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

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

For the quarterly period ended June 30, 2005

[ ]  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)

<TABLE>
<S>                                         <C>
                 DELAWARE                                22-2572390
         (State of incorporation)           (I.R.S. Employer Identification No.)
</TABLE>

<TABLE>
<S>                                                      <C>
505 MARTINSVILLE ROAD, LIBERTY CORNER, NJ                07938-0813
 (Address of principal executive offices)                (Zip Code)
</TABLE>

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

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

                                 Yes [ ] No [X]

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

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

     The registrant has outstanding 28,074,097 shares of Common Stock and
2,492,401 shares of Class B Stock (which is immediately convertible into Common
Stock, on a share-for-share basis) as of November 30, 2005.

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

<PAGE>

                               FEDDERS CORPORATION

                                      INDEX

<TABLE>
<CAPTION>
                                                                           PAGE
                                                                          NUMBER
                                                                          ------
<S>       <C>                                                             <C>
PART I    FINANCIAL INFORMATION
ITEM 1.   CONDENSED FINANCIAL STATEMENTS
          CONSOLIDATED STATEMENTS OF OPERATIONS
          FOR THE THREE MONTHS ENDED JUNE 30, 2005 AND 2004 AND FOR THE
          SIX MONTHS ENDED JUNE 30, 2005 AND 2004                            3
          CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2005, DECEMBER
          31, 2004 AND JUNE 30, 2004                                         4
          CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS
          ENDED JUNE 30, 2005 AND 2004                                       5
          NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS         6-20
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
          AND FINANCIAL CONDITION                                          21-24
ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK        25
ITEM 4.   CONTROLS AND PROCEDURES                                           25
PART II   OTHER INFORMATION                                                 28
ITEM 3A.  DEFAULTS ON SENIOR SECURITIES                                     28
ITEM 6.   EXHIBITS                                                          28

          SIGNATURE                                                         29
          CERTIFICATIONS                                                   30-33
</TABLE>


                                        2

<PAGE>

                          PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                               FEDDERS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                       THREE MONTHS ENDED     SIX MONTHS ENDED
                                                                                            JUNE 30,              JUNE 30,
                                                                                      -------------------   -------------------
                                                                                        2005       2004       2005       2004
                                                                                      --------   --------   --------   --------
                                                                                          (AMOUNTS IN THOUSANDS, EXCEPT PER
                                                                                                     SHARE DATA)
                                                                                                     (UNAUDITED)
<S>                                                                                   <C>        <C>        <C>        <C>
Net sales .........................................................................   $122,732   $174,539   $195,630   $290,171
Costs and expenses:
   Cost of sales ..................................................................     99,632    146,887    158,918    241,953
   Selling, general and administrative expense ....................................     19,607     19,175     37,351     35,494
   Restructuring credit ...........................................................         --       (709)        --       (709)
                                                                                      --------   --------   --------   --------
Total expenses ....................................................................    119,239    165,353    196,269    276,738
                                                                                      --------   --------   --------   --------
Operating income (loss) ...........................................................      3,493      9,186       (639)    13,433

Partners' net interest in joint venture results ...................................        314       (329)       693       (598)
Interest expense, net .............................................................      5,688      5,213     11,046     10,140
Debt extinguishments ..............................................................         --        683         --      8,075
Other (income) expense ............................................................         85         95       (522)      (262)
                                                                                      --------   --------   --------   --------
Income (loss) from continuing operations before income taxes ......................     (1,966)     2,866    (10,470)    (5,118)

Provision (benefit) for income taxes ..............................................        119        905        347     (1,657)
                                                                                      --------   --------   --------   --------
Net income (loss) from continuing operations ......................................     (2,085)     1,961    (10,817)    (3,461)

Income from discontinued operations, net of tax of $23, $161, $37, and $309 .......        698        298      1,333        574
                                                                                      --------   --------   --------   --------
Net income (loss) .................................................................     (1,387)     2,259     (9,484)    (2,887)

Preferred stock dividends .........................................................      1,144      1,005      2,149      2,010
                                                                                      --------   --------   --------   --------
Net income (loss) applicable to common stockholders ...............................   $ (2,531)  $  1,254   $(11,633)  $ (4,897)
                                                                                      ========   ========   ========   ========

Income (loss) per common share:
   Basic net income (loss) per common share from continuing operations ............   $  (0.10)  $   0.03   $  (0.42)  $  (0.18)
                                                                                      ========   ========   ========   ========
   Diluted net income (loss) per common share from continuing operations ..........      (0.10)      0.03      (0.42)     (0.18)
                                                                                      ========   ========   ========   ========
   Basic net income per common share from discontinued operations .................   $   0.02   $   0.01   $   0.04   $   0.02
                                                                                      ========   ========   ========   ========
   Diluted net income per common share from discontinued operations ...............       0.02       0.01       0.04       0.02
                                                                                      ========   ========   ========   ========
   Basic net income (loss) per share applicable to common shareholders ............   $  (0.08)  $   0.04   $  (0.38)  $  (0.16)
                                                                                      ========   ========   ========   ========
   Diluted net income (loss) per share applicable to common shareholders ..........      (0.08)      0.04      (0.38)     (0.16)
                                                                                      ========   ========   ========   ========

Weighted averages shares:
   Basic ..........................................................................     30,603     30,444     30,568     30,435
   Diluted ........................................................................     30,603     30,846     30,568     30,435

Dividends per share declared:
   Common Stock ...................................................................   $  0.030   $  0.060   $  0.060   $  0.090
   Class B Stock ..................................................................      0.030      0.060      0.060      0.090
   Preferred Stock ................................................................      0.538      1.076      1.076      1.614
</TABLE>

See accompanying notes to the consolidated financial statements


                                        3

<PAGE>

                               FEDDERS CORPORATION

                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                 JUNE 30,   DECEMBER 31,   JUNE 30,
                                                                   2005         2004         2004
                                                                 --------   ------------   --------
                                                                    (AMOUNTS IN THOUSANDS, EXCEPT
                                                                           PAR VALUE DATA)
                                                                             (UNAUDITED)
<S>                                                              <C>        <C>            <C>
                            ASSETS
Current assets:
   Cash and cash equivalents .................................   $ 17,773     $ 22,783     $ 32,713
   Accounts receivable (net of allowance of $4,452, $3,391 and
      $2,060 at June 30, 2005, December 31, 2004 and
      June 30, 2004, respectively) ...........................     88,413       26,933      101,531
   Inventories:
      Finished goods .........................................     77,228      100,165       92,372
      Work-in-process ........................................      2,799        2,746        3,352
      Raw materials and supplies .............................     23,713       27,666       30,697
                                                                 --------     --------     --------
   Net inventories ...........................................    103,740      130,577      126,421
   Deferred income taxes .....................................      8,830        8,827        7,645
   Assets held for sale ......................................         --           --        8,249
   Other current assets ......................................     10,384       10,389       16,570
   Current assets of discontinued operations .................      4,202        4,273        4,640
                                                                 --------     --------     --------
Total current assets .........................................    233,342      203,782      297,769
Net property, plant and equipment:
   Land and improvements .....................................      5,186        5,183        1,293
   Buildings and leasehold improvements ......................     40,783       40,326       32,457
   Machinery and equipment ...................................    106,673      102,688       97,655
                                                                 --------     --------     --------
   Gross property, plant and equipment .......................    152,642      148,197      131,405
   Less accumulated depreciation .............................     94,716       89,632       82,076
                                                                 --------     --------     --------
Net property, plant and equipment ............................     57,926       58,565       49,329
Deferred income taxes ........................................     22,263       22,263        8,224
Goodwill .....................................................     87,442       77,937       78,064
Other intangible assets ......................................      4,737          261          303
Other assets .................................................     36,280       36,099       35,833
Other assets of discontinued operations ......................      3,188        3,290        3,464
                                                                 --------     --------     --------
Total assets .................................................   $445,178     $402,197     $472,986
                                                                 ========     ========     ========
             LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Short-term notes ..........................................   $ 90,492     $ 57,571     $ 36,865
   Current portion of long-term debt .........................      1,465        1,522        1,290
   Accounts payable ..........................................     55,527       47,955       85,873
   Income taxes payable ......................................      1,283          586           --
   Accrued expenses ..........................................     49,482       39,443       69,541
   Current liabilities of discontinued operations ............      1,183        1,468        1,281
                                                                 --------     --------     --------
Total current liabilities ....................................    199,432      148,545      194,850
Long-term debt ...............................................    159,823      160,286      158,430
Other long-term liabilities ..................................     29,127       29,703       31,225
Long-term liabilities of discontinued operations .............      1,420        1,463        1,571
Partners' net interest in joint venture ......................      4,536        3,994        4,056
Stockholders' equity:
Preferred Stock, $0.01 par value, 15,000 shares authorized,
   2,127, 1,870 and 1,870 issued at June 30, 2005,
   December 31, 2004 and June 30, 2004, respectively .........         21           19           19
Common Stock, $0.01 par value, 70,000 shares authorized,
   36,716, 36,528 and 36,519 issued at June 30, 2005,
   December 31, 2004 and June 30, 2004, respectively .........        367          365          365
Class B Stock, $0.01 par value, 5,000 shares authorized,
   2,492 issued at June 30, 2005, December 31, 2004
   and June 30, 2004 .........................................         25           25           25
Additional paid-in capital ...................................    115,297      108,363      109,019
Retained earnings (deficit) ..................................    (23,637)     (10,176)      14,962
Accumulated other comprehensive loss .........................     (1,650)        (676)      (1,690)
                                                                 --------     --------     --------
                                                                   90,423       97,920      122,700
Treasury stock, at cost, 8,521 shares of Common Stock at
   June 30, 2005, December 31, 2004 and June 30, 2004 ........    (39,188)     (39,188)     (39,188)
Deferred compensation ........................................       (395)        (526)        (658)
                                                                 --------     --------     --------
Total stockholders' equity ...................................     50,840       58,206       82,854
                                                                 --------     --------     --------
Total liabilities and stockholders' equity ...................   $445,178     $402,197     $472,986
                                                                 ========     ========     ========
</TABLE>

See accompanying notes to the consolidated financial statements


                                        4

<PAGE>

                               FEDDERS CORPORATION

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                     SIX MONTHS ENDED
                                                                         JUNE 30,
                                                                   --------------------
                                                                     2005        2004
                                                                   --------   ---------
                                                                        (AMOUNTS IN
                                                                        THOUSANDS)
                                                                        (UNAUDITED)
<S>                                                                <C>        <C>
Cash flows from operating activities:
Net loss .......................................................   $ (9,484)  $  (2,887)
Adjustments to reconcile net loss to net cash used in
   operating activities:
   Depreciation and amortization ...............................      5,145       4,456
   Deferred income taxes .......................................         (3)          7
   Amortization of deferred financing costs ....................        424         358
   Gain(loss) on asset disposal ................................        (55)        286
   Loss on debt extinguishment .................................         --       8,075
   Partners' net interest in joint venture results .............       (540)        652
Changes in operating assets and liabilities, net of acquisition:
   Accounts receivable .........................................    (58,043)    (73,918)
   Inventories .................................................     30,647      16,695
   Other current assets ........................................      2,312      11,617
   Other assets ................................................        404         596
   Accounts payable ............................................      5,775         256
   Accrued expenses and income taxes payable ...................      6,025      28,855
   Other long-term liabilities .................................       (628)       (140)
   Other--net ..................................................       (652)        224
                                                                   --------   ---------
Net cash used in operating activities ..........................    (18,673)     (4,868)
                                                                   --------   ---------
Cash flows from investing activities:
   Additions to property, plant and equipment ..................     (3,315)     (3,039)
   Proceeds from disposal of property, plant and equipment .....        127       1,551
   Investment in joint venture .................................         --        (932)
   Acquisition of business, net of cash acquired (Note 5) ......     (9,426)         --
                                                                   --------   ---------
Net cash used in investing activities ..........................    (12,614)     (2,420)
                                                                   --------   ---------
Cash flows from financing activities:
   Proceeds from short-term notes ..............................     31,156       6,419
   Repayments of long-term debt ................................       (901)     (2,815)
   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 ..............................................     (3,978)     (3,837)
   Proceeds from stock rights exercised ........................         --      28,323
   Costs of stock offerings ....................................         --        (223)
                                                                   --------   ---------
Net cash provided by financing activities ......................     26,277      17,958
                                                                   --------   ---------
Net (decrease) increase in cash and cash equivalents ...........     (5,010)     10,670
Cash and cash equivalents at beginning of period ...............     22,783      22,043
                                                                   --------   ---------
Cash and cash equivalents at end of period .....................   $ 17,773   $  32,713
                                                                   ========   =========
Supplemental disclosure:
   Interest paid ...............................................   $ 10,172   $  10,037
   Income taxes paid ...........................................        248         846
</TABLE>

See accompanying notes to the consolidated financial statements


                                        5

<PAGE>

                               FEDDERS CORPORATION

            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             (amounts in thousands, except share and per share data)
                                   (unaudited)

1. BASIS OF PRESENTATION

     The financial statements included herein are 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 the Annual Report
on Form 10-K of Fedders Corporation's (the "Company") for the fiscal year ended
December 31, 2004.

     On January 25, 2005, the Company's Board of Directors approved the sale of
all the capital stock of Melcor Corporation, its thermal management subsidiary.
Melcor's results of operations and assets and liabilities are reported as
discontinued operations. Certain reclassifications have been made in prior-year
amounts to conform to the current-year presentation.

     The Company's business is seasonal and, consequently, operating results for
the six-month period ending June 30, 2005 are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 2005.

     As a result of the previously reported delay in filing its Annual Report on
Form 10-K, the Company has not timely filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q for the first, second and third
quarters of 2005. The financial statements for the Company's 2005 quarters could
not be completed until the fiscal year 2004 financial statements were completed
and a new external auditor was engaged.

2. COMPREHENSIVE INCOME (LOSS)

     Assets and liabilities of the Company's foreign subsidiaries are translated
at the rate of exchange in effect at the end of the period. Net sales and
expenses are translated at the monthly average exchange rate. Translation
adjustments are reflected in other comprehensive loss as a separate component of
stockholders' equity.

<TABLE>
<CAPTION>
                                   THREE MONTHS ENDED       SIX MONTHS ENDED
                                        JUNE 30,                JUNE 30,
                                  --------------------   ---------------------
                                    2005       2004        2005        2004
                                  -------   ----------   --------   ----------
                                            (RESTATED)              (RESTATED)
<S>                               <C>       <C>          <C>        <C>
Net (loss) income..............   $(1,387)    $2,259     $ (9,484)   $(2,887)
Other comprehensive loss:
Foreign currency translation...      (687)       (84)        (974)        62
                                  -------     ------     --------    -------
Comprehensive (loss) income ...   $(2,074)    $2,175     $(10,458)   $(2,825)
                                  =======     ======     ========    =======
</TABLE>

     In previously reporting comprehensive income (loss), the Company
incorrectly included the effects of preferred stock dividends declared in its
measurement. As a result, comprehensive income as previously reported for the
three months and six months ended June 30, 2004 has been restated. This
adjustment had no effect on basic/diluted net loss per share applicable to
common stockholders.

3. 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 (loss) for options granted, as all
options granted have an exercise price equal to the market value of the
underlying Common Stock on the date of grant.

     In December 2004, the Financial Accounting Standards Board (FASB) issued
revised SFAS No. 123, "Share-Based Payment." The statement requires that
compensation costs for all share-based awards to employees be recognized in the
financial statements at fair value. The statement, as issued by the FASB, was to
be effective as of the beginning of the first interim or annual reporting period


                                        6

<PAGE>

that begins after June 15, 2005. However, on April 15, 2005, the Securities and
Exchange Commission (SEC) adopted a new rule which amends the compliance date
for revised SFAS No. 123. The rule allows for implementation of the statement at
the beginning of the next fiscal year that begins after June 15, 2005. The
Company intends to adopt the revised statement as of January 1, 2006. The
Company is studying the provisions of this new pronouncement to determine the
impact on its financial statements.

     On December 29, 2004, the Company's Board of Directors approved the
elimination of vesting restrictions on all outstanding stock options. There are
no stock-based employee compensation expenses for the three and six months ended
June 30, 2005.

     The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair-value recognition provisions of SFAS
No. 123 to stock-based employee compensation.

<TABLE>
<CAPTION>
                                                                           THREE MONTHS ENDED     SIX MONTHS ENDED
                                                                                JUNE 30,              JUNE 30,
                                                                           ------------------   ------------------
                                                                              2005     2004       2005       2004
                                                                            -------   ------    --------   -------
<S>                                                                        <C>        <C>       <C>        <C>
Loss applicable to common stockholders-as reported......................    $(2,531)  $1,254    $(11,633)  $(4,897)
Deduct: Total stock-based employee compensation expense determined under
   fair-value-based method for all awards, net of related tax effects...         --      184          --       459
                                                                            -------   ------    --------   -------
Pro forma net (loss) income.............................................    $(2,531)  $1,070    $(11,633)  $(5,356)
                                                                            =======   ======    ========   =======
Net (loss) income per common share:
   Basic/diluted -- as reported.........................................    $ (0.08)  $ 0.04    $  (0.38)  $ (0.16)
   Basic/diluted -- pro forma...........................................    $ (0.08)  $ 0.03    $  (0.38)  $ (0.18)
</TABLE>

4. EARNINGS PER SHARE

     For the three months ended June 30, 2005 and 2004, net income (loss) per
share was computed using the weighted average number of shares of Common and
Class B stock outstanding, which amounted to 30,603,105 and 30,444,418 shares,
respectively. Stock options included in computing diluted earnings per share
amounted to 401,355 shares for the three months ended June 30, 2004. Stock
options totaling 1,380,145 were excluded for the three months ended June 30,
2004 in computing diluted earnings per share due to their anti dilutive effect.

     For the six months ended June 30, 2005 and 2004, net income (loss) per
share was computed using the weighted average number of shares of Common and
Class B stock outstanding, which amounted to 30,568,289 and 30,434,757 shares,
respectively. Due to their anti-dilutive effect, 1,427,500 and 575,046 dilutive
stock options were excluded from the computation of diluted loss per share for
the six months ended June 30, 2005 and 2004, respectively.

5. ACQUISITIONS AND DISCONTINUED OPERATIONS

Melcor

     On January 25, 2005, the Company's Board of Directors approved the sale of
all the capital stock of Melcor Corporation, its thermal management subsidiary,
which the Company does not consider a core business unit. On October 25, 2005,
the Company sold Melcor to Laird Technologies, Inc. for $17.4 million in cash
which resulted in a pre-tax gain of approximately $11 million. Melcor's results
of operations, assets and liabilities are reported as discontinued operations.
Melcor revenues in 2004 were $13.5 million which were reported in the Engineered
Products segment and were $9.5 million for the first nine months of 2005.

Acquisition of Islandaire

     On March 7, 2005, the Company completed the acquisition of eighty percent
of the stock of Islandaire, Inc. ("Islandaire") for a combination of $9,550 in
cash, 257,484 shares of Preferred Stock valued at $6,437, 100,000 shares of
Common Stock valued at $310, and $32 of transaction costs, which primarily
consisted of fees paid for appraisals, legal and accounting services. The
Company is obligated to purchase the remaining twenty percent of Islandaire
stock within three years at a price based on a multiple of trailing EBITDA
(earnings before interest, taxes, depreciation, and amortization).

     Islandaire is located in Ronkonkoma, New York, which is now known as
Fedders Islandaire, Inc. It manufactures and markets a line of specialized
through-the-wall packaged terminal air conditioners (PTACs) and heat pumps,
primarily for replacement applications in apartment buildings, hotels and
motels, and in institutional buildings such as schools, offices, hospitals and
nursing


                                        7

<PAGE>

homes. Islandaire's replacement PTAC units fit into existing wall openings
without alteration to the structure of the building. The addition of
Islandaire's products extends the Company's existing commercial HVAC product
line. This subsidiary has been included within the HVACR reportable segment.

     The Company has accounted for the acquisition under the purchase method of
accounting according to SFAS No. 141, "Business Combinations". The consolidated
financial statements include the results of Islandaire from the date of
acquisition. The purchase price has been allocated based on estimated fair
values as of the acquisition date. The purchase price allocation is preliminary
and a final determination of required purchase accounting adjustments will be
made upon the completion of the Company's purchase price allocation. The
following table represents the preliminary allocation of the purchase price:

                                AT MARCH 1, 2005

<TABLE>
<S>                                                                        <C>
Cash                                                                       $   158
Accounts receivable                                                          3,365
Inventory                                                                    3,804
Other current assets                                                           255
Property, plant and equipment                                                1,049
Goodwill                                                                     9,489
Intangible assets:
   Customer relationships (estimated useful life of 10 years)                3,300
   Engineering drawings (estimated useful life of 2 years)                     300
   Noncompetition agreement (estimated useful life of 5.5 years)             1,100
   Other intangible assets                                                      42
Current liabilities                                                         (5,930)
Long-term debt                                                                (168)
Minority interest                                                             (435)
                                                                           -------
Net assets acquired                                                        $16,329
                                                                           =======
</TABLE>

     The amount assigned to intangible assets primarily represents customer
relationships, a noncompetition agreement and engineering drawings and was based
on an appraisal. The intangible assets will be amortized over periods ranging
from two to ten years using straight-line methods.

     The Islandaire facility continues to be leased from an officer of the
subsidiary on substantially the same terms.

6. 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 performs
an annual test for indications of goodwill impairment. 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, if any, must be measured. The
Company measures the amount of goodwill impairment 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, the impairment is recognized as an operating expense.


                                        8

<PAGE>

     Goodwill and other intangible assets of continuing operations consist of
the following:

<TABLE>
<CAPTION>
                                                             ENGINEERED
                                                    HVACR     PRODUCTS     TOTAL
                                                   -------   ----------   -------
<S>                                                <C>       <C>          <C>
Goodwill balance as of December 31, 2004........   $69,469     $8,497     $77,966
Goodwill from Islandaire acquisition (note 5)...     9,489         --       9,489
Effect of foreign currency change...............        16         --          16
Less goodwill of discontinued operations........       (29)        --         (29)
                                                   -------     ------     -------
Goodwill balance as of June 30, 2005............   $78,945     $8,497     $87,442
                                                   =======     ======     =======
</TABLE>

<TABLE>
<CAPTION>
                                                   JUNE 30,   DECEMBER 31,   JUNE 30,
                                                     2005         2004         2004
                                                   --------   ------------   --------
<S>                                                <C>        <C>            <C>
Other intangible assets.........................   $ 6,490      $ 1,716      $ 1,682
Accumulated amortization........................    (1,753)      (1,455)      (1,379)
                                                   -------      -------      -------
Other intangible assets - net...................   $ 4,737      $   261      $   303
                                                   =======      =======      =======
</TABLE>

     Goodwill increased by $9,489 as a result of the Islandaire acquisition (see
Note 5). Other intangible assets primarily include intangible assets purchased
with Islandaire (see Note 5). Amortization expense of continuing operations for
the three months ended June 30, 2005 and 2004 was $218 and $28, respectively.
Amortization expense of continuing operations for the six months ended June 30,
2005 and 2004 was $362 and $60, respectively. Estimated amortization expense for
other intangibles will be approximately $680 for each of the next two years,
$530 for each of the following three years, and $1,787 thereafter.

7. ASSETS HELD FOR SALE

     At December 31, 2004, net assets totaling $8,249, which were previously
classified as "Assets Held for Sale", were reclassified as held and used and
included in net property, plant and equipment due to the inability of the
Company to complete the sale of its Walkersville, Maryland facility in
accordance with the Company's original plans and expectations. "Assets Held for
Sale" at June 30, 2005 and 2004 were $0 and $8,249, respectively.

8. 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 and fan filter units.
These products are sold through manufacturers' representatives, distributors and
direct sales to end-users.


                                        9

<PAGE>

SUMMARY OF BUSINESS BY SEGMENT:

<TABLE>
<CAPTION>
                                                                            THREE MONTHS ENDED     SIX MONTHS ENDED
                                                                                 JUNE 30,              JUNE 30,
                                                                           -------------------   -------------------
                                                                             2005       2004       2005       2004
                                                                           --------   --------   --------   --------
<S>                                                                        <C>        <C>        <C>        <C>
Net sales:
   HVACR ...............................................................   $114,217   $167,795   $180,855   $275,939
   Engineered Products .................................................      8,515      6,744     14,775     14,232
                                                                           --------   --------   --------   --------
   Net sales ...........................................................   $122,732   $174,539   $195,630   $290,171
                                                                           ========   ========   ========   ========
Income (loss) before interest expense, income taxes and loss on debt
   extinguishment:
   HVACR ...............................................................   $  3,752   $  6,793   $  1,610   $  9,853
   Engineered Products .................................................        671        434        850        550
                                                                           --------   --------   --------   --------
   Segment income before interest expense, income taxes, and other .....      4,423      7,227      2,460     10,403
   Non-allocated (expense) income ......................................       (701)     1,535     (1,884)     2,694
   Loss on debt extinguishments ........................................         --        683         --      8,075
   Interest expense, net ...............................................      5,688      5,213     11,046     10,140
   Income tax (benefit) expense ........................................        119        905        347     (1,657)
                                                                           --------   --------   --------   --------
   Net (loss) income from continuing operations ........................     (2,085)     1,961    (10,817)    (3,461)
   Income from discontinued operations, net of tax .....................        698        298      1,333        574
                                                                           --------   --------   --------   --------
   Net (loss) income ...................................................   $ (1,387)  $  2,259   $ (9,484)  $ (2,887)
                                                                           ========   ========   ========   ========
</TABLE>

<TABLE>
<CAPTION>
                              JUNE 30,   DECEMBER 31,   JUNE 30,
                                2005         2004         2004
                              --------   ------------   --------
<S>                           <C>        <C>            <C>
Total assets:
HVACR .....................   $323,143     $288,500     $358,745
Engineered Products .......     45,035       46,854       48,433
Non-allocated assets ......     69,610       59,280       57,704
Discontinued operations ...      7,390        7,563        8,104
                              --------     --------     --------
                              $445,178     $402,197     $472,986
                              ========     ========     ========
</TABLE>

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

9. PENSION PLANS AND OTHER COMPENSATION ARRANGEMENTS

     The Company has a deferred retiree obligation for certain retirees. The
following table displays the activity and balances of the pension liability for
six months ended June 30:

<TABLE>
<CAPTION>
                                                2005      2004
                                              -------   -------
<S>                                           <C>       <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year ...   $11,228   $12,068
Service cost ..............................        --        --
Interest cost .............................       305       323
Actuarial loss ............................        --        --
Benefits paid .............................      (839)     (879)
                                              -------   -------
Benefit obligation as of June 30 ..........   $10,694   $11,512
                                              =======   =======
Weighted-average assumptions:
Discount rate .............................      5.75%     5.75%
</TABLE>


                                       10

<PAGE>

10. 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. 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.

     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 re-evaluated.

     The following table displays the activity and balances of the product
warranty liability for six months ended June 30:

<TABLE>
<CAPTION>
                                                         2005      2004
                                                       -------   -------
<S>                                                    <C>       <C>
Warranty balance at beginning of period ............   $ 7,333   $ 5,641
Accruals for warranties issued during the period ...     5,785     9,713
Settlements made during the period .................    (6,963)   (6,310)
                                                       -------   -------
Warranty balance at end of period ..................   $ 6,155   $ 9,044
                                                       =======   =======
</TABLE>

11. EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS

     In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 153, "Exchanges of
Non-monetary Assets", as an amendment of APB Opinion No. 29. SFAS No. 153
eliminates the exception to fair value for exchanges of similar productive
assets and replaces it with a general exception for exchange transactions that
do not have commercial substance. The provisions of this Statement shall be
effective for non-monetary asset exchanges occurring in fiscal periods beginning
after June 15, 2005. The provisions of this Statement shall be applied
prospectively. The Company adopted SFAS No. 153 in the third quarter of 2005,
and it did not have a material impact on the results of operations, financial
position, or cash flows.

     In March 2005, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 107, "Share Based Payments" ("SAB 107") to provide
public companies additional guidance in applying the provisions of SFAS No.
123(R). Among other things, SAB 107 describes the SEC staff's expectations in
determining the assumptions that underlie the fair value estimates and discusses
the interaction of SFAS No. 123(R) with certain existing SEC guidance. We intend
to adopt provisions of SAB 107 in conjunction with the adoption of SFAS No.
123(R) as of January 1, 2006.

     During 2005, the FASB issued the following three Staff Position Papers
("FSP's") providing guidance on the implementation of SFAS No. 123(R) "Share
Based Payments": FSP SFAS No. 123(R) - 1, "Classification and Measurement of
Freestanding Financial Instruments Originally Issued in Exchange for Employee
Services under SFAS No. 123(R)"; FSP SFAS No. 123(R) - 2, "Practical
Accommodation to the Application of Grant Date as Defined in SFAS No. 123(R)";
and FSP SFAS No. 123(R) - 3, "Transition Election Related to Accounting for the
Tax Effect of Share-Based Payment Awards". SFAS No. 123(R) is effective for the
Company as of January 1, 2006. The Company will consider the guidance in these
FPF's as it considers the impact SFAS No. 123(R) will have on its results of
operations, financial position, and cash flows.

     In March 2005, the FASB issued FASB Interpretation No. 47, "Accounting for
Contingent Asset Retirement Obligations" ("FIN 47"), an interpretation of SFAS
No. 143, "Asset Retirement Obligations" ("SFAS 143"). FIN 47 clarifies that the
term "conditional asset retirement obligation" as used in SFAS 143 refers to a
legal obligation to perform an asset retirement activity in which the timing and
(or) method of settlement are conditional on a future event that may or may not
be within the control of the entity. An entity is required to recognize a
liability for the fair value of a conditional asset retirement obligation if the
fair value of the liability can be reasonably estimated, even if conditional on
a future event. FIN 47 is effective no later than the end of fiscal years ending
after December 15, 2005. For existing contingent asset retirement obligations
which are determined to be recognizable under FIN 47, the effect of applying FIN
47 would be recognized as a cumulative effect of a change in accounting
principle. We are currently evaluating the provisions of FIN 47 and do not
believe that its adoption will have a material impact on the Company's financial
condition or results of operations.


                                       11

<PAGE>

     In May 2005, the FASB issued SFAS 154, "Accounting Changes and Error
Corrections" ("SFAS 154"), which replaces Accounting Principles Board Opinions
No. 20 "Accounting Changes" and SFAS No. 3, "Reporting Accounting Changes in
Interim Financial Statements-An Amendment of APB Opinion No. 28." SFAS 154
provides guidance on the accounting for and reporting of accounting changes and
error corrections. It establishes retrospective application, unless
impracticable, as the required method for reporting a change in accounting
principle and the reporting of a correction of an error and for reporting a
change when retrospective application is impracticable. FAS 154 is effective for
accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005 and is required to be adopted by the Company in the
first quarter of fiscal 2006. The Company is not currently contemplating an
accounting change which would be impacted by SFAS 154.

12. DEBT AND SUBSEQUENT EVENTS

     On June 24, 2005, Fedders North America, Inc. ("FNA") defaulted on the
covenant in the indenture pursuant to which its 9 7/8% Senior Notes due 2014
(the "Senior Notes") were issued (the "Indenture") requiring the Company to file
a Form 10-K for the year ended December 31, 2004. This delay in filing the Form
10-K also resulted in a default under FNA's agreement with Wachovia Bank, NA
(the "Senior Lender"). On September 13, 2005, FNA received the written consent
from holders of a majority in aggregate principal amount of the outstanding
Senior Notes under the Indenture waiving the default in performance of this
covenant and consenting to the adoption of the First Supplemental Indenture and
Waiver, dated September 13, 2005, (the "First Supplemental Indenture") among
Fedders Corporation, Fedders North America, Inc., the Guarantors named in the
Indenture (the "Guarantors") and U.S. Bank National Association, as Trustee (the
"Trustee"). The First Supplemental Indenture established a waiver period (the
"Waiver Period"), which ends on December 31, 2005, during which the Company must
complete the filing of its Form 10-K and of the Forms 10-Q for the 2005
quarters. The Company filed its 10-K for 2004 on September 30, 2005 and will
file its Forms 10-Q during the Waiver Period.

     A default under the Indenture or under FNA's agreement with the Senior
Lender will trigger a cross default under the terms of the other agreement.
During 2005, as a result of the delay in filing the Annual Report on Form 10-K
and quarterly reports on Form 10-Q for the first and second quarters, the
Company was in default of its agreement with the Senior Lender related to a
covenant requiring the Company to timely file these reports. The Company
subsequently received a waiver of this default. By the terms of the waiver, the
Company must file its Form 10-K on or before September 30, 2005, which filing
was completed on this date and must file its Forms 10-Q for the first and second
quarters for 2005 on or before November 30, 2005. Subsequently, the Senior
Lender provided an additional waiver of this filing date to December 31, 2005
and modified a net worth covenant. The Company will file Forms 10-Q before
December 31, 2005 and is in compliance with the modified net worth covenant.

     In order to obtain the consent of the holders of the Senior Notes, pursuant
to the First Supplemental Indenture, the Company and FNA agreed that during the
Waiver Period an additional 100 basis points of interest will accrue on the
principal amount of the Senior Notes, which amount shall be payable with the
interest payment due on March 1, 2006.

     In connection with the waiver of the default, the Indenture was amended by
the First Supplemental Indenture as follows:

     -    To include the Company under certain covenants of the Indenture;

     -    To limit the Company, FNA and the Restricted Subsidiaries, as defined
          in the First Supplemental Indenture (the "Restricted Subsidiaries"),
          from making restricted payments, including any dividends, incurring
          debt obligations or making acquisitions during the Waiver Period;

     -    To require the Company to enter into a pledge agreement pursuant to
          which it granted a second lien on the stock of Fedders International,
          Inc. to secure its obligations under its guarantee in the Indenture.

     Pursuant to the Indenture, FNA was required to make a semi-annual interest
payment to the note holders on September 1, 2005. FNA did not make the payment
on or before September 1, 2005. Under the terms of the Indenture, a failure to
make an interest payment by the date due is not an event of default if the
payment is made within 30 days from the date it was originally due. FNA utilized
the 30-day grace period in order to complete the documentation required for the
waiver and paid all accrued interest due on the Senior Notes on September 14,
2005.

     On October 25, 2005, the Company sold its non-core thermal management
business, Melcor Corporation, to Laird Technologies, Inc. for $17.4 million in
cash. The proceeds were used to reduce short-term borrowing under the revolving
credit facility.


                                       12

<PAGE>

13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

     FNA is a wholly-owned subsidiary of the Company. FNA and its parent are the
issuer and the guarantor, respectively, of the Senior Notes. In addition, the
subsidiaries of FNA and, effective September 13, 2005, Fedders International,
Inc. are also guarantors of the Senior Notes.

The Company's and the subsidiaries' guarantees are full and unconditional. The
following condensed consolidating financial statements present separate
information for its guarantor entities (FNA and the Corporate Parent) and the
other non-guarantor subsidiaries and should be read in conjunction with the
consolidated financial statements of the Company. The following presentation has
been prepared on a historical basis taking into account the
guarantor/non-guarantor structure that resulted from the issuance of the Senior
Notes in March 2004 and the adoption of the First Supplemental Indenture and
Waiver, dated September 13, 2005. See Note 12.

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

                                       13

<PAGE>

                               FEDDERS CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED JUNE 30, 2005
                                                         ----------------------------------------------------------
                                                          FEDDERS
                                                           NORTH     OTHER    CORPORATE   ELIMINATING     FEDDERS
                                                          AMERICA   FEDDERS     PARENT      ENTRIES     CORPORATION
                                                         --------   -------   ---------   -----------   -----------
<S>                                                      <C>        <C>       <C>         <C>           <C>
Net sales.............................................   $107,346   $36,612    $    --     $(21,226)     $122,732
Cost of sales.........................................     89,365    31,493         --      (21,226)       99,632
Selling, general and administrative expense...........     14,983     4,535         89           --        19,607
                                                         --------   -------    -------     --------      --------
Operating income (loss)...............................      2,998       584        (89)          --         3,493
Partners' net interest in joint venture results.......        (69)      383         --           --           314
Equity income in investment...........................         --        --     (1,214)       1,214            --
Interest expense (income), net........................      5,102       602        (16)          --         5,688
Other (income) expense................................        (12)       (3)       100           --            85
                                                         --------   -------    -------     --------      --------
Income (loss) before income taxes.....................     (2,161)      368     (1,387)       1,214        (1,966)
(Benefit) provision for income taxes..................         56        63                      --           119
                                                         --------   -------    -------     --------      --------
Net income (loss) from continuing operations .........     (2,217)      305     (1,387)       1,214        (2,085)
Discontinued operations, net of tax...................        629        69         --           --           698
                                                         --------   -------    -------     --------      --------
Net income (loss).....................................     (1,588)      374     (1,387)       1,214        (1,387)
Preferred stock dividend..............................         --        --      1,144           --         1,144
                                                         --------   -------    -------     --------      --------
Net income (loss) applicable to common stockholders...   $ (1,588)  $   374    $(2,531)    $  1,214      $ (2,531)
                                                         ========   =======    =======     ========      ========
</TABLE>

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED JUNE 30, 2004
                                                         ----------------------------------------------------------
                                                          FEDDERS
                                                           NORTH     OTHER    CORPORATE   ELIMINATING     FEDDERS
                                                          AMERICA   FEDDERS     PARENT      ENTRIES     CORPORATION
                                                         --------   -------   ---------   -----------   -----------
<S>                                                      <C>        <C>       <C>         <C>           <C>
Net sales ............................................   $151,473   $80,736    $    --     $(57,670)     $174,539
Cost of sales ........................................    131,592    72,965         --      (57,670)      146,887
Selling, general and administrative expense ..........     14,780     5,977     (1,582)          --        19,175
Restructuring credit .................................       (709)       --         --           --          (709)
                                                         --------   -------    -------     --------      --------
Operating income .....................................      5,810     1,794      1,582           --         9,186
Partners' net interest in joint venture results ......       (287)      (42)        --           --          (329)
Equity income in investment ..........................         --        --      1,299       (1,299)           --
Interest expense, net ................................      4,620       543         50           --         5,213
Debt extinguishment ..................................        683        --         --           --           683
Other (income) expense ...............................        (67)      162         --           --            95
                                                         --------   -------    -------     --------      --------
Income (loss) before income taxes ....................        287     1,047      2,831       (1,299)        2,866
(Benefit) provision for income taxes .................         84       250        571           --           905
                                                         --------   -------    -------     --------      --------
Net income (loss) from continuing operations .........        203       797      2,260       (1,299)        1,961
Discontinued operations, net of tax ..................        251        47         --           --           298
                                                         --------   -------    -------     --------      --------
Net income (loss).....................................        454       844      2,260       (1,299)        2,259
Preferred stock dividend .............................         --        --      1,005           --         1,005
                                                         --------   -------    -------     --------      --------
Net income (loss) applicable to common stockholders ..   $    454   $   844    $ 1,255     $ (1,299)     $  1,254
                                                         ========   =======    =======     ========      ========
</TABLE>


                                       14

<PAGE>

                               FEDDERS CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                        SIX MONTHS ENDED JUNE 30, 2005
                                                         ----------------------------------------------------------
                                                          FEDDERS
                                                           NORTH      OTHER    CORPORATE   ELIMINATING     FEDDERS
                                                          AMERICA    FEDDERS     PARENT      ENTRIES     CORPORATION
                                                         --------   --------   ---------   -----------   -----------
<S>                                                      <C>        <C>        <C>         <C>           <C>
Net sales ............................................   $171,472   $105,248   $     --     $(81,090)     $195,630
Cost of sales ........................................    146,450     93,558         --      (81,090)      158,918
Selling, general and administrative expense ..........     26,099      9,821      1,431           --        37,351
                                                         --------   --------   --------     --------      --------
Operating (loss) income ..............................     (1,077)     1,869     (1,431)          --          (639)
Partners' net interest in joint venture results ......        (38)       731         --           --           693
Equity income in investment ..........................         --         --     (7,985)       7,985            --
Interest expense (income), net .......................      9,922      1,137        (13)          --        11,046
Other (income) expense ...............................       (550)       (53)        81           --          (522)
                                                         --------   --------   --------     --------      --------
Income (loss) before income taxes ....................    (10,487)     1,516     (9,484)       7,985       (10,470)
Provision for income taxes ...........................         56        291         --           --           347
                                                         --------   --------   --------     --------      --------
Net income (loss) from continuing operations .........    (10,543)     1,225     (9,484)       7,985       (10,817)
Discontinued operations, net of tax ..................      1,197        136         --           --         1,333
                                                         --------   --------   --------     --------      --------
Net income (loss) ....................................     (9,346)     1,361     (9,484)       7,985        (9,484)
Preferred stock dividend .............................         --         --      2,149           --         2,149
                                                         --------   --------   --------     --------      --------
Net (loss) income applicable to common stockholders ..   $ (9,346)  $  1,361   $(11,633)    $  7,985      $(11,633)
                                                         ========   ========   ========     ========      ========
</TABLE>

<TABLE>
<CAPTION>
                                                                        SIX MONTHS ENDED JUNE 30, 2004
                                                         ----------------------------------------------------------
                                                          FEDDERS
                                                           NORTH      OTHER    CORPORATE   ELIMINATING     FEDDERS
                                                          AMERICA    FEDDERS     PARENT      ENTRIES     CORPORATION
                                                         --------   --------   ---------   -----------   -----------
<S>                                                      <C>        <C>        <C>         <C>           <C>
Net sales ............................................   $254,529   $166,466    $    --     $(130,824)    $290,171
Cost of sales ........................................    219,057    153,720         --      (130,824)     241,953
Selling, general and administrative expense ..........     27,443     10,831     (2,780)           --       35,494
Restructuring credit .................................       (709)        --         --            --         (709)
                                                         --------   --------    -------     ---------     --------
Operating income .....................................      8,738      1,915      2,780            --       13,433
Partners' net interest in joint venture results ......       (503)       (95)        --            --         (598)
Equity income in investment ..........................         --         --     (4,646)        4,646           --
Interest expense, net ................................      8,936      1,073        131            --       10,140
Debt extinguishment ..................................      8,075         --         --            --        8,075
Other (income) .......................................       (150)      (112)        --            --         (262)
                                                         --------   --------    -------     ---------     --------
Income (loss) before income taxes ....................     (8,626)       859     (1,997)        4,646       (5,118)
(Benefit) provision for income taxes .................     (2,823)       276        890            --       (1,657)
                                                         --------   --------    -------     ---------     --------
Net income (loss)from continuing operations ..........     (5,803)       583     (2,887)        4,646       (3,461)
Discontinued operations, net of tax ..................        496         78         --            --          574
                                                         --------   --------    -------     ---------     --------
Net income (loss) ....................................     (5,307)       661     (2,887)        4,646       (2,887)
Preferred stock dividend .............................         --         --      2,010            --        2,010
                                                         --------   --------    -------     ---------     --------
Net income (loss) applicable to common stockholders ..   $ (5,307)  $    661    $(4,897)    $   4,646     $ (4,897)
                                                         ========   ========    =======     =========     ========
</TABLE>


                                       15

<PAGE>

                               FEDDERS CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                     CONDENSED CONSOLIDATING BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                              JUNE 30, 2005
                                                       -----------------------------------------------------------
                                                        FEDDERS
                                                         NORTH      OTHER    CORPORATE   ELIMINATING     FEDDERS
                                                        AMERICA    FEDDERS     PARENT      ENTRIES     CORPORATION
                                                       --------   --------   ---------   -----------   -----------
<S>                                                    <C>        <C>        <C>         <C>           <C>
ASSETS

Current assets:
   Cash and cash equivalents .......................   $  7,847   $  7,190   $  2,736     $     --      $ 17,773
   Net accounts receivable .........................     75,291     13,122         --           --        88,413
   Net inventories .................................     83,631     20,109         --           --       103,740
   Other current assets ............................      3,603      7,109     13,842       (5,340)       19,214
   Current assets of discontinued operations .......      3,173      1,029         --           --         4,202
                                                       --------   --------   --------     --------      --------
Total current assets ...............................    173,545     48,559     16,578       (5,340)      233,342
Investments in subsidiaries ........................         --         --    (43,496)      43,496            --
Net property, plant and equipment ..................     40,657     17,052        217           --        57,926
Goodwill ...........................................     72,173     15,269         --           --        87,442
Other intangible assets ............................      4,700         37         --           --         4,737
Other assets .......................................     10,729      4,248     43,566           --        58,543
Other assets of discontinued operations ............      2,595        593         --           --         3,188
                                                       --------   --------   --------     --------      --------
Total assets .......................................   $304,399   $ 85,758   $ 16,865     $ 38,156      $445,178
                                                       ========   ========   ========     ========      ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Short-term notes ................................   $ 55,643   $ 34,849   $     --     $     --      $ 90,492
   Current portion of long-term debt ...............      1,347        118                      --         1,465
   Accounts and income taxes payable ...............     19,472     36,095      1,243           --        56,810
   Accrued expenses ................................     32,088     10,026      7,368           --        49,482
   Current liabilities of discontinued operations ..        922        261         --           --         1,183
                                                       --------   --------   --------     --------      --------
Total current liabilities ..........................    109,472     81,349      8,611           --       199,432
Long-term debt .....................................    158,445      1,378         --           --       159,823
Other long-term liabilities ........................        301     10,467     28,235       (5,340)       33,663
Long-term liabilities of discontinued operations ...        579        841         --           --         1,420
Net due to (from) affiliates .......................     64,311      6,510    (70,821)          --            --
Stockholders' equity:
   Preferred Stock .................................         --         --         21           --            21
   Common and Class B Stock ........................          5         --        392           (5)          392
   Additional paid-in capital ......................     20,293     25,542    115,297      (45,835)      115,297
   Retained earnings (deficit) .....................    (48,677)   (39,009)   (23,637)      87,686       (23,637)
   Deferred compensation and treasury stock ........         --         --    (39,583)          --       (39,583)
   Accumulated other comprehensive loss ............       (330)    (1,320)    (1,650)       1,650        (1,650)
                                                       --------   --------   --------     --------      --------
Total stockholders' equity .........................    (28,709)   (14,787)    50,840       43,496        50,840
                                                       --------   --------   --------     --------      --------
Total liabilities and stockholders' equity .........   $304,399   $ 85,758   $ 16,865     $ 38,156      $445,178
                                                       ========   ========   ========     ========      ========
</TABLE>


                                       16

<PAGE>

                               FEDDERS CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                     CONDENSED CONSOLIDATING BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                DECEMBER 31, 2004
                                                       -----------------------------------------------------------
                                                        FEDDERS
                                                         NORTH      OTHER    CORPORATE   ELIMINATING     FEDDERS
                                                        AMERICA    FEDDERS     PARENT      ENTRIES     CORPORATION
                                                       --------   --------   ---------   -----------   -----------
<S>                                                    <C>        <C>        <C>         <C>           <C>
ASSETS

Current assets:
   Cash and cash equivalents .......................   $  2,778   $ 14,529   $  5,476     $     --      $ 22,783
   Net accounts receivable .........................     15,592     11,341         --           --        26,933
   Net inventories .................................     95,926     34,651         --           --       130,577
   Other current assets ............................      4,520      5,869     14,167       (5,340)       19,216
   Current assets of discontinued liabilities ......      3,202      1,071         --           --         4,273
                                                       --------   --------   --------     --------      --------
Total current assets ...............................    122,018     67,461     19,643       (5,340)      203,782
Investments in subsidiaries ........................         --         --    (34,538)      34,538            --
Net property, plant and equipment ..................     42,487     15,708        370           --        58,565
Goodwill ...........................................     62,841     15,096         --           --        77,937
Other intangible assets ............................        261         --         --           --           261
Other assets .......................................     11,323      3,139     44,058           --        58,520
Other assets of discontinued operations ............      2,548        584         --           --         3,132
                                                       --------   --------   --------     --------      --------
Total assets .......................................   $241,478   $101,988   $ 29,533     $ 29,198      $402,197
                                                       ========   ========   ========     ========      ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Short-term notes ................................   $ 28,330   $ 29,241   $     --     $     --      $ 57,571
   Current portion of long-term debt ...............      1,403        119         --           --         1,522
   Accounts and income taxes payable ...............      9,960     36,473      2,108           --        48,541
   Accrued expenses ................................     25,351      8,448      5,644           --        39,443
   Current liabilities of discontinued operations ..        766        702         --           --         1,468
                                                       --------   --------   --------     --------      --------
Total current liabilities ..........................     65,810     74,983      7,752           --       148,545
Long-term debt .....................................    158,853      1,433         --           --       160,286
Other long-term liabilities ........................         24     10,257     28,756       (5,340)       33,697
Long-term liabilities of discontinued operations ...        600        863         --           --         1,463
Net due to (from) affiliates .......................     41,685     23,496    (65,181)          --            --
Stockholders' equity:
   Preferred Stock .................................         --         --         19           --            19
   Common and Class B Stock ........................          5         --        390           (5)          390
   Additional paid-in capital ......................     20,293     25,542    108,363      (45,835)      108,363
   Retained earnings (deficit) .....................    (45,446)   (34,256)   (10,176)      79,702       (10,176)
   Deferred compensation and treasury stock ........         --         --    (39,714)          --       (39,714)
   Accumulated other comprehensive loss ............       (346)      (330)      (676)         676          (676)
                                                       --------   --------   --------     --------      --------
Total stockholders' equity .........................    (25,494)    (9,044)    58,206       34,538        58,206
                                                       --------   --------   --------     --------      --------
Total liabilities and stockholders' equity .........   $241,478   $101,988   $ 29,533     $ 29,198      $402,197
                                                       ========   ========   ========     ========      ========
</TABLE>


                                       17

<PAGE>

                               FEDDERS CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                     CONDENSED CONSOLIDATING BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                               JUNE 30, 2004
                                                        -----------------------------------------------------------
                                                         FEDDERS
                                                          NORTH      OTHER    CORPORATE   ELIMINATING     FEDDERS
                                                         AMERICA    FEDDERS     PARENT      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 ..........................     84,753     16,778         --           --       101,531
   Net inventories ..................................     94,862     31,559         --           --       126,421
   Assets held for sale .............................      8,249         --         --           --         8,249
   Other current assets .............................      3,548      9,474     11,193           --        24,215
   Current assets of discontinued operations ........      3,847        793         --           --         4,640
                                                        --------   --------   --------     --------      --------
Total current assets ................................    205,683     70,745     21,341           --       297,769
Investments in subsidiaries .........................         --         --    (15,484)      15,484            --
Net property, plant and equipment ...................     33,804     15,061        464           --        49,329
Goodwill ............................................     62,841     15,223         --           --        78,064
Other intangible assets .............................        244         59         --           --           303
Other assets ........................................     11,202      1,972     37,906       (7,023)       44,057
Other assets of discontinued operations .............      2,839        625         --           --         3,464
                                                        --------   --------   --------     --------      --------
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 ................      1,171        119         --           --         1,290
   Accounts and income taxes payable ................     22,034     62,211      1,628           --        85,873
   Accrued expenses .................................     52,197      8,326      9,018           --        69,541
   Current liabilities of discontinued operations ...        981        300         --           --         1,281
                                                        --------   --------   --------     --------      --------
Total current liabilities ...........................     76,383    107,821     10,646           --       194,850
Long-term debt ......................................    156,945      1,485         --           --       158,430
Other long-term liabilities .........................        732     11,478     30,094       (7,023)       35,281
Long-term liabilities of discontinued operations ....        829        742         --           --         1,571
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)    (5,406)    82,854       15,484        82,854
                                                        --------   --------   --------     --------      --------
Total liabilities and stockholders' equity ..........   $316,613   $103,685   $ 44,227     $  8,461      $472,986
                                                        ========   ========   ========     ========      ========
</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, 2005
                                                           -----------------------------------------------------------
                                                            FEDDERS
                                                             NORTH      OTHER    CORPORATE   ELIMINATING     FEDDERS
                                                            AMERICA    FEDDERS     PARENT      ENTRIES     CORPORATION
                                                           --------   --------   ---------   -----------   -----------
<S>                                                        <C>        <C>        <C>         <C>           <C>
Net cash (used in) provided by operating activities ....   $(28,210)  $ 12,957    $(3,420)       $--        $(18,673)
                                                           --------   --------    -------        ---        --------
Net additions to property, plant and equipment .........       (663)    (2,652)        --         --          (3,315)
Disposal of property, plant and equipment ..............         11         --        116         --             127
Acquisition of business, net of cash acquired ..........     (9,426)        --         --         --          (9,426)
                                                           --------   --------    -------        ---        --------
Net cash (used in) provided by investing activities ....    (10,078)    (2,652)       116         --         (12,614)
                                                           --------   --------    -------        ---        --------
Proceeds (repayments) of short-term notes ..............     25,548      5,608         --         --          31,156
Net repayments of long-term debt .......................       (845)       (56)        --         --            (901)
Cash dividends .........................................      6,115     (6,115)    (3,978)        --          (3,978)
Change in net due to (from) affiliate ..................     12,539    (17,081)     4,542         --              --
                                                           --------   --------    -------        ---        --------
Net cash provided by (used in) financing activities ....     43,357    (17,644)       564         --          26,277
                                                           --------   --------    -------        ---        --------
Net (decrease) increase in cash and cash equivalents ...      5,069     (7,339)    (2,740)        --          (5,010)
Cash and cash equivalents at beginning of period .......      2,778     14,529      5,476         --          22,783
                                                           --------   --------    -------        ---        --------
Cash and cash equivalents at end of period .............   $  7,847   $  7,190    $ 2,736        $--        $ 17,773
                                                           ========   ========    =======        ===        ========
</TABLE>

<TABLE>
<CAPTION>
                                                                       FOR THE SIX MONTHS ENDED JUNE 30, 2004
                                                           -----------------------------------------------------------
                                                            FEDDERS
                                                             NORTH       OTHER    CORPORATE   ELIMINATING     FEDDERS
                                                            AMERICA     FEDDERS     PARENT      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>


                                       19

<PAGE>

                               FEDDERS CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

The historical condensed consolidating financial statements presented above
include the following transactions:

     a) The Company charges corporate overhead essentially on a cost basis
     allocated in proportion to sales. Such charges to FNA amounted to
     approximately $4.4 million and $6.0 million for the three months ended June
     30, 2005 and 2004, respectively. Such charges to FNA amounted to
     approximately $7.1 million and $10.4 million for the six months ended June
     30, 2005 and 2004, respectively.

     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,
     2005 and 2004 amounted to approximately $2.0 million and $1.1 million,
     respectively. Capital expenditures of FNA amounted to $0.3 million and $0.8
     million in the three months ended June 30, 2005 and 2004, respectively.

     FNA's depreciation and amortization for the six months ended June 30, 2005
     and 2004 amounted to approximately $3.7 million and $3.2 million,
     respectively. Capital expenditures of FNA amounted to $0.6 million and $1.2
     million in the six months ended June 30, 2005 and 2004, 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) On October 25, 2005, FNA sold its non-core thermal management business,
     Melcor Corporation, to Laird Technologies, Inc. for $ 17.4 million in cash.
     Melcor's results of operations are reported as discontinued operations.

     g) On March 7, 2005, the Company completed the acquisition of eighty
     percent of the stock of Islandaire, Inc. ("Islandaire") for a combination
     of $9,550 in cash, 257,484 shares of Preferred Stock valued at $6,437,
     100,000 shares of Common Stock valued at $310, and $32 of transaction
     costs, which primarily consisted of fees paid for appraisals, legal and
     accounting services. The Company is obligated to purchase the remaining
     twenty percent of Islandaire stock within three years at a price based on a
     multiple of trailing EBITDA (earnings before interest, taxes, depreciation,
     and amortization). Located in Ronkonkoma, New York, Islandaire, which is
     now known as Fedders Islandaire, Inc., manufactures and markets a line of
     specialized through-the-wall packaged terminal air conditioners (PTACs) and
     heat pumps, primarily for replacement applications in apartment buildings,
     hotels and motels, and in institutional buildings such as schools, offices,
     hospitals and nursing homes. See Note 5.


                                       20

<PAGE>

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

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

OVERVIEW

     Fedders 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, heat pumps, gas furnaces,
dehumidifiers, humidifiers and air cleaners. 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 billion global air treatment market. Major markets we are
targeting include 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.

ACQUISITIONS AND JOINT VENTURES

     We have pursued acquisitions, strategic alliances and joint ventures that
complement or enhance our core air treatment business and generate overall
corporate value. These activities have (i) been a critical factor in driving
down costs by establishing our low-cost manufacturing base in Asia; (ii)
provided access to new geographic markets through well-known local brand names,
existing sales and distribution networks and experienced employees who are
familiar with the local markets; and (iii) expanded our air treatment business
through broadening product lines and extending distribution into commercial and
industrial markets.

     In November 2004, we acquired the Addison Products Division of Heat
Controller, Inc., ("Addison") which manufactures and markets a broad line of air
conditioning products, primarily serving commercial and institutional markets,
and which now operates as Fedders Addison Company, Inc.

     In March 2005, we acquired eighty percent of the stock of Islandaire, Inc.
("Islandaire"), which manufactures and markets a line of specialized
through-the-wall packaged terminal air conditioners and heat pumps, primarily
for replacement applications in commercial and institutional markets and which
now operates as Fedders Islandaire, Inc. The Company is obligated to acquire the
remaining twenty percent of Islandaire stock within three years at a price based
on a multiple of trailing EBITDA (earnings before interest, taxes, depreciation,
and amortization).

DISCONTINUED OPERATIONS

     On January 25, 2005, the Company's Board of Directors approved the sale of
all the capital stock of Melcor Corporation, its thermal management subsidiary,
which the Company does not consider a core business unit. On October 25, 2005,
the Company sold Melcor to Laird Technologies, Inc. for $17.4 million in cash
which resulted in a pre-tax gain of approximately $11 million. Melcor's results
of operations, assets and liabilities are reported as discontinued operations.
Melcor revenues in 2004 were $13.5 million which were reported in the Engineered
Products segment and were $9.5 million for the first nine months of 2005.

RESULTS OF OPERATIONS

     The following table presents our results of continuing operations for the
periods indicated. Results for the three months and six months ended June 30,
2005 and 2004 are unaudited. Operating results for Melcor Corporation are
disclosed as discontinued operations.


                                       21

<PAGE>

OPERATING RESULTS AS A PERCENT OF NET SALES-CONTINUING OPERATIONS

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED     SIX MONTHS ENDED
                                                       JUNE 30,              JUNE 30,
                                                 -------------------   -------------------
                                                   2005       2004       2005       2004
                                                 --------   --------   --------   --------
<S>                                              <C>        <C>        <C>        <C>
Net sales.....................................   $122,732   $174,539   $195,630   $290,171

Gross profit .................................       18.8%      15.8%      18.8%      16.6%
Selling, general and administrative expense...       16.0       11.0       19.1       12.2
Operating income..............................        2.8        5.3       (0.3)       4.6
Net interest expense..........................        4.6        3.0        5.6        3.5
Pre-tax (loss) income.........................       (1.6)       1.6       (5.4)      (1.8)
</TABLE>

THREE MONTHS ENDED JUNE 30, 2005 VERSUS THE THREE MONTHS ENDED JUNE 30, 2004

     Net sales for the three-month period ended June 30, 2005 decreased 29.7% to
$122.7 million, compared to $174.5 million in the prior-year period. Net sales
within the HVACR reporting segment decreased 31.9% during the period, due
primarily to the effect of increased inventory at customers of room air
conditioners in key North American markets, caused by cooler than normal summer
weather in 2004. This decrease in room air conditioner sales was offset in part
by increased sales of commercial air conditioners resulting from the acquisition
of Addison and to a lesser extent Islandaire. Sales in the Engineered Products
reporting segment increased 26.3% due primarily to industrial air cleaning
projects in Asia.

     Gross profit declined to $23.1 million in the three-month period ended June
30, 2005, compared to $27.7 million in the prior-year period, but increased to
18.8% of net sales during the period versus 15.8% in the prior-year period.
Gross profit dollars declined as a result of lower sales volume. During the
three months ended June 30, 2005, the Company manufactured fewer room air
conditioners than in the prior year in order to reduce inventories. Reduced
production resulted in lower absorption of fixed overhead. Despite the increased
costs related to overhead absorption, as well as inflationary pressures on raw
materials, the gross profit margin as a percentage of net sales increased as a
result of a more favorable product mix and price increases initiated to offset
both material cost increases realized in 2004 and a reduction in the VAT rebate
on exports from China initiated in early 2004.

     Selling, general and administrative expenses ("SG&A") for the three-month
period ended June 30, 2005 were $19.6 million, or 16.0% of net sales, compared
to $19.2 million, or 11.0% of net sales in the prior-year period. SG&A expenses
were higher than the prior year as a result of SG&A expenses of the acquired
operations, $2.6 million, offset in part by reductions in SG&A expenses in the
Company's other HVACR and Engineered Products businesses.

     Operating income for the three months ended June 30, 2005 was $3.5 million,
or 2.8% of net sales, compared to operating income of $9.2 million, or 5.3% of
net sales, in the prior-year period. The decrease reflects lower sales of room
air conditioners in North America, offset in part by increased selling prices.

     Net interest expense increased in the three-month period ended June 30,
2005 to $5.7 million, or 4.6% of net sales, compared to $5.2 million, or 3.0% of
net sales, in the prior-year period. Interest expense consisted of interest on
the Company's long-term debt, interest on short-term working capital loans in
Asia and on the Company's revolving credit facility in the U.S. Net interest
expense was higher than prior year due to higher short-term borrowings during
the period.

     Based on SFAS No. 109, "Accounting for Income Taxes", the Company recorded
a valuation allowance against deferred tax assets generated from a tax benefit
related to losses in 2005. Accordingly, the reported effective tax rate reflects
only provisions for foreign and state income taxes. Management believes the
Company's deferred tax asset is appropriate in the near term.

     A loss on debt extinguishment of $0.7 million was recorded during the
prior-year period to account for the early retirement of the Company's Senior
Subordinated Notes due August 2007 and the issuance of new Senior Notes due
March 2014.

     Net income from discontinued operations in the three-month period ended
June 30, 2005 was $0.7 million compared to $0.3 million in the prior-year
period.


                                       22

<PAGE>

     Net loss applicable to common stockholders in the three-month period ended
June 30, 2005 was $2.5 million, or $0.08 loss per diluted common share. Net
income applicable to common stockholders in the prior-year period was $1.3
million, or $0.04 income per diluted common share.

SIX MONTHS ENDED JUNE 30, 2005 VERSUS THE SIX MONTHS ENDED JUNE 30, 2004

     Net sales for the six-month period ended June 30, 2005 decreased 32.6% to
$195.6 million compared to $290.2 million in the prior-year period. Net sales in
the HVACR reporting segment decreased 34.5% during the period due primarily to
the effect of increased inventory at the customer of room air conditioners in
key North American markets, caused by cooler than normal summer weather in 2004.
This decrease in room air conditioner sales was offset in part by increased
sales of commercial air conditioners resulting from the acquisition of Addison
and, to a lesser extent, Islandaire. Sales in the Engineered Products reporting
segment increased 3.8% due primarily to industrial air cleaning projects in
Asia.

     Gross profit declined to $36.7 million in the six-month period ended June
30, 2005 compared to $48.2 million in the prior-year period, but increased to
18.8% of net sales during the period versus 16.6% in the prior-year period.
Gross profit dollars declined as a result of lower sales volume. During the six
months ended June 30, 2005, the Company manufactured fewer room air conditioners
than in the prior year in order to reduce inventories. Reduced production
resulted in lower absorption of fixed overhead. Despite the increased costs
related to overhead absorption, as well as inflationary pressures on raw
materials, the gross profit margin as a percentage of net sales increased as a
result of a more favorable product mix and price increases initiated to offset
both material cost increases realized in 2004 and a reduction in the VAT rebate
on exports from China initiated in early 2004.

     SG&A for the six-month period ended June 30, 2005 were $37.4 million, or
19.1% of net sales, compared to $35.5 million, or 12.2% of net sales in the
prior-year period. SG&A expenses were higher than the prior year as a result of
SG&A expenses of the acquired operations, $4.2 million offset in part by
reductions in SG&A expenses in the Company's other HVACR and Engineered Products
businesses.

     Operating loss for the six months ended June 30, 2005 was $0.6 million, or
0.3% of net sales, compared to operating income of $13.4 million, or 4.6% of net
sales, in the prior-year period. The decrease reflects lower sales of room air
conditioners in North America, offset in part by increased selling prices.

     Net interest expense increased in the six-month period ended June 30, 2005
to $11.0 million, or 5.6% of net sales, compared to $10.1 million, or 3.5% of
net sales, in the prior-year period. Interest expense consisted of interest on
the Company's long-term debt, interest on short-term working capital loans in
Asia and on the Company's revolving credit facility in the U.S. Net interest
expense was 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
prior-year period to account for the early retirement of the Company's Senior
Subordinated Notes due August 2007 and the issuance of new Senior 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.

     Based on SFAS No. 109, "Accounting for Income Taxes", the Company recorded
a valuation allowance against deferred tax assets generated from a tax benefit
related to losses in 2005. Accordingly, the reported effective tax rate reflects
only provisions for foreign and state income taxes. Management believes the
Company's deferred tax asset is appropriate in the near term.

     Net income from discontinued operations in the six-month period ended June
30, 2005 was $1.3 million compared to $0.6 million in the prior-year period.

     Net loss applicable to common stockholders in the six-month period ended
June 30, 2005 was $11.6 million, or $0.38 loss per diluted common share. Net
loss applicable to common stockholders in the prior-year period was $4.9
million, or $0.16 loss per diluted common share.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's working capital requirements 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 $17.8 million at June 30, 2005 compared to $32.7 million a year
earlier.



                                       23

<PAGE>
Short-term borrowings under the Company's working capital credit facilities
amounted to $90.5 million at June 30, 2005 compared to $36.9 million a year
earlier.

     The Company utilized $18.7 million in operating activities in the first six
months of 2005, primarily as a result of a $58.0 million increase in accounts
receivable as the Company entered its selling season and a net loss of $9.5
million. These uses were offset in part by a $30.6 million decrease in
inventories. This compares with cash utilization of $4.9 million in operations
in the six-month period of 2004, resulting from an increase of $73.9 million in
accounts receivable, on higher sales levels, and a decrease in inventory of
$16.7 million. Inventory declined at a greater rate in 2005 as fewer room air
conditioners were produced than in the prior year.

     Net cash used in investing activities in the six-month period ended June
30, 2005 amounted to $12.6 million. $9.4 million was used for the acquisition of
Islandaire and $3.3 million for capital expenditures, primarily for a research
and design center in Qingpu, China. This compared to $3.0 million in the
prior-year period, primarily for capital expenditures to support production
capacity in China. The Company also issued 257,484 shares of Preferred Stock and
100,000 shares of Common Stock as part of the consideration in the acquisition
of Islandaire.

     Net cash provided by financing activities for the six-month period ended
June 30, 2005 amounted to $26.3 million, consisting primarily of $31.2 million
in short-term borrowings which were used to support operating needs, the
acquisition of Islandaire and $4.0 million of cash dividends. Net cash provided
by financing activities in the prior-year period was $18.0 million and consisted
primarily of $6.4 million in short-term borrowings to support production in Asia
and $28.3 million of proceeds from stock rights exercised, partially offset by
$3.8 million of cash dividends and the repayment of $2.8 million of long-term
debt.

     The Company declared dividends of $0.06 on each share of outstanding Common
and Class B Stock and $1.076 on each share of outstanding Preferred Stock in the
six months ended June 30, 2005 and 2004, respectively. The First Supplemental
Indenture (Note 14) limits, among other things, the Company from making any
dividend payments without sufficient consolidated net income beginning January
1, 2006.

     The Company's $100 million revolving credit facility expires on February 1,
2006. The Company plans to renew this facility.

     Senior Notes bearing interest at 9 7/8% with an aggregate $155.0 million
principal amount maturing in 2014 were issued during 2004 to refinance $150.0
million principal amount outstanding of 9 3/8% Senior Notes due in 2007.

     As a result of the delay in filing the Annual Report on Form 10-K, this
Quarterly Report on Form 10-Q for the period ended June 30, 2005 could not be
completed and timely filed. In addition, on April 14, 2005, Deloitte & Touche
LLP informed the Company that it would not stand for reappointment as the
Company's independent registered public accounting firm for the year ending
December 31, 2005 or for any of the quarterly reporting periods therein and the
Company could not engage a new independent registered public accounting firm
until after the filing of the 2004 10-K. The delayed filings resulted in
defaults under provisions of the Company's primary credit facility and of the
Indenture related to its 9 7/8% Senior Notes due 2014. The Company has received
waivers of the default under the Indenture and from its lender under the credit
facility. During the Waiver Period, the Company will pay an additional 100 basis
points of interest on the Senior Notes.

     The Company has incurred operating losses and used cash in its operations
and for investment in the year ended December 31, 2004, requiring the Company to
utilize higher levels of its short-term borrowing facilities to fund ongoing
operations. In an effort to reduce costs and enhance the Company's liquidity,
management has taken steps to rationalize and consolidate certain of its
domestic operations and reduce redundancies and overlap within its
organizational structure. In addition, the Company has offered for sale all of
the capital stock of Melcor Corporation, its thermal management subsidiary, and
its industrial facility and 182 acres of development property in Walkersville,
Maryland. The Company sold its Melcor subsidiary for $17.4 million in cash on
October 25, 2005. Because an auction of the Maryland facility and property did
not receive acceptable offers, the Company will be retaining a national broker
to market this asset.

     Management believes that through existing operations, as well as the steps
outlined above, the Company's existing and future sources of cash, anticipated
future earnings, and short-term borrowing capacity are adequate to meet the
demands of its operations and its short and long-term credit requirements. In
addition, the Company believes it will be able to secure a revolving credit
facility upon the expiration of its current revolving credit facility with
Wachovia Bank, NA, which expires in February 2006.

     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 obligations to update any
forward-looking statements to incorporate subsequent events.


                                       24

<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The only activity subject to market risk in which the Company engages is
hedging exchange rates. From time to time we engage in hedging activities in an
effort to mitigate the impact of exchange rate fluctuations. However, we cannot
assure that any hedging transactions we enter into will be effective or will not
result in foreign exchange hedging loss. The impact of exchange rate
fluctuations on our results of operations cannot be accurately predicted.

ITEM 4. CONTROLS AND PROCEDURES

     The Company maintains disclosure controls and procedures that are designed
to ensure that information required to be disclosed in the Company's reports
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and that such information is accumulated and
communicated to management, including the Company's Chief Executive Officer
("CEO") and Chief Financial Officer ("CFO"), as appropriate, to allow timely
decisions regarding required disclosure. The Company periodically reviews the
design and effectiveness of its disclosure controls and internal control over
financial reporting. The Company makes modifications to improve the design and
effectiveness of its disclosure controls and internal control structure, and may
take other corrective action, if its reviews identify a need for such
modifications or actions.

     A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system are met. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in decision-making can
be faulty and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
control. The design of any system of controls also is based, in part, upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions. Over time, controls may become inadequate because
of changes in conditions or the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.

     In connection with the preparation of the Company's 2004 Annual Report on
Form 10-K, as of December 31, 2004, an evaluation was performed under the
supervision and with the participation of the Company's management, including
the CEO and CFO, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and
15d-15(e) under the Exchange Act). The Company concluded that control
deficiencies in its internal control over financial reporting as of December 31,
2004 constituted material weaknesses within the meaning of the Public Company
Accounting Oversight Board's Auditing Standard No. 2, An Audit of Internal
Control Over Financial Reporting Performed in Conjunction with an Audit of
Financial Statements. The material weaknesses identified by the Company were
disclosed in its 2004 Annual Report on Form 10-K, which was filed with the SEC
on September 30, 2005. Based on that evaluation, the Company's Chief Executive
Officer and Chief Financial Officer have concluded that, as of June 30, 2005,
the Company's disclosure controls and procedures were not effective.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

     Management, with oversight from the Audit Committee of the Board of
Directors, has been addressing the material weaknesses disclosed in its Form
10-K and is committed to effectively remediating known weaknesses as
expeditiously as possible. Although the Company's remediation efforts are well
underway, control weaknesses will not be considered remediated until new
internal controls over financial reporting are implemented and operational for a
period of time and are tested, and management and its independent registered
public accounting firm conclude that these controls are operating effectively.
Management has therefore concluded that there have been no changes made in the
Company's internal controls over financial reporting in connection with its
third quarter evaluation that would materially affect, or are reasonably likely
to materially affect, its internal control over financial reporting.

     The current status of the Company's remediation efforts to address the
material weaknesses in internal control over financial reporting identified in
2004 is as follows:

     -    The Company's control environment did not sufficiently promote
          effective internal control over financial reporting throughout its
          management structure, and this material weakness was a contributing
          factor in the development of other material weaknesses described
          below. Principal contributing factors included the turnover of
          employees in key financial reporting positions, the lack of a formal
          program for training members of the Company's finance and accounting
          groups, a lack of a full evaluation of the Company's financial system
          applications due to incomplete documentation and testing of key


                                       25

<PAGE>

          controls, and the lack of a complete entity-wide risk assessment. This
          deficient control environment also contributed to the Company's
          inability to complete its documentation of controls by the as of date
          of December 31, 2004, and to complete its assessment of design
          effectiveness, general computer controls, financial system application
          controls, and tax controls.

     Steps taken to date:

     a)   A Corporate Controller was hired with a strong background and
          expertise in Generally Accepted Accounting Principles and in SEC
          financial reporting.

     b)   Internal Audit Department was strengthened and expanded.

     c)   The Company engaged GR Consulting Group to assist in the remediation
          of material weaknesses.

     d)   Internal controls for taxes have been documented and remediated with
          the assistance of a consultant.

     e)   A change management software package (ECORA) was purchased and
          implemented to aid in the assessment of general computer controls.

     f)   During 2005, significant training has taken place for the financial
          staff.

     g)   A company-wide risk assessment was completed in April, 2005 and is
          being updated during 2005 based on key controls.

     h)   The documentation and testing of key controls is in progress. The
          Company expects to complete the testing early in 2006.

     -    Controls over the selection and application of accounting principles
          generally accepted in the United States of America to resolve
          non-routine or complex accounting matters are ineffective as a result
          of inadequate resources and technical accounting expertise, along with
          a lack of appropriate training.

     Steps taken to date:

     a)   A Corporate Controller was hired with a strong background and
          expertise in Generally Accepted Accounting Principles and in SEC
          financial reporting

     b)   The Company has retained a public accounting firm, JH Cohn, for advice
          on GAAP and SEC financial reporting issues.

     c)   The Company has identified areas where technical expertise needed
          improvement and training has been provided.

     -    The design and operation of controls over the financial closing and
          reporting process are ineffective as a result of the lack of timely
          preparation of account analyses and reconciliations, a lack of
          appropriate review of account reconciliations and supporting analyses,
          errors in account balance classifications, and inadequate controls
          over spreadsheet preparation.

     Steps taken to date:

     a)   A detailed schedule of due dates was established that includes dates
          for key account analyses and reconciliations for which a sign off by
          an appropriate reviewer is required. The schedule takes into
          consideration financial statement filing requirements and requires
          that key analyses be done in a timely manner, while best utilizing
          accounting resources available.

     b)   During 2005, all spreadsheets with a financial impact are being
          identified with internal controls related to the spreadsheets
          evaluated and strengthened where required.

     -    Controls over the process for recording and approving journal entries
          were inadequate as a result of a lack of appropriate evidence of
          review and approval, and a lack of adequate documentation and support.

     Steps taken to date:

     a)   A policy has been instituted requiring the review and approval of
          manual journal entries prior to being recorded as well as the
          quarterly testing of manual entries.

     -    Controls over the segregation of duties were inadequate due to an
          inadequate level of accounting and finance resources.


                                       26

<PAGE>

     Steps taken to date:

     a)   The Company has identified the segregation of duties deficiencies,
          where an effective compensating control does not exist, and assigned
          the corrective action for management oversight. Remediation for these
          deficiencies is expected to be complete and tested early in 2006.

     -    Controls over the recording of product revenues were not effective
          with respect to estimating a provision for returns of seasonal product
          and the proper cut-off of revenue with respect to a non-routine
          revenue transaction.

     Steps taken to date:

     a)   The Company instituted a change in its accounting policy regarding its
          provision for sales allowances and returns. The change relates to
          certain significant customers of room air conditioners, whereby the
          Company now has a process of estimating potential end-of-season
          returns based upon a review of customer inventory levels, taking into
          account actual and expected sell-through of product during the summer
          season.

     b)   In addition, the quarterly certification that is required from all
          Controllers and General Managers was expanded to include a specific
          item on revenue recognition.

     -    The design and operation of controls over the valuation of inventory
          reserves for the following: refurbishments, shrinkage, manufacturing
          variances, and inter-company profit; were ineffective as a result of a
          lack of effective supervisory controls over the monitoring and review
          of these inventory reserves.

     Steps taken to date:

     a)   This material weakness was specifically related to the Company's
          Appliances and Unitary Products businesses domestically, and, its
          Nanjing, China facility. The detailed schedule of due dates for key
          reconciliations and account analysis implemented during 2005, requires
          inventory reserves at all locations, including the locations
          specified, be analyzed and valued each quarter.

     b)   During 2005, the Corporate Controller is reviewing, and approving the
          calculation.

     -    Controls over the recording and reconciliation of property, plant and
          equipment at certain domestic businesses were ineffective as a result
          of a lack of timely and effective reconciliation of the fixed asset
          subsidiary ledgers to the general ledger.

     Steps taken to date:

     a)   Under the schedule of required analysis and due dates, fixed asset
          subsidiary ledgers are required to be reconciled to the general ledger
          each quarter.

     b)   During 2005, the Corporate Controller is reviewing, and approving the
          reconciliation.


                                       27

<PAGE>

                            PART II OTHER INFORMATION

ITEM 3A. DEFAULTS ON SENIOR SECURITIES

     On June 24, 2005, Fedders North America, Inc. ("FNA"), a wholly-owned
subsidiary of the Company, defaulted on the covenant in the indenture pursuant
to which its 9 7/8% Senior Notes due 2014 (the "Senior Notes") were issued (the
"Indenture") requiring the Company to file timely a Form 10-K for the year ended
December 31, 2004 and for its Forms 10-Q fpr 2005. This delay in filing the Form
10-K and Forms 10-Q also resulted in a default under FNA's agreement with
Wachovia Bank, NA (the "Senior Lender").

     The Company subsequently received a waiver of these defaults. By the terms
of the waivers, the Company must file its Form 10-K on or before September 30,
2005, which was completed by this date, and Forms 10-Q for the 2005 quarters on
or before November 30, 2005. Subsequently, the Senior Lender provided an
additional waiver of this filing date to December 31, 2005 and modified a net
worth covenant. The Company will file Forms 10-Q before December 31, 2005 and is
in compliance with the modified net worth covenant.

ITEM 6. 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>


                                       28

<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.
                                             ---------------------------------
                                             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.

December 30, 2005


                                       29