<PAGE>

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

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

For the quarterly period ended June 30, 2006

[ ]  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 [X] No [ ]

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

                                 Yes [X] No [ ]

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 28,777,871 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 July 31, 2006.

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


                                        1

<PAGE>

                               FEDDERS CORPORATION

                                      INDEX

<TABLE>
<CAPTION>
                                                                           PAGE
                                                                          NUMBER
                                                                          ------
<S>                                                                       <C>
PART I     FINANCIAL INFORMATION                                              3
ITEM 1.    FINANCIAL STATEMENTS                                               3
           CONSOLIDATED STATEMENTS OF OPERATIONS
           FOR THE THREE MONTHS ENDED JUNE 30, 2006 AND 2005 AND FOR
           THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005                        3
           CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2006, DECEMBER
           31, 2005 AND JUNE 30, 2005                                         4
           CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS
           ENDED JUNE 30, 2006 AND 2005                                       5
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   6-20
ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
           OPERATIONS AND FINANCIAL CONDITION                              21-25
ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK        26
ITEM 4.    CONTROLS AND PROCEDURES                                         26-28

PART II    OTHER INFORMATION                                                 29
ITEM 1.    LEGAL PROCEEDINGS                                                 29
ITEM 1A.   RISK FACTORS                                                      29
ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS                         29
ITEM 3.    DEFAULTS ON SENIOR SECURITIES                                     29
ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS               29
ITEM 5.    OTHER INFORMATION                                                 29
ITEM 6.    EXHIBITS                                                          30
           SIGNATURE                                                         31
           CERTIFICATIONS                                                  32-35
</TABLE>


                                        2
<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                               FEDDERS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                  THREE MONTHS ENDED     SIX MONTHS ENDED
                                                                                       JUNE 30,              JUNE 30,
                                                                                 -------------------   -------------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)                                      2006       2005       2006       2005
                                                                                 --------   --------   --------   --------
<S>                                                                              <C>        <C>        <C>        <C>
Net sales ....................................................................   $ 95,567   $122,732   $195,268   $195,630
   Cost of sales .............................................................     81,878     99,632    168,884    158,918
                                                                                 --------   --------   --------   --------
Gross profit .................................................................     13,689     23,100     26,384     36,712
   Selling, general and administrative expense ...............................     16,509     19,410     31,549     36,979
   Asset impairment, employee severance and other restructuring
      charges/(credits) ......................................................        611        197        611        372
                                                                                 --------   --------   --------   --------
Total operating expenses .....................................................     17,120     19,607     32,160     37,351
                                                                                 --------   --------   --------   --------
Operating income/(loss) ......................................................     (3,431)     3,493     (5,776)      (639)
Partners' net interest in joint venture results ..............................        215        314         68        693
Interest expense, net ........................................................      5,340      5,688     10,813     11,046
Other (income)/expense .......................................................         30         85        589       (522)
                                                                                 --------   --------   --------   --------
Income/(loss) from continuing operations before income taxes .................     (8,586)    (1,966)   (17,110)   (10,470)
Provision/(benefit) for income taxes .........................................        315        119        592        347
                                                                                 --------   --------   --------   --------
Income/(loss) from continuing operations .....................................     (8,901)    (2,085)   (17,702)   (10,817)
Income/(loss) from discontinued operations, net of 2005 tax of $0 and $14 ....          -        698          -      1,333
                                                                                 --------   --------   --------   --------
Net income/(loss) ............................................................     (8,901)    (1,387)   (17,702)    (9,484)
Preferred stock dividends ....................................................      1,144      1,144      2,287      2,149
                                                                                 --------   --------   --------   --------
Net income/(loss) applicable to common stockholders ..........................   $(10,045)  $ (2,531)  $(19,989)  $(11,633)
                                                                                 ========   ========   ========   ========

Income/(loss) per common share:
   Basic net income/(loss) per common share from continuing operations .......   $  (0.32)  $  (0.10)  $  (0.65)  $  (0.42)
                                                                                 ========   ========   ========   ========
   Diluted net income/(loss) per common share from continuing operations .....      (0.32)     (0.10)     (0.65)     (0.42)
                                                                                 ========   ========   ========   ========
   Basic net income/(loss) per common share from discontinued operations .....   $      -   $   0.02   $      -   $   0.04
                                                                                 ========   ========   ========   ========
   Diluted net income/(loss) per common share from discontinued operations ...          -       0.02          -       0.04
                                                                                 ========   ========   ========   ========
  Basic net income/(loss) per common share ...................................   $  (0.32)  $  (0.08)  $  (0.65)  $  (0.38)
                                                                                 ========   ========   ========   ========
  Diluted net income/(loss) per common share .................................      (0.32)     (0.08)     (0.65)     (0.38)
                                                                                 ========   ========   ========   ========

Weighted average shares:
   Basic......................................................................     30,927     30,603     30,879     30,568
   Diluted....................................................................     30,927     30,603     30,879     30,568

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

See accompanying notes to the consolidated financial statements


                                        3

<PAGE>

                               FEDDERS CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                   JUNE 30,    DECEMBER 31,     JUNE 30,
(AMOUNTS IN THOUSANDS, EXCEPT PAR VALUE DATA)                                        2006          2005           2005
                                                                                 -----------   ------------   -----------
                                                                                 (Unaudited)                  (Unaudited)
<S>                                                                              <C>           <C>            <C>
                                    ASSETS

Current assets:
   Cash and cash equivalents .................................................    $ 11,754       $ 14,417       $ 17,773
   Accounts receivable (net of allowance of $4,148, $3,928 and $4,452
      at June 30, 2006, December 31, 2005 and June 30, 2005, respectively) ...      57,175         42,157         88,413
   Inventories:
      Finished goods .........................................................      40,071         52,395         77,228
      Work-in-process ........................................................       2,407          2,694          2,799
      Raw materials and supplies .............................................      19,253         19,224         23,713
                                                                                  --------       --------       --------
   Net inventories ...........................................................      61,731         74,313        103,740
   Deferred income taxes .....................................................       3,882          3,882          8,830
   Assets held for sale ......................................................           -            843              -
   Other current assets ......................................................       8,136          6,333         10,384
   Current assets of discontinued operations .................................           -              -          4,202
                                                                                  --------       --------       --------
Total current assets .........................................................     142,678        141,945        233,342

Net property, plant and equipment:
   Land and improvements .....................................................       4,900          4,900          5,186
   Buildings and leasehold improvements ......................................      35,576         35,952         40,783
   Machinery and equipment ...................................................      73,248         71,083        106,673
                                                                                  --------       --------       --------
   Gross property, plant and equipment .......................................     113,724        111,935        152,642
   Less accumulated depreciation .............................................      71,076         67,392         94,716
                                                                                  --------       --------       --------
Net property, plant and equipment ............................................      42,648         44,543         57,926
Deferred income taxes ........................................................      21,629         21,629         22,263
Goodwill .....................................................................      87,721         87,725         87,442
Other intangible assets ......................................................       4,236          4,726          4,737
Other assets .................................................................      31,156         30,486         36,280
Other assets of discontinued operations ......................................           -              -          3,188
                                                                                  --------       --------       --------
Total assets .................................................................    $330,068       $331,054       $445,178
                                                                                  ========       ========       ========

                LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)

Current liabilities:
   Short-term notes ..........................................................    $ 45,774       $ 56,740       $ 90,492
   Current portion of long-term debt .........................................       2,297          2,470          1,465
   Accounts payable ..........................................................      65,676         43,961         55,527
   Income taxes payable ......................................................       1,679          1,370          1,283
   Accrued expenses ..........................................................      44,473         39,149         49,482
   Current liabilities of discontinued operations ............................           -              -          1,183
                                                                                  --------       --------       --------
Total current liabilities ....................................................     159,899        143,690        199,432

Long-term debt ...............................................................     157,872        158,113        159,823
Other long-term liabilities ..................................................      24,477         24,952         29,127
Long-term liabilities of discontinued operations .............................           -              -          1,420
Partners' net interest in joint venture ......................................       4,862          4,361          4,536
                                                                                  --------       --------       --------
Total liabilities ............................................................     347,110        331,116        394,338

Stockholders' equity/(deficit):
Preferred Stock, $0.01 par value, 15,000 shares authorized and 2,127
   shares issued .............................................................          21             21             21
Common Stock, $0.01 par value, 70,000 shares authorized, 37,298,
   36,816 and 36,628 issued at June 30, 2006, December 31, 2005 and
   June 30, 2005, respectively ...............................................         370            367            367
Class B Stock, $0.01 par value, 5,000 shares authorized and 2,492
   shares issued .............................................................          25             25             25
Additional paid-in capital ...................................................     115,424        115,523        115,297
Retained earnings/(deficit) ..................................................     (93,937)       (76,235)       (23,637)
Accumulated other comprehensive gain/(loss) ..................................         243            (92)        (1,650)
Treasury stock, at cost, 8,521 shares of Common Stock at June 30,
   2006, December 31, 2005 and June 30, 2005 .................................     (39,188)       (39,188)       (39,188)
Deferred compensation ........................................................           -           (483)          (395)
                                                                                  --------       --------       --------
Total stockholders' equity/(deficit) .........................................     (17,042)           (62)        50,840
                                                                                  --------       --------       --------
Total liabilities and stockholders' equity/(deficit) .........................    $330,068       $331,054       $445,178
                                                                                  ========       ========       ========
</TABLE>

See accompanying notes to the consolidated financial statements


                                       4
<PAGE>

                               FEDDERS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                     SIX MONTHS ENDED
                                                                         JUNE 30,
                                                                   -------------------
(AMOUNTS IN THOUSANDS)                                               2006       2005
                                                                   --------   --------
                                                                       (UNAUDITED)
<S>                                                                <C>        <C>
Cash flows from operating activities:
Net loss .......................................................   $(17,702)  $ (9,484)
Adjustments to reconcile net loss to net cash used in
   operating activities:
   Depreciation and amortization ...............................      3,256      5,145
   Deferred income taxes .......................................         --         (3)
   Amortization of deferred financing costs ....................        445        424
   (Gain)/loss on asset disposal ...............................        (35)       (55)
   Partners' net interest in joint venture results .............        147       (540)
Changes in operating assets and liabilities, net of acquisition:
   Accounts receivable .........................................    (15,018)   (58,043)
   Inventories .................................................     12,582     30,647
   Other current assets ........................................     (1,803)     2,312
   Other assets ................................................         98        404
   Accounts payable ............................................     21,715      5,775
   Accrued expenses and income taxes payable ...................      5,637      6,025
   Other long-term liabilities .................................       (475)      (628)
   Other-net ...................................................        366        322
                                                                   --------   --------
Net cash provided by/(used in) operating activities ............      9,213    (17,699)
                                                                   --------   --------
Cash flows from investing activities:
   Additions to property, plant, and equipment .................     (1,598)    (3,315)
   Proceeds from disposal of property, plant and equipment .....        878        127
   Acquisition of business, net of cash acquired (Note 5) ......         --     (9,426)
                                                                   --------   --------
Net cash provided by/(used in) investing activities ............       (720)   (12,614)
                                                                   --------   --------
Cash flows from financing activities:
   Proceeds/(repayments) from short-term notes .................    (10,966)    31,156
   Repayments of long-term debt ................................       (583)      (901)
   Cash dividends ..............................................         --     (3,978)
                                                                   --------   --------
Net cash provided by/(used in) financing activities ............    (11,549)    26,277
                                                                   --------   --------
Effect of exchange rate changes ................................        393       (974)
                                                                   --------   --------
Net (decrease)/increase in cash and cash equivalents ...........     (2,663)    (5,010)
Cash and cash equivalents at beginning of period ...............     14,417     22,783
                                                                   --------   --------
Cash and cash equivalents at end of period .....................   $ 11,754   $ 17,773
                                                                   ========   ========
Supplemental disclosure:
   Interest paid ...............................................   $ 11,004   $ 10,172
   Income taxes paid ...........................................        294        248
</TABLE>

In accordance with Statement of Financial Accounting Standards No. 123 (revised
2004), "Share-Based Payment", effective January 1, 2006, the Company reversed
the unearned compensation balance related to restricted stock, included in
deferred compensation in the December 31, 2005 consolidated balance sheet,
netting the balance against additional paid-in capital. In February 2006, the
Company granted 100,000 shares of restricted stock with a value of $139. In June
2006, the Company granted 300,000 shares of restricted stock with a value of
$783. (See Note 3)

In June 2006, the Company granted Directors 82,764 shares of common stock with a
value of $216.

See accompanying notes to the consolidated financial statements


                                        5

<PAGE>

                               FEDDERS CORPORATION

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

1.   BASIS OF PRESENTATION

     The financial 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, 2005. Certain reclassifications may have been made in prior-year
amounts to conform to the current-year presentation.

     On January 25, 2005, the Company's Board of Directors approved the sale of
all of the capital stock of Melcor Corporation, its thermal management
subsidiary, which was not considered a core business unit. On October 25, 2005,
the Company sold Melcor to Laird Technologies, Inc. for $17,300 in cash (before
a $200 temporary holdback), which resulted in a pre-tax gain of $11,400. The
consolidated statements of operations, consolidated balance sheets, and notes to
the consolidated financial statements have been adjusted to reflect the accounts
of Melcor as discontinued operations. Melcor's revenues, which were reported in
the Engineered Products segment, were $6,644 for the first six months of 2005.
Discontinued operations do not include an allocation of interest expense.

     The Company's business is seasonal and, consequently, operating results for
the six-month period ending June 30, 2006 are not necessarily indicative of the
results that may be expected for the fiscal year ended December 31, 2006. The
Company is succeeding with its strategy to diversify sales and earnings to
become less dependent on the manufacture and sale of room air conditioners. The
demand for room air conditioners is highly seasonal in the North American
market.

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 average rate of exchange for the period.
Translation adjustments are reflected in other comprehensive loss as a separate
component of stockholders' equity.

<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED     SIX MONTHS ENDED
                                                                JUNE 30,              JUNE 30,
                                                           ------------------   -------------------
                                                             2006      2005       2006       2005
                                                           -------   --------   --------   --------
<S>                                                        <C>       <C>        <C>        <C>
Net income/(loss) ......................................   $(8,901)  $(1,387)   $(17,702)  $ (9,484)
Other comprehensive income/(loss):
Change in fair value of cash flow hedge income/(loss) ..       (58)        -         (58)         -
Foreign currency translation ...........................      (385)     (687)        393       (974)
                                                           -------   -------    --------   --------
Comprehensive income/(loss) ............................   $(9,344)  $(2,074)   $(17,367)  $(10,458)
                                                           =======   =======    ========   ========
</TABLE>

3.   STOCK COMPENSATION

     The Company adopted SFAS No. 123(R), "Share-Based Payment" as of January 1,
2006. This Statement replaced SFAS No. 123, "Accounting for Stock-Based
Compensation" and superseded Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25). SFAS No. 123(R) requires
the cost of employee services received in exchange for an award of equity
instruments to be based upon the grant-date fair value of the award. This cost
is to be recognized as expense over the period during which an employee is
required to provide services in exchange for the award (usually the vesting
period). SFAS No. 123(R) also requires that the additional tax benefits the
Company receives from stock-based compensation be recorded as cash inflows from
financing activities in the statement of cash flows. Prior to January 1, 2006,
the Company applied the provisions of APB 25 in accounting for awards made under
the Company's stock-based compensation plans.


                                        6

<PAGE>

     The Company adopted the provisions of SFAS No. 123(R) using the
modified-prospective transition method. Under this method, results from prior
periods have not been restated. During 2003, the Company ceased granting stock
options, and as a result, the effect of adopting SFAS No. 123(R) was not
material to the Company's results of operations, balance sheet, or cash flows
for the six months ended June 30, 2006, nor on a pro-forma basis for the six
months ended June 30, 2005.

     The Company grants restricted stock to certain key employees. The
restricted stock requires no payment from the recipient and compensation cost is
measured based on the market price on the grant date and is recorded over the
vesting period. Restricted stock does not have an option for cash payment.

     The following table summarizes stock-based compensation expense recorded
for the three months and six months ended June 30, 2006 and 2005.

<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED   SIX MONTHS ENDED
                                                           JUNE 30,             JUNE 30
                                                      ------------------   ----------------
                                                          2006   2005         2006   2005
                                                          ----   ----         ----   ----
<S>                                                   <C>        <C>       <C>       <C>
Restricted stock ..................................        $89    $66         $169   $132
Stock options .....................................          -      -            -      -
                                                           ---    ---         ----   ----
Total share-based compensation expense ............         89     66          169    132
Tax effect on share-based compensation expense ....          -      -            -      -
                                                           ---    ---         ----   ----
Net effect on income from continuing operations ...         89     66          169    132
Effect on basic and diluted earnings per share ....        $ -    $ -         $  -   $  -
                                                           ===    ===         ====   ====
</TABLE>

     The following table summarizes restricted stock activity for the six months
ended June 30,

<TABLE>
<CAPTION>
                                           WEIGHTED                     WEIGHTED
                            SIX MONTHS      AVERAGE      SIX MONTHS      AVERAGE
                              ENDED       GRANT-DATE       ENDED       GRANT-DATE
Restricted stock shares   JUNE 30, 2006   FAIR VALUE   JUNE 30, 2005   FAIR VALUE
-----------------------   -------------   ----------   -------------   ----------
<S>                       <C>             <C>          <C>             <C>
Balance at January 1 ..      250,000         $4.33        150,000         $5.70
Granted ...............      400,000          2.31              -             -
Cancelled or expired ..            -             -              -             -
                             -------                      -------
Balance at June 30 ....      650,000         $3.08        150,000         $5.70
                             =======         =====        =======         =====
</TABLE>

     The following table summarizes stock option activity for the six months
ended June 30,

<TABLE>
<CAPTION>
                                               WEIGHTED                     WEIGHTED
                                SIX MONTHS      AVERAGE      SIX MONTHS      AVERAGE
                                  ENDED       GRANT-DATE       ENDED       GRANT-DATE
Stock options                 JUNE 30, 2006   FAIR VALUE   JUNE 30, 2005   FAIR VALUE
-------------                 -------------   ----------   -------------   ----------
<S>                           <C>             <C>          <C>             <C>
Outstanding at January 1 ..       1,128,750      $4.25         1,474,000      $4.30
Granted ...................               -          -                 -          -
Cancelled or expired ......        (100,000)      4.92           (46,250)      4.16
Exercised .................               -          -                 -          -
                              -------------                -------------
Outstanding at June 30 ....       1,028,750      $4.18         1,427,750      $4.30
                              =============      =====     =============      =====
Exercisable at June 30 ....       1,028,750      $4.18         1,427,750      $4.30
                              =============      =====     =============      =====
Exercise price per share ..   $3.02 - $5.65                $3.02 - $5.65
                              =============                =============
</TABLE>


                                        7
<PAGE>

     There were no stock options granted during 2006 or 2005. The fair value of
each option granted prior to 2004 was estimated on the date of grant using the
Binomial option pricing model with the following weighted-average assumptions.

<TABLE>
<S>                          <C>
Expected dividend yield ..   2.1%
Risk-free rate ...........   3.0%
Expected life in years ...     5
Volatility ...............    39%
</TABLE>

     The following table summarizes information on stock options outstanding at
June 30, 2006:

<TABLE>
<CAPTION>
                           OPTIONS OUTSTANDING            OPTIONS EXERCISABLE
                  ------------------------------------   ----------------------
                     NUMBER     CONTRACTUAL   EXERCISE      NUMBER     EXERCISE
EXERCISE PRICES   OUTSTANDING     LIFE(1)     PRICE(1)   EXERCISABLE   PRICE(1)
---------------   -----------   -----------   --------   -----------   --------
<S>               <C>           <C>           <C>        <C>           <C>
$3.02 .........      573,750        0.99       $ 3.02        573,750    $ 3.02
$5.65 .........      455,000        2.33         5.65        455,000      5.65
                   ---------        ----       ------     ----------    ------
                   1,028,750        1.58       $ 4.18      1,028,750    $ 4.18
                   =========        ====       ======      =========    ======
</TABLE>

----------
(1)  weighted average

4.   EARNINGS/(LOSS) PER SHARE

     For the three months ended June 30, 2006 and 2005, net loss per share was
computed using the weighted average number of shares of Common and Class B stock
outstanding, which amounted to 30,927,183 and 30,603,105 shares, respectively.
Due to their anti-dilutive effect, 1,028,750 and 1,427,750 stock options were
excluded from the computation of diluted loss per share for the three months
ended June 30, 2006 and 2005, respectively.

     For the six months ended June 30, 2006 and 2005, net loss per share was
computed using the weighted average number of shares of Common and Class B stock
outstanding, which amounted to 30,878,736 and 30,568,289 shares, respectively.
Due to their anti-dilutive effect, 1,028,750 and 1,427,750 stock options were
excluded from the computation of diluted loss per share for the six months ended
June 30, 2006 and 2005, respectively.

5.   ACQUISITIONS AND DISCOUNTINUED OPERATIONS

Sale of Melcor

     On January 25, 2005, the Company's Board of Directors approved the sale of
all of the capital stock of Melcor Corporation, its thermal management
subsidiary, which was not considered a core business unit. On October 25, 2005,
the Company sold Melcor to Laird Technologies, Inc. for $17,300 in cash (before
a $200 temporary holdback), which resulted in a pre-tax gain of $11,400.
Melcor's revenues, which were reported in the Engineered Products segment, were
$6,644 for the first six 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). The results
of operations of Islandaire have been included in the Company's consolidated
financial statements since the acquisition date. The acquisition was not
material to the Company's operations, financial position, or cash flows, and
thus pro-forma information has not been presented.

     Islandaire is located in East Setauket, New York, and now operates as
Fedders Islandaire, Inc. It manufactures and markets a line of specialized
through-the-wall packaged terminal air conditioners (PTACs) and heat pumps,
primarily for replacement applications in apartment buildings, hotels, and
motels, and in institutional buildings such as schools, offices, hospitals, and
nursing homes. Islandaire's replacement PTAC units fit into existing wall
openings without alteration to the structure of the building. The addition of
Islandaire's products extends the product line of the


                                       8

<PAGE>

Company's existing commercial products division. This subsidiary has been
included within the HVACR segment since the date of acquisition.

     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 following table represents the purchase
price allocation.

                                AT MARCH 7, 2005
<TABLE>
<S>                                                                <C>
Cash                                                               $   158
Accounts receivable                                                  3,412
Inventory                                                            3,862
Other current assets                                                   226
Property, plant and equipment                                          880
Goodwill                                                             9,582
Intangible assets:
   Customer relationships (estimated useful life of 10 years)        3,300
   Engineering drawings (estimated useful life of 2 years)             300
   Noncompetition agreement (estimated useful life of 5.5 years)     1,100
   Other intangible assets                                              42
Current liabilities                                                 (5,930)
Long-term debt                                                        (168)
Minority interest                                                     (435)
                                                                   -------
Net assets acquired                                                $16,329
                                                                   =======
</TABLE>

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

     The Islandaire facility continues to be leased from an officer of the
subsidiary at a market rate.

6.   GOODWILL AND OTHER INTANGIBLE ASSETS

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

     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, 2005 ..   $79,336     $8,389     $87,725
Effect of foreign currency change ........         (4)         -          (4)
                                              -------     ------     -------
Goodwill balance as of June 30, 2006 .....    $79,332     $8,389     $87,721
                                              =======     ======     =======
</TABLE>

<TABLE>
<CAPTION>
                                   June 30,   December 31,   June 30,
                                     2006         2005         2005
                                   --------   ------------   --------
<S>                                <C>        <C>            <C>
Other intangible assets ........... $7,084       $7,911       $6,490
Accumulated amortization .......... (2,848)      (3,185)      (1,753)
                                    ------       ------       ------
Other intangible assets - net ..... $4,236       $4,726       $4,737
                                    ======       ======       ======
</TABLE>


                                       9

<PAGE>

     Goodwill decreased by $4 as a result of a positive currency tr anslation
adjustment. Other intangible assets primarily represent intangible assets of
Islandaire. Amortization expense for continuing operations for the three months
ended June 30, 2006 and 2005 was $227 and $218, respectively. Amortization
expense for continuing operations for the six months ended June 30, 2006 and
2005 was $469 and $362, respectively. Estimated amortization expense for other
intangibles for the next five years will be approximately $815, $614, $598, $559
and $427, respectively, and $1,223 thereafter.

7.   ASSETS HELD FOR SALE

     At December 31, 2005, net assets totaling $843 at the Company's Columbia,
Tennessee facility were classified as "Assets Held for Sale". These assets were
sold at their carrying value on February 3, 2006. There were no "Assets Held for
Sale" at June 30, 2006 and 2005.

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.

SUMMARY OF BUSINESS BY SEGMENT:
<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED   SIX MONTHS ENDED
                                                                              JUNE, 30             JUNE, 30
                                                                         ------------------   -------------------
                                                                           2006      2005       2006       2005
                                                                         -------   --------   --------   --------
<S>                                                                      <C>       <C>        <C>        <C>
Net sales:

   HVACR ............................................................    $87,986   $114,217   $181,285   $180,855
   Engineered Products ..............................................      7,581      8,515     13,983     14,775
                                                                         -------   --------   --------   --------
   Net sales ........................................................    $95,567   $122,732   $195,268   $195,630
                                                                         =======   ========   ========   ========

   Income/(loss) by segment:
   HVACR ............................................................    $(1,086)  $  3,832   $ (3,010)  $  1,715
   Engineered Products ..............................................        370        788        433      1,117
                                                                         -------   --------   --------   --------
   Segment operating income/(loss) ..................................       (716)     4,620     (2,577)     2,832
   Goodwill impairment, asset impairment, employee severance and
      other restructuring charges/(credits) .........................        611        197        611        372
   Non-allocated expense/(income) ...................................      1,919        701      3,109      1,884
   Interest expense, net ............................................      5,340      5,688     10,813     11,046
   Income tax expense/(benefit) .....................................        315        119        592        347
                                                                         -------   --------   --------   --------
   Income/(loss) from continuing operations .........................     (8,901)    (2,085)   (17,702)   (10,817)
   Net income/(loss) from discontinued operations, net of tax .......          -        698          -      1,333
                                                                         -------   --------   --------   --------
   Net income/(loss) ................................................    $(8,901)  $ (1,387)  $(17,702)  $ (9,484)
                                                                         =======   ========   ========   ========
</TABLE>


                                       10
<PAGE>

<TABLE>
<CAPTION>
                              JUNE 30,   DECEMBER 31,   JUNE 30,
                                2006         2005         2005
                              --------   ------------   --------
<S>                           <C>        <C>            <C>
Total assets:
HVACR .....................   $237,914     $240,281     $323,143
Engineered Products .......     39,262       40,287       45,035
Non-allocated assets ......     52,892       50,486       69,610
Discontinued operations ...          -            -        7,390
                              --------     --------     --------
                              $330,068     $331,054     $445,178
                              ========     ========     ========
</TABLE>

     Non-allocated (income)/expense and assets are primarily related to the
Company's corporate headquarters, other (income)/expense, and minority interest.

9. DEFERRED RETIREE OBLIGATION AND OTHER COMPENSATION ARRANGEMENTS

     The Company has a deferred retiree obligation for certain retirees. The
following table summarizes certain information with respect to this obligation.

<TABLE>
<CAPTION>
                                                   SIX MONTHS ENDED
                                                       JUNE 30,
                                                  -----------------
                                                    2006      2005
                                                  -------   -------
<S>                                               <C>       <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year .......   $10,280   $11,228
Service cost ..................................         -         -
Interest cost .................................       240       305
Actuarial changes and other ...................       (90)        -
Benefits paid .................................      (833)     (839)
                                                  -------   -------
Benefit obligation at end of period ...........   $ 9,597   $10,694
                                                  =======   =======

Weighted-average assumptions as of June 30:
Discount rate .................................      5.75%     5.75%
</TABLE>

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 customer
return policies which allow customers 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 six months ended June 30:

<TABLE>
<CAPTION>
                                                                2006      2005
                                                              -------   -------
<S>                                                           <C>       <C>
Warranty balance at beginning of period ...................   $ 7,552   $ 7,333
Accrual for warranty based on revenue during the period ...     5,278     5,785
Settlements made during the period ........................    (3,474)   (6,963)
                                                              -------   -------
Warranty balance at end of period .........................   $ 9,356   $ 6,155
                                                              =======   =======
</TABLE>

11. EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS

     In May 2005, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 154, "Accounting
Changes and Error Corrections - a replacement of APB Opinion No. 20 and SFAS No.
3". This Statement changes the requirements for accounting and reporting of a
voluntary change in accounting principle and changes required by an accounting
pronouncement when the specific transition provisions are absent. This statement
requires retrospective application to prior periods' financial statements of
changes in accounting principle. If it is impracticable to determine either the
period-specific effects or the cumulative effect of the change, this Statement
requires that the new accounting principle be adopted prospectively from the
earliest practicable date. SFAS


                                       11

<PAGE>

No. 154 was effective for the Company as of January 1, 2006 and did not have a
material impact on the Company's financial position and results of operations.

     In December 2004, the FASB issued SFAS No. 151, "Inventory Costs, an
amendment of ARB No. 43, Chapter 4" to improve the comparability of cross-border
financial reporting. This statement amends and clarifies the accounting for
abnormal amounts of idle facility expenses, freight, handling costs, and wasted
material (spoilage). This Statement requires that those items be recognized as
current-period charges regardless of whether they meet the criterion of "so
abnormal" as stated in ARB No. 43, Chapter 4. In addition, this Statement
requires that allocation of fixed production overhead costs to conversion costs
be based on the normal capacity of the production facilities. The provisions of
this Statement were effective for the Company as of January 1, 2006, and did not
have a material impact on the Company's financial position and results of
operations.

     In December 2004, the FASB issued SFAS No. 123 (revised 2004), or SFAS No.
123(R), "Share-Based Payment", which replaces Statement No. 123 "Accounting for
Stock-Based Compensation", and supersedes APB Opinion No. 25, "Accounting for
Stock Issued to Employees". SFAS No. 123(R) eliminates the alternative to use
APB Opinion 25's intrinsic value method of accounting and requires recording
expense for stock compensation based on a fair value based method.

     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. The
Company adopted SAB 107 in conjunction with adopting SFAS No. 123(R) as of
January 1, 2006.

     During 2005, the FASB issued the following four Staff Position Papers
("FSPs") providing guidance on implementing 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)"; FSP SFAS No.
123(R)-3, "Transition Election Related to Accounting for the Tax Effect of
Share-Based Payment Awards"; and FSP SFAS No. 123(R)-4, "Classification of
Options and Similar Instruments Issued as Employee Compensation that Allow for
Cash Settlement upon the Occurrence of a Contingent Event".

     The Company implemented SFAS No. 123(R) effective January 1, 2006. The
Company used the modified-prospective phase-in method that requires entities to
recognize compensation costs in financial statements issued after the date of
adoption for all share based payments granted, modified, or settled after the
date of adoption as well as for any awards that were granted prior to the
adoption date for which the required service has not yet been performed. The
Company does not believe that any of the alternative phase-in methods would have
a materially different effect on the Company's financial position and results of
operations. The provisions of this Statement did not have a material impact on
the Company's financial position and results of operations.

12. DEBT AND SUBSEQUENT EVENTS

     On January 31, 2006, the Company replaced its expiring $100 million secured
revolving credit facility with a five-year, $75 million secured revolving credit
facility. The Company reduced the amount of its revolver based on its
anticipated borrowing needs. Availability under the new line of credit is based
primarily on advance rates on accounts receivable and inventory in the United
States and Canada. Financial covenants include an EBITDA test if availability
under the line falls below $10 million or below $7.5 million if no revolving
loan balance is outstanding. The revolver balance was approximately $22 million
at June 30, 2006. The credit facility is collateralized by substantially all of
the Company's assets and is in effect until January 2011. The Company is no
longer subject to minimum working capital or net worth covenants.

     On July 27, 2006, the Company announced that it hired an advisor to explore
the possible sale of its global indoor air quality business, which includes all
of the Engineered Products segment plus a non-material portion of the
residential business in the HVACR segment. Annual sales of this business are
approximately $50 million with assets less than $50 million.


                                       12

<PAGE>

13. HEDGING

     During the second quarter the Company entered into a foreign currency
derivative to hedge against fluctuations in the Canadian dollar. As a cash flow
hedge, changes in the fair value of the derivative are recorded in accumulated
other comprehensive income/(loss) in shareholders' equity and amounts in
accumulated other comprehensive income/(loss) are reclassified into earnings in
the same period or period during which the hedged transaction affects earnings.
Because less than the full value of Canadian dollar receivables was hedged, the
hedge was deemed to be one hundred percent effective. The accumulated other
changes in equity from cash flow hedges are shown in the following table.

CASH FLOW HEDGE IMPACT ON EQUITY

<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED   SIX MONTHS ENDED
                                                 JUNE 30,            JUNE 30,
                                            ------------------   ----------------
                                                2006   2005         2006   2005
                                                ----   ----         ----   ----
<S>                                         <C>        <C>       <C>       <C>
Balance at January 1 ....................       $  -    $ -         $  -    $ -
Net gain (loss) from cash flow hedges ...        (74)     -          (74)     -
Net amounts reclassified to earnings ....         16      -           16      -
                                                ----    ---         ----    ---
Balance at June 30 ......................       $(58)   $ -         $(58)   $ -
                                                ====    ===         ====    ===
</TABLE>

14. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

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

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

     The following unaudited condensed consolidating financial statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures normally included
in annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures made are
adequate to make the information not misleading. It is suggested that these
condensed consolidating financial statements be read in conjunction with the
financial statements and the notes thereto included in the Company's latest Form
10-K.

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


                                       13
<PAGE>

                               FEDDERS CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                            THREE MONTHS ENDED JUNE 30, 2006
                                                               ----------------------------------------------------------
                                                               FEDDERS
                                                                NORTH      OTHER    CORPORATE   ELIMINATING     FEDDERS
                                                               AMERICA    FEDDERS     PARENT      ENTRIES     CORPORATION
                                                               -------   --------   ---------   -----------   -----------
<S>                                                            <C>       <C>        <C>         <C>           <C>
Net sales ..................................................   $81,211    $71,184   $      -      $(56,828)     $ 95,567
Cost of sales ..............................................    72,833     65,589        284       (56,828)       81,878
                                                               -------    -------   --------      --------      --------
Gross profit ...............................................     8,378      5,595       (284)            -        13,689
Selling, general and administrative expense (a) ............    11,496      3,238      1,775             -        16,509
Asset impairment, employee severance and other restructuring
   charges/(credits) .......................................       410          -        201             -           611
                                                               -------    -------   --------      --------      --------
Operating income/(loss) ....................................    (3,528)     2,357     (2,260)            -        (3,431)
Partners' net interest in joint venture results ............      (165)       380          -             -           215
Equity income in investment ................................         -          -     (6,841)        6,841             -
Interest expense, net (b) ..................................     4,739        601          -             -         5,340
Other (income)/expense .....................................        71        159       (200)            -            30
                                                               -------    -------   --------      --------      --------
Income/(loss) before income taxes ..........................    (8,503)     1,977     (8,901)        6,841        (8,586)
Provision/(benefit) for income taxes .......................        68        247          -             -           315
                                                               -------    -------   --------      --------      --------
Net income/(loss) ..........................................    (8,571)     1,730     (8,901)        6,841        (8,901)
Preferred stock dividends ..................................         -          -      1,144             -         1,144
                                                               -------    -------   --------      --------      --------
Net income/(loss) applicable to common stockholders ........   $(8,571)   $ 1,730   $(10,045)     $  6,841      $(10,045)
                                                               =======    =======   ========      ========      ========
</TABLE>

<TABLE>
<CAPTION>
                                                                                THREE MONTHS ENDED JUNE 30, 2005
                                                                  ------------------------------------------------------------
                                                                   FEDDERS
                                                                    NORTH       OTHER    CORPORATE   ELIMINATING     FEDDERS
                                                                   AMERICA     FEDDERS    PARENT       ENTRIES     CORPORATION
                                                                  ---------   --------   ---------   -----------   -----------
<S>                                                               <C>         <C>        <C>         <C>           <C>
Net sales .....................................................   $107,346    $36,612     $     -      $(21,226)    $122,732
Cost of sales .................................................     89,365     31,493           -       (21,226)      99,632
                                                                  --------    -------     -------      --------     --------
Gross profit ..................................................     17,981      5,119          --             -       23,100
Selling, general and administrative expense (a) ...............     14,910      4,411          89             -       19,410
Asset impairment, employee severance and other restructuring
   charges/(credits) ..........................................         73        124           -             -          197
                                                                  --------    -------     -------      --------     --------
Operating income/(loss) .......................................      2,998        584         (89)            -        3,493
Partners' net interest in joint venture results ...............        (69)       383           -             -          314
Equity income in investment ...................................                            (1,214)        1,214            -
Interest expense, net (b) .....................................      5,102        602         (16)            -        5,688
Other (income)/expense ........................................        (12)        (3)        100             -           85
                                                                  --------    -------     -------      --------     --------
Income/(loss) from continuing operations before income taxes ..     (2,161)       368      (1,387)        1,214       (1,966)
Provision/(benefit) for income taxes ..........................         56         63                         -          119
                                                                  --------    -------     -------      --------     --------
Income/(loss) from continuing operations ......................     (2,217)       305      (1,387)        1,214       (2,085)
Discontinued operations, net of tax ...........................        629         69           -             -          698
                                                                  --------    -------     -------      --------     --------
Net income/(loss) .............................................     (1,588)       374      (1,387)        1,214       (1,387)
Preferred stock dividends .....................................          -          -       1,144             -        1,144
                                                                  --------    -------     -------      --------     --------
Net income/(loss) applicable to common stockholders ...........   $ (1,588)   $   374     $(2,531)     $  1,214     $ (2,531)
                                                                  ========    =======     =======      ========     ========
</TABLE>


                                       14

<PAGE>

                               FEDDERS CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                               SIX MONTHS ENDED JUNE 30, 2006
                                                               -------------------------------------------------------------
                                                                FEDDERS
                                                                 NORTH       OTHER     CORPORATE   ELIMINATING     FEDDERS
                                                                AMERICA     FEDDERS      PARENT      ENTRIES     CORPORATION
                                                               ---------   ---------   ---------   -----------   -----------
<S>                                                            <C>          <C>        <C>         <C>           <C>
Net sales ..................................................   $172,434     $146,392   $      -     $(123,558)     $195,268
Cost of sales ..............................................    157,519      134,639        284      (123,558)      168,884
                                                               --------     --------   --------     ---------      --------
Gross profit ...............................................     14,915       11,753       (284)            -        26,384
Selling, general and administrative expense (a) ............     22,830        6,643      2,076             -        31,549
Asset impairment, employee severance and other restructuring
   charges/(credits) .......................................        410            -        201             -           611
                                                               --------     --------   --------     ---------      --------
Operating income/(loss) ....................................     (8,325)       5,110     (2,561)            -        (5,776)
Partners' net interest in joint venture results ............       (194)         262          -             -            68
Equity income in investment ................................                            (15,341)       15,341             -
Interest expense, net (b) ..................................      9,545        1,268          -             -        10,813
Other (income)/expense .....................................        325          464       (200)            -           589
                                                               --------     --------   --------     ---------      --------
Income/(loss) before income taxes ..........................    (18,389)       3,640    (17,702)       15,341       (17,110)
Provision/(benefit) for income taxes .......................         77          515          -             -           592
                                                               --------     --------   --------     ---------      --------
Net income/(loss) ..........................................    (18,466)       3,125    (17,702)       15,341       (17,702)
Preferred stock dividends ..................................          -            -      2,287             -         2,287
                                                               --------     --------   --------     ---------      --------
Net income/(loss) applicable to common stockholders ........   $(18,466)    $  3,125   $(19,989)    $  15,341      $(19,989)
                                                               ========     ========   ========     =========      ========
</TABLE>

<TABLE>
<CAPTION>
                                                                                  SIX MONTHS ENDED JUNE 30, 2005
                                                                  -------------------------------------------------------------
                                                                   FEDDERS
                                                                    NORTH       OTHER     CORPORATE   ELIMINATING     FEDDERS
                                                                   AMERICA     FEDDERS      PARENT      ENTRIES     CORPORATION
                                                                  ---------   ---------   ---------   -----------   -----------
<S>                                                               <C>         <C>         <C>         <C>           <C>
Net sales .....................................................   $171,472     $105,248   $      -     $(81,090)     $195,630
Cost of sales .................................................    146,450       93,558          -      (81,090)      158,918
                                                                  --------     --------   --------     --------      --------
Gross profit ..................................................     25,022       11,690          -            -        36,712
Selling, general and administrative expense (a) ...............     25,968        9,580      1,431            -        36,979
Asset impairment, employee severance and other restructuring
   charges/(credits) ..........................................        131          241          -            -           372
                                                                  --------     --------   --------     --------      --------
Operating income/(loss) .......................................     (1,077)       1,869     (1,431)           -          (639)
Partners' net interest in joint venture results ...............        (38)         731          -            -           693
Equity income in investment ...................................          -            -     (7,985)       7,985            --
Interest expense, net (b) .....................................      9,922        1,137        (13)           -        11,046
Other (income)/expense ........................................       (550)         (53)        81            -          (522)
                                                                  --------     --------   --------     --------      --------
Income/(loss) from continuing operations before income taxes ..    (10,487)       1,516     (9,484)       7,985       (10,470)
Provision/(benefit) for income taxes ..........................         56          291          -            -           347
                                                                  --------     --------   --------     --------      --------
Income/(loss) from continuing operations ......................    (10,543)       1,225     (9,484)       7,985       (10,817)
Discontinued operations, net of tax ...........................      1,197          136          -            -         1,333
                                                                  --------     --------   --------     --------      --------
Net income/(loss) .............................................     (9,346)       1,361     (9,484)       7,985        (9,484)
Preferred stock dividends .....................................          -            -      2,149            -         2,149
                                                                  --------     --------   --------     --------      --------
Net income/(loss) applicable to common stockholders ...........   $ (9,346)    $  1,361   $(11,633)    $  7,985      $(11,633)
                                                                  ========     ========   ========     ========      ========
</TABLE>


                                       15

<PAGE>

                               FEDDERS CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                     CONDENSED CONSOLIDATING BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                         JUNE 30, 2006
                                                 ------------------------------------------------------------
                                                  FEDDERS
                                                   NORTH       OTHER    CORPORATE   ELIMINATING     FEDDERS
                                                  AMERICA     FEDDERS     PARENT      ENTRIES     CORPORATION
                                                 ---------   --------   ---------   -----------   -----------
<S>                                              <C>         <C>        <C>         <C>           <C>
ASSETS
Current assets:
   Cash and cash equivalents .................   $   5,798   $  4,713   $   1,243     $      -      $ 11,754
   Net accounts receivable ...................      46,419     10,756           -            -        57,175
   Net inventories ...........................      46,324     15,407           -            -        61,731
   Other current assets ......................       2,058      6,109       9,191       (5,340)       12,018
                                                 ---------   --------   ---------     --------      --------
Total current assets .........................     100,599     36,985      10,434       (5,340)      142,678
Investments in subsidiaries ..................           -          -    (102,549)     102,549             -
Net property, plant and equipment ............      26,329     16,250          69            -        42,648
Goodwill .....................................      72,452     15,269           -            -        87,721
Other intangible assets ......................       4,199         37           -            -         4,236
Other assets .................................           -      6,724      46,061            -        52,785
                                                 ---------   --------   ---------     --------      --------
Total assets .................................   $ 203,579   $ 75,265   $ (45,985)    $ 97,209      $330,068
                                                 =========   ========   =========     ========      ========
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)
Current liabilities:
   Short-term notes ..........................   $  21,817   $ 23,957   $       -     $      -      $ 45,774
   Current portion of long-term debt .........       2,179        118           -            -         2,297
   Accounts and income taxes payable .........      13,400     51,648         628            -        65,676
   Accrued expenses ..........................      28,036      9,096       9,020            -        46,152
                                                 ---------   --------   ---------     --------      --------
Total current liabilities ....................      65,432     84,819       9,648            -       159,899
Long-term debt ...............................     156,494      1,378           -            -       157,872
Other long-term liabilities ..................       4,087      9,858      20,734       (5,340)       29,339
Net due to (from) affiliates .................      59,757       (432)    (59,325)           -             -
                                                 ---------   --------   ---------     --------      --------
Total liabilities ............................   $ 285,770   $ 95,623   $ (28,943)    $ (5,340)     $347,110
Stockholders' equity/(deficit):
   Preferred Stock ...........................           -          -          21            -            21
   Common and Class B Stock ..................           5          -         395           (5)          395
   Additional paid-in capital ................      26,927     28,538     115,424      (55,465)      115,424
   Retained earnings (deficit) ...............    (109,223)   (49,039)    (93,937)     158,262       (93,937)
   Deferred compensation and treasury stock ..           -          -     (39,188)           -       (39,188)
   Accumulated other comprehensive loss ......         100        143         243         (243)          243
                                                 ---------   --------   ---------     --------      --------
Total stockholders' equity/(deficit) .........     (82,191)   (20,358)    (17,042)     102,549       (17,042)
                                                 ---------   --------   ---------     --------      --------
Total liabilities and stockholders'
   equity/(deficit) ..........................   $ 203,579   $ 75,265   $ (45,985)    $ 97,209      $330,068
                                                 =========   ========   =========     ========      ========
</TABLE>


                                       16
<PAGE>

                               FEDDERS CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                     CONDENSED CONSOLIDATING BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                               DECEMBER 31, 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 ..........................   $  6,455   $  6,300   $  1,662     $      -      $ 14,417
   Net accounts receivable ............................     32,275      9,882          -            -        42,157
   Net inventories ....................................     55,704     18,609          -            -        74,313
   Other current assets ...............................      3,764      3,762      8,872       (5,340)       11,058
                                                          --------   --------   --------     --------      --------
Total current assets ..................................     98,198     38,553     10,534       (5,340)      141,945
Investments in subsidiaries ...........................          -          -    (89,539)      89,539             -
Net property, plant and equipment .....................     27,356     17,092         95            -        44,543
Goodwill ..............................................     72,980     14,745          -            -        87,725
Other intangible assets ...............................      4,726          -          -            -         4,726
Other assets ..........................................      4,594      5,198     42,323            -        52,115
                                                          --------   --------   --------     --------      --------
Total assets ..........................................   $207,854   $ 75,588   $(36,587)    $ 84,199      $331,054
                                                          ========   ========   ========     ========      ========
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)
Current liabilities:
   Short-term notes ...................................   $ 34,599   $ 22,141   $      -     $      -      $ 56,740
   Current portion of long-term debt ..................      2,351        119          -            -         2,470
   Accounts payable ...................................     14,773     29,154         34            -        43,961
   Accrued expenses ...................................     22,835      6,047     11,637            -        40,519
                                                          --------   --------   --------     --------      --------
Total current liabilities .............................     74,558     57,461     11,671            -       143,690
Long-term debt ........................................    156,764      1,349          -            -       158,113
Other long-term liabilities ...........................      2,817      9,735     22,101       (5,340)       29,313
Net due to (from) affiliates ..........................     37,539     32,758    (70,297)           -             -
                                                          --------   --------   --------     --------      --------
Total liabilities .....................................    271,678    101,303    (36,525)      (5,340)      331,116
Stockholders' equity/(deficit):
   Preferred Stock ....................................          -          -         21            -            21
   Common and Class B Stock ...........................          5          -        392           (5)          392
   Additional paid-in capital .........................     26,927     26,542    115,523      (53,469)      115,523
   Retained earnings/(deficit) ........................    (90,757)   (52,164)   (76,235)     142,921       (76,235)
   Deferred compensation and treasury stock ...........          -          -    (39,671)           -       (39,671)
   Accumulated other comprehensive loss ...............          1        (93)       (92)          92           (92)
                                                          --------   --------   --------     --------      --------
Total stockholders' equity/(deficit) ..................    (63,824)   (25,715)       (62)      89,539           (62)
                                                          --------   --------   --------     --------      --------
Total liabilities and stockholders' equity/(deficit) ..   $207,854   $ 75,588   $(36,587)    $ 84,199      $331,054
                                                          ========   ========   ========     ========      ========
</TABLE>


                                       17

<PAGE>

                               FEDDERS CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                     CONDENSED CONSOLIDATING BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                              JUNE 30, 2005
                                                       -----------------------------------------------------------
                                                       FEDDERS
                                                         NORTH      OTHER    CORPORATE   ELIMINATING     FEDDERS
                                                        AMERICA    FEDDERS     PARENT      ENTRIES     CORPORATION
                                                       --------   --------   ---------   -----------   -----------
<S>                                                    <C>        <C>        <C>         <C>           <C>
ASSETS
Current assets:
   Cash and cash equivalents .......................   $  7,847   $  7,190   $  2,736     $      -      $ 17,773
   Net accounts receivable .........................     75,291     13,122          -            -        88,413
   Net inventories .................................     83,631     20,109          -            -       103,740
   Other current assets ............................      3,603      7,109     13,842       (5,340)       19,214
   Current assets of discontinued operations .......      3,173      1,029          -            -         4,202
                                                       --------   --------   --------     --------      --------
Total current assets ...............................    173,545     48,559     16,578       (5,340)      233,342
Investments in subsidiaries ........................          -          -    (43,496)      43,496             -
Net property, plant and equipment ..................     40,657     17,052        217            -        57,926
Goodwill ...........................................     72,173     15,269          -            -        87,442
Other intangible assets ............................      4,700         37          -            -         4,737
Other assets .......................................     10,729      4,248     43,566            -        58,543
Other assets of discontinued operations ............      2,595        593          -            -         3,188
                                                       --------   --------   --------     --------      --------
Total assets .......................................   $304,399   $ 85,758   $ 16,865     $ 38,156      $445,178
                                                       ========   ========   ========     ========      ========
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)
Current liabilities:
   Short-term notes ................................   $ 55,643   $ 34,849   $      -     $      -      $ 90,492
   Current portion of long-term debt ...............      1,347        118          -            -         1,465
   Accounts and income taxes payable ...............     19,472     36,095      1,243            -        56,810
   Accrued expenses ................................     32,088     10,026      7,368            -        49,482
   Current liabilities of discontinued operations ..        922        261          -            -         1,183
                                                       --------   --------   --------     --------      --------
Total current liabilities ..........................    109,472     81,349      8,611            -       199,432
Long-term debt .....................................    158,445      1,378          -            -       159,823
Other long-term liabilities ........................        301     10,467     28,235       (5,340)       33,663
Long-term liabilities of discontinued operations ...        579        841          -            -         1,420
Net due to (from) affiliates .......................     64,311      6,510    (70,821)           -             -
                                                       --------   --------   --------     --------      --------
Total liabilities ..................................    333,108    100,545    (33,975)      (5,340)      394,338
Stockholders' equity/(deficit):
   Preferred Stock .................................          -          -         21            -            21
   Common and Class B Stock ........................          5          -        392           (5)          392
   Additional paid-in capital ......................     20,293     25,542    115,297      (45,835)      115,297
   Retained earnings (deficit) .....................    (48,677)   (39,009)   (23,637)      87,686       (23,637)
   Deferred compensation and treasury stock ........          -          -    (39,583)           -       (39,583)
   Accumulated other comprehensive loss ............       (330)    (1,320)    (1,650)       1,650        (1,650)
                                                       --------   --------   --------     --------      --------
Total stockholders' equity/(deficit)................    (28,709)   (14,787)    50,840       43,496        50,840
                                                       --------   --------   --------     --------      --------
Total liabilities and stockholders' equity/(deficit)   $304,399   $ 85,758   $ 16,865     $ 38,156      $445,178
                                                       ========   ========   ========     ========      ========
</TABLE>


                                       18

<PAGE>

                               FEDDERS CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                     FOR THE SIX MONTHS ENDED JUNE 30, 2006
                                                          -----------------------------------------------------------
                                                           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 ...   $ 29,441   $(35,407)  $ 15,179        $ -        $  9,213
                                                          --------   --------   --------        ---        --------
Net additions to property, plant and equipment ........       (752)      (787)       (59)         -          (1,598)
Disposal of property, plant and equipment .............        878          -          -          -             878
Acquisition of business, net of cash acquired .........          -          -          -          -               -
                                                          --------   --------   --------        ---        --------
Net cash (used in) provided by investing activities ...        126       (787)       (59)         -            (720)
                                                          --------   --------   --------        ---        --------
Proceeds (repayments) of short-term notes .............    (12,782)     1,816          -          -         (10,966)
Net repayments of long-term debt ......................       (531)       (52)         -          -            (583)
Change in net due to (from) affiliate .................    (16,911)    32,450    (15,539)         -               -
                                                          --------   --------   --------        ---        --------
Net cash provided by (used in) financing activities ...    (30,224)    34,214    (15,539)         -         (11,549)
                                                          --------   --------   --------        ---        --------
Effect of exchange rates ..............................          -        393          -          -             393
                                                          --------   --------   --------        ---        --------
Net (decrease) increase in cash and cash equivalents ..       (657)    (1,587)      (419)         -          (2,663)
Cash and cash equivalents at beginning of period ......      6,455      6,300      1,662          -          14,417
                                                          --------   --------   --------        ---        --------
Cash and cash equivalents at end of period ............   $  5,798   $  4,713   $  1,243        $ -        $ 11,754
                                                          ========   ========   ========        ===        ========
</TABLE>

<TABLE>
<CAPTION>
                                                                     FOR THE SIX MONTHS ENDED JUNE 30, 2005
                                                          -----------------------------------------------------------
                                                           FEDDERS
                                                            NORTH      OTHER    CORPORATE   ELIMINATING     FEDDERS
                                                           AMERICA    FEDDERS     PARENT      ENTRIES     CORPORATION
                                                          --------   --------   ---------   -----------   -----------
<S>                                                       <C>        <C>        <C>         <C>           <C>
Net cash (used in) provided by operating activities ...   $(28,210)  $ 13,931    $(3,420)       $ -        $(17,699)
                                                          --------   --------    -------        ---        --------
Net additions to property, plant and equipment ........       (663)    (2,652)         -          -          (3,315)
Disposal of property, plant and equipment .............         11          -        116          -             127
Acquisition of business, net of cash acquired .........     (9,426)         -          -          -          (9,426)
                                                          --------   --------    -------        ---        --------
Net cash (used in) provided by investing activities ...    (10,078)    (2,652)       116         --         (12,614)
                                                          --------   --------    -------        ---        --------
Proceeds (repayments) of short-term notes .............     25,548      5,608          -          -          31,156
Net repayments of long-term debt ......................       (845)       (56)         -          -            (901)
Cash dividends ........................................      6,115     (6,115)    (3,978)         -          (3,978)
Change in net due to (from) affiliate .................     12,539    (17,081)     4,542          -               -
                                                          --------   --------    -------        ---        --------
Net cash provided by (used in) financing activities ...     43,357    (17,644)       564          -          26,277
                                                          --------   --------    -------        ---        --------
Effect of exchange rates ..............................          -       (974)         -          -            (974)
                                                          --------   --------    -------        ---        --------
Net (decrease) increase in cash and cash equivalents ..      5,069     (7,339)    (2,740)         -          (5,010)
Cash and cash equivalents at beginning of period ......      2,778     14,529      5,476          -          22,783
                                                          --------   --------    -------        ---        --------
Cash and cash equivalents at end of period ............   $  7,847   $  7,190    $ 2,736        $ -        $ 17,773
                                                          ========   ========    =======        ===        ========
</TABLE>


                                       19
<PAGE>

                               FEDDERS CORPORATION
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

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

     a) The Company charges corporate overhead essentially on a cost basis
     allocated in proportion to sales. Such charges amounted to approximately
     $3.8 million and $4.4 million for the three months ended June 30, 2006 and
     2005, respectively. Such charges to FNA amounted to approximately $7.8
     million and $7.1 million for the six months ended June 30, 2006 and 2005,
     respectively.

     b) FNA's interest expense reflects actual interest charges on the 9 7/8%
     Senior Notes, Addison mortgage, Trion Industrial Revenue Bond, State of
     Illinois Promissory Note, Eubank mortgage, capital lease obligations and a
     revolving line of credit.

     c) FNA's depreciation and amortization for the six months ended June 30,
     2006 and 2005 amounted to approximately $1.6 million and $3.6 million,
     respectively. Capital expenditures of FNA amounted to $0.8 million and $0.6
     million in the six months ended June 30, 2006 and 2005, respectively. FNA's
     depreciation and amortization for the quarter ended June 30, 2006 and 2005
     amounted to approximately $0.6 million and $1.9 million, respectively.
     Capital expenditures of FNA amounted to $0.3 million and $0.3 million in
     the three months ended June 30, 2006 and 2005, 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 26, 2005, FNA sold its non-core thermal management business,
     Melcor Corporation, to Laird Technologies, Inc. for $ 17.3 million in cash
     (before a $0.2 million temporary holdback). 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 $9.6 million in cash, 257,484 shares of Preferred Stock valued at $6.4
     million, 100,000 shares of Common Stock valued at $0.3 million, and $0.1
     million 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 East Setauket,
     New York, Islandaire, which is now known as Fedders Islandaire, Inc.,
     manufactures and markets a line of specialized through-the-wall packaged
     terminal air conditioners (PTACs) and heat pumps, primarily for replacement
     applications in apartment buildings, hotels and motels, and in
     institutional buildings such as schools, offices, hospitals and nursing
     homes. (See Note 5)


                                       20

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF 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. This discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ from those anticipated
in forward-looking statements for many reasons.

OVERVIEW

     Fedders is a leading global producer and marketer of air treatment products
for the residential, commercial and industrial markets. Our products include a
wide range of residential and commercial heating and cooling products, air
cleaners, dehumidifiers and humidifiers. 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 seven years, we have repositioned 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 have
entered include residential central and commercial air conditioning and high
growth markets in Asia. Due to the current seasonality of our business, a
majority of shipments and revenue occurs during the first six months of the
calendar year.

     The Company's results were affected in 2005 by unfavorable weather in North
America during the summer of 2004 that reduced sales and left excess inventory
in the distribution system. That inventory sharply reduced customer orders for
2005. During 2005, hot weather depleted most inventories at retail distribution,
creating demand for room air conditioners entering 2006. In November 2005, the
Company disclosed it would discontinue selling room air conditioners and
dehumidifiers through The Home Depot retail stores in the United States for 2006
due to low profit margins and higher working capital requirements of this
business. The Company has continued to sell these products to Home Depot Supply,
Home Depot.com, and Home Depot Canada in 2006.

     The Company implemented a restructuring plan during the latter part of 2005
to significantly reduce costs throughout the Company, to enhance its competitive
position in the markets in which it participates, and to return the Company to
profitability. The restructuring involved ceasing manufacturing and refurbishing
of room air conditioners in Effingham, Illinois; consolidating commercial air
conditioner manufacturing from our Longview, Texas factory into our Orlando,
Florida factory; consolidating air filtration manufacturing from our
Albuquerque, New Mexico factory into our Sanford, North Carolina factory;
consolidating air conditioner manufacturing in China from three factories to two
factories; and consolidating all domestic warehousing from Company-owned and
third-party warehouses into our Effingham, Illinois facility.

     In 2006, sales are essentially even with the prior year, even without sales
to The Home Depot retail stores in the United States, which were $31.8 million
for the first six months of 2005. Profitability, however, has been negatively
impacted by rising raw material costs of $9.8 million for the first six months
that could not be passed along to customers with fixed price contracts.

     In the second quarter of 2006, the Company incurred further restructuring
costs to streamline the organization. The Company may consider additional
business actions that may impact restructuring going forward.

DEVELOPMENT OF THE BUSINESS

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

     In 1999, the Company acquired Trion, Inc., a leading manufacturer of
equipment to improve indoor air quality in clean room, residential, commercial
and industrial environments.


                                       21

<PAGE>

     In 2000, the Company acquired (i) Sun Manufacturing, Inc. (which was merged
into Eubank Manufacturing Enterprises, Inc.), a manufacturer of specialized air
conditioning equipment used in schools and wireless communications enclosures;
(ii) Eubank Manufacturing Enterprises, Inc., a manufacturer of residential and
commercial heating and air conditioning products; and (iii) ABB Koppel, Inc.
(now Fedders Koppel, Inc.) a leading manufacturer of room air conditioners in
the Philippines.

     In 2001, the Company acquired manufacturing assets to produce air
conditioners in Shanghai, China. Also in 2001, we acquired Polenz GmbH, a
leading German HVAC distributor, providing access to this important market. In
addition, we established a joint venture with Voltas, Ltd. to produce air
conditioners in India, giving us access to this growing market in Asia.

     In 2002, the Company established a residential, commercial, and industrial
air cleaning and humidification company in Suzhou, China, which was expanded to
include another factory in 2003.

     Also in 2003, the Company licensed technology to manufacture and market
residential gas furnaces which are now produced in our Ningbo, China factory.

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

     In March 2005, the Company 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).

     The results of operations of Islandaire have been included in the Company's
consolidated financial statements since the acquisition date. The acquisition
was not material to the Company's operations, financial position, or cash flows,
and thus pro-forma information has not been presented.

     Islandaire is located in East Setauket, New York, and now operates as
Fedders Islandaire, Inc. It manufactures and markets a line of specialized
through-the-wall packaged terminal air conditioners (PTACs) and heat pumps,
primarily for replacement applications in apartment buildings, hotels, and
motels, and in institutional buildings such as schools, offices, hospitals, and
nursing homes. Islandaire's replacement PTAC units fit into existing wall
openings without alteration to the structure of the building. The addition of
Islandaire's products extends the product line of the Company's existing
commercial products division. This subsidiary has been included within the HVACR
reportable segment since the date of acquisition.

     On July 27, 2006, the Company announced that it hired an advisor to explore
the possible sale of its global indoor air quality business, which includes all
of the Engineered Products segment plus a non-material portion of the
residential business in the HVACR segment. Annual sales of this business are
approximately $50 million with assets less than $50 million.

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 $17.3 million in cash
(before a $0.2 million temporary holdback) which resulted in a pre-tax gain of
$11.4 million. Melcor's results of operations, assets and liabilities are
reported as discontinued operations. Melcor revenues, which were reported in the
Engineered Products segment, were $6.6 million for the first six months of
2005.

RESULTS OF OPERATIONS

     The following table presents our results of continuing operations for
periods indicated. Results for the three months and six months ended June 30,
2006 and 2005 are unaudited. Operating results for Melcor Corporation are
disclosed as discontinued operations.


                                       22

<PAGE>

OPERATING RESULTS AS A PERCENT OF NET SALES

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED     SIX MONTHS ENDED
                                                        JUNE 30,             JUNE 30,
                                                  ------------------   -------------------
                                                    2006      2005       2006       2005
                                                  -------   --------   --------   --------
<S>                                               <C>       <C>        <C>        <C>
Net sales .....................................   $95,567   $122,732   $195,268   $195,630
Gross profit ..................................      14.3%      18.8%      13.5%      18.8%
Selling, general, and administrative expense ..      17.3       15.8       16.2       18.9
Restructuring expense .........................       0.6        0.2        0.3        0.2
Operating income/(loss) .......................      (3.6)       2.8       (3.0)      (0.3)
Net interest expense ..........................       5.6        4.6        5.5        5.6
Pre-tax loss ..................................      (9.0)      (1.6)      (8.8)      (5.4)
</TABLE>

THREE MONTHS ENDED JUNE 30, 2006 VERSUS THE THREE MONTHS ENDED JUNE 30, 2005

     Net sales for the three-month period ended June 30, 2006 of $95.6 million
declined by 22.1% compared with $122.7 million in the prior-year period. Net
sales within the HVACR segment dropped by 23.0% during the period due primarily
to lower sales of room air conditioners as a result of customers purchasing
product directly from the Company's China facilities during the first quarter of
2006 rather than from the Company's domestic warehouses nearer to the summer
season, as occurred in the second quarter of 2005. In addition, the Company is
no longer selling to The Home Depot retail stores in the United States, which
accounted for sales of $18.2 million in the second quarter of 2005. Sales in the
Engineered Products segment decreased by 11.0% due to lower sales in China.

     Gross profit declined to $13.7 million in the three-month period ended June
30, 2006, compared with $23.1 million in the prior-year period, and decreased to
14.3% of net sales during the second quarter versus 18.8% in the prior-year
quarter. Gross profit dollars declined primarily as a result of increased
commodity costs of copper, aluminum, and plastic as well as components that
contain these materials of $5.6 million that could not be passed along to
fixed-price-contract room air conditioner and dehumidifier customers in the form
of price increases. These lower-margin sales were partly offset by increased
gross margins of residential ducted air conditioners and commercial air
conditioners in the HVACR segment as well as increased gross margins of
air-quality products in the Engineered Products segment.

     Operating expenses for the three-month period ended June 30, 2006 were
$17.1 million, or 17.9% of net sales, compared with $19.6 million, or 16.0% of
net sales, in the prior-year period. This is a 12.7% reduction as a result of
cost-savings programs initiated in late 2005 and in 2006 as well as management's
continued focus on controlling costs. Operating expenses in the second-quarter
of 2006 include $0.6 million of restructuring costs.

     The operating loss for the three-months ended June 30, 2006 was $3.4
million, or 3.6% of net sales, compared with income of $3.5 million, or 2.8% of
net sales, in the prior-year period. The decrease is due to lower gross profit
from reduced sales volume and higher raw material costs, partially offset by the
lower selling, general and administrative ("SG&A") costs.

     Net interest expense decreased slightly in the three-month period ended
June 30, 2006, to $5.3 million, or 5.6% of net sales, compared with $5.7
million, or 4.6% of net sales, in the prior-year period. Interest expense
consisted of interest on the Company's long-term debt, on short-term working
capital loans in Asia, and on the Company's revolving credit facility in the
U.S. Net interest expense was lower than prior year due to a $45 million
reduction in short-term notes, partly offset by higher interest rates during the
current quarter.

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

     Net loss applicable to common stockholders in the three-month period ended
June 30, 2006 was $10.0 million, or a $0.32 loss per diluted common share. Net
loss applicable to common stockholders in the prior-year period was $2.5
million, or a $0.08 loss per diluted common share.

SIX MONTHS ENDED JUNE 30, 2006 VERSUS THE SIX MONTHS ENDED JUNE 30, 2005

     Net sales for the six-month period ended June 30, 2006 of $195.3 million
were essentially even compared with $195.6 million in the prior-year period.
This was accomplished without $31.8 million of sales to The Home Depot retail
stores in the United States in the six months ended June 30, 2005. Net sales in
the HVACR reporting segment increased slightly during the period due to
increases in commercial air conditioners and unitary products. Sales in the


                                       23

<PAGE>

Engineered Products segment decreased 5.4% due primarily to fewer industrial air
cleaning projects in Asia.

     Gross profit declined to $26.4 million in the six-month period ended June
30, 2006 compared with $36.7 million in the prior-year period, and decreased to
13.5% of net sales during the period versus 18.8% in the prior-year period.
Gross profit dollars declined as a result of increased commodity costs of
copper, aluminum, and plastic as well as components that use these materials of
$9.8 million that could not be passed along to fixed-price-contract room air
conditioner and dehumidifier customers in the form of price increases.

     Operating expenses for the six-month period ended June 30, 2006 were $32.2
million, or 16.5% of net sales, compared with $37.4 million, or 19.1% of net
sales, in the prior-year period. Operating expenses were lower than prior year
due to the Company's cost reduction initiatives in late 2005 and in 2006.

     Operating loss for the six months ended June 30, 2006 was $5.8 million, or
3.0% of net sales, compared with an operating loss of $0.6 million, or 0.3% of
net sales, in the prior-year period. The decrease reflects the lower gross
profit, offset in part by reduced SG&A costs.

     Net interest expense decreased in the six-month period ended June 30, 2006
to $10.8 million, or 5.5% of net sales, compared with $11.0 million, or 5.6% of
net sales, in the prior-year period. Interest expense consisted of interest on
the Company's long-term debt, on short-term working capital loans in Asia, and
on the Company's revolving credit facility in the U.S. Net interest expense was
lower than prior year due to lower short-term borrowings during the period,
partly offset by higher interest rates.

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

     Net loss applicable to common stockholders in the six-month period ended
June 30, 2006 was $20.0 million, or a $0.65 loss per diluted common share. Net
loss applicable to common stockholders in the prior-year period was $11.6
million, or a $0.38 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 $11.8 million at June 30, 2006 compared with $17.8 million a year
earlier. Short-term borrowings under the Company's working capital credit
facilities amounted to $45.8 million at June 30, 2006 compared with $90.5
million a year earlier. Current portion of long-term debt amounted to $2.3
million at June 30, 2006, compared with $1.5 million a year earlier.

     Net cash provided by operating activities for the six-month period ended
June 30, 2006 amounted to $9.2 million, compared with cash used of $17.7 million
in the prior-year period. Cash was provided by operations primarily as a result
of increased accounts receivable as the Company was in a more active selling
season, partly offset by increased accounts payable. Accounts receivable
increased $15.0 million versus an increase of $58.0 million in the prior year.
Net inventories at June 30, 2006 were $61.7 million compared with $74.3 million
at December 31, 2005 and $103.7 million at June 30, 2005. The reduced inventory
levels reflect the Company's decision to discontinue room air conditioner and
dehumidifier sales to The Home Depot United States retail stores and
management's focus on reducing inventory. Accounts payable at June 30, 2006 were
$65.7 million compared with $44.0 million at December 31, 2005 and $55.5 million
at June 30, 2005, and reflect increased production compared with prior year.

     Net cash used in investing activities in the six-month period ended June
30, 2006 of $0.7 million compared with cash used of $12.6 million in the
prior-year period. Investing activities included $1.6 million for additions to
property, plant, and equipment, compared with $3.3 million for the prior-year
period. This was partly offset by $0.9 million proceeds from asset sales in the
first quarter.

     Net cash used by financing activities for the six-month period ended June
30, 2006 amounted to $11.5 million, primarily for repaying debt. Net cash
provided by financing activities in the prior-year period was $26.3 million,
comprised primarily of $31.2 million in short-term borrowings that were used to
support operating needs, and $4.0 million of cash dividends.

     On July 27, 2006, the Company announced that it hired an advisor to explore
the possible sale of its global indoor


                                       24

<PAGE>

air quality business which includes all of the Engineered Products segment plus
a non-material portion of the residential business in the HVACR segment.
Proceeds from this sale would primarily be used to reduce debt. (See Note 12.)

     The Company did not declare quarterly dividends in the three months ended
June 30, 2006. The First Supplemental Indenture limits, among other things, the
Company from making any dividend payments without sufficient consolidated net
income beginning January 1, 2006. The Company declared quarterly dividends of
$0.03 on each share of outstanding common and Class B stock and $0.5375 on each
share of outstanding preferred stock in the three months ended June 30, 2005 and
$0.06 on each share of outstanding common and Class B stock and $1.076 on each
share of outstanding preferred stock in the six months ended June 30, 2005.

     On June 24, 2005, Fedders North America, Inc. ("FNA"), a wholly-owned
subsidiary of the Company, received notice that FNA defaulted on the covenant in
the indenture pursuant to which its 9 7/8% Senior Notes, due 2014 (the "Senior
Notes") were issued (the "Indenture") requiring the Company to file timely its
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 (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").

     On January 31, 2006, the Company replaced its expiring $100 million secured
revolving credit facility with a five-year, $75 million secured revolving credit
facility. The Company reduced the amount of its revolver based on its
anticipated borrowing needs. Availability under the new line of credit is based
primarily on advance rates on accounts receivable and inventory in the United
States and Canada. Financial covenants include an EBITDA test if availability
under the line falls below $10 million or below $7.5 million if no revolving
loan balance is outstanding. The credit facility is collateralized by
substantially all of the Company's assets and is in effect until January 2011.
The Company is no longer subject to minimum working capital or net worth
covenants.

     In the third quarter of 2006, the interest rate on the revolver will
increase by 50 basis points because the Company's EBITDA was less than $5
million for the first six months of 2006. The revolver balance was approximately
$22 million at June 30, 2006.

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


                                       25
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     From time to time the Company engages in hedging activities in an effort to
mitigate the impact of currency exchange rate fluctuations. However, the Company
cannot assure that any hedging transactions we enter into will be effective or
will not result in foreign exchange hedging loss. The impact of exchange rate
fluctuations on our results of operations cannot be accurately predicted (See
Note 13).

     At June 30, 2006, the Company has variable-rate debt of $45.1 million. At
this level, a one percentage point increase in interest rates would create $0.5
million additional expense annually.

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, control 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 2005 Annual Report on
Form 10-K, as of December 31, 2005, 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,
2005 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 2005 Annual Report on Form 10-K, which was filed with the SEC
on March 31, 2006. Based on that evaluation, the Chief Executive Officer and
Chief Financial Officer have concluded that, as of March 31, 2006, the Company's
disclosure controls and procedures were not effective, for the reasons described
above (relating to the previously-identified material weakness in internal
control over financial reporting).

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

     Changes In Internal Control Over Financial Reporting. Management completed
its assessment of internal controls for the year ended December 31, 2005. This
was done after its 2004 assessment in September 2005 and filing its Report on
Form 10-K for the year ended December 31, 2004 on September 30, 2005. The
Company engaged new auditors, UHY LLP, in November 2005, because Deloitte &
Touche elected not to stand for reappointment in 2005. As a result of the
lateness described above, the Company also began its remediation efforts for
material weaknesses identified in the 2004 assessment process later than would
be ideal during 2005.

     Management, with oversight from the Audit Committee, has been addressing
each of the issues identified in the December 31, 2005 Form 10-K, and is
committed to effectively remediating known weaknesses as expeditiously as
possible. The Company's remediation efforts during the fiscal quarter ended
December 31, 2005 and during the six


                                       26

<PAGE>

months ended June 30, 2006 have made progress in changing internal controls over
financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act, in areas identified as having a material weakness in
management's 2005 assessment. Management is addressing all of the material
weaknesses listed in its 2005 Annual Report. Changes described below were made
through the second quarter of 2006.

     The Company's remediation includes the following:

     The conclusion of management's assessment of internal controls as of and
for the year ended December 31, 2005 was that the Company's control environment
did not sufficiently promote effective internal control over financial reporting
throughout its management structure.

     STEPS TAKEN THROUGH THE SECOND QUARTER:

     a.)  The Corporate Controller has initiated regular corporate-wide meetings
          of divisional controllers and other financial managers to effectively
          communicate accounting policies and procedures, process improvements,
          and change management.

     b.)  Effective in 2006, the Company is establishing new, more efficient
          accounting processes and simplifying its complex accounting entity
          structure, which will free up resources to accelerate the closing
          process and reconcile accounts.

     c.)  The Company engaged a new third-party consulting firm with expertise
          in risk assessment, internal controls, and Sarbanes-Oxley compliance,
          to work with management in implementing the necessary internal
          controls and test the effectiveness of these controls.

     d.)  The Company developed an internal audit work plan to include
          operational and financial audits. This was enhanced by engaging the
          new third-party consulting firm to focus on Sarbanes-Oxley work.

     The following section lists specific control issues and corrective steps
taken as of the date of this filing.

     The Company's design and operation of controls over the accounting closing
and reporting process are not effective due to lack of timely and complete
preparation of account analyses and reconciliations, a lack of appropriate
review of account reconciliations and supporting analyses and errors in account
balance classifications.

     STEPS TAKEN THROUGH THE SECOND QUARTER:

     a.)  A detailed schedule of due dates was established that includes dates
          for key account analyses and reconciliation for which evidence of
          review and approval is required. The schedule takes into consideration
          financial statement filing requirements, and requires that key
          analyses be completed in a timely manner, while best utilizing
          accounting resources available.

     Fedders' controls over the process for recording and approving journal
entries were ineffective as a result of a lack of appropriate evidence of
journal entry review and approval. In addition, numerous instances occurred in
which journal entries were not adequately documented and supported. There were
also instances that identified adjusting entries were not made or were recorded
incorrectly.

     STEPS TAKEN THROUGH THE SECOND QUARTER:

     a.)  A policy was instituted requiring the appropriate evidence of review
          and approval on manual journal entries prior to being recorded as well
          as the quarterly testing of manual entries.

     Fedders' controls over the tax function were ineffective as a result of a
lack of resources necessary to assure the accuracy and completeness of the
preparation and approval of the Company's income tax provision and related tax
balances.

     STEPS TAKEN THROUGH THE SECOND QUARTER:

     a.)  The Company engaged a third-party CPA firm with technical expertise in
          the tax function to provide an


                                       27

<PAGE>

          independent review of tax accounts, including deferred income taxes
          and deferred income tax valuation accounts.

     Fedders' information technology general controls were ineffective as to
access controls, change management, and computer operations.

     STEPS TAKEN THROUGH THE SECOND QUARTER:

     a.)  The Company developed an improved standard set of information
          technology policies and procedures over these areas.

     Limitations on the Effectiveness of Controls. A company's internal control
over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. A company's internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the financial statements.

     Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

     Further, the design of disclosure controls and procedures and internal
control over financial reporting must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. 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.


                                       28
<PAGE>

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     None.

ITEM 1A. RISK FACTORS

     The reader should carefully consider the risk factors disclosed in the
Company's Annual Report on Form 10-K for the year ended December 31, 2005, in
Part I, Item 1A, Risk Factors. Any of those risks could have a material adverse
effect on the Company's financial condition and results of operations.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     None.

ITEM 3. DEFAULTS ON SENIOR SECURITIES

     The Company stopped paying dividends in the third quarter of 2005. The
amount of unpaid dividends on the Company's Series A Cumulative Preferred Stock
was $4.6 million, or $2.15 per preferred share, at June 30, 2006.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The Company held its Annual Meeting of Stockholders on June 20, 2006. At
the meeting, stockholders voted upon the (i) election of directors, (ii)
adoption of Fedders Corporation Restricted Stock Plan and certain previous
grants of restricted stock, and (iii) ratification of the appointment of
independent registered public accountants. All of the Company's then current
directors were nominated and elected, the stockholders approved the adoption of
the Fedders Corporation restricted stock plan and certain previous grants of
restricted stock, and ratified the appointment of UHY LLP as the Company's
independent registered public accounting firm. The results of the voting were as
follows:

<TABLE>
<CAPTION>
DIRECTORS                VOTES FOR   VOTES WITHHELD
---------                ---------   --------------
<S>                     <C>          <C>
Sal Giordano, Jr.       27,887,373       951,267
William J. Brennan      27,938,562       900,078
Dr. David C. Chang      27,982,463       856,177
Michael L. Ducker       27,985,292       853,348
Joseph Giordano         27,906,580       932,060
Michael Giordano        27,888,552       950,088
Howard S. Modlin        27,941,258       897,382
Herbert A. Morey        27,987,243       851,397
S.A. Muscarnera         27,980,772       857,868
Anthony E. Puleo        27,994,733       893,907
Dr. Jitendra V. Singh   27,986,581       852,059
</TABLE>

     The proposal to adopt the Fedders Corporation Restricted Stock Plan and
certain previous grants of restricted stock was approved by a vote of 14,251,358
in favor and 1,868,036 against, with 269,897 abstaining. The broker non-vote was
12,449,349.

     The appointment of UHY LLP was ratified by a vote of 28,277,484 in favor
and 239,483 against, with 321,672 abstaining.

ITEM 5. OTHER INFORMATION

     None.


                                       29

<PAGE>

ITEM 6. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                                 DESCRIPTION
-------                                 -----------
<S>       <C>
  31.1    Certifications pursuant to Section 302 of the Sarbanes-OxleyAct of 2002

  31.2    Certifications pursuant to Section 302 of the Sarbanes-OxleyAct 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>


                                       30

<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: 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.

August 9, 2006


                                       31