<PAGE>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q

<Table>
<C>        <S>
   [ ]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934

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

           FOR THE TRANSITION PERIOD FROM SEPTEMBER 1, 2003 TO DECEMBER
           31, 2003
</Table>

                         COMMISSION FILE NUMBER 1-8831

                              FEDDERS CORPORATION
             (Exact name of registrant as specified in its charter)

<Table>
<S>                                            <C>
                   DELAWARE                                      22-2572390
           (State of incorporation)                 (I.R.S. Employer Identification No.)
  505 MARTINSVILLE ROAD, LIBERTY CORNER, NJ                      07938-0813
   (Address of principal executive offices)                      (Zip Code)
</Table>

              REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
                                 (908) 604-8686

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

                               Yes [X]     No [ ]

     The registrant has outstanding 27,934,929 shares of Common Stock and
2,493,061 shares of Class B Stock (which is immediately convertible into Common
Stock, on a share-for-share basis) as of January 31, 2004.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                             ---------------------

                              FEDDERS CORPORATION

                                     INDEX

<Table>
<Caption>
                                              PAGE
                                             NUMBER
                                             ------
<S>      <C>                                 <C>
PART I   FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
         CONSOLIDATED STATEMENTS OF
           OPERATIONS AND COMPREHENSIVE
           LOSS FOR THE FOUR MONTHS ENDED
           DECEMBER 31, 2003 AND DECEMBER
           31, 2002........................      3
         CONSOLIDATED BALANCE SHEETS AS OF
           DECEMBER 31, 2003, AUGUST 31,
           2003 AND DECEMBER 31, 2002......      4
         CONSOLIDATED STATEMENTS OF CASH
           FLOWS FOR THE FOUR MONTHS ENDED
           DECEMBER 31, 2003 AND DECEMBER
           31, 2002........................      5
         NOTES TO THE CONSOLIDATED
           FINANCIAL STATEMENTS............   6-20
</Table>

<Table>
<Caption>
                                              PAGE
                                             NUMBER
                                             ------
<S>      <C>                                 <C>
ITEM 2.  MANAGEMENT'S DISCUSSION AND
           ANALYSIS OF RESULTS OF
           OPERATIONS AND FINANCIAL
           CONDITION.......................  21-23
ITEM 3.  QUANTITATIVE AND QUALITATIVE
           DISCLOSURES ABOUT MARKET RISK...     23
ITEM 4.  CONTROLS AND PROCEDURES...........     24
PART II  OTHER INFORMATION
ITEM 6.  EXHIBITS AND REPORTS ON FORM
           8-K.............................     24
         SIGNATURE.........................     25
         CERTIFICATIONS....................  26-29
</Table>

                             ---------------------

                                        2
<PAGE>

                          PART I FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                              FEDDERS CORPORATION

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                             AND COMPREHENSIVE LOSS

<Table>
<Caption>
                                                                 FOUR MONTHS ENDED
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                 2003         2002
                                                              ----------   ----------
                                                              (AMOUNTS IN THOUSANDS,
                                                              EXCEPT PER SHARE DATA)
                                                                    (UNAUDITED)
<S>                                                           <C>          <C>
Net sales...................................................   $ 55,554     $ 49,303
Costs and expenses:
  Cost of sales.............................................     48,253       40,332
  Selling, general and administrative expense...............     23,508       18,654
  Gain on sale of joint venture interest....................       (638)          --
                                                               --------     --------
                                                                 71,123       58,986
                                                               --------     --------
Operating loss..............................................    (15,569)      (9,683)
Partners' net interest in joint venture results.............     (1,355)        (526)
Interest expense, net.......................................     (6,003)      (5,964)
Other income (expense)......................................        265          101
                                                               --------     --------
Loss before income taxes and cumulative effect of a change
  in accounting principle...................................    (22,662)     (16,072)
Benefit for income taxes....................................     (7,361)      (5,222)
                                                               --------     --------
Loss before cumulative effect of a change in accounting
  principle.................................................    (15,301)     (10,850)
Cumulative effect of a change in accounting principle.......         --       11,906
                                                               --------     --------
Net loss....................................................    (15,301)     (22,756)
Preferred stock dividends...................................        484           --
                                                               --------     --------
Net loss applicable to common stockholders..................    (15,785)     (22,756)
Other comprehensive (loss) income:
  Foreign currency translation, net of tax..................        493           66
                                                               --------     --------
Comprehensive loss..........................................   $(15,292)    $(22,690)
                                                               ========     ========
Loss per common share:
  Basic/diluted loss per common share before cumulative
     effect of a change in accounting principle, less
     preferred stock dividends..............................   $  (0.52)    $  (0.33)
  Cumulative effect of a change in accounting principle.....         --        (0.37)
                                                               --------     --------
  Basic/diluted loss per common shares......................      (0.52)       (0.70)
                                                               ========     ========
Weighted averages shares:
  Basic.....................................................     30,179       32,489
  Diluted...................................................     30,179       32,489
Dividends per share declared:
  Common Stock..............................................   $   0.03     $   0.03
  Class B Stock.............................................       0.03     $   0.03
  Preferred Stock...........................................      0.538           --
</Table>

See accompanying notes to the consolidated financial statements
                                        3
<PAGE>

                              FEDDERS CORPORATION

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                              DECEMBER 31,   AUGUST 31,   DECEMBER 31,
                                                                  2003          2003          2002
                                                              ------------   ----------   ------------
                                                                       (AMOUNTS IN THOUSANDS)
                                                                            (UNAUDITED)
<S>                                                           <C>            <C>          <C>
                                                ASSETS
Current assets:
  Cash and cash equivalents.................................    $ 22,043      $ 60,902      $ 22,819
  Accounts receivable (net of allowance of $1,888, $2,032
    and $2,157 at December 31, 2003, August 31, 2003 and
    December 31, 2002, respectively)........................      29,718        51,178        21,626
  Inventories:
    Finished goods..........................................     113,659        52,226        75,285
    Work-in-process.........................................       4,487         5,114         3,617
    Raw materials and supplies..............................      27,340        21,608        24,794
                                                                --------      --------      --------
  Net inventories...........................................     145,486        78,948       103,696
  Deferred income taxes.....................................       7,652         7,654         5,607
  Assets held for sale......................................       8,564         8,564         8,249
  Other current assets......................................      28,352        21,463        18,939
                                                                --------      --------      --------
Total current assets........................................     241,815       228,709       180,936
Net property, plant and equipment:
  Land and improvements.....................................       1,508         1,508         1,524
  Buildings and leasehold improvements......................      31,880        31,423        34,770
  Machinery and equipment...................................     102,815       100,581        96,925
                                                                --------      --------      --------
  Gross property, plant and equipment.......................     136,203       133,512       133,219
  Less accumulated depreciation.............................      81,541        77,652        74,881
                                                                --------      --------      --------
Net property, plant and equipment...........................      54,662        55,860        58,338
Deferred income taxes.......................................       8,224         8,224         2,867
Goodwill....................................................      78,630        78,630        78,630
Other intangible assets.....................................       1,685         1,788         1,510
Other assets................................................      31,232        35,718        35,392
                                                                --------      --------      --------
Total assets................................................    $416,248      $408,929      $357,673
                                                                ========      ========      ========
                                 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term notes..........................................    $ 30,446      $  7,520      $ 24,304
  Current portion of long-term debt.........................       2,779         4,652         3,105
  Accounts payable..........................................      86,313        56,812        56,249
  Income taxes payable......................................          --         5,452         1,161
  Accrued expenses..........................................      39,032        64,552        29,807
                                                                --------      --------      --------
Total current liabilities...................................     158,570       138,988       114,626
Long-term debt..............................................     158,965       159,392       162,891
Other long-term liabilities.................................      31,528        31,037        21,858
Partners' net interest in joint venture.....................       4,235         4,584         4,087
Stockholders' equity:
Preferred Stock, $0.01 par value, 15,000 shares authorized,
  675, 675 and 324 issued at December 31, 2003, August 31,
  2003 and December 31, 2002, respectively..................           7             7             3
Common Stock, $0.01 par value, 70,000 shares authorized,
  36,444, 35,278 and 35,934 issued at December 31, 2003,
  August 31, 2003 and December 31, 2002, respectively.......         364           353           359
Class B Stock, $0.01 par value, 5,000 shares authorized,
  2,493 issued at December 31, 2003, August 31, 2003 and
  December 31, 2002, respectively...........................          25            25            25
Additional paid-in capital..................................      80,680        74,025        68,851
Retained earnings...........................................      23,603        40,179        23,823
Accumulated other comprehensive loss........................      (1,752)       (2,245)       (1,246)
                                                                --------      --------      --------
                                                                 102,927       112,344        91,815
Treasury stock, at cost, 8,521 shares of Common Stock at
  December 31, 2003, 8,158 shares of Common Stock at August
  31, 2003 and December 31, 2002, respectively..............     (39,188)      (37,322)      (37,322)
Deferred compensation.......................................        (789)          (94)         (282)
                                                                --------      --------      --------
Total stockholders' equity..................................      62,950        74,928        54,211
                                                                --------      --------      --------
Total liabilities and stockholders' equity..................    $416,248      $408,929      $357,673
                                                                ========      ========      ========
</Table>

See accompanying notes to the consolidated financial statements

                                        4
<PAGE>

                              FEDDERS CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                 FOUR MONTHS ENDED
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                 2003         2002
                                                              ----------   ----------
                                                              (AMOUNTS IN THOUSANDS)
                                                                    (UNAUDITED)
<S>                                                           <C>          <C>
Cash flows from operating activities:
Net loss....................................................   $(15,301)    $(22,756)
Adjustments to reconcile net loss to net cash used in
  operating activities:
  Depreciation and amortization.............................      3,413        3,071
  Deferred income taxes.....................................          2           13
  Stock option repricing....................................      2,256         (339)
  Cumulative effect of a change in accounting principle.....         --       11,906
  Gain on sale of joint venture interest....................       (638)          --
  Partners' net interest in joint venture results...........      1,355          526
Changes in operating assets and liabilities:
  Accounts receivable.......................................     21,417       10,142
  Inventories...............................................    (66,538)     (55,116)
  Other current assets......................................     (5,993)      (5,375)
  Other assets..............................................        115        1,389
  Accounts payable..........................................     30,395       14,361
  Accrued expenses..........................................    (24,412)      (6,320)
  Income taxes payable......................................     (5,452)      (4,794)
  Other long-term liabilities...............................        984         (301)
  Other -- net..............................................        165          609
                                                               --------     --------
Net cash used in operating activities.......................    (58,232)     (52,984)
                                                               --------     --------
Cash flows from investing activities:
  Additions to property, plant and equipment................     (2,116)      (2,947)
  Disposal of property, plant and equipment.................         --           15
  Sale of joint venture interest............................      1,561           --
                                                               --------     --------
Net cash used in investing activities.......................       (555)      (2,932)
                                                               --------     --------
Cash flows from financing activities:
  Proceeds from short-term notes............................     22,926       14,475
  Proceeds from stock options exercised.....................      1,709           --
  Repayments of long-term debt..............................     (2,300)      (1,135)
  Cash dividends............................................     (2,383)      (1,944)
  Preferred stock exchange offer expenses...................        (24)         (40)
                                                               --------     --------
Net cash provided by financing activities...................     19,928       11,356
                                                               --------     --------
Net decrease in cash and cash equivalents...................    (38,859)     (44,560)
Cash and cash equivalents at beginning of period............     60,902       67,379
                                                               --------     --------
Cash and cash equivalents at end of period..................   $ 22,043     $ 22,819
                                                               ========     ========
Supplemental disclosure:
  Interest paid.............................................   $    881     $    768
  Income taxes paid.........................................        223          633
                                                               ========     ========
</Table>

See accompanying notes to the consolidated financial statements

                                        5
<PAGE>

                              FEDDERS CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                  (UNAUDITED)

1.  BASIS OF PRESENTATION

     The financial information included herein is unaudited and prepared in
accordance with the instructions for Form 10-Q; however, such information
reflects all adjustments, which consist solely of normal recurring adjustments
which are, in the opinion of management, necessary for a fair presentation of
results for the interim periods. Reference should be made to the annual
financial statements, including footnotes thereto, included in Fedders
Corporation's (the "Company") Annual Report on Form 10-K for the fiscal year
ended August 31, 2003. The Company's fiscal year end through the 2003 fiscal
year was August 31. However, on August 26, 2003 the Board of Directors decided
to change the Company's fiscal year end from August 31, to December 31.
Reference to a "fiscal year" period throughout the notes refer to the Company's
August 31 fiscal year basis of reporting. The financial statements and notes
included herein provide unaudited results of the Company for the four month
transition period from September 1, 2003 through December 31, 2003. The prior
unaudited four month period ended December 31, 2002 has been provided for
comparison purposes.

     Certain reclassifications have been made in prior-year amounts to conform
to the current-year presentation.

2.  STOCK COMPENSATION

     On October 28, 2003, the Board of Directors granted options to purchase
approximately 791,000 shares of the Common Stock of the Company to 25 employees
under a stock option plan approved by stockholders in 1996. The exercise price
of the options is equal to the fair market value of the Common Stock of the
Company on the date of the grant. These options have a term of 5 years and vest
in increments of 25% per year over a four-year period on the anniversary date of
the grant.

     The Company accounts for stock options issued to its employees under the
recognition and measurement principles of APB Opinion 25, "Accounting for Stock
Issued to Employees," and related interpretations. No stock-based employee
compensation cost is reflected in net income, as all options granted had an
exercise price equal to the market value of the underlying Common Stock on the
date of grant. The following table illustrates the effect on net income and
earnings per share if the Company had applied the fair-value recognition
provisions of SFAS No. 123 to stock-based employee compensation.

<Table>
<Caption>
                                                               FOUR MONTHS ENDED
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2003       2002
                                                              --------   --------
<S>                                                           <C>        <C>
Net loss applicable to common stockholders-as reported......  $(15,785)  $(22,756)
Add: Stock-based employee compensation expense (income)
  included in reported net loss, net of related tax
  effects...................................................     1,523       (229)
Deduct: Total stock-based employee compensation expense
  determined under fair-value-based method for all awards,
  net of related tax effects................................        64        120
                                                              --------   --------
Pro forma net loss..........................................  $(14,326)  $(23,105)
                                                              ========   ========
Net loss per common share:
     Basic and diluted -- as reported.......................  $  (0.52)  $  (0.70)
     Basic and diluted -- pro forma.........................  $  (0.47)  $  (0.71)
</Table>

                                        6
<PAGE>
                              FEDDERS CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3.  ASSET IMPAIRMENT, EMPLOYEE SEVERANCE AND OTHER RESTRUCTURING AND RELATED
CHARGES

     In the fourth quarter of fiscal year 2001, the Company announced a plan to
restructure its existing operations, which included the transfer of a majority
of the Company's room air conditioner production, as well as all production of
dehumidifiers and compressors, from its Illinois, Tennessee and Maryland
facilities to facilities in China in order to lower costs and improve
profitability. The Company's plan resulted in charges for fixed-asset
impairments, employee severance costs, inventory write-downs, and other
restructuring charges directly related to the restructuring plan, including
facility closing costs and lease termination costs. In conjunction with the
restructuring plan, the Company recorded $13,694 of charges in the fourth
quarter of fiscal year 2001. In the four months ended December 31, 2003, the
Company expended $137, primarily for facility closing costs.

     The following table displays the activity and balances of the restructuring
reserve account from August 31, 2003 to December 31, 2003.

<Table>
<Caption>
                                            AUGUST 31,                            DECEMBER 31,
                                               2003                                   2003
                                             BALANCE     ADDITIONS   DEDUCTIONS     BALANCE
                                            ----------   ---------   ----------   ------------
<S>                                         <C>          <C>         <C>          <C>
Workforce reductions......................    $  586        --           --          $  586
Facility closing costs....................       477        --          137             340
Other costs...............................       214        --           --             214
                                              ------         --         ---          ------
  Total...................................    $1,277        --          137          $1,140
                                              ======         ==         ===          ======
</Table>

     The remaining balance of $1,140, which consists primarily of workforce
reduction and facility closing costs, is expected to be expended during the
twelve months ended December 31, 2004. The final amounts will be settled upon
the expiration period for workers' compensation claims and completion of
facility clean up and waste removal.

4.  STOCKHOLDERS' EQUITY

     In October 2002, the Company's Board of Directors approved a plan pursuant
to which a new class of cumulative Preferred Stock would be offered to
stockholders in exchange for up to 15,000,000 shares of the Company's Common
Stock, with 0.14 shares of Preferred Stock being offered in exchange for every
share of Common Stock. The Series A Cumulative Preferred Stock receives a
cumulative annual dividend of $2.15 and has a liquidation preference of $25.00
plus the amount of any accrued and unpaid dividends. The holders of the Series A
Cumulative Preferred Stock have no right to vote, except in limited
circumstances. The exchange of 2,315,750 shares of Common Stock for 323,947
shares of Series A Cumulative Preferred Stock was completed on December 27, 2002
and is reflected in the Company's financial statements as of December 31, 2002.

     On October 1, 2003, the Company granted an officer 150,000 shares of
restricted Common Stock of the Company pursuant to the officer's employment
agreement. The officer is not permitted to sell, assign, transfer, pledge or
otherwise encumber these shares prior to January 1, 2007. The Company recorded
$0.9 million of deferred compensation expense to be amortized over the vesting
period.

     On December 5, 2003, the Company's Board of Directors authorized the
distribution of transferable rights to the holders of the Company's Common and
Class B stock. In the rights offering, holders of Common Stock and Class B Stock
as of December 22, 2003 received subscription rights to purchase shares of
Series A Cumulative Preferred Stock. Every 20 rights entitled the holder to
purchase one share of Cumulative Preferred Stock at the subscription price of
$23.70 per share, and carried with it a basic

                                        7
<PAGE>
                              FEDDERS CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

subscription right and an over-subscription right. The rights offering expired
at 5:00 p.m. New York City time on January 16, 2004. (see NOTE 13)

5.  EARNINGS PER SHARE

     For the four months ended December 31, 2003 and 2002, net loss per share
was computed using the weighted average number of shares of Common and Class B
stock outstanding, which amounted to approximately 30,179,359 and 32,489,203
shares, respectively. Due to their anti-dilutive effect, 736,567 and zero
options were excluded from the computation of diluted earnings per share for the
four months ended December 31, 2003 and 2002, respectively.

6.  STOCK OPTION REPRICING

     In October 2000, the Company's Board of Directors approved the repricing of
a majority of unexercised stock options, reducing the exercise price to $3.625
per share, which was the fair market value of the Class A Stock on the date of
repricing. For the four months ended December 31, 2003, the Company recorded a
$2.3 million charge to compensation expense due to the variable accounting
treatment associated with the value of re-priced stock options to reflect the
increase in the market price of Fedders Stock. As a result of the exercise of
851,769 options during the four month period ended December 31, 2003, the
Company's additional paid in capital increased by $5,794. For the four months
ended December 31, 2002, the Company recorded a $339 reduction to compensation
expense to reflect changes in the market price of the Company's stock.

7.  GOODWILL AND INTANGIBLE ASSETS

     The Company records the excess purchase price of net tangible and
intangible assets acquired over their estimated fair value as goodwill. The
Company adopted the provisions of SFAS 142 "Goodwill and Other Intangible
Assets" ("SFAS 142"), as of September 1, 2002. Under SFAS 142, the Company is
required to test goodwill for impairment at least annually. The Company has
elected to perform its annual test for indications of goodwill impairment as of
September 1 of each year. The Company identifies potential goodwill impairment
by comparing the fair value of a reporting segment with its carrying amount,
including goodwill. The Company determines fair value using a discounted cash
flow and market-multiple approach. If the fair value of a reporting segment
exceeds its carrying amount, goodwill of the reporting segment is not considered
impaired. If the carrying amount of a segment exceeds its fair value, the amount
of goodwill impairment loss, if any, must be measured. The Company measures the
amount of goodwill impairment loss by comparing the implied fair value of
reporting segment goodwill with the carrying amount of that goodwill. If the
carrying amount of the segment goodwill exceeds the implied fair value of
goodwill, an impairment loss is recognized as an operating expense.

     The Company completed the transitional goodwill impairment test during the
fourth quarter of fiscal year 2003 and recognized a non-cash goodwill impairment
charge of $11.9 million within its Engineered Products reporting segment. As
required, the transitional goodwill impairment charge was recorded as a
cumulative effect of a change in accounting principle as of September 1, 2002.
In accordance with SFAS No. 142, the Company ceased amortization of goodwill as
of September 1, 2002.

                                        8
<PAGE>
                              FEDDERS CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Goodwill and other intangible assets consist of the following:

<Table>
<Caption>
                                                              DECEMBER 31,   AUGUST 31,
                                                                  2003          2003
                                                              ------------   ----------
<S>                                                           <C>            <C>
Goodwill....................................................    $78,630       $78,630
                                                                =======       =======
Gross other amortizable intangibles.........................    $ 3,178       $ 3,189
Accumulated amortization....................................     (1,493)       (1,401)
                                                                -------       -------
Other intangible assets.....................................    $ 1,685       $ 1,788
                                                                =======       =======
</Table>

     As of December 31, 2003 and August 31, 2003, the Company had goodwill of
$70,133 and $8,497 reflected in its HVACR and Engineered Products reportable
segments, respectively. Other intangible assets primarily include a right
associated with a joint venture that is being amortized over 20 years.
Amortization expense for the four months ended December 31, 2003 and 2002 is $63
and $60, respectively. Estimated amortization expense for other intangible
assets will be approximately $180 for each of the next five years.

8.  ASSETS HELD FOR SALE

     In connection with a restructuring of the Company's operations in 2001
(Note 3), the Company ceased production at its Walkersville, Maryland facility,
part of the Company's HVACR reportable segment. In December 2002, the Company
began the process of actively marketing the sale of the Walkersville facility.
The Company anticipates the selling price of the facility will exceed its net
book value after consideration of selling expenses associated with marketing the
facility for sale. A vacant property belonging to the Company in Ningbo, China
is also being marketed for sale. The sale of both properties is expected to be
completed no later than June 2004. At December 31, 2003, assets totaling $8,564,
which consist of land, land improvements, buildings, and building improvements
have been classified as "Assets Held for Sale" and are no longer being
depreciated in accordance with SFAS 144.

     The following table presents the carrying amount, by asset class, of the
"Assets Held for Sale" at December 31:

<Table>
<Caption>
                                                                2003
                                                               ------
<S>                                                            <C>
Land and land improvements..................................   $2,181
Building, net...............................................    4,587
Building improvements, net..................................    1,796
                                                               ------
Assets Held for Sale........................................   $8,564
                                                               ======
</Table>

9.  INDUSTRY SEGMENTS

     The Company has two reportable segments: Heating, Ventilation, Air
Conditioning and Refrigeration ("HVACR") and Engineered Products. The Company's
reportable segments were determined based upon several factors, including the
nature of the products provided and markets served. Each reportable segment is
managed separately and includes various operating segments that have been
aggregated due to similar economic characteristics.

     The HVACR segment designs, manufactures and distributes window, split,
multi-split, through-the-wall, portable and vertical packaged unit air
conditioners and dehumidifiers. HVACR products are distributed through a variety
of sales channels, including national retailers, regional retailers, wholesale
distributors, catalog supply houses, private label/OEM, government direct and
the Internet.

                                        9
<PAGE>
                              FEDDERS CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Engineered Products segment designs, manufactures and distributes media
filters, electronic filters, humidifiers, dust collectors, fan filter units, and
solid-state thermoelectric heat pump modules. These products are sold through
manufacturers' representatives, distributors and direct sales to end-users.

SUMMARY OF BUSINESS BY SEGMENT:

<Table>
<Caption>
                                                               FOUR MONTHS ENDED
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2003       2002
                                                              --------   --------
<S>                                                           <C>        <C>
Net sales:
  HVACR.....................................................  $ 42,814   $ 36,555
  Engineered Products.......................................    12,740     12,748
                                                              --------   --------
  Net sales.................................................  $ 55,554   $ 49,303
                                                              ========   ========
Loss before interest, taxes and cumulative effect of a
  change in accounting principle:
  HVACR.....................................................  $ (9,749)  $ (8,246)
  Engineered Products.......................................       947        (53)
                                                              --------   --------
  Segment income before interest and taxes..................    (8,802)    (8,299)
  Cumulative effect of a change in accounting principle.....        --     11,906
  Non-allocated expenses....................................     7,857      1,809
  Interest expense, net.....................................     6,003      5,964
  Benefit for income taxes..................................    (7,361)    (5,222)
                                                              --------   --------
  Net loss..................................................  $(15,301)  $(22,756)
                                                              ========   ========
</Table>

<Table>
<Caption>
                                                    DECEMBER 31,   AUGUST 31,   DECEMBER 31,
                                                        2003          2003          2002
                                                    ------------   ----------   ------------
<S>                                                 <C>            <C>          <C>
Total assets:
HVACR.............................................    $310,646      $266,967      $255,747
Engineered Products...............................      52,826        53,024        54,957
Non-allocated assets..............................      52,776        88,938        46,969
                                                      --------      --------      --------
                                                      $416,248       408,929      $357,673
                                                      ========      ========      ========
</Table>

10.  GUARANTEES

  PRODUCT WARRANTY

     Certain of the Company's products are covered by standard product warranty
plans that extend from 1 to 5 years. In addition, major retailers have consumer
return policies which allow consumers to return product that may be defective in
lieu of field service. Upon return to the Company, these units are inspected,
repaired as required, reboxed and held for future sale as factory reconditioned
products. A portion of those units returned is not repairable. At the time
revenue is recognized, upon shipment, measurements of those sales are reduced by
estimates of the future costs associated with fulfilling warranty obligations
and for the expense associated with repairing or scrapping defective returns.

     The Company uses historical failure and defective return rates, which may
or may not be indicative of future rates. Each quarter, the estimate of warranty
and defective return obligations including the assumptions about estimated
failure and return rates, is reevaluated.

                                        10
<PAGE>
                              FEDDERS CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table displays the activity and balances of the product
warranty liability from August 31, 2003 to December 31, 2003:

<Table>
<Caption>
                                                                  FOUR MONTHS
                                                                     ENDED
                                                               DECEMBER 31, 2003
                                                               -----------------
<S>                                                            <C>
Warranty balance at August 31, 2003.........................        $ 9,660
Accruals for warranties issued during the period............            690
Settlements made during the period..........................         (4,709)
                                                                    -------
Warranty balance at December 31, 2003.......................        $ 5,641
                                                                    =======
</Table>

  LOAN GUARANTEES

     Guarantees of subsidiary debt by Fedders Corporation ("the Parent") and
subsidiaries consist of the following at December 31, 2003:

          (i) The Parent guarantees the obligations of Fedders North America,
     Inc. ("FNA") under its 9 3/8% Senior Subordinated Notes due 2007 (the
     "Notes"). This is a guarantee of payment of principal and interest on the
     Notes that arose in connection with the issuance and sale of $150 million
     in principal amount of the Notes. The Parent would be required to perform
     under the guarantee in the event FNA failed to pay principal and interest
     when due or to perform its obligations under the indenture pursuant to
     which the Notes were issued.

          (ii) The Parent and various subsidiaries guarantee the obligations of
     certain subsidiaries under a $100 million working capital line of credit.
     The line of credit bears interest at Libor +2% or the prime rate of
     Wachovia Bank and expires in February 2006. The Parent and guarantor
     subsidiaries would be required to perform under the guarantees in the event
     that the borrowing subsidiaries failed to repay amounts borrowed under the
     line of credit and interest and other charges associated therewith, or
     failed to comply with the provisions of the credit agreement. There is no
     outstanding loan balance at December 31, 2003.

          (iii) The Parent guarantees the obligations of its subsidiary, Melcor
     Corporation, under a $1.3 million New Jersey Economic Development Authority
     Economic Development Bond. The bond bears interest at the rate of 6.6% per
     annum and matures in July 2010. The Parent would be required to perform
     under the guaranty in the event that Melcor fails to pay the principal of
     and interest on the bond or fails to comply with the provisions of the bond
     agreement pursuant to which the bond was issued. The outstanding loan
     balance at December 31, 2003 is $0.9 million.

          (iv) The Parent and Melcor Corporation guarantee the obligations of a
     subsidiary, Eubank Manufacturing Enterprises, Inc., under an equipment
     financing lease in the amount of $3.1 million. The lease bears interest at
     the rate of 7.16% per annum and expires in December 2007. The Parent and
     Melcor Corporation would be required to perform under the guarantee in the
     event Eubank fails to pay rent when due or fails to comply with the
     provisions of the lease agreement. The outstanding loan balance at December
     31, 2003 is $2.1 million.

          (v) The Parent guarantees the obligations of a subsidiary, Eubank
     Manufacturing Enterprises, Inc., under a loan agreement providing for a
     loan of $2.0 million. The loan bears interest at the prime rate of Flag
     Bank and matures in February 2007. The Parent would be required to perform
     under the guaranty in the event Eubank fails to pay the principal of and
     interest on the loan or fails to comply with the provisions of the loan
     agreement. The outstanding loan balance at December 31, 2003 is $0.5
     million.

                                        11
<PAGE>
                              FEDDERS CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

          (vi) The Parent guarantees the obligations of a subsidiary, Fedders
     Shanghai Co., Ltd. ("FSC") under a working capital line of credit totaling
     $6.0 million. The line of credit bears interest at the rate of Sibor +1.5%
     per annum and matures at various dates. The Parent would be obligated to
     perform under the guarantee in the event that FSC fails to pay the
     principal of and interest on the loan or fails to comply with the
     provisions of the loan agreement. The outstanding loan balance at December
     31, 2003 is $1.2 million.

          (vii) The Parent guarantees the obligations of a subsidiary, Polenz
     GmbH ("Polenz"), under a Euro 6.0 million working capital line of credit.
     The line of credit bears interest at the rate of Libor +2.5% per annum and
     matures June 2004. The Parent would be obligated to perform under the
     guarantee in the event Polenz fails to pay the principal of and interest on
     the loan or fails to comply with the provisions of the loan agreement.
     There is no outstanding loan balance at December 31, 2003.

          (viii) The Parent guarantees the obligations of a subsidiary, Fedders
     Koppel, Inc. ("FK"), under a Ph peso 320 million term loan. The loan bears
     interest at the rate of Phibor +3% per annum and matures May 2005. The
     Parent would be obligated to perform under the guarantee in the event that
     FK fails to pay the principal of and interest on the loan or fails to
     comply with the provisions of the loan agreement. The outstanding loan
     balance at December 31, 2003 is $1.8 million.

          (ix) The Parent guarantees the obligations of a subsidiary, Eubank
     Manufacturing Enterprises, Inc., under a mortgage agreement providing for a
     loan of $1.0 million. The loan has an interest rate of 4.25% and matures in
     June 2008. The Parent would be required to perform under the guaranty in
     the event Eubank fails to pay the principal of and interest on the loan or
     fails to comply with the provisions of the loan agreement. The outstanding
     loan balance at December 31, 2003 is $0.9 million.

     The Company also provides loan guarantees to two joint ventures which are
not consolidated in the Company's financial statements:

          (i) Fedders International, Inc., ("FI") a subsidiary of the Company,
     guarantees up to 50% of the obligations of a 50%-owned joint venture,
     Universal Comfort Products Pvt., Ltd., ("UCPL"), under a Rupees 230 million
     term loan. The loan bears interest at the rate of State Bank Mid Term Loan
     Rate and matures November 2006. FI would be obligated to perform under the
     guaranty in the event UCPL fails to pay the principal of and interest on
     the loan or fails to comply with the terms of the loan agreement. FI's
     exposure under the guarantee at December 31, 2003 is $2.3 million.

          (ii) Fedders Indoor Air Quality (Suzhou) Co., Ltd., ("FIAQ"), a
     subsidiary of the Company, guarantees up to RMB 5 million of the
     obligations of Xi'an Fedders Dong Fang Air Conditioner Compressor Co.,
     Ltd., ("FDF"), a 50%-owned joint venture of the Company, under a working
     capital line of credit. The line of credit bears interest at the rate set
     by the Peoples Bank of China and matures December 2004. FIAQ would be
     obligated to perform its obligations under the guaranty in the event FDF
     fails to pay the principal of and interest on the loan or fails to comply
     with the provisions of the loan agreement. FIAQ's maximum exposure under
     the guarantee is $0.6 million as of December 31, 2003.

11.  ACQUISITIONS AND JOINT VENTURES

     On October 21, 2003, the Company entered into a joint venture with Jiangsu
Xingrong Hi-Tech Company ("Xingrong") to design, produce and market heat
exchangers used in air conditioners. The Company and Xingrong each have a 50%
interest in the joint venture, Changzhou Fedders Xingrong Air Conditioner
Components Co., Ltd. This joint venture is included within the HVACR reportable
segment. The Company reports the results of the joint venture by the equity
method of accounting.

                                        12
<PAGE>
                              FEDDERS CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     On December 9, 2003, the Company and BSH Bosch und Siemens Hausgerate GmbH
terminated their joint venture named BSH and Fedders International Air
Conditioning, S.A., as of November 2003. This joint venture was established on
March 24, 1998. The Company agreed to sell its interest for the sum of 3.6
million Euros, approximately $4.4 million. The two parties also settled other
various claims. Net proceeds received from the sale were $1.6 million. The
Company realized a gain of $0.6 million on the sale.

     On December 29, 2003 the Company entered into a strategic alliance with WFI
Industries Ltd. ("WFI") to produce water source heat pumps in China. These units
will be sold in China and Korea by WFI under the WaterFurnace brand.

12.  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     On December 23, 2003, the FASB issued Statement of Financial Accounting
Standards No. 132 (revised 2003), "Employers' Disclosures about Pensions and
Other Postretirement Benefits, an amendment of FASB Statements No. 87, 88, and
106, and a revision of FASB Statement No. 132." This Statement requires
additional disclosures about the assets, obligations, cash flows, and net
periodic benefit cost of defined benefit pension plans and other defined benefit
postretirement plans. The new disclosures are generally effective for 2003
calendar year-end financial statements of public companies, with a delayed
effective date for certain disclosures for foreign plans. The Company does not
provide defined pension and postretirement benefits and therefore is not subject
to the additional disclosure requirements of this revised statement.

13.  SUBSEQUENT EVENTS

     On December 5, 2003, the Company's Board of Directors authorized the
distribution of transferable rights to the Company's Common and Class B
stockholders. Stockholders received one right for every share of Common Stock
and Class B Stock they held as of December 22, 2003. Every 20 rights entitled
the holder to purchase one share of Cumulative Preferred Stock at the
subscription price of $23.70 per share, and carried with it a basic subscription
right and an over-subscription right. As of January 16, 2004, 1,195,092 shares
of Cumulative Preferred Stock had been issued as result of the offering for
gross proceeds of $28.3 million.

     In January 2004, the Company announced that it is establishing a research
and development center in China and the existing engineering facility in
Singapore will be closed at the end of 2004.

     On February 6, 2004, the Company announced the commencement by its
wholly-owned subsidiary, Fedders North America, Inc. ("FNA"), of a cash tender
offer for any and all of FNA's outstanding 9 3/8% Senior Subordinated Notes due
2007, issued August 24, 1999, and any and all of FNA's outstanding 9 3/8% Senior
Subordinated Notes due 2007, issued August 18, 1997 (collectively, the "Notes").
In connection with the tender offer, FNA is also soliciting consents to the
adoption of certain proposed amendments to the Notes and the related indentures
governing the Notes. The total consideration offered in the tender is comprised
of the tender offer consideration and a consent payment. The tender offer
consideration is equal to $1,012.50 per $1,000 principal amount of Notes plus
accrued and unpaid interest from the last interest payment up to, but not
including, the settlement date. The consent payment, made to holders who
effectively consent to amend the Notes, is $20.00 per $1,000 principal amount of
Notes.

14.  SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

     Fedders North America, Inc. ("FNA") is a wholly-owned subsidiary of the
Company. FNA and the Parent are the issuer and the guarantor, respectively, of
the Senior Subordinated Notes due 2007, of which $100,000 were issued in August
1997 and $50,000 were issued in August 1999.

                                        13
<PAGE>
                              FEDDERS CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Parent's guarantee is full and unconditional. The following condensed
consolidating financial statements present separate information for FNA and for
the Parent and its subsidiaries other than FNA, and should be read in
conjunction with the consolidated financial statements of the Company.

                                        14
<PAGE>
                              FEDDERS CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
                            AND COMPREHENSIVE INCOME

<Table>
<Caption>
                                                      FOUR MONTHS ENDED DECEMBER 31, 2003
                                           ---------------------------------------------------------
                                           FEDDERS
                                            NORTH     OTHER                ELIMINATING     FEDDERS
                                           AMERICA   FEDDERS   CORPORATE     ENTRIES     CORPORATION
                                           -------   -------   ---------   -----------   -----------
<S>                                        <C>       <C>       <C>         <C>           <C>
Net sales................................  $31,567   $27,923         --      $(3,936)     $ 55,554
Cost of sales............................   28,947    23,242         --       (3,936)       48,253
Selling, general and administrative
  expense(a).............................    9,143     9,633   $  4,732           --        23,508
Gain on sale of joint venture interest...       --      (638)        --           --          (638)
                                           -------   -------   --------      -------      --------
Operating loss...........................   (6,523)   (4,314)    (4,732)          --       (15,569)
Partners' net interest in joint venture
  results................................     (194)   (1,161)        --           --        (1,355)
Equity income in investment..............       --        --    (12,135)      12,135            --
Interest expense, net(b).................   (5,201)     (724)       (78)          --        (6,003)
Other income (expense)...................     (113)      160        218           --           265
                                           -------   -------   --------      -------      --------
Loss before income taxes.................  (12,031)   (6,039)   (16,727)      12,135       (22,662)
Benefit for income taxes.................   (3,998)   (1,937)    (1,426)          --        (7,361)
                                           -------   -------   --------      -------      --------
Net loss.................................   (8,033)   (4,102)   (15,301)      12,135       (15,301)
Preferred stock dividend.................       --        --       (484)          --          (484)
                                           -------   -------   --------      -------      --------
Net loss applicable to common
  stockholders...........................   (8,033)   (4,102)   (15,785)      12,135       (15,785)
Foreign currency translation, net of
  tax....................................     (121)      621        493         (500)          493
                                           -------   -------   --------      -------      --------
Comprehensive loss.......................  $(8,154)  $(3,481)  $(15,292)     $11,635      $(15,292)
                                           =======   =======   ========      =======      ========
</Table>

<Table>
<Caption>
                                                     FOUR MONTHS ENDED DECEMBER 31, 2002
                                          ----------------------------------------------------------
                                          FEDDERS
                                           NORTH      OTHER                ELIMINATING     FEDDERS
                                          AMERICA    FEDDERS   CORPORATE     ENTRIES     CORPORATION
                                          --------   -------   ---------   -----------   -----------
<S>                                       <C>        <C>       <C>         <C>           <C>
Net sales...............................  $ 27,587   $26,917         --      $(5,201)     $ 49,303
Cost of sales...........................    24,480    21,053         --       (5,201)       40,332
Selling, general and administrative
  expense(a)............................     9,094     9,076   $    484                     18,654
                                          --------   -------   --------      -------      --------
Operating loss..........................    (5,987)   (3,212)      (484)          --        (9,683)
Partners' net interest in joint venture
  results...............................        --      (526)        --           --          (526)
Equity income in investment.............        --        --    (22,592)      22,592            --
Interest expense, net(b)................    (5,534)     (684)       254           --        (5,964)
Other income (expense)..................       257      (161)         5           --           101
                                          --------   -------   --------      -------      --------
Loss before income taxes and cumulative
  effect of a change in accounting
  principle.............................   (11,264)   (4,583)   (22,817)      22,592       (16,072)
Benefit for income taxes................    (3,749)   (1,412)       (61)          --        (5,222)
                                          --------   -------   --------      -------      --------
Net loss before cumulative effect of a
  change in accounting principle........    (7,515)   (3,171)   (22,756)      22,592       (10,850)
Cumulative effect of a change in
  accounting principle..................     6,906     5,000         --           --        11,906
                                          --------   -------   --------      -------      --------
Net loss................................   (14,421)   (8,171)   (22,756)      22,592       (22,756)
Foreign currency translation, net of
  tax...................................        (1)       68         66          (67)           66
                                          --------   -------   --------      -------      --------
Comprehensive loss......................  $(14,422)  $(8,103)  $(22,690)     $22,525      $(22,690)
                                          ========   =======   ========      =======      ========
</Table>

                                        15
<PAGE>
                              FEDDERS CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                     CONDENSED CONSOLIDATING BALANCE SHEETS

<Table>
<Caption>
                                                           AS OF DECEMBER 31, 2003
                                         ------------------------------------------------------------
                                         FEDDERS
                                          NORTH      OTHER                  ELIMINATING     FEDDERS
                                         AMERICA    FEDDERS    CORPORATE      ENTRIES     CORPORATION
                                         --------   --------   ----------   -----------   -----------
<S>                                      <C>        <C>        <C>          <C>           <C>
ASSETS
Current assets:
  Cash and cash equivalents............  $ 13,975   $  8,068         --            --      $ 22,043
  Net accounts receivable..............    14,540     15,178         --            --        29,718
  Net inventories......................   114,028     31,458         --            --       145,486
  Assets held for sale.................     8,249        315         --            --         8,564
  Other current assets.................    13,519     12,611    $16,897       $(7,023)       36,004
                                         --------   --------    -------       -------      --------
Total current assets...................   164,311     67,630     16,897        (7,023)      241,815
Investments in subsidiaries............        --         --    (11,047)       11,047            --
Net property, plant and equipment......    31,858     22,213        591            --        54,662
Goodwill...............................    57,885     20,745         --            --        78,630
Other intangible assets................       255      1,430         --            --         1,685
Other assets...........................     6,297      2,362     30,797            --        39,456
                                         --------   --------    -------       -------      --------
Total assets...........................  $260,606   $114,380    $37,238       $ 4,024      $416,248
                                         ========   ========    =======       =======      ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term notes.....................  $ 16,790   $ 13,656         --            --      $ 30,446
  Current portion of long-term debt....       421      2,356    $     2            --         2,779
  Accounts and income taxes payable....    58,972     26,095      1,246            --        86,313
  Accrued expenses.....................    22,362      8,627      8,043            --        39,032
                                         --------   --------    -------       -------      --------
Total current liabilities..............    98,545     50,734      9,291            --       158,570
Long-term debt.........................   153,499      5,466         --            --       158,965
Other long-term liabilities............       847     11,413     30,526       $(7,023)       35,763
Net due to (from) affiliates...........    (4,294)    69,823    (65,529)           --            --
Stockholders' equity:
  Preferred Stock......................        --         --          7            --             7
  Common and Class B Stock.............         5         --        389            (5)          389
  Additional paid-in capital...........    21,109     24,725     80,680       (45,834)       80,680
  Retained earnings (deficit)..........    (8,192)   (46,940)    23,603        55,132        23,603
  Deferred compensation and treasury
     stock.............................        --         --    (39,977)           --       (39,977)
  Accumulated other comprehensive
     loss..............................      (913)      (841)    (1,752)        1,754        (1,752)
                                         --------   --------    -------       -------      --------
Total stockholders' equity.............    12,009    (23,056)    62,950        11,047        62,950
                                         --------   --------    -------       -------      --------
Total liabilities and stockholders'
  equity...............................  $260,606   $114,380    $37,238       $ 4,024      $416,248
                                         ========   ========    =======       =======      ========
</Table>

                                        16
<PAGE>
                              FEDDERS CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                     CONDENSED CONSOLIDATING BALANCE SHEETS

<Table>
<Caption>
                                                            AS OF AUGUST 31, 2003
                                         -----------------------------------------------------------
                                         FEDDERS
                                          NORTH      OTHER                 ELIMINATING     FEDDERS
                                         AMERICA    FEDDERS    CORPORATE     ENTRIES     CORPORATION
                                         --------   --------   ---------   -----------   -----------
<S>                                      <C>        <C>        <C>         <C>           <C>
ASSETS
Current assets:
  Cash and cash equivalents............  $ 54,354   $  6,548         --           --      $ 60,902
  Net accounts receivable..............    28,913     22,265         --           --        51,178
  Net inventories......................    42,204     36,744         --           --        78,948
  Assets held for sale.................     8,249        315         --           --         8,564
  Other current assets.................     8,081     12,689   $ 15,370     $ (7,023)       29,117
                                         --------   --------   --------     --------      --------
Total current assets...................   141,801     78,561     15,370       (7,023)      228,709
Investments in subsidiaries............        --         --     17,139      (17,139)           --
Net property, plant and equipment......    33,464     21,742        654           --        55,860
Goodwill...............................    57,885     20,745         --           --        78,630
Other intangible assets................       274      1,514         --           --         1,788
Other assets...........................     7,314      6,202     30,426           --        43,942
                                         --------   --------   --------     --------      --------
Total assets...........................  $240,738   $128,764   $ 63,589     $(24,162)     $408,929
                                         ========   ========   ========     ========      ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term notes.....................        --   $  7,520         --           --      $  7,520
  Current portion of long-term debt....  $    451      4,185   $     16           --         4,652
  Accounts and income taxes payable....    26,981     28,072      7,211           --        62,264
  Accrued expenses.....................    44,760     10,553      9,239           --        64,552
                                         --------   --------   --------     --------      --------
Total current liabilities..............    72,192     50,330     16,466           --       138,988
Long-term debt.........................   153,544      5,848         --           --       159,392
Other long-term liabilities............     1,351     11,529     29,764     $ (7,023)       35,621
Net due to (from) affiliates...........   (24,029)    81,598    (57,569)          --            --
Stockholders' equity:
  Preferred Stock......................        --         --          7           --             7
  Common and Class B Stock.............         5         --        378           (5)          378
  Additional paid-in capital...........    21,209     24,625     74,025      (45,834)       74,025
  Retained earnings (deficit)..........    17,258    (43,704)    40,179       26,446        40,179
  Deferred compensation and treasury
     stock.............................        --         --    (37,416)          --       (37,416)
  Accumulated other comprehensive
     loss..............................      (792)    (1,462)    (2,245)       2,254        (2,245)
                                         --------   --------   --------     --------      --------
Total stockholders' equity.............    37,680    (20,541)    74,928      (17,139)       74,928
                                         --------   --------   --------     --------      --------
Total liabilities and stockholders'
  equity...............................  $240,738   $128,764   $ 63,589     $(24,162)     $408,929
                                         ========   ========   ========     ========      ========
</Table>

                                        17
<PAGE>
                              FEDDERS CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                     CONDENSED CONSOLIDATING BALANCE SHEETS

<Table>
<Caption>
                                                           AS OF DECEMBER 31, 2002
                                         -----------------------------------------------------------
                                         FEDDERS
                                          NORTH      OTHER                 ELIMINATING     FEDDERS
                                         AMERICA    FEDDERS    CORPORATE     ENTRIES     CORPORATION
                                         --------   --------   ---------   -----------   -----------
<S>                                      <C>        <C>        <C>         <C>           <C>
ASSETS
Current assets:
  Cash and cash equivalents............  $ 16,760   $  6,059         --           --      $ 22,819
  Net accounts receivable..............     8,935     12,691         --           --        21,626
  Net inventories......................    71,247     32,449         --           --       103,696
  Assets held for sale.................     8,249         --         --           --         8,249
  Other current assets.................     8,096      9,826   $ 13,647     $ (7,023)       24,546
                                         --------   --------   --------     --------      --------
Total current assets...................   113,287     61,025     13,647       (7,023)      180,936
Investments in subsidiaries............        --         --     (1,942)       1,942            --
Net property, plant and equipment......    36,644     20,942        752           --        58,338
Goodwill...............................    57,885     20,745         --           --        78,630
Other intangible assets................       299      1,211                      --         1,510
Other assets...........................     7,696      5,371     25,192           --        38,259
                                         --------   --------   --------     --------      --------
Total assets...........................  $215,811   $109,294   $ 37,649     $ (5,081)     $357,673
                                         ========   ========   ========     ========      ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term notes.....................  $ 11,182   $ 13,122         --           --      $ 24,304
  Current portion of long-term debt....       544      2,655   $    (94)          --         3,105
  Accounts and income taxes payable....    32,847     22,803      1,760           --        57,410
  Accrued expenses.....................    14,850     10,091      4,866           --        29,807
                                         --------   --------   --------     --------      --------
Total current liabilities..............    59,423     48,671      6,532           --       114,626
Long-term debt.........................   153,478      9,427        (14)          --       162,891
Other long-term liabilities............     1,747     11,371     19,850     $ (7,023)       25,945
Net due to (from) affiliates...........   (15,119)    58,049    (42,930)          --            --
Stockholders' equity:
  Preferred Stock......................        --         --          3           --             3
  Common and Class B Stock.............         5         --        384           (5)          384
  Additional paid-in capital...........    21,609     24,325     68,851      (45,934)       68,851
  Retained earnings (deficit)..........    (5,343)   (41,293)    23,823       46,636        23,823
  Deferred compensation and treasury
     stock.............................        --         --    (37,604)          --       (37,604)
  Accumulated other comprehensive
     loss..............................        11     (1,256)    (1,246)       1,245        (1,246)
                                         --------   --------   --------     --------      --------
Total stockholders' equity.............    16,282    (18,224)    54,211        1,942        54,211
                                         --------   --------   --------     --------      --------
Total liabilities and stockholders'
  equity...............................  $215,811   $109,294   $ 37,649     $ (5,081)     $357,673
                                         ========   ========   ========     ========      ========
</Table>

                                        18
<PAGE>
                              FEDDERS CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                  FOR THE FOUR MONTHS ENDED DECEMBER 31, 2003
                                          -----------------------------------------------------------
                                          FEDDERS
                                           NORTH      OTHER                 ELIMINATING     FEDDERS
                                          AMERICA    FEDDERS    CORPORATE     ENTRIES     CORPORATION
                                          --------   --------   ---------   -----------   -----------
<S>                                       <C>        <C>        <C>         <C>           <C>
Net cash (used in) provided by operating
  activities............................  $(59,453)  $  9,062    $ 8,710     $(16,551)     $(58,232)
                                          --------   --------    -------     --------      --------
Net additions to property, plant and
  equipment.............................      (825)    (1,253)       (38)          --        (2,116)
Sale of joint venture interest..........                1,561                                 1,561
                                          --------   --------    -------     --------      --------
Net cash (used in) provided by investing
  activities............................      (825)       308        (38)          --          (555)
                                          --------   --------    -------     --------      --------
Proceeds from short-term notes..........    16,790      6,136         --           --        22,926
Net repayments of long-term debt........       (75)    (2,211)       (14)          --        (2,300)
Proceeds from stock options exercised...        --         --      1,709           --         1,709
Cash dividends..........................   (16,551)        --     (2,383)      16,551        (2,383)
Preferred stock exchange offer..........                             (24)                       (24)
Change in net due to (from) affiliate...    19,735    (11,775)    (7,960)          --            --
                                          --------   --------    -------     --------      --------
Net cash provided by (used in) financing
  activities............................    19,899     (7,850)    (8,672)      16,551        19,928
                                          --------   --------    -------     --------      --------
Net (decrease) increase in cash and cash
  equivalents...........................   (40,379)     1,520         --           --       (38,859)
Cash and cash equivalents at beginning
  of period.............................    54,354      6,548         --           --        60,902
                                          --------   --------    -------     --------      --------
Cash and cash equivalents at end of
  period................................  $ 13,975   $  8,068    $    --     $     --      $ 22,043
                                          ========   ========    =======     ========      ========
</Table>

                                        19
<PAGE>
                              FEDDERS CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                  FOR THE FOUR MONTHS ENDED DECEMBER 31, 2002
                                          -----------------------------------------------------------
                                          FEDDERS
                                           NORTH      OTHER                 ELIMINATING     FEDDERS
                                          AMERICA    FEDDERS    CORPORATE     ENTRIES     CORPORATION
                                          --------   --------   ---------   -----------   -----------
<S>                                       <C>        <C>        <C>         <C>           <C>
Net cash used in operating activities...  $(38,600)  $ (6,391)   $(7,993)          --      $(52,984)
                                          --------   --------    -------     --------      --------
Net additions to property, plant and
  equipment.............................    (2,242)      (685)        (5)          --        (2,932)
                                          --------   --------    -------     --------      --------
Net cash used in investing activities...    (2,242)      (685)        (5)          --        (2,932)
                                          --------   --------    -------     --------      --------
Proceeds from short-term notes..........     8,750      5,725         --                     14,475
Net repayments of long-term debt........      (195)      (709)      (231)          --        (1,135)
Cash dividends..........................        --         --     (1,944)          --        (1,944)
Other...................................        --         --        (40)          --           (40)
Change in net due (from) to affiliate...   (15,119)     4,906     10,213           --            --
                                          --------   --------    -------     --------      --------
Net cash (used in) provided by financing
  activities............................    (6,564)     9,922      7,998           --        11,356
                                          --------   --------    -------     --------      --------
Net (decrease) increase in cash and cash
  equivalents...........................   (47,406)     2,846         --           --       (44,560)
Cash and cash equivalents at beginning
  of period.............................    64,166      3,213         --           --        67,379
                                          --------   --------    -------     --------      --------
Cash and cash equivalents at end of
  period................................  $ 16,760   $  6,059         --           --      $ 22,819
                                          ========   ========    =======     ========      ========
</Table>

INTERCOMPANY TRANSACTIONS:

     The historical condensed consolidating financial statements presented above
include the following transactions between the Company and FNA:

          a) The Company charges corporate overhead essentially on a cost basis
     allocated in proportion to sales. Such charges to FNA amounted to
     approximately $3.4 million and $3.1 million for the four months ended
     December 31, 2003 and 2002, respectively.

          b) FNA's interest expense reflects actual interest charges on the
     9 3/8% Senior Subordinated Notes due 2007, State of Illinois Promissory
     Note, Trion Industrial Revenue Bond, capital lease obligations and a
     revolving line of credit.

          c) FNA's depreciation and amortization for the four months ended
     December 31, 2003 and 2002 amounted to approximately $2.5 million and $2.1
     million, respectively. Capital expenditures of FNA amounted to $0.8 million
     and $2.3 million in the four months ended December 31, 2003 and 2002,
     respectively.

          d) The Company guarantees FNA's obligations under FNA's revolving
     credit facility.

          e) The Company's stock option plans include FNA's employees.

          f) Certain reclassifications have been made in the prior year to
     conform to the current year presentation.

          g) In the four months ended December 31, 2003, FNA declared a dividend
     of $16,551 to the Company. In Fiscal 2003, FNA did not declare a dividend.

                                        20
<PAGE>

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

     The following is management's discussion and analysis of certain
significant factors, which affected the Company's financial position, and
operating results during the periods included in the accompanying consolidated
financial statements.

     Fedders Corporation is a leading global producer and marketer of air
treatment products for the residential, commercial and industrial markets. Our
products include room air conditioners, central air conditioners, dehumidifiers,
humidifiers, air cleaners, and thermal technology products. We have two
reportable industry segments: Heating, Ventilation, Air Conditioning and
Refrigeration ("HVACR") and Engineered Products. Both segments operate and sell
products in the global air treatment market. Over the past five years, we have
re-positioned ourselves through globalization and expansion of our product
offerings from serving primarily the $1.3 billion North American market for
window air conditioners to serving the $37.0 billion global air treatment
market. Major markets we are targeting include the global market for central air
conditioning and high growth markets in Asia.

     Due to the current seasonality of our business, we normally report a loss
during the second half of the calendar year, with a majority of shipments and
revenue being derived during the first six months of the calendar year.

     The following table presents our results of operations for the transition
period indicated. Results for the four month periods ended December 31, 2003 and
2002 are unaudited. On August 26, 2003, our board of directors decided to change
our fiscal year from August 31 to December 31. This report covers the transition
period from September 1, 2003 to December 31, 2003.

<Table>
<Caption>
                                                               RESULTS OF OPERATIONS
                                                                   AS PERCENT OF
                                                                     NET SALES
                                                               ---------------------
                                                                 FOUR MONTHS ENDED
                                                                   DECEMBER 31,
                                                               ---------------------
                                                                 2003         2002
                                                               --------     --------
<S>                                                            <C>          <C>
Gross profit................................................    13.1%        18.2%
Selling, general and administrative expense.................    42.3%        37.8%
Operating loss..............................................    28.0%        19.6%
Net interest expense........................................    10.8%        12.1%
Pre-tax loss................................................    40.8%        32.6%
                                                                =====        =====
</Table>

RESULTS OF OPERATIONS FOR THE FOUR MONTHS ENDED DECEMBER 31, 2003 VERSUS THE
FOUR MONTHS ENDED DECEMBER 31, 2002.

     Net sales in the four-month period ended December 31, 2003 increased by
12.7% to $55.6 million, compared to $49.3 million in the prior-year period. The
improvement was the result of an increase of $6.3 million, or 17.1%, within the
HVACR reporting segment due to increased air conditioner sales in Asia and
dehumidifier sales in North America. Sales in the Engineered Products reporting
segment of $12.7 million were essentially flat compared to prior year as weak
sales of commercial and industrial air cleaners in Europe and North America were
offset by sales growth in Asia.

     The gross profit in the period was $7.3 million, or 13.1% of net sales,
compared to $9.0 million, or 18.2% of net sales, in the prior-year period. The
lower gross margin was the result of costs associated with the closing of the
Company's air conditioner production plant in Georgia and consolidation of the
production of commercial air conditioners at our plant in Texas. Costs
associated with this manufacturing rationalization and redundant overhead costs
between the two plants during the period amounted to approximately $2.0 million.
The Company also incurred start-up and transition costs of approximately $2.2
million during the period associated with the transfer of production of
additional high-volume products from the U.S. to China. Margins were also
affected during the period due to an increase in sales of lower margin products.

                                        21
<PAGE>

     Selling, general and administrative ("SG&A") expenses in the four months
ended December 31, 2003 were $23.5 million, or 42.3% of net sales, compared to
$18.7 million, or 37.8% of net sales, in the prior-year period. The SG&A
expenses in the current period included two non-recurring charges. A non-cash
charge of $2.3 million was recorded due to the variable accounting treatment
associated with the value of re-priced stock options to reflect the increase in
the market price of the Company's stock. All of the re-priced options were
exercised or expired during the period and will have no further effect on SG&A
expenses in subsequent periods. A $1.6 million charge was recorded to account
for a tax gross-up on the expiration of restrictions on stock granted pursuant
to a employment agreement in October 1997.

     The operating loss in the four months ended December 31, 2003 was $15.6
million, or 28.0% of net sales, compared to an operating loss of $9.7 million,
or 19.6% of net sales, in the prior-year period.

     Net interest expense in the four months ended December 31, 2003 of $6.0
million was approximately equal to prior year and consisted primarily of
interest expense on the Company's long-term debt. Net interest expense as a
percent of net sales was lower than prior year due to the increase in sales.

     Upon adoption of SFAS No. 142, the Company was required to perform a
transitional goodwill impairment test. The transitional goodwill impairment test
was completed during the fourth quarter of fiscal year 2003. As a result, the
Company recognized a non-cash transitional goodwill impairment charge of $11.9
million in its Engineered Products segment, because the projected financial
performance of the Engineered Products segment was insufficient to support the
related goodwill. As required, the transitional goodwill impairment charge was
recorded as a cumulative effect of a change in accounting principle as of
September 1, 2002.

     Net loss in the four months ended December 31, 2003 applicable to common
stockholders was $15.8 million, or 52 cents diluted loss per common share,
compared to a net loss in the four months ended December 31, 2002 applicable to
common stockholders, before the cumulative effect of a change in accounting
principle, of $10.9 million, or 33 cents diluted loss per common share. Net loss
applicable to common stockholders in the four months ended December 31, 2002,
including the $11.9 million non-cash transitional goodwill impairment charge,
which was recorded as a cumulative effect of a change in accounting principle,
was $22.8 million, or 70 cents diluted loss per common share.

LIQUIDITY AND CAPITAL RESOURCES

     Working capital requirements of the Company are seasonal, with cash
balances peaking in the third quarter of each calendar year and the greatest
utilization of its lines of credit occurring early in the calendar year. Cash on
hand amounted to $22.0 million at December 31, 2003 compared to $22.8 million a
year earlier.

     Net cash used in operations for the four months ended December 31, 2003
amounted to $58.2 million, compared to $53.0 million in the prior period. A
build-up in inventory to support seasonal requirements was the main use of cash
during the period. Net inventories at December 31, 2003 were $145.5 million
compared to $78.9 million at August 31, 2003 and $103.7 million at December 31,
2002. Inventories are higher compared to the previous year due to inventory
required to support the expansion of sales of central air conditioners globally
and all products in Asian markets, as well as to meet U.S. retailers' earlier
shipment requirements for the 2004 season.

     Net cash used in investing activities was $0.6 million and consisted of
capital expenditures of $2.1 million primarily to support the expansion of
production capacity in Asia offset by the sale of the Company's interest in its
former joint venture in Spain for $1.6 million versus $2.9 million used in
investing activities in the prior-year period.

     Net cash provided by financing activities during the four months ended
December 31, 2003 was $19.9 million and consisted primarily of $22.9 million in
short-term borrowings to support production in Asia, $1.7 million of proceeds
from stock options exercised offset by $2.4 million of cash dividends and the
repayment of $2.3 million of long-term debt. Net cash provided by financing
activities during the prior-

                                        22
<PAGE>

year period was $11.4 million, consisting primarily of $14.5 million in
short-term borrowings to support production in Asia offset by $1.9 million of
cash dividends and the repayment of $1.1 million of long-term debt.

     The Company declared quarterly dividends of 3 cents on each share of
outstanding Common and Class B Stock and 53.8 cents on each share of outstanding
Preferred Stock in the four months ended December 31, 2003. The Company declared
quarterly dividends of 3 cents on each share of outstanding Common and Class B
Stock in the four months ended December 31, 2002.

     The following summarizes Fedders' contractual cash obligations and
commercial commitments at December 31, 2003, and the effect such obligations are
expected to have on liquidity and cash flow in future periods.

<Table>
<Caption>
                                                PAYMENTS DUE BY PERIOD LESS THAN
                                      ----------------------------------------------------
                                                                                    AFTER
CONTRACTUAL OBLIGATION                 TOTAL     1 YEAR    2-3 YEARS   4-5 YEARS   5 YEARS
----------------------                --------   -------   ---------   ---------   -------
                                                     (AMOUNTS IN THOUSANDS)
<S>                                   <C>        <C>       <C>         <C>         <C>
Long-term debt, including current
  maturities........................  $157,725   $ 2,145    $2,207     $149,965    $3,408
Capital lease obligations...........     4,019       634     1,002        1,290     1,093
Operating leases and contractual
  minimum payments..................    18,423     3,444     5,708        5,422     3,849
Short-term notes....................    30,446    30,446        --           --        --
                                      --------   -------    ------     --------    ------
Total contractual cash
  obligations.......................  $210,613   $36,669    $8,917     $156,677    $8,350
                                      ========   =======    ======     ========    ======
</Table>

     From time to time, subsidiaries of the Company may guarantee the debt of
certain unconsolidated joint ventures, up to a maximum of the Company's
ownership percentage in the unconsolidated joint venture. The Company currently
holds no collateral for such guarantees, and has not recorded corresponding
obligations. The Company's subsidiaries would be obligated to perform their
obligations under such guarantees in the event the unconsolidated joint ventures
fail to pay the principal and interest on the loans or fail to comply with the
terms of the loan agreement.

<Table>
<Caption>
                                                   COMMITMENTS BY PERIOD LESS THAN
                                          -------------------------------------------------
                                                                                     AFTER
OTHER COMMERCIAL COMMITMENTS              TOTAL    1 YEAR   2-3 YEARS   4-5 YEARS   5 YEARS
----------------------------              ------   ------   ---------   ---------   -------
                                                       (AMOUNTS IN THOUSANDS)
<S>                                       <C>      <C>      <C>         <C>         <C>
Guarantee of debt.......................  $2,900   $1,400    $1,500         --         --
                                          ------   ------    ------        ---        ---
Total commercial commitments............  $2,900   $1,400    $1,500         --         --
                                          ======   ======    ======        ===        ===
</Table>

     Management believes that the Company's cash, earnings and borrowing
capacity are adequate to meet the demands of its operations and its long-term
credit requirements.

     Forward-looking statements are covered under the "Safe-Harbor" clause of
the Private Securities Litigation Reform Act of 1995. Such statements are based
upon current expectations and assumptions. Actual results could differ
materially from those currently anticipated as a result of known and unknown
risks and uncertainties including, but not limited to, weather and economic,
political, market and industry conditions and reliance on key customers. Such
factors are described in Fedders' SEC filings, including its most recently filed
annual report on Form 10-K. The Company disclaims any obligation to update any
forward-looking statements to incorporate subsequent events.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     None

                                        23
<PAGE>

ITEM 4.

CONTROLS AND PROCEDURES

     (a) Evaluation of Disclosure Controls and Procedures. The Company's Chief
Executive Officer and Chief Financial Officer have evaluated the effectiveness
of the Company's disclosure controls and procedures (as such term is defined in
Rules 13a-14 (c) and 15d-14(c) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") as of the end of the period covered by this
quarterly report (the "Evaluation Date"). Based on such evaluation, such
officers have concluded that, as of the Evaluation Date, the Company's
disclosure controls and procedures are effective in alerting them on a timely
basis to material information relating to the Company, including its
consolidated subsidiaries required to be included in the Company's reports filed
or submitted under the Exchange Act.

     (b) Changes in Internal Controls. During the Company's last four month
period ended December 31, 2003, there have not been any significant changes in
the Company's internal controls over financial reporting or in other factors
that have materially affected or are reasonably likely to materially affect the
Company's internal control over financial reporting.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits

<Table>
<Caption>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<S>       <C>
 31.1     Certifications pursuant to Section 302 of the Sarbanes-Oxley
          Act of 2002 of Chief Executive Officer.
 31.2     Certifications pursuant to Section 302 of the Sarbanes-Oxley
          Act of 2002 of Chief Financial Officer.
 32.1     Certifications pursuant to Section 906 of the Sarbanes-Oxley
          Act of 2002 of Chief Executive Officer.
 32.2     Certifications pursuant to Section 906 of the Sarbanes-Oxley
          Act of 2002 of Chief Financial Officer.
</Table>

     (b) Reports on Form 8-K

     None

                                        24
<PAGE>

                                   SIGNATURE

     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.

                                          FEDDERS CORPORATION

                                          By:     /s/ MICHAEL GIORDANO
                                            ------------------------------------
                                                 Executive Vice President,
                                               Finance and Administration and
                                                  Chief Financial Officer

     Signing both in his capacity as Executive Vice President, Finance and
Administration and Chief Financial Officer and on behalf of the registrant.

February 13, 2004

                                        25