................................         7,177            1,847
      Depreciation and amortization ........................        21,323           22,553
      Loss on sale of business .............................            --            1,331
      Gain on sale of property .............................        (4,538)             --
      Other non-cash items, net ............................          (400)             263
      Changes in operating assets and liabilities ..........       (14,182)          11,165
                                                                ------------     -------------

Net cash from operating activities .........................        13,495           32,524

Cash flows from investing activities:

      Capital expenditures, net ............................       (10,567)          (5,514)
      Proceeds from sale of business .......................          --             12,996

      Proceeds from sale of property .......................         6,922             --
                                                                  --------         --------
Net cash from investing activities .........................        (3,645)           7,482

Cash flows from financing activities:

      Net borrowings (repayments) under short-term borrowing         2,508          (19,147)
          arrangements

      Payments on long-term debt ...........................        (6,322)         (42,377)
      Proceeds from issuance of long-term debt .............           238           30,000
      Repurchase of senior notes ...........................        (7,443)             --
      Payments of debt issuance costs ......................            --           (1,387)
                                                                  --------         --------
Net cash from financing activities .........................       (11,019)         (32,911)

Effect of exchange rate changes on cash ....................          (920)          (1,027)
                                                                  --------         --------
Net increase (decrease) in cash and cash equivalents .......        (2,089)           6,068
Cash and cash equivalents at beginning of period ...........        11,522            9,168
                                                                  --------         --------
Cash and cash equivalents at end of period .................      $  9,433         $ 15,236
                                                                  ========         ========
</TABLE>

               See Notes to the Consolidated Financial Statements


                                       5

<PAGE>



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

<TABLE>
<CAPTION>


                                                         Three Months Ended              Nine Months Ended
                                                             March 31,                       March 31,
                                                    -----------------------------    --------------------------
                                                        2001            2000            2001           2000
                                                    -------------   -------------    ------------   -----------
<S>                                                 <C>             <C>              <C>            <C>
Net income (loss) ...............................       $   899        $(2,467)       $ 4,115        $(4,635)
Other comprehensive income (loss):
       Foreign currency translation adjustments..        (2,086)        (1,811)        (3,255)        (1,790)
       Write off of accumulated foreign currency
           translation adjustments due to sale of
           business..............................          --             --             --              829
                                                    -------------   -------------    ------------   -----------
Comprehensive income (loss) .....................       $(1,187)       $(4,278)       $   860        $(5,596)
                                                    =============   =============    ============   ===========

</TABLE>


               See Notes to the Consolidated Financial Statements


                                       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 nine months ended March 31, 2001 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 March 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 is in the process of completing
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:                     March 31,            June 30,
                                                             2001                2000
                                                       -----------------    ---------------
                                                                (dollars in thousands)
<S>                                                    <C>                  <C>
      FIFO cost:
            Raw materials...........................           $ 41,867           $ 42,278
            Work-in-process.........................             23,165             19,313
            Finished goods..........................             44,774             42,325
                                                       -----------------    ---------------
                                                                109,807            103,916
            LIFO adjustment.........................             (1,166)               (81)
                                                       -----------------    ---------------
                                                              $ 108,641          $ 103,835
                                                       =================    ===============
</TABLE>


                                       7


<PAGE>



3. OTHER INCOME AND 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

     In the second and third quarters of fiscal 2001, the Company repurchased
$8 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 of certain debt, the Company wrote off certain unamortized 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 month and nine month periods ended March
31, 2001 and 2000 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 month and nine month periods ended March
31, 2001 and 2000, 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 nine month periods ended March 31, 2000 reflects the effect
of the sale of a foreign subsidiary.

5.  DEBT AND FINANCIAL INSTRUMENTS

     In the second and third quarters of fiscal 2001, the Company repurchased a
total of $8 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 March 31, 2001 was
$117 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 in its balance sheet at fair
market value. The net result of these positions recognized in operations for the
nine months ended March 31, 2001 was income of $0.3 million.

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 $2.5 million of the recorded reserve through March 31, 2001.


                                       8

<PAGE>

During the third quarter of fiscal 2001, the Company approved and commenced
additional restructuring actions in its Commercial Air Conditioning and
Refrigeration Group primarily in the United Kingdom, recording reserves of
approximately $0.6 million. The $0.6 million reserve primarily represents
severance accruals related to the elimination of approximately 10 employees.
The Company has spent approximately $0.2 million of the recorded reserve
through March 31, 2001.

     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 March 31, 2001, the Company
has spent approximately $3.0 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 March 31,
2001, the Company has spent $3.2 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 March 31, 2001, contracts for 2.3 million pounds of copper were in place.
These contracts have various expiration dates through January 31, 2002.

     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 provided for 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 on its financial statements.


                                       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 nine months
ended March 31, 2001 and 2000:

<TABLE>
<CAPTION>

                                                              Three Months Ended             Nine Months Ended
                                                                   March 31,                     March 31,
                Classified By Industry                      2001         2000             2001         2000
                ----------------------                      ----         ----             ----         ----
                                                                        (dollars in thousands)
<S>                                                      <C>              <C>             <C>          <C>
Net Sales:
     Commercial Air Conditioning and Refrigeration       $ 126,722        $ 129,638        $ 390,542        $ 399,093
     Filtration Products .........................          86,335           85,864          250,855          244,597
     Eliminations ................................          (2,060)            (442)          (3,514)          (1,315)
                                                         ---------        ---------        ---------        ---------
             Total ...............................       $ 210,997        $ 215,060        $ 637,883        $ 642,375
                                                         =========        =========        =========        =========
Operating Income (Loss):
     Commercial Air Conditioning and Refrigeration       $   1,330        $  (1,283)       $   5,332        $    (689)
     Filtration Products .........................           5,311            4,778           13,803           15,068
     Corporate ...................................            (178)             245           (1,133)            (121)
                                                         ---------        ---------        ---------        ---------
             Total ...............................       $   6,463        $   3,740        $  18,002        $  14,258
                                                         =========        =========        =========        =========
Depreciation/Amortization:
     Commercial Air Conditioning and Refrigeration       $   4,371        $   4,982        $  14,433        $  15,137
     Filtration Products .........................           2,278            2,444            6,873            7,388
     Corporate                                                   6                6               17               28
                                                         ---------        ---------        ---------        ---------
             Total ...............................       $   6,655        $   7,432        $  21,323        $  22,553
                                                         =========        =========        =========        =========
Capital Expenditures:
     Commercial Air Conditioning and Refrigeration       $   2,622        $     749        $   7,741        $   2,594
     Filtration Products .........................           1,001            1,413            2,821            2,845
     Corporate                                                  --               75                5               75
                                                         ---------        ---------        ---------        ---------
             Total ...............................       $   3,623        $   2,237        $  10,567        $   5,514
                                                         =========        =========        =========        =========
</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 period is as follows:

<TABLE>
<CAPTION>

                                                           Three Months Ended             Nine Months Ended
                                                                March 31,                     March 31,
                                                            2001         2000             2001         2000
                                                            ----         ----             ----         ----
                                                                        (dollars in thousands)
<S>                                                        <C>           <C>              <C>        <C>
Operating income from business segments                      $6,641      $ 3,495          $19,135    $ 14,379
Over (under) allocation of corporate expenses                  (178)         245           (1,133)       (121)
Interest expense, net                                         4,663        5,421           14,958      16,840
Other (income) expense, net                                      42          (23)          (4,957)      1,839
                                                          ---------     ---------         --------   --------
Income (loss) before income taxes                           $ 1,758      $(1,658)         $ 8,001    $ (4,421)
                                                          =========     =========         ========   ========
</TABLE>


                                      10

<PAGE>




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

     RESULTS OF OPERATIONS

     NET SALES were $211.0 million in the three months ended March 31, 2001,
which represents a decrease of $4.1 million, or 1.9%, as compared to $215.1
million for the same period in the prior year. Net sales decreased $4.5 million,
or 0.7% to $637.9 million from $642.4 million for the nine months ended March
31, 2001 and 2000, respectively. In October 1999, the Company sold its
commercial air conditioning operation in France, which had sales of $11.6
million in the first nine months of fiscal 2000. Additionally, the Company
estimates that sales have decreased by approximately $6.4 million and $26.9
million for the three months and nine months ending March 31, 2001,
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 nine
months ended March 31, 2001 increased $2.4 million or 1.1% and $34.1 million or
5.4%, respectively, as compared to the corresponding period of the prior year.

     COMMERCIAL AIR CONDITIONING AND REFRIGERATION GROUP net sales for the three
months ended March 31, 2001 decreased $2.9 million, or 2.2%, to $126.7 million
as compared to $129.6 million for the three months ended March 31, 2000.
Additionally, the Company estimates that sales have decreased by approximately
$2.6 million for the three months ended March 31, 2001 due to the impact of
unfavorable currency trends in translating European sales. Excluding the
currency impact, net sales for the three months ended March 31, 2001 are
essentially flat with those of the comparable prior year quarter.

     Year-to-date sales decreased $8.6 million, or 2.1%, to $390.5 million from
$399.1 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 $12.8 million of
the decrease is due to the impact of unfavorable currency trends in translating
European sales. Excluding these two items, net sales increased $15.9 million, or
4.1%. This increase is the result of a 3.8% increase in domestic sales and a
5.2% 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 8.6% from the prior year, while service revenues
increased 14.7%. 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
$114 million at March 31, 2001 as compared to $124 million and $113 million at
June 30, 2000 and March 31, 2000, respectively.

     FILTRATION PRODUCTS GROUP net sales for the three months ended March 31,
2001 increased $.5 million, or 0.5%, to $86.3 million as compared to $85.8
million for the three months ended March 31, 2000. The Company estimates that
sales have decreased by approximately $3.8 million for the third quarter of
fiscal 2001 due to the impact of unfavorable currency trends in translating
European sales. Excluding the currency impact, net sales increased $4.3 million
or 5.0%. This increase is the result of a 12.7% increase in domestic sales.
International sales were flat with the prior year. The increase in domestic
sales is primarily attributable to continued strong clean room sales and
increased replacement air filter retail sales.

     Year-to-date sales increased $6.3 million, or 2.6%, to $250.9 million from
$244.6 million for the nine months ended March 31, 2000. The Company estimates
that sales have decreased by approximately $14.1 million for the first nine
months of fiscal 2001 due to the impact of unfavorable currency trends in
translating European sales. Excluding the currency impact, net sales increased
$20.4 million or 8.3% for the nine months ended March 31, 2001 versus 2000.
Domestic sales increased 6.9%, while international sales increased 8.5%. The
increase in domestic sales is primarily attributable to strong clean room sales
and Machinery Filtration and Acoustical Systems ("MFAS") activity, while the
increase in international sales is attributable to improving market conditions
in Asia and strong Air Pollution and Control Products and Systems ("APC") sales
in Europe.


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<PAGE>

     GROSS PROFIT increased to $54.9 million, or 26.0% of sales, for the three
months ended March 31, 2001 as compared to $54.0 million, or 25.1% of sales, for
the three months ended March 31, 2000. Year-to-date gross profit increased
slightly to $166.0 million, or 26.0% of sales, from $164.5 million, representing
25.6% of sales, for the nine months ended March 31, 2000. In the Commercial Air
Conditioning and Refrigeration Group, year-to-date gross profit as a percentage
of sales was 24.9% as compared to 23.7% 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 28.6%
in fiscal 2000 to 27.4% 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 23.0% of sales, for the third
quarter of fiscal 2001 versus $50.2 million, or 23.4% of sales, for the third
quarter of fiscal 2000. For the first nine months of fiscal years 2001 and 2000,
operating expenses were $148.0 million, or 23.2% of sales, versus $150.2
million, or 23.4% of sales, respectively. Excluding amortization and
restructuring charges, year-to-date operating expenses were $132.5 million, or
20.8% of sales, versus $140.0 million, or 21.8% of sales. The decrease for the
first nine months of fiscal 2001 compared to the first nine months of fiscal
2000 is primarily attributable to lower commissions due to favorable sales mix
and continued focus on cost control.

     INCOME FROM OPERATIONS for the third quarter of fiscal 2001 and
year-to-date increased as compared to the same periods in fiscal 2000. For the
third quarter income from operations increased to $6.5 million, or 3.1% of
sales, as compared to $3.7 million, or 1.7% of sales, in the third quarter of
fiscal 2000. Year-to-date income from operations increased to $18.0 million, or
2.8% of sales, as compared to $14.3 million, or 2.2% of sales in fiscal 2000.
Excluding amortization and restructuring charges, year-to-date income from
operations increased to $33.5 million, or 5.2% of sales, compared to $24.5
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 third quarter of fiscal 2001 to $3.5 million, or 2.8%
of sales, as compared to $1.9 million, or 1.5% of sales, in the third quarter of
fiscal 2000, excluding amortization and restructuring charges. Year-to-date
income from operations, excluding amortization and restructuring charges,
increased from $5.9 million, or 1.5% of sales, to $16.7 million, or 4.3% of
sales, for the first nine months of fiscal 2000 as compared to the first nine
months of fiscal 2001, respectively.

     The Filtration Products Group income from operations, excluding
amortization and restructuring charges, for the third quarter of fiscal 2001
increased from $6.0 million, or 6.9% of sales, in fiscal 2000 to $6.5 million,
or 7.5% of sales. Year-to-date income from operations, excluding amortization
and restructuring charges, decreased from $18.5 million, or 7.6% of sales,
during the first nine months of fiscal 2000 to $17.9 million, or 7.1% of sales,
for the first nine months of fiscal 2001.

     NET INTEREST EXPENSE decreased to $4.7 million and $15.0 million during the
third quarter and nine months ended March 31, 2001 from $5.4 million and $16.8
million for the comparable periods ended March 31, 2000. Decrease in interest
expense is attributable to lower debt levels.


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<PAGE>




     NET OTHER (INCOME) EXPENSE was income of $0.4 million year-to-date as
compared to expense of $1.8 million for the same period in fiscal 2000. See Note
3 to the unaudited consolidated 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 nine months of fiscal 2001, funds generated by operating
activities were $13.5 million as compared to $32.5 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 $28.0 million. During the first nine months of
fiscal 2001, net cash from investing activities is comprised of $10.6 million in
capital expenditures, partially offset by $6.9 million in cash proceeds from the
sale of property in the United Kingdom. Capital spending for the first nine
months increased from $5.5 million in the prior year to $10.6 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 March 31, 2001, remaining borrowing availability under the
Revolving Credit portion of the Bank Credit Agreement was $42.0 million.
Payments on long-term debt for the first nine months of fiscal 2001 were $6.3
million. In addition, as more fully discussed in Note 5 to the unaudited
consolidated financial statements, the Company used cash of $7.4 million to
repurchase $8.0 million in Senior Notes. Short-term borrowings increased by $2.5
million during the nine-month period.

     A short-term credit facility provided to a subsidiary of the Company is
supported by a l11.5 million letter of credit from the Company's parent,
O.Y.L. Industries Berhad (OYL), which expires on May 31, 2001. Approximately
l8.4 million of this facility was utilized at March 31, 2001. 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.


                                       13

<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, economic conditions
in the United States, 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, 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 May 11, 2001      By:    /s/ BRUCE D. KRUEGER
     ----------------         ----------------------------
                              Bruce D. Krueger
                              Vice President of Finance
                              (Principal Financial and Chief Accounting Officer)


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