<PAGE>

================================================================================

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

                           FORM 10-Q/A Amendment No. 1

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

For the quarterly period ended June 30, 2004

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

                          COMMISSION FILE NUMBER 1-8831

                               FEDDERS CORPORATION

             (Exact name of registrant as specified in its charter)

              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)

               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 [ ]

   Indicate by check mark whether the registrant is an accelerated filer (as
                  defined in Rule 12b-2 of the Exchange Act).

                                 Yes [X] No [ ]

      The registrant has outstanding 36,300,462 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 July 31, 2004.

================================================================================
<PAGE>

Explanatory Note

This amendment on Form 10-Q/A is being filed with respect to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 filed with the
Securities and Exchange Commission (the "SEC") on August 9, 2004 (the "Form
10-Q"). The financial statements for the three months and six months ended June
30, 2004 have been restated to record a provision for returned products. Return
privileges were granted to certain significant customers in the third quarter,
in connection with sales negotiations for 2005 business. The company has
determined that a provision for the returns should be reflected in the quarter
ended June 30, 2004. This amendment is being filed to restate the unaudited
consolidated financial statements and the notes thereto, as of and for the three
months and six months ended June 30, 2004 contained in Item 1. For additional
information regarding the restatement refer to Note 1 of the Notes to the
unaudited consolidated financial statement in item 1. The Company also has
updated Item 2, Management's Discussion and Analysis of Financial Condition and
Results of Operations to give effect to the restatement. Item 4 has been amended
to discuss the restatement and reflect the date of the filing of this amendment
No.1. Other disclosures have not been updated to reflect other developments
since the original filing. The restatement has no effect on the Company's
previously reported full fiscal year results for the year ended August 31, 2003
and for the transition period from September 1, 2003 to December 31, 2003.

                                       2
<PAGE>

                               FEDDERS CORPORATION

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                                              PAGE
                                                                                                                             NUMBER
                                                                                                                             ------
<S>                                                                                                                          <C>
        EXPLANATORY NOTE                                                                                                        2
PART I  FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
        CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)  FOR THE THREE AND SIX MONTHS ENDED JUNE
        30, 2004 (AS RESTATED) AND JUNE 30, 2003.                                                                               4
        CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2004 (AS RESTATED), DECEMBER 31, 2003 AND JUNE 30, 2003                      5
        CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2004 (AS RESTATED) AND 2003                     6
        NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                                                       7-20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION                               21-25
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                             26
ITEM 4. CONTROLS AND PROCEDURES                                                                                                26
PART II OTHER INFORMATION
ITEM 5. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                    27
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                                                       27
        SIGNATURE                                                                                                              28
        CERTIFICATIONS                                                                                                      29-32
</TABLE>

                                       3
<PAGE>

                           PART I FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                               FEDDERS CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                         AND COMPREHENSIVE INCOME (LOSS)

                  (amounts in thousands, except per share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                           THREE MONTHS ENDED             SIX MONTHS ENDED
                                                                                JUNE 30,                      JUNE 30,
                                                                      ----------------------------    ---------------------------
                                                                           2004            2003          2004              2003
                                                                      -------------     ----------    -----------      ----------
                                                                      (AS RESTATED,                   (AS RESTATED,
                                                                        SEE NOTE 1)                    SEE NOTE 1)
<S>                                                                   <C>               <C>           <C>              <C>
Net sales...........................................................    $  178,125      $  186,696    $  297,420       $  310,050
Costs and expenses:
  Cost of sales.....................................................       149,237         142,684       246,774          238,004
  Selling, general and administrative expense.......................        19,913          17,972        36,963           33,245
  Restructuring credit..............................................          (709)             --          (709)              --
                                                                        ----------      ----------    ----------       ----------
                                                                           168,441         160,656       283,028          271,249
                                                                        ----------      ----------    ----------       ----------
Operating income....................................................         9,684          26,040        14,392           38,801
Partners' interest in joint venture (losses) earnings...............          (361)          1,291          (652)           1,129
Interest expense, net...............................................         5,226           4,795        10,169            9,857
Loss on debt extinguishment.........................................           683              --         8,075               --
Other (expense) income..............................................           (87)            147           270              308
                                                                        ----------      ----------    ----------       ----------
Income (loss) before income taxes...................................         3,327          22,683        (4,234)          30,381
Provision (benefit) for income taxes................................         1,067           7,372        (1,347)           9,874
                                                                        ----------      ----------    -----------      ----------

Net income (loss)...................................................         2,260          15,311        (2,887)          20,507
Preferred stock dividends...........................................         1,005             222         2,010              396
                                                                        ----------      ----------    ----------       ----------
Net income (loss) applicable to common stockholders.................         1,255          15,089        (4,897)          20,111
Other comprehensive (loss) income:
  Foreign currency translation, net of tax..........................           (84)           (195)           62             (276)
                                                                        ----------      ----------    ----------       ----------
Comprehensive income (loss).........................................    $    1,171      $   14,894    $   (4,835)      $   19,835
                                                                        ==========      ==========    ==========       ==========
   Net income (loss) per common share:
Basic/diluted net income (loss) per common share....................          0.04            0.50         (0.16)            0.66
                                                                        ==========      ==========    ==========       ==========
Weighted average shares outstanding:
  Basic.............................................................        30,444          29,610        30,435           29,890
  Diluted...........................................................        30,846          29,719        30,435           29,947
Dividends per share declared:
  Common Stock......................................................    $    0.060      $    0.060    $    0.090       $    0.090
  Class B Stock.....................................................         0.060           0.060         0.090            0.090
  Preferred Stock...................................................         1.076           1.076         1.614            1.614
</TABLE>

See accompanying notes to the unaudited consolidated financial statements

                                       4
<PAGE>

                               FEDDERS CORPORATION

                           CONSOLIDATED BALANCE SHEETS
                    (amounts in thousands, except par value)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                              JUNE 30,     DECEMBER 31,   JUNE 30,
                                                                                                2004          2003         2003
                                                                                            ------------   ------------   --------
                                                                                            (AS RESTATED,
                                                                                             SEE NOTE 1)
<S>                                                                                         <C>            <C>         <C>
           ASSETS
Current assets:
  Cash and cash equivalents...............................................................  $    32,713     $   22,043  $    39,020
  Accounts receivable (net of allowance of $2,060, $2,032 and $2,346
    at June 30, 2004, December 31, 2003 and June 30, 2003, respectively)..................      103,636         29,718       90,427
  Inventories:
    Finished goods........................................................................       92,909        113,659       61,154
    Work-in-process.......................................................................        4,033          4,487        3,939
    Raw materials and supplies............................................................       31,849         27,340       21,311
                                                                                            -----------     ----------  -----------
  Net inventories.........................................................................      128,791        145,486       86,404
  Deferred income taxes...................................................................        7,645          7,652        5,578
  Assets held for sale....................................................................        8,249          8,564        8,249
  Other current assets....................................................................       16,735         28,352       23,875
                                                                                            -----------     ----------  -----------
Total current assets......................................................................      297,769        241,815      253,553
Net property, plant and equipment:
  Land and improvements...................................................................        1,508          1,508        1,434
  Buildings and leasehold improvements....................................................       33,737         31,880       32,355
  Machinery and equipment.................................................................      101,049        102,815       99,927
                                                                                            -----------     ----------  -----------
  Gross property, plant and equipment.....................................................      136,294        136,203      133,716
  Less accumulated depreciation...........................................................       84,670         81,541       76,353
                                                                                            -----------     ----------  -----------
Net property, plant and equipment.........................................................       51,624         54,662       57,363
Deferred income taxes.....................................................................        8,224          8,224        2,867
Goodwill..................................................................................       78,093         78,630       78,630
Other intangible assets...................................................................        1,422          1,685        1,463
Other assets..............................................................................       35,854         31,232       35,545
                                                                                            -----------     ----------  -----------
Total assets..............................................................................  $   472,986     $  416,248  $   429,421
                                                                                            ===========     ==========  ===========
        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term notes........................................................................  $    36,865     $   30,446  $    23,173
  Current portion of long-term debt.......................................................        1,421          2,779        3,452
  Accounts payable........................................................................       86,569         86,313       73,174
  Income taxes payable....................................................................           --             --       10,852
  Accrued expenses........................................................................       69,995         39,032       63,435
                                                                                            -----------     ----------  -----------
Total current liabilities.................................................................      194,850        158,570      174,086
Long-term debt............................................................................      159,096        158,965      161,114
Other long-term liabilities...............................................................       31,388         31,528       18,802
Partners' net interest in joint venture...................................................        4,798          4,235        4,864
Stockholders' equity:
Preferred Stock, $0.01 par value, 15,000 shares authorized, 1,870, 675
  and 324 issued at June 30, 2004, December 31, 2003 and June 30, 2003, respectively......           19              7            4
Common Stock, $0.01 par value, 70,000 shares authorized, 36,519, 36,444 and 35,934
  issued at June 30, 2004, December 31, 2003 and June 30, 2003, respectively..............          365            364          353
Class B Stock, $0.01 par value, 5,000 shares authorized, 2,493 issued at June 30, 2004,
  December 31, 2003 and June 30, 2003.....................................................           25             25           25
Additional paid-in capital................................................................      109,019         80,680       68,122
Retained earnings.........................................................................       14,962         23,603       41,036
Accumulated other comprehensive loss......................................................       (1,690)        (1,752)      (1,522)
                                                                                            -----------     ----------  -----------
                                                                                                122,700        102,927      108,018
Treasury stock, at cost, 8,521, 8,521 and 8,158 shares of Common Stock at June
  30, 2004, December 31, 2003 and June 30, 2003, respectively.............................      (39,188)       (39,188)     (37,322)
Deferred compensation.....................................................................         (658)          (789)        (141)
                                                                                            -----------     ----------  -----------
Total stockholders' equity................................................................       82,854         62,950       70,555
                                                                                            -----------     ----------  -----------
Total liabilities and stockholders' equity................................................  $   472,986     $  416,248  $   429,421
                                                                                            ===========     ==========  ===========
</TABLE>

See accompanying notes to the unaudited consolidated financial statements

                                       5
<PAGE>

                               FEDDERS CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             (amounts in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                         SIX MONTHS ENDED
                                                                                             JUNE 30,
                                                                                   ----------------------------
                                                                                        2004            2003
                                                                                   ------------     -----------
                                                                                   (AS RESTATED,
                                                                                    SEE NOTE 1)
<S>                                                                                <C>              <C>
Cash flows from operating activities:
Net income......................................................................   $     (2,887)    $    20,507
Adjustments to reconcile net income to net cash used in
  operating activities:
  Depreciation and amortization.................................................          4,657           5,116
  Deferred compensation amortization............................................            131             141
  Deferred income taxes.........................................................              7              29
  Loss on debt extinguishment...................................................          8,075              --
  Partners' net interest in joint venture losses (earnings).....................            652          (1,129)
  Loss (gain) on disposal of assets.............................................            286             (96)
Changes in operating assets and liabilities:
  Accounts receivable...........................................................        (73,918)        (71,917)
  Inventories...................................................................         16,695          17,292
  Other current assets..........................................................         11,617          (4,936)
  Other assets..................................................................            753           2,830
  Accounts payable..............................................................            256          19,224
  Accrued expenses..............................................................         28,855          33,334
  Income taxes payable..........................................................             --           9,691
  Other long-term liabilities...................................................           (140)         (3,056)
  Other-- net...................................................................             93            (276)
                                                                                   ------------     -----------
Net cash (used in) provided by operating activities.............................         (4,868)         26,754
                                                                                   ------------     -----------
Cash flows from investing activities:
  Additions to property, plant and equipment....................................         (3,039)         (4,281)
  Disposal of property, plant and equipment.....................................          1,551             539
  Investment in joint venture...................................................           (932)         (1,333)
                                                                                   ------------     -----------
Net cash used in investing activities...........................................         (2,420)         (5,075)
                                                                                   ------------     -----------
Cash flows from financing activities:
  Proceeds from short-term notes................................................          6,419          (1,131)
  Repayments of long-term debt..................................................         (2,815)         (1,430)
  Net proceeds from issuance of 9 7/8% Senior Notes.............................        150,245              --
  Repayment of 9 3/8% Senior Subordinated Notes.................................       (150,000)             --
  Call premium and deferred financing charges...................................        (10,245)             --
  Proceeds from stock options exercised.........................................             91              --
  Cash dividends................................................................         (3,837)         (2,183)
  Costs of stock offerings......................................................           (223)           (734)
  Proceeds from stock rights exercised..........................................         28,323              --
                                                                                   ------------     ----------
Net cash provided by (used in) financing activities.............................         17,958          (5,478)
                                                                                   ------------     -----------
Net increase in cash and cash equivalents.......................................         10,670          16,201
Cash and cash equivalents at beginning of period................................         22,043          22,819
                                                                                   ------------     -----------
Cash and cash equivalents at end of period......................................   $     32,713     $    39,020
                                                                                   ============     ===========
Supplemental disclosure:
  Interest paid.................................................................   $     10,037     $     8,929
  Income taxes paid.............................................................            846           1,125
                                                                                   ============     ===========
</TABLE>

See accompanying notes to the unaudited consolidated financial statements

                                       6
<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. The
financial statements and notes included herein provide unaudited results of the
Company for the three-month period from April 1, 2004 through June 30, 2004 and
for the six-month period from January 1, 2004 through June 30, 2004. The
unaudited statements for the three-month and six-month periods ended June 30,
2003 have been provided for comparison purposes.

      The Company's business is seasonal and, consequently, operating results
for the six-month period ending June 30, 2004 are not necessarily indicative of
the results that may be expected for the fiscal year ending December 31, 2004.
Certain reclassifications have been made in prior-year amounts to conform to the
current-year presentation.

Restatement

      Subsequent to the issuance of its unaudited consolidated financial
statements for the quarter ended June 30, 2004, the Company determined that a
provision for returns granted to certain significant customers should have been
recorded in the second quarter when the sales were recognized. At the time the
Company recorded the sales, the Company did not consider customer buying
patterns and programs, historical experience, and levels of inventory at those
customers. As a result, the Company has restated its second quarter 2004
financial statements to recognize approximately $17.9 million of sales returns
and reduce related costs of sales by $12.4 million.

A summary of the significant effects of the restatement is as follows:

<TABLE>
<CAPTION>
                                                 FOR THE THREE MONTHS ENDED JUNE 30, 2004
                                                 ----------------------------------------
                                                  AS PREVIOUSLY REPORTED    AS RESTATED
                                                 -----------------------    -------------
<S>                                              <C>                        <C>
Statement of Operations
Net Sales                                                 $196,018          $178,125
Cost of sales                                              161,603           149,237
Operating income                                            15,211             9,684
Income before income taxes                                   8,854             3,327
Provision for income taxes                                   2,835             1,067
Net income                                                   6,019             2,260
Net income applicable to common stockholders                 5,014             1,255
Comprehensive income                                         4,930             1,171
Basic and diluted income per share                            0.16              0.04
</TABLE>

<TABLE>
<CAPTION>
                                                    FOR THE SIX MONTHS ENDED JUNE 30,2004
                                                    -------------------------------------
                                                    AS PREVIOUSLY REPORTED    AS RESTATED
                                                    ----------------------    -----------
<S>                                                 <C>                       <C>
Statement of Operations
Net sales                                                 $ 315,313           $ 297,420
Cost of sales                                               259,140             246,774
Operating income                                             19,919              14,392
Income (loss)  before income taxes                            1,293              (4,234)
Provision for (benefit from) income taxes                       421              (1,347)
Net income (loss)                                               872              (2,887)
Net loss applicable to common stockholders                   (1,138)             (4,897)
Comprehensive loss                                           (1,076)             (4,835)
</TABLE>

                                       7
<PAGE>

<TABLE>
<S>                                                     <C>                 <C>
Basic and diluted loss per share                        (0.04)              (0.16)
</TABLE>

<TABLE>
<CAPTION>
                                                    AS OF JUNE 30,2004
                                            AS PREVIOUSLY REPORTED   AS RESTATED
                                            ----------------------   -----------
<S>                                         <C>                      <C>
Balance Sheet
Finished goods                                      $ 80,686          $ 92,909
Net inventories                                      116,568           128,791
Other current assets                                  14,966            16,735
Total current assets                                 283,777           297,769
Total assets                                         458,994           472,986
Accrued expenses                                      52,244            69,995
Total current liabilities                            177,099           194,850
Retained earnings                                     18,721            14,962
Total stockholders' equity                            86,613            82,854
Total liabilities and stockholders' equity           458,994           472,986
</TABLE>

<TABLE>
<CAPTION>
                                   FOR THE SIX MONTHS ENDED JUNE 30,2004
                                  --------------------------------------
                                  AS PREVIOUSLY REPORTED    AS RESTATED
                                  ----------------------    ------------
<S>                               <C>                       <C>
Statement of Cash Flow
Net income (loss)                      $    872             $ (2,887)
Inventories                              28,918               16,695
Other current assets                     13,386               11,617
Accrued expenses                         11,104               28,855
</TABLE>

Revenue Recognition

      Sales are recorded consistent with their related shipping terms upon the
passing of title and the risks and rewards of ownership to the customer. For a
majority of the Company's customers, title and the risks and rewards of
ownership pass at the time of shipment. However, certain of the Company's sales
are recorded at the time the products are delivered to the customers. Sales are
recorded net of a provision for sales allowances, warranties and returns.

      The Company estimates a provision for sales allowances and for returns at
the time of sale based on consideration of a number of factors including
historical experience, customer buying patterns and programs, and information
with respect to customer inventory levels.

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

2. STOCK COMPENSATION

      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 have 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.

                                       8
<PAGE>

<TABLE>
<CAPTION>
                                                                                    THREE MONTHS ENDED          SIX MONTHS ENDED
                                                                                         JUNE 30,                   JUNE 30,
                                                                                   -------------------------------------------------
                                                                                     2004          2003         2004          2003
                                                                                   --------     ---------    ---------     ---------
<S>                                                                                <C>          <C>          <C>           <C>
Net income (loss) applicable to common stockholders-as reported..............      $  1,255     $  15,089    $  (4,897)    $  20,111
Deduct: Total stock-based employee compensation expense determined under
  fair-value-based method for all awards, net of related tax effects.........           184            90          459           180
                                                                                   --------     ---------    ---------     ---------
Pro forma net income (loss)..................................................      $  1,071     $  14,999    $  (5,356)    $  19,931
                                                                                   ========     =========    =========     =========
Net income (loss) per common share:
   Basic/diluted -- as reported..............................................      $   0.04     $    0.50    $   (0.16)    $    0.66
   Basic/diluted -- pro forma................................................      $   0.03     $    0.50    $   (0.18)    $    0.67
</TABLE>

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 first six months of 2004, the Company
expended $30, primarily for facility closing costs. During the three months
ended June 30, 2004, the Company conducted a detailed evaluation of the
remaining restructuring reserves, as the activities for the past 10 months have
been minimal. The Company identified required reserves of $401 for on going
projects and recorded a restructuring credit of $709 for reserves in excess of
identified requirements.

      The following table displays the activity and balances of the
restructuring reserve account from December 31, 2003 to June 30, 2004.

<TABLE>
<CAPTION>
                                                                           DECEMBER 31,                               JUNE 30,
                                                                              2003                                     2004
                                                                             BALANCE       ADDITIONS   DEDUCTIONS     BALANCE
                                                                           ------------    ---------   ----------    ----------
<S>                                                                        <C>             <C>         <C>           <C>
Workforce reductions..................................................      $    586          --           432        $   154
Facility closing costs................................................           340          --           292             48
Other costs...........................................................           214          --            15            199
                                                                            --------          --          ----        -------
  Total...............................................................      $  1,140          --           739        $   401
                                                                            ========          ==          ====        =======
</TABLE>

      The remaining balance of $401, which consists primarily of workforce
reduction and environmental cleanup costs, is expected to be expended during
fiscal 2004. The final amounts will be settled upon the expiration of the period
for workers' compensation claims and completion of facility clean up and waste
removal.

4. STOCKHOLDERS' EQUITY

      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.

5. EARNINGS PER SHARE

      For the three months ended June 30, 2004 and 2003, net income (loss) per
share was computed using the weighted average number of shares of Common and
Class B stock outstanding, which amounted to 30,444,418 and 29,609,770 shares,
respectively. Stock options included in computing diluted earnings per share
amounted to 401,355 and 109,017 shares for the three months ended June 30, 2004
and 2003, respectively.

                                       9
<PAGE>

      For the six months ended June 30, 2004 and 2003, net income (loss) per
share was computed using the weighted average number of shares of Common and
Class B stock outstanding, which amounted to 30,434,757 and 29,889,826 shares,
respectively. Stock options included in computing diluted earnings per share
amounted to 57,339 shares for the six months ended June 30, 2003. Due to their
anti-dilutive effect, 575,046 options were excluded from the computation of
diluted loss per share for the six months ended June 30, 2004.

6. LONG-TERM DEBT

      On February 6, 2004, Fedders North America, Inc., a wholly owned
subsidiary of the Company ("FNA") commenced 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"). As of June 30,
2004, all Notes have been purchased and the Company recorded a loss on debt
extinguishment of $8,075, consisting of $4,848 of call premiums and $3,227 for
the write-off of associated debt issuance costs.

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.

      Goodwill and other intangible assets consist of the following:

<TABLE>
<CAPTION>
                                                                                                ENGINEERED
                                                                                    HVACR        PRODUCTS      TOTAL
                                                                                  ----------     ---------   ----------
<S>                                                                               <C>            <C>         <C>
Goodwill balance as of December 31, 2003........................................  $   70,133     $   8,497   $   78,630
Effect of foreign currency charge...............................................        (537)           --         (537)
                                                                                  ----------     ---------   ----------
Goodwill balance as of June 30, 2004............................................  $   69,596     $   8,497   $   78,093
                                                                                  ==========     =========   ==========
</TABLE>

<TABLE>
<CAPTION>
                                                                                    JUNE 30,     DECEMBER 31,
                                                                                      2004          2003
                                                                                   ----------    ------------
<S>                                                                                <C>           <C>
Other intangible assets.........................................................   $    2,994     $   3,178
Accumulated amortization........................................................       (1,572)       (1,493)
                                                                                   ----------     ---------
Other intangible assets.........................................................   $    1,422     $   1,685
                                                                                   ==========     =========
</TABLE>

      Other intangible assets primarily include a right associated with a joint
venture that is being amortized over 20 years. Amortization expense for the
three months ended June 30, 2004 and 2003 is $51 and $44, respectively.
Amortization expense for the six months ended June 30, 2004 and 2003 is $102 and
$92, 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 Walkersville facility for sale. The Company
has since changed the marketing strategy and taken necessary actions to divide
the property in order to enhance the property value. Currently there are several
interested parties; the Company is managing the process to maximize the sale
price. 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. At June 30, 2004, assets totaling $8,249, which consist
of land, land improvements, buildings and building improvements have been
classified as "Assets Held for Sale" and are no

                                       10
<PAGE>

longer being depreciated in accordance with SFAS 144. During the three months
ended June 30, 2004, a building in Ningbo, China was sold; the Company recorded
loss of $7 on the disposal of this property.

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

<TABLE>
<CAPTION>
                                                                                    JUNE 30,   DECEMBER 31,
                                                                                      2004         2003
                                                                                    --------   ------------
<S>                                                                                 <C>        <C>
Land and land improvements......................................................    $  2,181     $  2,181
Building, net...................................................................       4,272        4,587
Building improvements, net......................................................       1,796        1,796
                                                                                    --------     --------
Assets held for sale............................................................    $  8,249     $  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,
through-the-wall, ductless split and portable room air conditioners, ducted
central air conditioning systems, air cleaners, humidifiers 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.

      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>
                                                                           THREE MONTHS ENDED                SIX MONTHS ENDED
                                                                                JUNE 30,                         JUNE 30,
                                                                        ----------------------------   -------------------------
                                                                            2004            2003           2004           2003
                                                                        --------------   -----------   -------------  -----------
<S>                                                                     <C>              <C>           <C>            <C>
Net sales:
  HVACR..............................................................   $   167,795      $   178,530   $   275,939     $  293,459
  Engineered Products................................................        10,330            8,166        21,481         16,591
                                                                        -----------      -----------   -----------     ----------
  Net sales..........................................................   $   178,125      $   186,696   $   297,420     $  310,050
                                                                        ===========      ===========   ===========     ==========
Income before interest expense, income taxes and loss on debt
  extinguishment:
  HVACR..............................................................   $     6,796      $    26,089   $     9,853     $   38,510
  Engineered Products................................................           908              (16)        1,463           (609)
                                                                        -----------      -----------   -----------     ----------
  Segment income before interest expense and income taxes............         7,704           26,073        11,316         37,901
  Non-allocated income...............................................         1,532            1,405         2,694          2,337
  Loss on debt extinguishment........................................           683               --         8,075             --
  Interest expense, net..............................................         5,226            4,795        10,169          9,857
  Provision for income taxes.........................................         1,067            7,372        (1,347)         9,874
                                                                        -----------      -----------   ------------    ----------
  Net income(loss)...................................................   $     2,260      $    15,311   $    (2,887)    $   20,507
                                                                        ===========      ===========   ============    ==========
</TABLE>

<TABLE>
<CAPTION>
                                                                            JUNE 30,     DECEMBER 31,      JUNE 30,
                                                                              2004           2003            2003
                                                                           ----------    ------------     ---------
<S>                                                                        <C>           <C>              <C>
Total assets:
HVACR.................................................................     $  358,745     $  310,646      $ 324,341
Engineered Products...................................................         56,537         52,826         52,996
Non-allocated assets..................................................         57,704         52,776         52,084
                                                                           ----------     ----------      ---------
                                                                           $  472,986     $  416,248      $ 429,421
                                                                           ==========     ==========      =========
</TABLE>

                                       11
<PAGE>

      Non-allocated income and assets are primarily related to the Company's
corporate headquarters.

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 are 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.

      The following table displays the activity and balances of the product
warranty liability from December 31, 2003 to June 30, 2004:

<TABLE>
<CAPTION>
                                                                                                SIX MONTHS
                                                                                                   ENDED
                                                                                               JUNE 30, 2004
                                                                                               -------------
<S>                                                                                            <C>
Warranty balance at December 31, 2003.....................................................       $   5,641
Accruals for warranties issued during the period..........................................           9,713
Settlements made during the period........................................................          (6,310)
                                                                                                 ---------
Warranty balance at June 30, 2004.........................................................       $   9,044
                                                                                                 =========
</TABLE>

      At June 30, 2004, $8,239 of warranty liability was included in current
liabilities and $805 of warranty liability was included in other long-term
liabilities.

LOAN GUARANTEES

      Guarantees of subsidiary debt by Fedders Corporation (the "Company" or the
"Parent") and subsidiaries consist of the following at June 30, 2004:

            (i) The Parent guarantees the obligations of FNA under its 9 7/8%
      Senior Notes due 2014 (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 $155 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 June 30, 2004.

            (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 guarantee 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 June 30, 2004 is $0.8 million.

            (iv) The Parent and Melcor Corporation guarantee the obligations of
      a subsidiary, Fedders Eubank Company, 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
                                       12
<PAGE>

      pay rent when due or fails to comply with the provisions of the lease
      agreement. The outstanding loan balance at June 30, 2004 is $1.9 million.

            (v) The Parent guarantees the obligations of a subsidiary, Fedders
      Eubank Company 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 guarantee 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 June 30, 2004 is $0.4 million.

            (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 June 30,
      2004 is $6.0 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% per annum and
      matures June 2006. 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 June 30, 2004.

            (viii) The Parent guarantees the obligations of a subsidiary,
      Fedders Eubank Company, 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 guarantee
      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 June 30, 2004 is $0.8 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 guarantee 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 June 30, 2004 is $1.9
      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 guarantee 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 June 30, 2004.

11. SUBSEQUENT EVENTS

      None

12. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

      FNA and the Company are the issuer and the guarantor, respectively, of the
$155 million 9 7/8% Senior Notes due 2014. In addition, the subsidiaries of FNA
are also guarantors of the notes.

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

      The unaudited interim financial statements for FNA as of and for the three
and six months ended June 30, 2004 have been restated from the amounts
previously reported to reflect a provision for returned products. See Note 1.

                                       13
<PAGE>

                               FEDDERS CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
                         AND COMPREHENSIVE INCOME (LOSS)

<TABLE>
<CAPTION>
                                                                                    THREE MONTHS ENDED JUNE 30, 2004
                                                                   -----------------------------------------------------------------
                                                                    FEDDERS
                                                                     NORTH      OTHER                    ELIMINATING       FEDDERS
                                                                    AMERICA    FEDDERS     CORPORATE       ENTRIES       CORPORATION
                                                                   ---------   -------     ---------     -----------     -----------
<S>                                                                <C>        <C>          <C>           <C>             <C>
Net sales.....................................................     $ 154,810  $ 80,985           --      $ (57,670)       $ 178,125
Costs and expenses:
Cost of sales.................................................       133,869    73,038           --        (57,670)         149,237
Selling, general and administrative expense (a)...............        15,436     6,058     $ (1,581)            --           19,913
Restructuring credit..........................................          (709)       --           --             --             (709)
                                                                   ---------  --------     --------      ---------        ---------
Operating income..............................................         6,214     1,889        1,581             --            9,684
Partners' net interest in joint venture losses................          (287)      (74)          --             --             (361)
Equity income in investment...................................            --        --        1,300         (1,300)              --
Interest expense, net (b).....................................         4,634       542           50             --            5,226
Loss on debt extinguishment...................................           683        --           --             --              683
Other income (expense)........................................            67      (154)          --             --              (87)
                                                                   ---------  --------     --------      ---------        ---------
Income before income taxes....................................           677     1,119        2,831         (1,300)           3,327
Provision for income taxes....................................           221       275          571             --            1,067
                                                                   ---------  --------     --------      ---------        ---------
Net income....................................................           456       844        2,260         (1,300)           2,260
Preferred stock dividend......................................            --        --        1,005             --            1,005
                                                                   ---------  --------     -------       ---------        ---------
Net income applicable to common stockholders..................           456       844        1,255         (1,300)           1,255
Foreign currency translation, net of tax......................                     (58)         (84)            58              (84)
                                                                   ---------  --------     --------      ---------        ---------
Comprehensive income..........................................     $     456  $    786     $  1,171      $  (1,242)       $   1,171
                                                                   =========  ========     ========      =========        =========
</TABLE>

<TABLE>
<CAPTION>
                                                                                    THREE MONTHS ENDED JUNE 30, 2003
                                                                   -----------------------------------------------------------------
                                                                    FEDDERS
                                                                     NORTH      OTHER                    ELIMINATING       FEDDERS
                                                                    AMERICA    FEDDERS     CORPORATE       ENTRIES       CORPORATION
                                                                   ---------   -------     ---------     -----------     -----------
<S>                                                                <C>        <C>          <C>           <C>             <C>
Net sales.....................................................     $ 169,339  $ 91,386           --      $ (74,029)       $ 186,696
Costs and expenses:
Cost of sales.................................................       134,502    82,211           --        (74,029)         142,684
Selling, general and administrative expense (a)...............        14,620     5,558     $ (2,206)            --           17,972
                                                                   ---------  --------     --------      ---------        ---------
Operating income..............................................        20,217     3,617        2,206             --           26,040
Partners' net interest in joint venture (losses) earnings.....          (334)    1,625           --             --            1,291
Equity income in investment...................................            --        --       13,889        (13,889)              --
Interest expense, net (b).....................................         4,092       636           67             --            4,795
Other income (expense)........................................           (69)      203           13             --              147
                                                                   ---------  --------     --------      ---------        ---------
Income before income taxes....................................        15,722     4,809       16,041        (13,889)          22,683
Provision for income taxes....................................         5,030     1,612          730             --            7,372
                                                                   ---------  --------     --------      ---------        ---------
Net income....................................................        10,692     3,197       15,311        (13,889)          15,311
Preferred stock dividend......................................            --        --          222             --              222
                                                                   ---------  --------     --------      ---------        ---------
Net income applicable to common stockholders..................        10,692     3,197       15,089        (13,889)          15,089
Foreign currency translation, net of tax......................          (420)      325         (195)            95             (195)
                                                                   ---------  --------     --------      ---------        ---------
Comprehensive income..........................................     $  10,272  $  3,522     $ 14,894      $ (13,794)       $  14,894
                                                                   =========  ========     ========      =========        =========
</TABLE>

                                       14
<PAGE>

                               FEDDERS CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
                         AND COMPREHENSIVE (LOSS) INCOME

<TABLE>
<CAPTION>
                                                                                      SIX MONTHS ENDED JUNE 30, 2004
                                                                   ----------------------------------------------------------------
                                                                    FEDDERS
                                                                     NORTH      OTHER                    ELIMINATING     FEDDERS
                                                                    AMERICA    FEDDERS     CORPORATE       ENTRIES     CORPORATION
                                                                   ---------   -------     ---------     -----------   ------------
<S>                                                                <C>         <C>         <C>           <C>           <C>
Net sales.....................................................     $ 261,089   $  167,155          --    $ (130,824)    $ 297,420
Costs and expenses:
Cost of sales.................................................       223,504      154,094          --      (130,824)      246,774
Selling, general and administrative expense (a)...............        28,762       10,981    $ (2,780)           --        36,963
Restructuring credit..........................................          (709)          --          --            --          (709)
                                                                   ---------   ----------    --------    ----------     ---------
Operating income..............................................         9,532        2,080       2,780            --        14,392
Partners' net interest in joint venture losses................          (503)        (149)         --            --          (652)
Equity income in investment...................................            --           --      (4,646)        4,646            --
Interest expense, net (b).....................................         8,966        1,072         131            --        10,169
Loss on debt extinguishment...................................         8,075           --          --            --         8,075
Other income..................................................           150          120          --            --           270
                                                                   ---------   ----------    --------    ----------     ---------
(Loss) income before income taxes.............................        (7,862)         979      (1,997)        4,646        (4,234)
(Benefit) provision for income taxes..........................        (2,555)         318         890            --        (1,347)
                                                                   ---------   ----------    --------    ----------     ---------
Net (loss) income.............................................        (5,307)         661      (2,887)        4,646        (2,887)
Preferred stock dividend......................................            --           --       2,010            --         2,010
                                                                   ---------   ----------    --------    ----------     ---------
Net (loss) income applicable to common stockholders...........        (5,307)         661      (4,897)        4,646        (4,897)
Foreign currency translation, net of tax......................             6           74          62           (80)           62
                                                                   ---------   ----------    --------    ----------     ---------
Comprehensive (loss) income...................................     $  (5,301)  $      735    $ (4,835)   $    4,566     $  (4,835)
                                                                   =========   ==========    ========    ==========     =========
</TABLE>

<TABLE>
<CAPTION>
                                                                                      SIX MONTHS ENDED JUNE 30, 2003
                                                                   ----------------------------------------------------------------
                                                                    FEDDERS
                                                                     NORTH        OTHER                  ELIMINATING     FEDDERS
                                                                    AMERICA      FEDDERS     CORPORATE     ENTRIES     CORPORATION
                                                                   ---------     -------     ---------   -----------   ------------
<S>                                                                <C>         <C>           <C>         <C>           <C>
Net sales.....................................................     $ 283,195   $  158,790          --    $ (131,935)      $ 310,050
Costs and expenses:
Cost of sales.................................................       227,634      142,305          --      (131,935)        238,004
Selling, general and administrative expense (a)...............        26,690        9,833    $ (3,278)           --          33,245
                                                                   ---------   ----------    --------    ----------       ---------
Operating income..............................................        28,871        6,652       3,278            --          38,801
Partners' net interest in joint venture (losses) earnings.....          (334)       1,463          --            --           1,129
Equity income in investment...................................            --           --      18,638       (18,638)             --
Interest expense, net (b).....................................         8,229        1,274         354            --           9,857
Other (expense) income........................................           (72)         373           7            --             308
                                                                   ---------   ----------    --------    ----------       ---------
Income before income taxes....................................        20,236        7,214      21,569       (18,638)         30,381
Provision for income taxes....................................         6,341        2,471       1,062            --           9,874
                                                                   ---------   ----------    --------    ----------       ---------
Net income....................................................        13,895        4,743      20,507       (18,638)         20,507
Preferred stock dividend......................................            --           --         396            --             396
                                                                   ---------   ----------    --------    ----------       ---------
Net income applicable to common stockholders..................        13,895        4,743      20,111       (18,638)         20,111
Foreign currency translation, net of tax......................          (328)         (21)       (276)          349            (276)
                                                                   ---------   ----------    --------    ----------       ---------
Comprehensive income..........................................     $  13,567   $    4,722    $ 19,835    $  (18,289)      $  19,835
                                                                   =========   ==========    ========    ==========       =========
</TABLE>

                                       15
<PAGE>

                               FEDDERS CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                     CONDENSED CONSOLIDATING BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                           AS OF JUNE 30, 2004
                                                                   -----------------------------------------------------------------
                                                                    FEDDERS
                                                                     NORTH        OTHER                   ELIMINATING      FEDDERS
                                                                    AMERICA      FEDDERS    CORPORATE       ENTRIES      CORPORATION
                                                                   ---------    --------    ----------    ------------   -----------
<S>                                                                <C>          <C>         <C>           <C>            <C>
ASSETS
Current assets:
  Cash and cash equivalents...................................     $  10,424   $   12,141   $   10,148            --      $  32,713
  Net accounts receivable.....................................        86,616       17,020           --            --        103,636
  Net inventories.............................................        96,751       32,040           --            --        128,791
  Assets held for sale........................................         8,249           --           --            --          8,249
  Other current assets........................................         3,643        9,544       11,193            --         24,380
                                                                   ---------   ----------   ----------     ---------      ---------
Total current assets..........................................       205,683       70,745       21,341            --        297,769
Investments in subsidiaries...................................            --           --      (15,484)    $  15,484             --
Net property, plant and equipment.............................        35,474       15,686          464            --         51,624
Goodwill......................................................        62,870       15,223           --            --         78,093
Other intangible assets.......................................         1,363           59           --            --          1,422
Other assets..................................................        11,223        1,972       37,906        (7,023)        44,078
                                                                   ---------   ----------   ----------     ---------      ---------
Total assets..................................................     $ 316,613   $  103,685   $   44,227     $   8,461      $ 472,986
                                                                   =========   ==========   ==========     =========      =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term notes............................................            --   $   36,865           --            --      $  36,865
  Current portion of long-term debt...........................     $   1,302          119           --            --          1,421
  Accounts and income taxes payable...........................        22,524       62,417   $    1,628            --         86,569
  Accrued expenses............................................        52,557        8,420        9,018            --         69,995
                                                                   ---------   ----------   ----------     ---------      ---------
Total current liabilities.....................................        76,383      107,821       10,646            --        194,850
Long-term debt................................................       157,611        1,485           --            --        159,096
Other long-term liabilities...................................           895       12,220       30,094     $  (7,023)        36,186
Net due to (from) affiliates..................................        91,802      (12,435)     (79,367)           --             --
Stockholders' equity:
  Preferred Stock.............................................            --           --           19            --             19
  Common and Class B Stock....................................             5           --          390            (5)           390
  Additional paid-in capital..................................        20,292       25,542      109,019       (45,834)       109,019
  Retained earnings...........................................       (29,468)     (30,181)      14,962        59,649         14,962
  Deferred compensation and treasury stock                                --           --      (39,846)           --        (39,846)
  Accumulated other comprehensive loss........................          (907)        (767)      (1,690)        1,674         (1,690)
                                                                   ---------   ----------   ----------     ---------      ---------
Total stockholders' equity....................................       (10,078)      (5,407)      82,855        15,484         82,854
                                                                   ---------   ----------   ----------     ---------      ---------
Total liabilities and stockholders' equity....................     $ 316,613   $  103,685   $   44,227     $   8,461      $ 472,986
                                                                   =========   ==========   ==========     =========      =========
</TABLE>

                                       16
<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...................................     $  13,657  $    8,386          --             --     $  22,043
  Net accounts receivable.....................................        18,646      11,072          --             --        29,718
  Net inventories.............................................       111,587      33,899          --             --       145,486
  Assets held for sale........................................         8,249         315          --             --         8,564
  Other current assets........................................         2,864      23,266    $  9,874             --        36,004
                                                                   ---------  ----------    --------      ---------     ---------
Total current assets..........................................       155,003      76,938       9,874             --       241,815
Investments in subsidiaries...................................            --          --     (11,047)     $  11,047            --
Net property, plant and equipment.............................        38,911      15,160         591             --        54,662
Goodwill......................................................        62,870      15,760          --             --        78,630
Other intangible assets.......................................         1,685          --          --             --         1,685
Other assets..................................................         8,035         624      37,820         (7,023)       39,456
                                                                   ---------  ----------    --------      ---------     ---------
Total assets..................................................     $ 266,504  $  108,482    $ 37,238      $   4,024     $ 416,248
                                                                   =========  ==========    ========      =========     =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term notes............................................            --  $   30,446          --             --     $  30,446
  Current portion of long-term debt...........................     $   1,446       1,331    $      2             --         2,779
  Accounts and income taxes payable...........................        27,983      57,084       1,246             --        86,313
  Accrued expenses............................................        21,497       9,492       8,043             --        39,032
                                                                   ---------  ----------    --------      ---------     ---------
Total current liabilities.....................................        50,926      98,353       9,291             --       158,570
Long-term debt................................................       157,027       1,938          --             --       158,965
Other long-term liabilities...................................           630      11,630      30,526      $  (7,023)       35,763
Net due to (from) affiliates..................................        62,829       2,700     (65,529)            --            --
Stockholders' equity:
  Preferred Stock.............................................            --          --           7             --             7
  Common and Class B Stock....................................             5          --         389             (5)          389
  Additional paid-in capital..................................        20,292      25,542      80,680        (45,834)       80,680
  Retained earnings (deficit).................................       (24,292)    (30,840)     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....................................        (4,908)     (6,139)     62,950         11,047        62,950
                                                                   ---------  ----------    --------      ---------     ---------
Total liabilities and stockholders' equity....................     $ 266,504  $  108,482    $ 37,238      $   4,024     $ 416,248
                                                                   =========  ==========    ========      =========     =========
</TABLE>

                                       17
<PAGE>

                               FEDDERS CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                     CONDENSED CONSOLIDATING BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                           AS OF JUNE 30, 2003
                                                                  ------------------------------------------------------------------
                                                                    FEDDERS
                                                                     NORTH       OTHER                  ELIMINATING       FEDDERS
                                                                    AMERICA     FEDDERS     CORPORATE     ENTRIES       CORPORATION
                                                                  ---------   ---------     ---------   -----------     -----------
<S>                                                               <C>         <C>           <C>         <C>             <C>
ASSETS
Current assets:
  Cash and cash equivalents...................................     $   9,806  $    8,497    $ 20,717           --        $  39,020
  Net accounts receivable.....................................        72,961      17,466          --           --           90,427
  Net inventories.............................................        68,466      17,938          --           --           86,404
  Assets held for sale........................................         8,249          --          --           --            8,249
  Other current assets........................................         2,244      20,849       6,360           --           29,453
                                                                   ---------  ----------    --------    ---------        ---------
Total current assets..........................................       161,726      64,750      27,077           --          253,553
Investments in subsidiaries...................................            --          --      16,378    $ (16,378)              --
Net property, plant and equipment.............................        41,449      15,223         691           --           57,363
Goodwill......................................................        62,870      15,760          --           --           78,630
Other intangible assets.......................................         1,463          --          --           --            1,463
Other assets..................................................         7,922       7,029      30,484       (7,023)          38,412
                                                                   ---------  ----------    --------    ---------        ---------
Total assets..................................................     $ 275,430  $  102,762    $ 74,630    $ (23,401)       $ 429,421
                                                                   =========  ==========    ========    =========        =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term notes............................................            --  $   23,173          --           --        $  23,173
  Current portion of long-term debt...........................     $   1,723       1,713    $     16           --            3,452
  Accounts and income taxes payable...........................        25,508      47,634      10,884           --           84,026
  Accrued expenses............................................        44,290      10,299       8,846           --           63,435
                                                                   ---------  ----------    --------    ---------        ---------
Total current liabilities.....................................        71,521      82,819      19,746           --          174,086
Long-term debt................................................       158,359       2,737          18           --          161,114
Other long-term liabilities...................................         1,755      11,899      17,035    $  (7,023)          23,666
Net due to (from) affiliates..................................        22,141      10,583     (32,724)          --               --
Stockholders' equity:
  Preferred Stock.............................................            --          --           4           --                4
  Common and Class B Stock....................................             5          --         378           (5)             378
  Additional paid-in capital..................................        20,292      25,542      68,122      (45,834)          68,122
  Retained earnings (deficit).................................         1,674     (29,541)     41,036       27,867           41,036
  Deferred compensation and treasury stock....................            --          --     (37,463)          --          (37,463)
  Accumulated other comprehensive loss........................          (317)     (1,277)     (1,522)       1,594           (1,522)
                                                                   ---------  ----------    --------    ---------        ---------
Total stockholders' equity....................................        21,654      (5,276)     70,555      (16,378)          70,555
                                                                   ---------  ----------    --------    ---------        ---------
Total liabilities and stockholders' equity....................     $ 275,430  $  102,762    $ 74,630    $ (23,401)       $ 429,421
                                                                   =========  ==========    ========    =========        =========
</TABLE>

                                       18
<PAGE>

                               FEDDERS CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                 FOR THE SIX MONTHS ENDED JUNE 30, 2004
                                                                  -----------------------------------------------------------------
                                                                     FEDDERS
                                                                      NORTH       OTHER                    ELIMINATING    FEDDERS
                                                                     AMERICA     FEDDERS     CORPORATE       ENTRIES    CORPORATION
                                                                  ----------   ----------    ---------     -----------  -----------
<S>                                                               <C>          <C>           <C>           <C>         <C>
Net cash (used in) provided by operating activities...........    $  (21,132)  $  16,478     $   (214)         --      $   (4,868)
                                                                  ----------   ---------     ---------      -----      ----------
Net additions to property, plant and equipment................        (1,178)     (1,841)         (20)         --          (3,039)
Disposal of property, plant and equipment.....................         1,243         308           --          --           1,551
Investment in joint venture...................................            --        (932)          --                        (932)
                                                                  ----------   ---------     --------       -----      ----------
Net cash provided by (used in) investing activities...........            65      (2,465)         (20)         --          (2,420)
                                                                  ----------   ---------     --------       -----      ----------
Proceeds from short-term notes /..............................            --       6,419           --          --           6,419
Net repayments of long-term debt..............................          (960)     (1,855)          --          --          (2,815)
Proceeds from stock options exercised.........................            --          --           91          --              91
Cash dividends................................................            --          --       (3,837)         --          (3,837)
Net proceeds from issuance of 9 7/8% Senior Notes.............       150,245          --           --          --         150,245
Repayments of 9 3/8% Senior Subordinated Notes................      (150,000)         --           --          --        (150,000)
Call premium and financing costs..............................       (10,245)         --           --          --         (10,245)
Costs of stock offerings......................................            --          --         (223)         --            (223)
Proceeds from stock rights offering...........................            --          --       28,323          --          28,323
Change in net due to (from) affiliate.........................        28,794     (14,822)     (13,972)         --              --
                                                                  ----------   ---------     --------       -----      ----------
Net cash provided by (used in) financing activities...........        17,834     (10,258)      10,382          --          17,958
                                                                  ----------   ---------     --------       -----      ----------
Net (decrease) increase in cash and cash equivalents..........        (3,233)      3,755       10,148          --          10,670
Cash and cash equivalents at beginning of period..............        13,657       8,386           --          --          22,043
                                                                  ----------   ---------     --------       -----      ----------
Cash and cash equivalents at end of period....................    $   10,424   $  12,141     $ 10,148          --      $   32,713
                                                                  ==========   =========     ========       =====      ==========
</TABLE>

<TABLE>
<CAPTION>
                                                                                FOR THE SIX MONTHS ENDED JUNE 30, 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..........    $  (6,975)  $  20,349     $ 13,380          --           $ 26,754
                                                                 ---------   ---------     --------      ------           --------
Net additions to property, plant and equipment...............       (2,209)     (1,935)        (137)         --             (4,281)
Disposal of property, plant and equipment....................          539          --           --          --                539
Investment in joint venture..................................           --      (1,333)          --          --             (1,333)
                                                                 ---------   ---------     --------      ------           --------
Net cash (used in) provided by investing activities..........       (1,670)     (3,268)        (137)         --             (5,075)
                                                                 ---------   ---------     --------      ------           --------
Repayments of short-term notes...............................           --      (1,131)          --          --             (1,131)
(Repayments of) proceeds from long-term debt.................         (958)       (506)          34          --             (1,430)
Cash dividends...............................................           --          --       (2,183)         --             (2,183)
Preferred stock exchange offer...............................           --          --         (734)         --               (734)
Change in net due to (from) affiliate........................        1,983     (12,340)      10,357          --                 --
                                                                 ---------   ---------     --------      ------           --------
Net cash provided by (used in) financing activities..........        1,025     (13,977)       7,474          --             (5,478)
                                                                 ---------   ---------     --------      ------           --------
Net (decrease) increase in cash and cash equivalents.........       (7,620)      3,104       20,717          --             16,201
Cash and cash equivalents at beginning of period.............       17,426       5,393           --          --             22,819
                                                                 ---------   ---------     --------      ------           --------
Cash and cash equivalents at end of period...................    $   9,806   $   8,497     $ 20,717          --           $ 39,020
                                                                 =========   =========     ========      ======           ========
</TABLE>

                                       19
<PAGE>

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 $6.0 million and $6.7 million for the three months
            ended June 30, 2004 and 2003, respectively. Such charges to FNA
            amounted to approximately $10.4 million for the six months ended
            June 30, 2004 and $11.3 million for the six months ended June 30,
            2003.

            b) FNA's interest expense reflects actual interest charges on the 9
            7/8% Senior Notes, 9 3/8% Senior Subordinated Notes, retired in
            April 2004, 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 three months ended
            June 30, 2004 and 2003 amounted to approximately $1.1 million and
            $1.8 million, respectively. Capital expenditures of FNA amounted to
            $0.8 million and $1.1 million in the three months ended June 30,
            2004 and 2003, respectively. FNA's depreciation and amortization for
            the six months ended June 30, 2004 and 2003 amounted to
            approximately $3.2 million and $3.6 million, respectively. Capital
            expenditures of FNA amounted to $1.2 million and $2.2 million in the
            six months ended June 30, 2004 and 2003, 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) For the three months ended June 30, 2004, net sales for Other
            Fedders entities were unfavorably affected by timing of production
            versus prior year period.

                                       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. The accompanying management's discussion and analysis of
results of operations and financial condition gives effect to the restatement of
the unaudited consolidated financial statements as of and for the three and six
months ended June 30, 2004, as described in Note 1 to the unaudited 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 periods
indicated. Results for the three-month and six-month periods ended June 30, 2004
and 2003 are unaudited. On August 26, 2003, the Board of Directors changed the
Company's fiscal year-end from August 31 to December 31.

<TABLE>
<CAPTION>
                                                                              RESULTS OF OPERATIONS          RESULTS OF OPERATIONS
                                                                                  AS PERCENT OF                  AS PERCENT OF
                                                                                    NET SALES                      NET SALES
                                                                             ----------------------          ---------------------
                                                                               THREE MONTHS ENDED              SIX MONTHS ENDED
                                                                                    JUNE 30,                       JUNE 30,
                                                                             -----------------------         ---------------------
                                                                              2004           2003             2004           2003
                                                                             ------         ------           ------         ------
<S>                                                                          <C>            <C>              <C>            <C>
Gross profit.........................................................         16.2%          23.6%           17.0%           23.2%
Selling, general and administrative expense..........................         11.2%           9.6%           12.4%           10.7%
Operating income.....................................................          5.4%          14.0%            4.8%           12.5%
Net interest expense.................................................          2.9%           2.7%            3.4%            3.2%
Pre-tax income.......................................................          1.9%          12.1%           (1.4)%           9.8%
</TABLE>

                                       21
<PAGE>

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2004 VERSUS THE THREE
MONTHS ENDED JUNE 30, 2003.

      Net sales in the three-month period ended June 30, 2004 decreased by 4.6%
to $178.1 million, compared to $186.7 million in the prior-year period. Net
sales were negatively affected by sales return of $17.9 million during the 2004
period. Sales in the HVACR reporting segment decreased by 6.0% to $167.8 million
from $178.5 million in the prior-year period. Sales in the HVACR segment
declined as a result of lower sales of room air conditioners in North America
caused by cooler than normal weather conditions and lower prices. This was
offset in part by improving sales of residential central air conditioners in the
Americas and sales of all HVACR products in Asia. Sales in the Engineered
Products reporting segment increased by 26.0% to $10.3 million from $8.2 million
in the prior-year period due primarily to increased sales of industrial air
cleaners in Asia and North America

      The gross profit in the period was $28.9 million, or 16.2% of net sales,
compared to $44.0 million, or 23.6% of net sales, in the prior-year period.
Gross profit during the 2004 period was negatively affected in the amount of
$5.5 million due to the sales returns. Gross profit and margin percentage in the
quarter were adversely affected by higher component and raw material costs due
to increases in commodity prices and costs associated with the wind down of high
volume manufacturing in the U.S. and start-up costs in China.

      Selling, general and administrative ("SG&A") expenses in the three months
ended June 30, 2004 were $19.9 million, or 11.2% of net sales, compared to $18.0
million, or 9.6% of net sales, in the prior-year period. SG&A expenses were
higher than prior year as a result of higher selling expenses due to increased
sales activity globally and increased warehousing costs to support higher
inventory levels as a result of the sale of a broader range of products globally
and higher inventory levels due to the cooler than normal weather conditions in
North America.

      Operating income in the three months ended June 30, 2004 was $9.7 million,
or 5.4% of net sales, compared to operating income of $26.0 million, or 14.0% of
net sales, in the prior-year period.

      Net interest expense in the three months ended June 30, 2004 was $5.2
million, or 2.9% of net sales, compared to $4.8 million, or 2.7% of net sales,
in the prior-year period and consisted of interest expense on the Company's
long-term debt and interest on short- term working capital loans in Asia and the
U.S. Net interest expense was higher than prior year due to higher short-term
borrowings during the period due to the higher inventory levels.

      A loss on debt extinguishment of $0.7 million was recorded during the
period to account for the early retirement of the Company's ten-year notes and
the issuance of new ten-year notes due March 2014. A $0.7 million credit was
recorded in the second quarter of 2004 due to a revision in management's
estimates of the required restructuring reserves for ongoing projects associated
with the 2001 restructuring.

      Net income in the three months ended June 30, 2004 applicable to common
stockholders, which included the loss on debt extinguishment, was $1.3 million,
or 4 cents per diluted common share, compared to net income in the three months
ended June 30, 2003 applicable to common stockholders of $15.1 million, or 50
cents per diluted common share.

                                       22
<PAGE>

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2004 VERSUS THE SIX
MONTHS ENDED JUNE 30, 2003.

      Net sales in the six-month period ended June 30, 2004 decreased by 4.1% to
$297.4 million, compared to $310.1 million in the prior-year period. Net sales
were negatively affected by sales return of $17.9 million during the 2004
period. Sales in the HVACR reporting segment decreased by 6% to $275.9 million
from $293.5 million in the prior-year period. Sales in the HVACR segment
declined as a result of lower sales of room air conditioners in North America
caused by cooler than normal summer weather conditions and lower prices. This
was offset in part by increased sales of residential central air conditioners in
the Americas and all HVACR products in Asia. Sales in the Engineered Products
reporting segment increased by 30.0% to $21.5 million from $16.6 million in the
prior-year period. Sales improved in all product categories and markets with the
exception of Europe. Net sales for the six months ended June 30, 2004 reflect an
adjustment to reclassify $3.9 million of accrued warranty expenses from Cost of
Sales to Net Sales, consistent with the Company's accounting practices. The
adjustment had no effect on gross profit or net income.

      The gross profit in the period was $50.6 million, or 17% of net sales,
compared to $72.0 million, or 23.2% of net sales, in the prior-year period.
Gross profit during the 2004 period was negatively affected in the amount of
$5.5 million due to the sales returns. Gross profit and margin percentage were
reduced by transition and start-up costs related to the final stages of
transferring production of high volume products from the U.S. to China and
increases in material and ocean freight costs.

      Selling, general and administrative ("SG&A") expenses in the six months
ended June 30, 2004 were $37.0 million, or 12.4% of net sales, compared to $33.2
million, or 10.7% of net sales, in the prior-year period. SG&A expenses were
higher than prior year as a result of higher selling expenses due to increased
sales activity globally and increased warehousing costs to support higher
inventory requirements.

      The operating income in the six months ended June 30, 2004 was $14.4
million, or 4.8% of net sales, compared to an operating income of $38.8 million,
or 12.5% of net sales, in the prior-year period.

      Net interest expense in the six months ended June 30, 2004 was $10.2
million, or 3.4% of net sales, compared to $9.9 million, or 3.2% of net sales,
in the prior-year period and consisted of interest expense on the Company's
long-term debt and interest on short-term working capital loans in Asia and the
U.S. Net interest expense was slightly higher than prior year due to higher
short-term borrowings during the period.

      A loss on debt extinguishment of $8.1 million was recorded during the
period to account for the early retirement of the Company's ten-year notes and
the issuance of new ten-year notes due March 2014. The charge consisted of $4.9
million of call premiums required to be paid to note holders and $3.2 million
for the write-off of unamortized debt discount. A $0.7 million credit due to a
revision in management's estimates of the required restructuring reserves for
ongoing projects associated with the 2001 restructuring was recorded in the
period.

      Net loss in the six months ended June 30, 2004 applicable to common
stockholders, which included the loss on debt extinguishment, was $4.9 million,
or 16 cents per diluted common share, compared to net income in the six months
ended June 30, 2003 applicable to common stockholders of $20.1 million, or 66
cents per diluted common share.

                                       23
<PAGE>

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 $32.7 million at June 30, 2004 compared to $39.0 million a year
earlier. Short-term borrowings under the Company's working capital credit
facilities amounted to $36.9 million at June 30, 2004 compared to $23.2 million
a year earlier and consisted of bank borrowings in China. There were no
borrowings on the Company's $100 million revolving credit facility at the end of
June.

      Net cash used in operations for the six months ended June 30, 2004
amounted to $4.9 million, compared to net cash provided by operations of $26.8
million in the prior period. A build-up in inventory to support seasonal
requirements and expansion of sales of new products was the main use of cash
during the period. Net inventories at June 30, 2004 were $128.8 million compared
to $145.5 million at December 31, 2003 and $86.4 million at June 30, 2003.
Inventories were higher compared to the previous year due to inventory required
to support the expansion of sales of central air conditioners globally, sales of
products in Asian markets, as well as higher inventory in North America due to
the cooler than normal weather conditions.

      Net cash used in investing activities was $2.4 million and consisted of
capital expenditures of $3.0 million, primarily to support the expansion of
production capacity in Asia offset by $1.6 million of proceeds on the sales of
building and equipment, versus $4.3 million used in investing activities in the
prior-year period.

      Net cash provided by financing activities during the six months ended June
30, 2004 was $18 million and consisted primarily of $6.4 million in short-term
borrowings to support production in Asia, $28.3 million of proceeds from stock
rights exercised offset by $3.8 million of cash dividends, $10.2 million of call
premium and financing charges, and the repayment of $2.8 million of long-term
debt. Net cash used by financing activities during the prior-year period was
$5.5 million, consisting primarily of $2.2 million of cash dividends, the
repayment of $1.1 million of short-term notes, and the repayment of $1.4 million
of long-term debt.

      The Company declared dividends of 6 cents on each share of outstanding
Common and Class B Stock and 107.6 cents on each share of outstanding Preferred
Stock in the three months ended June 30, 2004 and the three months ended June
30, 2003.

      The Company declared dividends of 9 cents on each share of outstanding
Common and Class B Stock and 161.4 cents on each share of outstanding Preferred
Stock in the six months ended June 30, 2004 and the six months ended June 30,
2003.

      The following summarizes Fedders' contractual cash obligations and
commercial commitments at June 30, 2004, and the effect such obligations are
expected to have on liquidity and cash flows 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.........................   $ 157,045   $    979    $  1,548   $   837    $ 153,681
Capital lease obligations............................................       3,472        442       1,360       711          959
Operating leases and contractual minimum payments....................      22,291      4,977       8,822     6,038        2,454
Short-term notes.....................................................      36,865     36,865          --        --           --
                                                                        ---------   --------    --------   -------    ---------
Total contractual cash obligations...................................   $ 219,673   $ 43,263    $ 11,730   $ 7,586    $ 157,094
                                                                        =========   ========    ========   =======    =========
</TABLE>

                                       24
<PAGE>

      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>
                                                                                    PAYMENTS DUE 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.....................................................   $ 2,455   $ 1,424     $ 1,031       --          --
                                                                         -------   -------     -------      ---         ---
Total commercial commitments..........................................   $ 2,455   $ 1,424     $ 1,031       --          --
                                                                         -------   -------     -------      ---         ---
</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.

                                       25
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None

ITEM 4. CONTROLS AND PROCEDURES

      (a)   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,
            and considering the restatement described below, 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.

            Subsequent to the issuance of its unaudited consolidated financial
            statements for the quarter ended June 30, 2004, the Company
            determined that a provision for returns granted to certain customers
            during the third quarter should have been reflected in the second
            quarter when the sales were recognized. At the time the Company
            recorded the sales, the Company did not considered customer buying
            patterns and programs, historical experience, and levels of
            inventory at those customers. As a result, the Company recognized
            approximately $17.9 million of sales returns and reduced related
            costs of sales by $12.4 million. This amendment to the Company's
            Form 10-Q for the quarter ended June 30, 2004 gives effect to this
            adjustment. This represents a material weakness.

            The Company has remediated this weakness by revising the procedures
            to determine the appropriate returns reserve by considering all
            available information.

      (b)   Changes in Internal Controls. During the six-month period ended June
            30, 2004, 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.

                                       26
<PAGE>

                            PART II OTHER INFORMATION

ITEM 5. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a)   The Company held its Annual Meeting of Stockholders on April 27, 2004.

(c)   Messrs. Sal Giordano, Jr., William J. Brennan, David C. Chang, Michael L.
      Ducker, Joseph Giordano, Howard S. Modlin, S. A. Muscarnera and Anthony E.
      Puleo were elected directors for a term of one year. The vote tabulation
      was as follows:

<TABLE>
<CAPTION>
                                      Votes For                 Votes Withheld
                                      ----------                --------------
<S>                                   <C>                       <C>
Sal Giordano, Jr.                     24,182,628                   1,874,290
William J. Brennan                    24,198,888                   1,858,030
David C. Chang                        23,901,585                   2,155,333
Michael L. Ducker                     23,903,766                   2,153,152
Joseph Giordano                       24,176,175                   1,880,743
Howard S. Modlin                      23,863,950                   2,192,868
S. A. Muscarnera                      21,181,283                   4,875,635
Anthony E. Puleo                      23,893,545                   2,163,373
</TABLE>

In addition to electing directors, stockholders:

      (i) approved an Incentive Compensation Plan for Executive Officers by a
vote of 15,157,046 votes for and 3,283,946 votes against, with 682,207 shares
abstaining;

      (ii) approved a grant of a performance-based award to the Chief Executive
Officer by a vote of 14,740,348 votes for and 3,693,180 votes against, with
689,672 shares abstaining; and

      (iii) ratified the appointment of Deloitte & Touche, LLP as the Company's
independent auditors by a vote of 25,579,430 votes for and 360,845 votes
against, with 116,642 shares abstaining.

Broker non-votes on items (c) (i) and (ii) were approximately 6.9 million
shares.

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.
 31.2       Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 32.1       Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 32.2       Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
</TABLE>

(b)   Reports on Form 8-K

No reports on Form 8-K were filed during the three months ended June 30, 2004.

                                       27
<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/ ROBERT L. LAURENT JR.
-----------------------------
Executive Vice President,
Finance and Acquisitions and
Chief Financial Officer

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

November 29, 2004

                                       28