<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 September 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>
PART I   FINANCIAL INFORMATION
ITEM 1.  CONDENSED FINANCIAL STATEMENTS
         CONSOLIDATED STATEMENTS OF OPERATIONS
         FOR THE THREE MONTHS ENDED  SEPTEMBER 30, 2005 AND 2004
         AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004            3
         CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2005,
         DECEMBER 31, 2004 AND SEPTEMBER 30, 2004                             4
         CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS
         ENDED SEPTEMBER 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                                          20-24
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK          25
ITEM 4.  CONTROLS AND PROCEDURES                                          26-27
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    NINE MONTHS ENDED
                                                                                SEPTEMBER 30,         SEPTEMBER 30,
                                                                             -------------------   -------------------
                                                                               2005       2004       2005       2004
                                                                             --------   --------   --------   --------
                                                                              (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE
                                                                                                DATA)
                                                                                            (UNAUDITED)
<S>                                                                          <C>        <C>        <C>        <C>
Net sales ................................................................   $ 63,110   $ 66,284   $258,740   $356,455
Costs and expenses:
   Cost of sales .........................................................     55,197     59,809    214,115    301,762
   Selling, general and administrative expense ...........................     17,965     17,336     55,316     52,830
   Asset impairment charge ...............................................      2,732         --      2,732         --
   Restructuring credit ..................................................         --         --         --       (709)
                                                                             --------   --------   --------   --------
Total expense ............................................................     75,894     77,145    272,163    353,883
                                                                             --------   --------   --------   --------
Operating (loss) income ..................................................    (12,784)   (10,861)   (13,423)     2,572
Partners' net interest in joint venture results ..........................        151        486        844       (112)
Interest expense, net ....................................................      5,492      4,754     16,538     14,894
Debt extinguishments .....................................................         --         --         --      8,075
Other (income) expense ...................................................        877       (221)       355       (483)
                                                                             --------   --------   --------   --------
Income (loss) from continuing operations before income taxes .............    (19,002)   (14,908)   (29,472)   (20,026)
Provision (benefit) for income taxes .....................................        (84)    (4,896)       263     (6,553)
                                                                             --------   --------   --------   --------
Net income (loss) from continuing operations .............................    (18,918)   (10,012)   (29,735)   (13,473)
Income from discontinued operations,
   net of tax of $11, $146, $48 and$456 ..................................        561        274      1,894        848
                                                                             --------   --------   --------   --------
Net loss .................................................................    (18,357)    (9,738)   (27,841)   (12,625)
Preferred stock dividends ................................................      1,145      1,005      3,294      3,015
                                                                             --------   --------   --------   --------
Net loss applicable to common stockholders ...............................   $(19,502)  $(10,743)  $(31,135)  $(15,640)
                                                                             ========   ========   ========   ========
(Loss) income per common share:
   Basic net loss per common share from continuing operations ............   $  (0.65)  $  (0.36)  $  (1.08)  $  (0.54)
                                                                             ========   ========   ========   ========
   Diluted net loss per common share from continuing operations ..........      (0.65)     (0.36)     (1.08)     (0.54)
                                                                             ========   ========   ========   ========
   Basic net income per common share from discontinued operations ........   $   0.02   $   0.01   $   0.06   $   0.03
                                                                             ========   ========   ========   ========
   Diluted net income per common share from discontinued operations ......       0.02       0.01       0.06       0.03
                                                                             ========   ========   ========   ========
   Basic net loss per share applicable to common shareholders ............   $  (0.63)  $  (0.35)  $  (1.02)  $  (0.51)
                                                                             ========   ========   ========   ========
   Diluted net loss per share applicable to common shareholders ..........      (0.63)     (0.35)     (1.02)     (0.51)
                                                                             ========   ========   ========   ========
Weighted averages shares:
   Basic .................................................................     30,688     30,494     30,608     30,454
   Diluted ...............................................................     30,688     30,494     30,608     30,454

Dividends per share declared:
   Common Stock ..........................................................   $     --   $     --   $  0.060   $  0.090
   Class B Stock .........................................................         --         --      0.060      0.090
   Preferred Stock .......................................................         --         --      0.700      0.990
</TABLE>

See accompanying notes to the condensed consolidated financial statements


                                        3

<PAGE>

                               FEDDERS CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                  SEPTEMBER 30,   DECEMBER 31,   SEPTEMBER 30,
                                                                                       2005           2004           2004
                                                                                  -------------   ------------   -------------
                                                                                    (AMOUNTS IN THOUSANDS, EXCEPT PAR VALUE
                                                                                                     DATA)
                                                                                                   (UNAUDITED)
                                     ASSETS
<S>                                                                               <C>             <C>            <C>
Current assets:
   Cash and cash equivalents ..................................................      $ 16,946       $ 22,783        $ 23,913
   Accounts receivable (net of allowance of $4,393, $3,391 and $1,884 at
      September 30, 2005, December 31, 2004 and September 30, 2004,
      respectively) ...........................................................        53,318         26,933          48,291
   Inventories:
      Finished goods ..........................................................        59,547        100,165          94,611
      Work-in-process .........................................................         3,040          2,746           2,623
      Raw materials and supplies ..............................................        21,365         27,666          28,962
                                                                                     --------       --------        --------
   Net inventories ............................................................        83,952        130,577         126,196
   Deferred income taxes ......................................................         8,887          8,827           6,993
   Assets held for sale .......................................................            --             --           8,249
   Other current assets .......................................................         8,754         10,389          21,660
   Current assets of discontinued operations ..................................         4,158          4,273           4,208
                                                                                     --------       --------        --------
Total current assets ..........................................................       176,015        203,782         239,510
Net property, plant and equipment:
   Land and improvements ......................................................         5,186          5,183           1,306
   Buildings and leasehold improvements .......................................        40,587         40,326          30,624
   Machinery and equipment ....................................................        86,236        102,688          99,973
                                                                                     --------       --------        --------
   Gross property, plant and equipment ........................................       132,009        148,197         131,903
   Less accumulated depreciation ..............................................        78,218         89,632          83,923
                                                                                     --------       --------        --------
Net property, plant and equipment .............................................        53,791         58,565          47,980
Deferred income taxes .........................................................        22,105         22,263          10,541
Goodwill ......................................................................        87,441         77,937          77,913
Other intangible assets .......................................................         4,556            261             255
Other assets ..................................................................        36,259         36,099          35,668
Assets of discontinued operations .............................................         3,088          3,290           3,386
                                                                                     --------       --------        --------
Total assets ..................................................................      $383,255       $402,197        $415,253
                                                                                     ========       ========        ========
                     LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Short-term notes ...........................................................      $ 66,438       $ 57,571        $ 31,632
   Current portion of long-term debt ..........................................         1,408          1,522           1,290
   Accounts payable ...........................................................        45,354         47,955          64,510
   Income taxes payable .......................................................         1,003            586              --
   Accrued expenses ...........................................................        41,153         39,443          47,638
   Current liabilities of discontinued operations .............................         1,196          1,468           1,150
                                                                                     --------       --------        --------
Total current liabilities .....................................................       156,552        148,545         146,220
Long-term debt ................................................................       159,517        160,286         158,171
Other long-term liabilities ...................................................        28,626         29,703          32,416
Long-term liabilities of discontinued operations ..............................         1,185          1,463           1,542
Partners' net interest in joint venture .......................................         4,358          3,994           3,725
Stockholders' equity:
Preferred Stock, $0.01 par value, 15,000 shares authorized,  2,127, 1,871
   and 1,871 issued at September 30, 2005, December 31, 2004 and September
   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 September 30, 2005, December 31, 2004 and September 30,
   2004, respectively .........................................................           367            365             365
Class B Stock, $0.01 par value, 5,000 shares authorized, 2,492 issued at
   September 30, 2005, December 31, 2004 and September 30, 2004 ...............            25             25              25
Additional paid-in capital ....................................................       115,297        108,363         109,038
Retained earnings (deficit) ...................................................       (41,995)       (10,176)          5,209
Accumulated other comprehensive loss ..........................................        (1,181)          (676)         (1,697)
                                                                                     --------       --------        --------
                                                                                       72,534         97,920         112,959
Treasury stock, at cost, 8,521 shares of Common Stock at September 30, 2005,
   December 31, 2004 and September 30, 2004 ...................................       (39,188)       (39,188)        (39,188)
Deferred compensation .........................................................          (329)          (526)           (592)
                                                                                     --------       --------        --------
Total stockholders' equity ....................................................        33,017         58,206          73,179
                                                                                     --------       --------        --------
Total liabilities and stockholders' equity ....................................      $383,255       $402,197        $415,253
                                                                                     ========       ========        ========
</TABLE>

See accompanying notes to the condensed consolidated financial statements


                                        4

<PAGE>

                               FEDDERS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                         NINE MONTHS ENDED
                                                                           SEPTEMBER 30,
                                                                      ----------------------
                                                                         2005        2004
                                                                       --------   ---------
                                                                      (AMOUNTS IN THOUSANDS)
                                                                            (UNAUDITED)
<S>                                                                   <C>         <C>
Cash flows from operating activities:
Net loss ..........................................................    $(27,841)  $ (12,625)
Adjustments to reconcile net loss to net cash used in
   operating activities:
   Depreciation and amortization ..................................       7,510       6,702
   Amortization of deferred financing costs .......................         635         570
   Loss on debt extinguishment ....................................          --       8,075
   Deferred income taxes ..........................................          98      (1,658)
   Gain(loss) on asset disposal ...................................         (55)        286
   Asset impairment charge ........................................       2,732          --
   Partners' net interest in joint venture results ................        (664)        170
Changes in operating assets and liabilities, net of acquisition:
   Accounts receivable ............................................     (22,711)    (20,242)
   Inventories ....................................................      50,294      16,907
   Other current assets ...........................................       1,831       6,536
   Other assets ...................................................        (642)        988
   Accounts payable ...............................................      (4,722)    (21,292)
   Accrued expenses and income taxes payable ......................        (190)      9,305
   Other long-term liabilities ....................................        (490)      1,051
   Other-- net ....................................................        (116)        281
                                                                       --------   ---------
Net cash provided (used) by operating activities ..................       5,669      (4,946)
                                                                       --------   ---------
Cash flows from investing activities:
   Additions to property, plant and equipment .....................      (3,961)     (4,139)
   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) by investing activities ...........................     (13,260)     (3,520)
                                                                       --------   ---------
Cash flows from financing activities:
   Proceeds from short-term notes .................................       7,102       1,186
   Repayments of long-term debt ...................................      (1,370)     (3,179)
   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 ....................          --     (10,356)
   Proceeds from stock options exercised ..........................          --         110
   Cash dividends .................................................      (3,978)     (5,769)
   Proceeds from stock rights exercised ...........................          --      28,323
   Costs of stock offerings .......................................          --        (224)
                                                                       --------   ---------
Net cash provided by financing activities .........................       1,754      10,336
                                                                       --------   ---------
Net increase (decrease) in cash and cash equivalents ..............      (5,837)      1,870
Cash and cash equivalents at beginning of period ..................      22,783      22,043
                                                                       --------   ---------
Cash and cash equivalents at end of period ........................    $ 16,946   $  23,913
                                                                       ========   =========
Supplemental disclosure:
   Interest paid ..................................................    $ 18,973   $  15,848
   Income taxes paid ..............................................         409       1,360
</TABLE>

See accompanying notes to the condensed 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 (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, 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 sold
Melcor on October 25, 2005.

     The Company's business is seasonal and, consequently, operating results for
the nine-month period ending September 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      NINE MONTHS ENDED
                                      SEPTEMBER 30,           SEPTEMBER 30,
                                  ---------------------   ---------------------
                                    2005        2004        2005        2004
                                  --------   ----------   --------   ----------
                                             (RESTATED)              (RESTATED)
<S>                               <C>        <C>          <C>        <C>
Net (loss) income .............   $(18,357)   $(9,738)    $(27,841)   $(12,625)
Other comprehensive loss:
Foreign currency translation ..        469         (6)        (505)         56
                                  --------    -------     --------    --------
Comprehensive (loss) income ...   $(17,788)   $(9,744)    $(28,346)   $(12,569)
                                  ========    =======     ========    ========
</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 loss previously reported for the three
months and nine months ended September 30, 2004 have 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 nine months
ended September 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    NINE MONTHS ENDED
                                                                                  SEPTEMBER 30,         SEPTEMBER 30,
                                                                               -------------------   -------------------
                                                                                 2005       2004       2005       2004
                                                                               --------   --------   --------   --------
<S>                                                                            <C>        <C>        <C>        <C>
Loss applicable to common stockholders-as reported .........................   $(19,502)  $(10,743)  $(31,135)  $(15,640)
Deduct: Total stock-based employee compensation expense determined under
   fair-value-based method for all awards, net of related tax effects ......         --       (175)        --       (634)
                                                                               --------   --------   --------   --------
Pro forma net (loss) income ................................................   $(19,502)  $(10,918)  $(31,135)  $(16,274)
                                                                               ========   ========   ========   ========
Net (loss) income per common share:
   Basic/diluted -- as reported ............................................   $  (0.63)  $  (0.35)  $  (1.02)  $  (0.51)
   Basic/diluted -- pro forma ..............................................   $  (0.63)  $  (0.35)  $  (1.02)  $  (0.51)
</TABLE>

4. EARNINGS PER SHARE

     For the three months ended September 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 30,687,508 and 30,493,949 shares,
respectively. Due to their anti-dilutive effect, 1,160,000 and 1,532,500
dilutive stock options were excluded from the computation of diluted loss per
share for the nine months ended September 30, 2005 and 2004, respectively.

     For the nine months ended September 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 30,608,029 and 30,454,488 shares,
respectively. Due to their anti-dilutive effect, 1,160,000 and 1,532,500
dilutive stock options were excluded from the computation of diluted loss per
share for the nine months ended September 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 and is now known as Fedders
Islandaire, Inc. It manufactures and markets specialized through-the-wall
packaged terminal air conditioners (PTACs) and heat pumps, primarily for
replacement applications in apartment buildings, hotels and motels, and
institutional buildings such as schools, offices, hospitals, and nursing homes.
Islandaire's replacement PTAC units fit into existing wall openings without
alteration to the structure of the building. The addition of Islandaire's


                                        7

<PAGE>

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
   Non-competition 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 non-competition agreement, and engineering drawings and was
based on a third-party appraisal. The intangible assets will be amortized over
periods ranging from two to ten years using the straight-line method.

     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. In 2005, and to
better coordinate with a prior change in fiscal year end, the Company elected to
change its annual date of impairment testing from September 1 to October 1. This
change enables the Company to use the budget for the next year which is a
critical component of the testing process. Furthermore, the Company would now
have adequate time to complete the testing before the next reporting period and
would have quarterly data available which would facilitate testing. 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 in the fourth quarter.


                                        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........   $69,468     $8,497     $77,965
Goodwill from Islandaire acquisition (note 5)...     9,489         --       9,489
Effect of foreign currency change...............        16         --          16
Less goodwill of discontinued operation.........       (29)        --         (29)
                                                   -------     ------     -------
Goodwill balance as of September 30, 2005.......   $78,944     $8,497     $87,441
                                                   =======     ======     =======
</TABLE>

<TABLE>
<CAPTION>
                                   SEPTEMBER 30,   DECEMBER 31,   SEPTEMBER 30,
                                        2005           2004            2004
                                   -------------   ------------   -------------
<S>                                <C>             <C>            <C>
Other intangible assets.........      $ 6,390        $ 1,716         $ 1,682
Accumulated amortization........       (1,834)        (1,455)         (1,427)
                                      -------        -------         -------
Other intangible assets - net...      $ 4,556        $   261         $   255
                                      =======        =======         =======
</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 September 30, 2005 and 2004 was $234 and $52,
respectively. Amortization expense of continuing operations for the nine months
ended September 30, 2005 and 2004 was $397 and $153, 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 $1,606
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 September 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    NINE MONTHS ENDED
                                                                             SEPTEMBER 30,         SEPTEMBER 30,
                                                                          -------------------   -------------------
                                                                            2005       2004       2005       2004
                                                                          --------   --------   --------   --------
<S>                                                                       <C>        <C>        <C>        <C>
Net sales:
   HVACR ..............................................................   $ 53,360   $ 59,556   $234,215   $335,495
   Engineered Products ................................................      9,750      6,728     24,525     20,960
                                                                          --------   --------   --------   --------
   Net sales ..........................................................   $ 63,110   $ 66,284   $258,740   $356,455
                                                                          ========   ========   ========   ========
Income (loss) before interest expense, income taxes, loss on debt
   extinguishment, and asset impairment charges:
   HVACR ..............................................................   $(15,231)  $ (7,738)  $(13,623)  $  2,114
   Engineered Products ................................................        599        656      1,449      1,206
                                                                          --------   --------   --------   --------
   Segment income (loss) before interest expense, income taxes, and
      other ...........................................................    (14,632)    (7,082)   (12,174)     3,320
   Non-allocated (expense) income .....................................      1,290     (3,072)      (760)      (377)
   Loss on debt extinguishments .......................................         --         --         --      8,075
   Interest expense, net ..............................................      5,492      4,754     16,538     14,894
   Income tax expense (benefit) .......................................         84     (4,896)       263     (6,553)
                                                                          --------   --------   --------   --------
   Net (loss) income from continuing operations .......................    (18,918)   (10,012)   (29,735)   (13,473)
   Income from discontinued operations, net of tax ....................        561        274      1,894        848
                                                                          --------   --------   --------   --------
   Net (loss) income ..................................................   $(18,357)  $ (9,738)  $(27,841)  $(12,625)
                                                                          ========   ========   ========   ========
</TABLE>

<TABLE>
<CAPTION>
                             SEPTEMBER 30,   DECEMBER 31,   SEPTEMBER 30,
                                  2005           2004            2004
                             -------------   ------------   -------------
<S>                          <C>             <C>            <C>
Total assets:
HVACR.....................      $262,410       $288,500        $300,112
Engineered Products.......        44,118         46,854          47,883
Non-allocated assets......        69,481         59,280          59,664
Discontinued operations...         7,246          7,563           7,594
                                --------       --------        --------
                                $383,255       $402,197        $415,253
                                ========       ========        ========
</TABLE>

     Non-allocated (income) expense 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
nine months ended September 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 .............................       454       485
Actuarial loss ............................        --        --
Benefits paid .............................    (1,258)   (1,299)
                                              -------   -------
Benefit obligation as of September 30 .....   $10,424   $11,254
                                              =======   =======
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 the nine months ended September 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...      9,195     13,801
Settlements made during the period.................    (10,882)   (12,150)
                                                      --------   --------
Warranty balance at end of period..................   $  5,646   $  7,292
                                                      ========   ========
</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. IMPAIRMENT OF LONG-LIVED ASSETS

     In accordance with SFAS No. 144, "Accounting for the impairment or disposal
of Long-Lived Assets", we review long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances indicate
that the recoverability of the carrying amount of an asset or asset group should
be assessed. We assess the carrying amount of the asset or asset group by
comparing the carrying amount to the estimate of cash inflows, net of outflows.
If the estimated net cash inflows are less than the asset carrying amount, the
asset is written down to fair value. Fair value is based upon quoted market
prices, if available. When quoted market prices are not available, we estimate
fair value based upon the selling prices of similar assets or valuation
techniques. We must estimate the net cash inflows to assess an asset or asset
group carrying amount and fair value. Estimates are based upon internal budgets
and forecasts. A change in the utilization of the assets or a decision to exit
certain product lines or manufacturing locations could impact our estimate of
future cash flows. A decrease in estimated future cash flows could reduce the
fair values of long-lived assets, increasing the likelihood of impairment,
which could have a significant impact on our consolidated results of operations
and financial position.

     During three months ended September 30, 2005 in accordance with its policy
on impairment of long-lived assets, the Company identified impairment losses of
assets to be disposed of and assets to be held and used. These losses, which are
reflected in consolidated statements of operation as "Asset impairment charges"
totaled $2,732, before taxes. The impairment review was conducted after the
Company's decision to outsource repairing and refurbishing of returned products
in the HVACR segment.

13. DEBT AND SUBSEQUENT EVENTS

     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 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 Forms 10-Q for the first, second and third quarters of 2005.
The Company filed Form 10-K on September 30, 2005 and will complete its Form
10-Q filings 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 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 file these reports timely. 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 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.

     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.



                                       12

<PAGE>

     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.

     Cumulative preferred dividends not declared or paid as a result of the
First Supplemental Indenture and the default waiver amounted to $1,145 at
September 30, 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.

14. 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 $155 million 9 7/8% Senior Notes
due 2014. 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 13.

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 SEPTEMBER 30, 2005
                                                          ----------------------------------------------------------
                                                           FEDDERS
                                                            NORTH     OTHER    CORPORATE   ELIMINATING     FEDDERS
                                                           AMERICA   FEDDERS     PARENT      ENTRIES     CORPORATION
                                                          --------   -------   ---------   -----------   -----------
<S>                                                       <C>        <C>       <C>         <C>           <C>
Net sales .............................................   $ 48,599   $23,114    $     --     $(8,603)     $ 63,110
Cost of sales .........................................     43,659    20,141          --      (8,603)       55,197
Selling, general and administrative expense ...........     11,136     3,966       2,863          --        17,965
Asset impairment charges ..............................      2,732        --          --          --         2,732
                                                          --------   -------    --------     -------      --------
Operating income (loss) ...............................     (8,928)     (993)     (2,863)         --       (12,784)
Partners' net interest in joint venture results .......       (254)      405          --          --           151
Equity income in investment ...........................         --        --     (15,437)     15,437            --
Interest expense (income), net ........................      4,877       573          42          --         5,492
Other (income) expense ................................       (195)    1,056          16          --           877
                                                          --------   -------    --------     -------      --------
Income (loss) before income taxes .....................    (13,864)   (2,217)    (18,358)     15,437       (19,002)
(Benefit) provision for income taxes ..................         71      (154)         (1)         --           (84)
                                                          --------   -------    --------     -------      --------
Net income (loss) from continuing operations...........    (13,935)   (2,063)    (18,357)     15,437       (18,918)
Discontinued operations, net of tax ...................        509        52          --          --           561
                                                          --------   -------    --------     -------      --------
Net income (loss) .....................................    (13,426)   (2,011)    (18,357)     15,437       (18,357)
Preferred stock dividend ..............................         --        --       1,145          --         1,145
                                                          --------   -------    --------     -------      --------
Net income (loss) applicable to common stockholders ...   $(13,426)  $(2,011)   $(19,502)    $15,437      $(19,502)
                                                          ========   =======    ========     =======      ========
</TABLE>

<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED SEPTEMBER 30, 2004
                                                          ----------------------------------------------------------
                                                           FEDDERS
                                                            NORTH     OTHER    CORPORATE   ELIMINATING     FEDDERS
                                                           AMERICA   FEDDERS     PARENT      ENTRIES     CORPORATION
                                                          --------   -------   ---------   -----------   -----------
<S>                                                       <C>        <C>       <C>         <C>           <C>
Net sales .............................................   $47,876    $33,058    $     --    $(14,650)     $ 66,284
Cost of sales .........................................    44,574     29,885          --     (14,650)       59,809
Selling, general and administrative expense ...........     9,720      5,261       2,355          --        17,336
                                                          -------    -------    --------    --------      --------
Operating income (loss) ...............................    (6,418)    (2,088)     (2,355)         --       (10,861)
Partners' net interest in joint venture results .......       (19)       505          --          --           486
Equity income in investment ...........................        --         --      (8,553)      8,553            --
Interest expense, net .................................     4,145        557          52          --         4,754
Other income (expense) ................................       100        117           4          --           221
                                                          -------    -------    --------    --------      --------
Income (loss) before income taxes .....................    10,482)    (2,023)    (10,956)      8,553       (14,908)
(Benefit) provision for income taxes ..................    (3,418)      (260)     (1,218)         --        (4,896)
                                                          -------    -------    --------    --------      --------
Net income (loss) from continuing operations...........    (7,064)    (1,763)     (9,738)      8,553       (10,012)
Discontinued operations, net of tax ...................       267          7          --          --           274
                                                          -------    -------    --------    --------      --------
Net income (loss) .....................................    (6,797)    (1,756)     (9,738)      8,553        (9,738)
Preferred stock dividend ..............................        --         --       1,005          --         1,005
                                                          -------    -------    --------    --------      --------
Net income (loss) applicable to common stockholders ...   $(6,797)   $(1,756)   $(10,743)   $  8,553      $(10,743)
                                                          =======    =======    ========    --------      ========
</TABLE>


                                       14

<PAGE>

                               FEDDERS CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                     NINE MONTHS ENDED SEPTEMBER 30, 2005
                                                          ----------------------------------------------------------
                                                           FEDDERS
                                                            NORTH      OTHER    CORPORATE   ELIMINATING    FEDDERS
                                                           AMERICA    FEDDERS     PARENT      ENTRIES    CORPORATION
                                                          --------   --------   ---------   -----------  -----------
<S>                                                       <C>        <C>        <C>         <C>          <C>
Net sales .............................................   $220,071   $128,362    $     --     $(89,693)   $258,740
Cost of sales .........................................    190,109    113,699          --      (89,693)    214,115
Selling, general and administrative expense ...........     37,235     13,787       4,294           --      55,316
Asset impairment charges ..............................      2,732         --          --           --       2,732
                                                          --------   --------    --------     --------    --------
Operating income (loss) ...............................    (10,005)       876      (4,294)          --     (13,423)
Partners' net interest in joint venture results .......       (292)     1,136          --           --         844
Equity income in investment ...........................         --         --     (23,422)      23,422          --
Interest expense (income), net ........................     14,799      1,710          29           --      16,538
Other (income) expense ................................       (745)     1,003          97           --         355
                                                          --------   --------    --------     --------    --------
Income (loss) before income taxes .....................    (24,351)      (701)    (27,842)      23,422     (29,472)
(Benefit) provision for income taxes ..................        127        137          (1)          --         263
                                                          --------   --------    --------     --------    --------
Net income (loss) from continuing operations...........    (24,478)      (838)    (27,841)      23,422     (29,735)
Discontinued operations, net of tax ...................      1,706        188          --           --       1,894
                                                          --------   --------    --------     --------    --------
Net income (loss) .....................................    (22,772)      (650)    (27,841)      23,422     (27,841)
Preferred stock dividend ..............................         --         --       3,294           --       3,294
                                                          --------   --------    --------     --------    --------
Net income (loss) applicable to common stockholders ...   $(22,772)  $   (650)   $(31,135)    $ 23,422    $(31,135)
                                                          ========   ========    ========     ========    ========
</TABLE>

<TABLE>
<CAPTION>
                                                                     NINE MONTHS ENDED SEPTEMBER 30, 2004
                                                          ----------------------------------------------------------
                                                           FEDDERS
                                                            NORTH      OTHER    CORPORATE   ELIMINATING    FEDDERS
                                                           AMERICA    FEDDERS     PARENT      ENTRIES    CORPORATION
                                                          --------   --------   ---------   -----------  -----------
<S>                                                       <C>        <C>        <C>         <C>          <C>
Net sales .............................................   $302,405   $199,524    $     --    $(145,474)   $356,455
Cost of sales .........................................    263,631    183,605          --     (145,474)    301,762
Selling, general and administrative expense ...........     37,163     16,092        (425)          --      52,830
Restructuring credit ..................................       (709)        --          --           --        (709)
                                                          --------   --------    --------    ---------    --------
Operating income (loss) ...............................      2,320       (173)        425           --       2,572
Partners' net interest in joint venture results .......       (522)       410          --           --        (112)
Equity income in investment ...........................         --         --     (13,199)      13,199          --
Interest expense, net .................................     13,081      1,630         183           --      14,894
Debt extinguishment ...................................      8,075         --          --           --       8,075
Other income (expense) ................................        250        229           4           --         483
                                                          --------   --------    --------    ---------    --------
Income (loss) before income taxes .....................    (19,108)    (1,164)    (12,953)      13,199     (20,026)
(Benefit) provision for income taxes ..................     (6,241)        16        (328)          --      (6,553)
                                                          --------   --------    --------    ---------    --------
Net income (loss) from continuing operations...........    (12,867)    (1,180)    (12,625)      13,199     (13,473)
Discontinued operations, net of tax ...................        763         85          --           --         848
                                                          --------   --------    --------    ---------    --------
Net income (loss) .....................................    (12,104)    (1,095)    (12,625)      13,199     (12,625)
Preferred stock dividend ..............................         --         --       3,015           --       3,015
                                                          --------   --------    --------    ---------    --------
Net income (loss) applicable to common stockholders ...   $(12,104)  $ (1,095)   $(15,640)   $  13,199    $(15,640)
                                                          ========   ========    ========    =========    ========
</TABLE>


                                       15

<PAGE>

                               FEDDERS CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                     CONDENSED CONSOLIDATING BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                            SEPTEMBER 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 .......................   $  7,753   $  6,543   $  2,650     $     --      $ 16,946
   Net accounts receivable .........................     41,162     12,156         --           --        53,318
   Net inventories .................................     67,610     16,342         --           --        83,952
   Other current assets ............................      3,125      6,420     13,436       (5,340)       17,641
   Current assets of discontinued operations .......      3,140      1,018         --           --         4,158
                                                       --------   --------   --------     --------      --------
Total current assets ...............................    122,790     42,479     16,086       (5,340)      176,015
Investments in subsidiaries ........................         --         --    (58,465)      58,465            --
Net property, plant and equipment ..................     36,386     17,218        187           --        53,791
Goodwill ...........................................     72,135     15,306         --           --        87,441
Other assets .......................................     14,956      4,414     43,550           --        62,920
Other assets of discontinued operations ............      2,511        577         --           --         3,088
                                                       --------   --------   --------     --------      --------
Total assets .......................................   $248,778   $ 79,994   $  1,358     $ 53,125      $383,255
                                                       ========   ========   ========     ========      ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Short-term notes ................................   $ 42,917   $ 23,521   $     --     $     --      $ 66,438
   Current portion of long-term debt ...............      1,290        118         --           --         1,408
   Accounts and income taxes payable ...............     18,319     27,058        980           --        46,357
   Accrued expenses ................................     25,114      8,483      7,556           --        41,153
   Current liabilities of discontinued operations...        995        201         --           --         1,196
                                                       --------   --------   --------     --------      --------
Total current liabilities ..........................     88,635     59,381      8,536           --       156,552
Long-term debt .....................................    158,168      1,349         --           --       159,517
Other long-term liabilities ........................         (8)     9,924     28,408       (5,340)       32,984
Long-term liabilities of discontinued operations ...        527        658         --           --         1,185
Net due to (from) affiliates .......................     43,401     25,202    (68,603)          --            --
Stockholders' equity:
   Preferred Stock .................................          5         --         21           (5)           21
   Common and Class B Stock ........................         --         --        392           --           392
   Additional paid-in capital ......................     20,293     25,542    115,297      (45,835)      115,297
   Retained earnings (deficit) .....................    (61,913)   (41,211)   (41,995)     103,124       (41,995)
   Deferred compensation and treasury stock ........         --         --    (39,517)          --       (39,517)
   Accumulated other comprehensive loss ............       (330)      (851)    (1,181)       1,181        (1,181)
                                                       --------   --------   --------     --------      --------
Total stockholders' equity .........................    (41,945)   (16,520)    33,017       58,465        33,017
                                                       --------   --------   --------     --------      --------
Total liabilities and stockholders' equity .........   $248,778   $ 79,994   $  1,358     $ 53,125      $383,255
                                                       ========   ========   ========     ========      ========
</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 operations .......      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>
                                                                            SEPTEMBER 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 .......................   $  8,447   $  7,839   $  7,627     $     --      $ 23,913
   Net accounts receivable .........................     32,863     15,428         --           --        48,291
   Net inventories .................................     98,133     28,063         --           --       126,196
   Assets held for sale ............................      8,249         --         --           --         8,249
   Other current assets ............................      5,694      7,775     15,184           --        28,653
   Current assets of discontinued operations .......      3,506        702         --           --         4,208
                                                       --------   --------   --------     --------      --------
Total current assets ...............................    156,892     59,807     22,811           --       239,510
Investments in subsidiaries ........................         --         --    (24,064)      24,064            --
Net property, plant and equipment ..................     32,696     14,860        424           --        47,980
Goodwill ...........................................     62,839     15,074         --           --        77,913
Other intangible assets ............................        255         --         --           --           255
Other assets .......................................     10,986      2,091     40,155       (7,023)       46,209
Other assets of discontinued operations ............      2,775        611         --           --         3,386
                                                       --------   --------   --------     --------      --------
Total assets .......................................   $266,443   $ 92,443   $ 39,326     $ 17,041      $415,253
                                                       ========   ========   ========     ========      ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Short-term notes ................................   $     --   $ 31,632   $     --     $     --      $ 31,632
   Current portion of long-term debt ...............      1,171        119         --           --         1,290
   Accounts and income taxes payable ...............     20,254     41,927      2,329           --        64,510
   Accrued expenses ................................     31,228      8,979      7,431           --        47,638
   Current liabilities of discontinued operations ..      1,002        148         --           --         1,150
                                                       --------   --------   --------     --------      --------
Total current liabilities ..........................     53,655     82,805      9,760           --       146,220
Long-term debt .....................................    156,712      1,459         --           --       158,171
Other long-term liabilities ........................        139     11,868     31,157       (7,023)       36,141
Long-term liabilities of discontinued operations ...      1,542         --         --           --         1,542
Net due to (from) affiliates .......................     71,270      3,500    (74,770)          --            --
Stockholders' equity:
   Preferred Stock .................................         --         --         19           --            19
   Common and Class B Stock ........................          5         --        390           (5)          390
   Additional paid-in capital ......................     20,292     25,542    109,038      (45,834)      109,038
   Retained earnings ...............................    (36,265)   (31,937)     5,209       68,202         5,209
   Deferred compensation and treasury stock ........         --         --    (39,780)          --       (39,780)
   Accumulated other comprehensive loss ............       (907)      (794)    (1,697)       1,701        (1,697)
                                                       --------   --------   --------     --------      --------
Total stockholders' equity .........................    (16,875)    (7,189)    73,179       24,064        73,179
                                                       --------   --------   --------     --------      --------
Total liabilities and stockholders' equity .........   $266,443   $ 92,443   $ 39,326     $ 17,041      $415,253
                                                       ========   ========   ========     ========      ========
</TABLE>


                                       18

<PAGE>

                               FEDDERS CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                   FOR THE NINE MONTHS ENDED SEPTEMBER 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 ....   $  2,958   $  6,374    $(3,663)       $--        $  5,669
                                                           --------   --------    -------        ---        --------
Net additions to property, plant and equipment .........       (828)    (3,133)        --         --          (3,961)
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 ....    (10,243)    (3,133)       116         --         (13,260)
                                                           --------   --------    -------        ---        --------
Proceeds (repayments) of short-term notes ..............     12,822     (5,720)        --         --           7,102
Net repayments of long-term debt .......................     (1,286)       (84)        --         --          (1,370)
Cash dividends .........................................      6,305     (6,305)    (3,978)        --          (3,978)
Change in net due to (from) affiliate ..................     (5,581)       882      4,699         --              --
                                                           --------   --------    -------        ---        --------
Net cash provided by (used in) financing activities ....     12,260    (11,227)       721         --           1,754
                                                           --------   --------    -------        ---        --------
Net (decrease) increase in cash and cash equivalents ...      4,975     (7,986)    (2,826)        --          (5,837)
Cash and cash equivalents at beginning of period .......      2,778     14,529      5,476         --          22,783
                                                           --------   --------    -------        ---        --------
Cash and cash equivalents at end of period .............   $  7,753   $  6,543    $ 2,650        $--        $ 16,946
                                                           ========   ========    =======        ===        ========
</TABLE>

<TABLE>
<CAPTION>
                                                                   FOR THE NINE MONTHS ENDED SEPTEMBER 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 ....   $  (1,703)  $ 2,145    $(5,388)       $--        $  (4,946)
                                                           ---------   -------    -------        ---        ---------
Net additions to property, plant and equipment .........      (1,542)   (2,547)       (50)        --           (4,139)
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 ....        (299)   (3,171)       (50)        --           (3,520)
                                                           ---------   -------    -------        ---        ---------
Proceeds from short-term notes .........................          --     1,186         --         --            1,186
Net repayments of long-term debt .......................      (1,359)   (1,820)        --         --           (3,179)
Proceeds from stock options exercised ..................          --        --        110         --              110
Cash dividends .........................................          --        --     (5,769)        --           (5,769)
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 .......................     (10,356)       --         --         --          (10,356)
Costs of stock offerings ...............................          --        --       (224)        --             (224)
Proceeds from stock rights offering ....................          --        --     28,323         --           28,323
Change in net due to (from) affiliate ..................       8,262     1,112     (9,374)        --               --
                                                           ---------   -------    -------        ---        ---------
Net cash provided by (used in) financing activities ....      (3,208)      478     13,066         --           10,336
                                                           ---------   -------    -------        ---        ---------
Net (decrease) increase in cash and cash equivalents ...      (5,210)     (548)     7,628         --            1,870
Cash and cash equivalents at beginning of period .......      13,657     8,386         --         --           22,043
                                                           ---------   -------    -------        ---        ---------
Cash and cash equivalents at end of period .............   $   8,447   $ 7,838    $ 7,628        $--        $  23,913
                                                           =========   =======    =======        ===        =========
</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. Overhead charges to FNA were
     approximately $2.0 million and $2.1 million for the three months ended
     September 30, 2005 and 2004, respectively. For the nine months ended
     September 30, 2005 and 2004, overhead charges to FNA amounted to
     approximately $9.1 million and $12.5 million, 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 September
     30, 2005 and 2004 amounted to approximately $2.3 million and $1.5 million,
     respectively. Capital expenditures of FNA amounted to $0.2 million and $0.3
     million in the three months ended September 30, 2005 and 2004,
     respectively.

     FNA's depreciation and amortization for the nine months ended September 30,
     2005 and 2004 amounted to approximately $5.2 million and $4.7 million,
     respectively. Capital expenditures excluding acquisitions of FNA amounted
     to $0.8 million and $1.5 million in the nine months ended September 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 home. See Note 5.

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.


                                       20

<PAGE>

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 (1) 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 nine months ended September
30, 2005 and 2004 are unaudited. Operating results for Melcor Corporation are
disclosed as discontinued operations.

OPERATING RESULTS AS A PERCENT OF NET SALES FROM CONTINUING OPERATIONS

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED    NINE MONTHS ENDED
                                                     SEPTEMBER 30,        SEPTEMBER 30,
                                                  ------------------   -------------------
                                                     2005      2004      2005       2004
                                                  --------   -------   --------   --------
<S>                                               <C>        <C>       <C>        <C>
Net sales .....................................    $63,110   $66,284   $258,740   $356,455

Gross profit ..................................       12.5%      9.8%      17.2%      15.3%
Selling, general and administrative expense ...       28.5      26.2       21.4       14.8
Operating income (loss) .......................      (20.3)    (16.4)      (5.2)       0.7
Net interest expense ..........................        8.7       7.2        6.4        4.2
Pre-tax income (loss) .........................      (30.1)    (22.5)     (11.4)      (5.6)
</TABLE>

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

     Net sales for the three-month period ended September 30, 2005 decreased by
4.8% to $63.1 million compared with $66.3 million in the prior-year period. Net
sales within the HVACR segment decreased by 10.4% during the period primarily
because of increased inventory levels at customers of room air conditioners in
key North American markets, caused by cooler-than-normal summer weather in 2004.
Warm summer weather during 2005 significantly reduced inventory levels in
distribution channels but did not result in additional sales to retail
customers. This decrease in room air conditioner sales was partly offset by
increased sales of commercial air conditioners from the Addison acquisition and
to a lesser extent from the Islandaire acquisition. Sales in the


                                       21

<PAGE>

Engineered Products segment increased by 44.9% due primarily to industrial air
cleaning projects in Asia.

     Gross profit grew to $7.9 million, or 12.5% of net sales, in the
three-month period ended September 30, 2005, compared with $6.5 million, or 9.8%
of net sales, in the prior-year period. Gross profit increased from a more
favorable product mix and price increases that offset both material cost
increases realized in 2004 and reduced VAT rebates on exports from China in
2004.

     Selling, general and administrative expenses ("SG&A") for the three-month
period ended September 30, 2005 were $18.0 million, or 28.5% of net sales,
compared with $17.3 million, or 26.2% of net sales, in the prior-year period.
SG&A expenses were higher than the prior year as a result of $2.9 million in
SG&A expenses from the acquired operations and $1.0 million in severance costs
incurred to make operations more efficient, partly offset by reduced SG&A
expenses in the Company's other HVACR and Engineered Products businesses.

     During the third quarter, the Company recognized $2.7 million in asset
impairment charges from writing off fixed assets that became idle from the
decision to outsource refurbishing of returned product in the HVACR segment.

     The operating loss for the three months ended September 30, 2005 was $12.8
million, or 20.3% of net sales, compared with an operating loss of $10.9
million, or 16.4% of net sales, in the prior-year period. The improvement in
gross profit was more than offset by the non-cash asset impairment charge.

     Net interest expense increased in the three-month period ended September
30, 2005 to $5.5 million, or 8.7% of net sales, compared with $4.8 million, or
7.2% of net sales, in the prior-year period. Net interest expense was higher
than prior year due to higher interest rates and more short-term borrowings
during the current period.

     Based on SFAS No. 109, "Accounting for Income Taxes", the Company recorded
a valuation allowance against deferred tax assets generated from the 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 three-month period ended
September 30, 2005 was $0.6 million compared with $0.3 million in the prior-year
period.

     The net loss applicable to common stockholders in the three-month period
ended September 30, 2005 was $19.5 million, or $0.63 loss per diluted common
share. The net loss applicable to common stockholders in the prior-year period
was $10.7 million, or $0.35 loss per diluted common share.

NINE MONTHS ENDED SEPTEMBER 30, 2005 VERSUS THE NINE MONTHS ENDED SEPTEMBER 30,
2004

     Net sales for the nine-month period ended September 30, 2005 decreased by
27.4% to $ 258.7 million compared with $356.5 million in the prior-year period.
Net sales within the HVACR reporting segment decreased by 30.2% during the
period due primarily to increased inventory levels at customers of room air
conditioners in key North American markets, caused by cooler than normal summer
weather in 2004. Warm summer weather during 2005 significantly reduced inventory
levels in distribution channels but did not result in additional sales to
customers. This decrease in room air conditioner sales was partly offset by
increased sales of commercial air conditioners resulting from the Addison
acquisition and, to a lesser extent, the Islandaire acquisition. Sales in the
Engineered Products reporting segment increased by 17.0% due primarily to
industrial air cleaning projects in Asia.

     Gross profit declined to $44.6 million in the nine-month period ended
September 30, 2005 compared with $54.7 million in the prior-year period. As a
percent of net sales, gross profit increased to 17.2% during the period versus
15.3% in the prior-year period. Gross profit dollars declined as a result of
lower sales volume. During the nine months ended September 30, 2005, the Company
manufactured fewer room air conditioners than in the prior year to reduce
inventory levels. Reduced production resulted in lower absorption of fixed
overhead. Despite increased costs related to overhead absorption and
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 pricing
that offset both material cost increases realized in 2004 and reduced VAT
rebates on exports from China in 2004.

     SG&A for the nine-month period ended September 30, 2005 were $55.3 million,
or 21.4% of net sales, compared with $52.8 million, or 14.8% of net sales in the
prior-year period. SG&A expenses were higher than the prior year as a result of
$7.5 million SG&A expenses of the acquired operations and $1.1 million in
severance costs incurred to make operations more efficient, offset


                                       22

<PAGE>

partly by reductions in SG&A expenses in the Company's other HVACR and
Engineered Products businesses.

     During the third quarter, the Company recognized $2.7 million in asset
impairment charges from writing off fixed assets that became idle from
discontinuing refurbishing returned product.

     Operating loss for the nine months ended September 30, 2005 was $13.4
million, or 5.2% of net sales, compared with operating income of $2.6 million,
or 0.7% 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 nine-month period ended September 30,
2005 to $16.5 million, or 6.4% of net sales, compared with $14.9 million, or
4.2% of net sales, in the prior-year period. Net interest expense was higher
than prior year due to higher interest rates and more 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 the 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.

     The Company recorded a loss on debt extinguishment of $8.1 million during
the prior-year period to account for the early retirement of the Company's
Senior Subordinated Notes due August, 2007 and 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 the unamortized
debt discount.

     Net income from discontinued operations in the nine-month period ended
September 30, 2005 was $1.9 million compared with $0.8 million in the prior-year
period.

     Net loss applicable to common stockholders in the nine-month period ended
September 30, 2005 was $31.1 million, or $1.02 loss per diluted common share.
Net loss applicable to common stockholders in the prior-year period was $15.6
million, or $0.51 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 $16.9 million at September 30, 2005 compared with $23.9 million a
year earlier. Short-term borrowings under the Company's working capital credit
facilities amounted to $66.4 million at September 30, 2005 compared with $31.6
million a year earlier.

     The Company generated $5.7 million in cash from operating activities in the
first nine months of 2005, primarily as a result of a $50.3 million decrease in
inventories from December, 2004. The cash benefit from inventories was partly
offset by a $22.7 million increase in receivables, a net loss of $27.8 million,
and a $4.7 million reduction in payables. As was previously discussed, inventory
levels were high at the end of 2004 due to the unusually cool summer months
which dampened sales that year. The unfavorable sales impact continued in 2005
due to product still in the distribution pipeline. In 2005, management focused
on reducing inventory levels and balanced production with inventory targets. In
2004, the Company used $4.9 million in cash from operating activities over the
nine-month period of 2004.

     Net cash used in investing activities for the nine-month period ended
September 30, 2005 amounted to $13.3 million, of which $9.4 million was for the
Islandaire acquisition and $4.0 million for capital expenditures, primarily for
a research and design center in Qingpu, China. In 2004, net cash used in
investing activities was $3.5 million, primarily for capital expenditures to
support expansion of production capacity in China which was partially offset by
$1.6 million of proceeds from the sale of a building and equipment. The Company
also issued 257,484 shares of Preferred Stock and 100,000 shares of Common Stock
for the Islandaire acquisition.

     Net cash provided by financing activities in the nine-month period ended
September 30, 2005 was $1.8 million, consisting primarily of $7.1 million in
short-term borrowings which were used to support operating needs, partly offset
by $4.0 million of cash dividends and $1.4 million of long-term debt repayments
Net cash provided by financing activities in the prior-year period was $10.3
million and consisted primarily of $28.3 million of proceeds from stock rights
exercised and $1.2 million in short-term borrowings to support production in
Asia, partly offset by $5.8 million of cash dividends, $10.4 million of call
premium and deferred financing charges, and the repayment of $3.2 million of
long-term debt.

     The Company declared dividends of $0.06 on each share outstanding of Common
and Class B Stock in the nine months ended September 30, 2005. In the prior-year
nine-month period, the Company declared dividends of $0.09 on each share
outstanding of Common and Class B Stock. The Company declared dividends of
$1.076 and $1.614 on each share outstanding of Preferred Stock in


                                       23

<PAGE>
 the nine months ended September 30, 2005 and 2004, respectively. The Company's
First Supplemental Indenture (note 13) executed in September, 2005 limits 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 September 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 in 2005, and the
Company could not engage a new independent registered public accounting firm
until after the filing of the Form 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.

     In 2004, the Company incurred operating losses and used cash for operations
as well as for investments that required greater short-term borrowing. To reduce
costs and enhance liquidity in 2005, management identified up to $20 million in
annual savings from consolidating operations from Longview, Texas into its
Orlando, Florida operation; consolidating operations from Albuquerque, New
Mexico into its Sanford, North Carolina operations; and consolidating operations
from its plant in Nanjing, China into Company facilities in Shanghai and Ningbo,
China. A significant portion of these actions will be completed in 2005. On
October 25, 2005, the Company sold Melcor Corporation, its thermal management
subsidiary, for $17.4 million. The Company has also offered for sale its
facility and 182 acres of development property in Walkersville, Maryland.
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 February, 2006 expiration of its current revolving credit
facility with Wachovia Bank, NA.

     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 the Company's 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 September 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 controls, and the lack of a complete entity-wide risk
     assessment. This deficient control environment also contributed to the


                                       25

<PAGE>

     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 its Forms 10-Q for 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>
  18.1    Letter re change in accounting principles
  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