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

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549
                                ----------------

                                    Form 10-K

|X|   Annual Report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

      For the fiscal year ended December 31, 2003

                                       or

|_|   Transition report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

      For the transition period from              to

                          Commission file number 0-7024

                              THE FIRST YEARS INC.
             (Exact Name of Registrant as Specified in its Charter)

              MASSACHUSETTS                           04-2149581
     (State or Other Jurisdiction of               (I.R.S. Employer
      Incorporation or Organization)              Identification No.)

            ONE KIDDIE DRIVE,
           AVON, MASSACHUSETTS                          02322
 (Address of Principal Executive Offices)             (Zip Code)

                                  508-588-1220
              (Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

     Title of Each Class           Name of Each Exchange on Which Registered
             None                                    None

Securities registered pursuant to Section 12(g) of the Act:

                          COMMON STOCK, $.10 PAR VALUE
                  (AND ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
                                (Title of Class)

    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 twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|.

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. |X|

    Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act) Yes |X| No |_|. The aggregate market value,
based upon the closing sale price of the shares as reported by the Nasdaq
National Market, of voting stock held by non-affiliates as of June 30, 2003 was
$76,051,935 (excludes shares held by executive officers, directors, and
beneficial owners of more than 10% of the Company's common stock). Exclusion of
shares held by any person should not be construed to indicate that such person
possesses the power, direct or indirect, to direct or cause the direction of
management or policies of the registrant or that such person is controlled by or
under common control with the registrant.

    The number of shares of Registrant's Common Stock outstanding on February
27, 2004 was 8,338,218.

    Portions of the Registrant's Definitive Proxy Statement for its 2004 Annual
Meeting of Stockholders are incorporated by reference into Part III of this
Report.

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

                                TABLE OF CONTENTS

  Item  Description                                                       Page
  ----  -----------                                                       ----

                                     Part I

    1   Business.........................................................  I-1
    2   Properties.......................................................  I-6
    3   Legal Proceedings................................................  I-6
    4   Submission of Matters to a Vote of Security Holders..............  I-6

                                     Part II

    5   Market for Registrant's Common Equity and Related Shareholder
           Matters.......................................................  II-1
    6   Selected Financial Data..........................................  II-2
        Management's Discussion and Analysis of Financial Condition and
    7      Results of Operations.........................................  II-2
   7A   Quantitative and Qualitative Disclosures about Market Risk.......  II-11
    8   Financial Statements and Supplementary Data......................  II-12
        Changes in and Disagreements with Accountants on Accounting and
    9      Financial Disclosure..........................................  II-12
   9A   Controls and Procedures..........................................  II-12

                                    Part III

   10   Directors and Executive Officers of the Registrant...............  III-1
   11   Executive Compensation...........................................  III-1
   12   Security Ownership of Certain Beneficial Owners and Management
           and Related Shareholder Matters...............................  III-1
   13   Certain Relationships and Related Transactions...................  III-1
   14   Principal Accountant Fees and Services...........................  III-1

                                     Part IV

   15   Exhibits, Financial Statement Schedules and Reports on Form 8-K..  IV-1
<PAGE>

                                     PART I

This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Our actual results could differ materially
from those set forth in the forward-looking statements. Certain factors that
might cause such a difference are discussed in the sections entitled "Cautionary
Note Regarding Forward-Looking Statements" on page II-2 and "Factors That May
Affect Financial Condition and Future Results" beginning on page II-7 and
elsewhere in this Form 10-K.

Item 1. Business

General

    The First Years Inc. is a leading worldwide marketer of quality innovative
products for infants and toddlers. Incorporated in 1952 as Kiddie Products,
Inc., and adopting its new name in 1995, The First Years is dedicated to
delivering products that out-perform the competition through an in-depth
understanding of parenting and child development. We work in consultation with
leading child development and parenting experts, as well as our worldwide
Parents Council, to develop products that make the first three years of life
happier, healthier and easier for babies and the families who love them.

    We maintain a website with the address www.thefirstyears.com. We are not
incorporating by reference information contained in our website as a part of
this Annual Report on Form 10-K. We make available free of charge through our
website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, and amendments to these reports, as soon as
reasonably practicable after we electronically file such material with, or
furnish such material to, the Securities and Exchange Commission.

Products

    Our product line, which contains approximately 350 items ranging in retail
price from approximately $0.96 to $149.99, is marketed under The First Years(R)
brand, licenses from The Walt Disney Company and Sesame Street(R), licensed from
the Sesame Workshop.

    Leveraging these brands, we market a broad range of products in three
categories.

Product Categories                        Products
------------------                        --------

Feeding & Soothing   o   Bottles, bottle brushes, bowls, breast pumps and other
                         nursing accessories, drinking cups, dishes, flatware,
                         bibs, booster seats, mealtime totes, bottle warmers,
                         feeding organizers, drying racks, disposable cups and
                         spill-proof cups.

Play & Discover      o   Toys, teethers, bath toys, books, stroller toys, and
                         rattles.

Care & Safety        o   Bathing and grooming products including bathtubs,
                         washcloths, hooded towels, nail clippers, toothbrushes,
                         comb and brush sets, baby scissors and tub-side bath
                         seats.

                     o   Home safety products including monitors, safety gates,
                         bed rails, and spout guards.

                     o   Wellness products, including thermometers, medicine
                         dispensers, health care kits and no scratch mitts.

                     o   Diapering and toilet training products including toilet
                         training seats, toilet training kits, diapering
                         accessories, and step stools.

    We had several innovative product introductions in 2003, including a program
of monitors and sleep accessories, a developmental toy program, an expanded
breastfeeding line, including disposable breast pads, and a one-of-a-kind


                                      I-1
<PAGE>

clear panel gate. In 2004, we expect to introduce new product programs to
continue to strengthen our product portfolio.

Product Design and Development

    We are actively engaged in designing and developing new products and
enhancements to our current products. During 2003, 2002, and 2001, we spent
approximately $7.5, $6.4, and $5.0 million, respectively, on new product
development. In 2004, we intend to continue to invest in product development
across all product lines. Our product development efforts are centered on
identifying areas in which we can differentiate our products and add value to
the parenting process, and on aggressively developing products to meet parents
needs.

    We believe our unique product design and development process contributes to
the success of our products. Our process has four main steps:

    1.  We use our parenting expertise, which we believe is unique in our
        industry, combined with the latest technology to develop product
        concepts that solve the needs and wants of parents.

    2.  We present our new product concepts to The First Years Parents Council,
        a global network comprised of expectant and current parents, to solicit
        feedback on purchase interest and suggestions for refinement. We further
        develop our products based on feedback from surveys and focus groups.

    3.  We consult with our in-house Director of Parenting & Child Development,
        Maureen O'Brien, Ph.D. to elicit developmental information and guidance
        prior to creating models of the product. If Dr. O'Brien determines the
        need, additional consultation is sought from external specialists from
        the appropriate medical or educational discipline. Once we have created
        a model, our internal cross-functional product development teams review
        and evaluate it thoroughly to confirm that it meets our standards for
        quality and safety prior to pre-testing by children and/or parents.

    4.  We send pre-production samples to parents for home use testing along
        with the closest product from our competitor. Our goal is to have our
        product out-perform the competition before manufacturing is authorized.

    In addition to designing new products, our product development team
regularly reevaluates and redesigns existing products to adapt to changing
consumer demands, market opportunities, technological advancements and product
introductions by competitors.

Marketing and Sales Distribution

    We market our products under three distinctive brands. Products are marketed
under our own brand, The First Years(R), and we license Winnie the Pooh(R) and
Mickey Mouse(R) and other related characters from Disney Enterprises, Inc. and
Sesame Street(R) characters from the Sesame Workshop.

    Our products are sold to approximately 700 customers in more than 41
countries. Our customer base includes mass merchants, national variety and drug
stores, supermarkets, wholesale clubs, convenience stores, toy specialty stores,
wholesale distributors, department stores, internet-based retailers, mail order
catalogs and catalog stores. Major customers include Wal*Mart, Toys "R" Us,
Target, Kmart, Sears, J.C. Penney, Mothercare UK Ltd., Baby Depot at Burlington
Coat Factory, Rite Aid, Albertson's, Kohls, Zellers, Buy Buy Baby, Walgreens,
Meijers, Peyton's, H. E. Butt Grocery Co., Safeway Stores, PLC, Eckerd Drug, and
Ahold.

    We market our products in the United States and Canada through our sales
organization, which is comprised of an internal sales staff and a network of
independent sales representatives. Our sales management is responsible for the
development and training of independent sales representatives. We conduct
training at our Massachusetts headquarters and at sales offices throughout the
United States. In 2003, we had sales offices in New Jersey, Missouri, Arkansas
and California.


                                      I-2
<PAGE>

    In Europe, the Middle East and Africa, our internal sales staff sells The
First Years' products from our sales office in Cirencester, England, which is
headed by our Vice President & General Manager -- Europe, Africa, and Middle
East and through distributors. This staff also manages a select group of
distributors and independent sales representatives. In Central and South
America, Australia and the Pacific Rim, our internal sales staff sells our
products through a network of foreign distributors and independent sales
representatives. In 2003, our continued focus on key customers in principal
international markets resulted in expanded international distribution and sales.

    During 2003, Wal*Mart, Toys "R" Us, and Target accounted for approximately
27%, 20%, and 18% of our net sales, respectively. A significant reduction in
purchases by any one of these customers could have a material adverse effect on
our business. Additionally, in 2003 our top ten customers collectively accounted
for 75% of net sales.

    In accordance with industry practice, we grant credit to our customers at
the time of purchase. Our practice is not to accept returned goods unless
authorized by management of our sales organization. Returns result primarily
from damage or shipping discrepancies. Returns are reflected as a reduction of
sales and accounts receivable. In addition to actual returns, our management
makes estimates of future returns based upon historical trends for future
planning purposes.

    We ship products according to the delivery schedules specified by our
customers. Orders are subject to cancellation or change any time prior to
shipment. The size of our order backlog is not a material aspect of our
business. The dollar amount of current backlog is not considered to be a
reliable indicator of future sales volume.

Licensed Character, Trademarked, or Copyrighted Materials

    We have several exclusive and non-exclusive agreements with third parties
that permit us to utilize licensed characters and other trademarked or
copyrighted material. These agreements contain provisions for the payment of
guaranteed or minimum royalty amounts. Total required minimum royalty payments
were approximately $4,245,000 and $3,890,000 for the periods ended December 31,
2003 and 2002, respectively. In 2002, we renewed a major licensing agreement
with Disney Enterprises, Inc., covering sales in the United States and Canada,
which will expire at the end of 2004. Sales of products licensed under this
major agreement with Disney Enterprises, Inc. amounted to 22% of our total net
sales for the year ended December 31, 2003. While our management currently
expects this licensing agreement to be renewed at the end of its term,
non-renewal of this major licensing agreement or renewal on terms not favorable
to us could have a material adverse effect on our business. In addition, the
Disney licensing agreement is non-exclusive and Disney has granted a license to
a retailer that includes the same types of products covered under our license.
In the future, Disney may grant licenses for the same products covered under our
license to additional retailers and other parties, which could have a material
adverse impact on our business.

Manufacturing and Sources of Supply

    We do not own or operate manufacturing facilities. In 2003, all of our
products were manufactured using either our custom tools such as molds and dies
or to our specifications by approximately 25 manufacturers located in the United
States, Canada, China, Taiwan, and Thailand. Approximately 76% of all of our
products sold in 2003 were manufactured in Asia, primarily in China. Because of
the significantly higher shipping costs from the Far East, most of our
furnishings and other large products were manufactured in 2003 by suppliers in
the United States and Canada.

    Generally, to make each product we use one manufacturer from our supplier
base. Due to the high cost of developing duplicate tooling, predominantly molds
and dies, most of our products are made using one set of tools; however, we have
developed duplicate tools for several of our key and high-volume products.

    In 2003, our largest supplier, located in Taiwan, manufactured products that
represented approximately 13% of our net sales. We have not entered into
long-term contractual arrangements with any of our suppliers.

    The principal raw materials used in the production and sale of our products
are resin-based plastics and certain natural materials, including paperboard and
cloth. The manufacturers who deliver completed products to us purchase


                                      I-3
<PAGE>

the raw materials for their use in the manufacturing process. Because the
primary source used in many manufactured plastics is petroleum, the cost of
plastic for use in our products varies to a great extent with the price of
petroleum. While all raw materials are purchased from outside sources, we are
not dependent upon a single supplier in any of our operations for any material
essential to our business or not otherwise commercially available to us. We have
been able to obtain an adequate supply of raw materials, and no shortage of any
materials is anticipated.

    We purchase our products from suppliers primarily in United States dollars
and Hong Kong dollars, which are currently pegged to the United States dollar.
We also purchase a small percentage of our products in Canadian dollars.
Generally, our suppliers ship the products on the basis of open credit terms or
upon our acceptance of the products.

    Because of our substantial reliance on suppliers located in the Far East,
primarily China and Hong Kong, we must order products further in advance of
customer orders than would generally be the case if such products were produced
in the United States. As a result, we may be required to carry significant
amounts of inventory to meet rapid delivery requirements of customers and to
ensure a continuous allotment of goods from suppliers.

    Foreign manufacturing is subject to a number of risks including
transportation delays and interruptions, the imposition of tariffs, quotas, and
other import or export controls, currency fluctuations, misappropriation of
intellectual property, political and economic disruptions, and changes in
governmental policies. From time to time, the United States Congress has
attempted to impose additional restrictions on trade with China. China gained
Permanent Normal Trade Relations (PNTR) status with the United States when it
acceded to the World Trade Organization, effective January 1, 2002. The United
States imposes the lowest applicable tariffs on exports from PNTR countries to
the United States. In order to maintain its WTO membership, China has agreed to
several requirements, including the elimination of caps on foreign ownership of
Chinese companies, lowering tariffs and publicizing its laws. No assurance can
be given that China will meet these requirements and remain a member of the WTO,
or that its PNTR trading status will be maintained. If China's WTO membership is
withdrawn or if PNTR status for goods produced in China were removed, there
could be a substantial increase in tariffs imposed on goods of Chinese origin
entering the United States, including those manufactured for us, which would
adversely impact our sales and cost of sales. The European Community has enacted
a quota and tariff system with respect to the importation into the European
Community of certain toy products originating in China. Therefore, we continue
to evaluate alternative sources of supply outside of China.

Facilities and Distribution

    We distribute our products in the United States from our warehouse facility
in Avon, Massachusetts and from a public warehouse in Ontario, California.
Products distributed in Canada are handled from a public warehouse in
Mississauga, Ontario. In Europe and the United Kingdom, we distribute our
products from public warehouses in Ghent, Belgium and Widnes, England.
Unaffiliated warehouse operators provide public warehousing services to us.

Seasonality

    Our business is not subject to substantial seasonal fluctuations.

Competition

    The juvenile products industry is highly competitive and is characterized by
the frequent introduction of new products and includes numerous domestic and
foreign competitors, some of which are substantially larger and have greater
financial and other resources than we do. We compete with a number of different
competitors, depending on the product category, and compete against no single
company across all product categories. Our competition includes large,
diversified health care product companies, specialty infant products makers, toy
makers, and specialty health care products companies. We compete principally on
the basis of brand name recognition, product quality innovation and price/value
relationship. In addition, we believe that we compete favorably with respect to
product design, customer service, and breadth of product line.


                                      I-4
<PAGE>

Trademarks, Patents, and Copyrights

    We believe that the intellectual property we own or license is an integral
part of our business and that it complements our design expertise, innovative
talents, and marketing capabilities across all product categories. Our principal
trademarks, THE FIRST YEARS(R) and THE FIRST YEARS and Design(R), are registered
in the United States and in a number of foreign countries throughout the world.
In total, we have approximately 290 registrations and pending applications for
our various trademarks. We also license other trademarks for certain of our
products and product categories, some of which are registered in the United
States and in various foreign countries.

    We also own utility patents and design patents in the United States and
utility patents, design patents, and design registrations in certain foreign
countries, as well as pending applications in the United States and foreign
countries. In total, we own approximately 164 patents and applications. Although
we believe this property is important to our business, we do not believe that
any single patent, design patent, or design registration, including any which
may be issued on a pending application, is material to our business. No
assurance can be made that our patents, design patents, or design registrations,
including those that may be issued on pending applications, offer any
significant competitive advantage for our products.

Employees

    Our people -- the employees of The First Years who work with our customers,
suppliers and other key constituents -- are critical to our success. As of
December 31, 2003, we employed 182 full-time employees, of whom 7 are senior
executive officers, and 8 part-time employees. All employees are in general
management, sales, marketing, product development, materials, purchasing,
quality assurance, data processing, finance, legal, administration and clerical,
and warehousing positions. None of our employees are represented by a union and
we have not experienced any work stoppages. We believe that relations with
employees are good.

Government Regulations

    Our products are subject to various laws, rules and regulations, including
the Federal Consumer Product Safety Act, the Federal Hazardous Substances Act,
as amended, the Federal Flammable Fabrics Act, the Child Safety Protection Act,
and the regulations promulgated under each such Act (the Acts). In addition, our
nursery monitors are subject to the regulations of the Federal Communications
Commission and our medical devices and drug products are subject to the
regulations of the Food and Drug Administration (FDA). The Acts empower the
Consumer Product Safety Commission (CPSC) to protect children from hazardous
toys and other articles. The CPSC has the authority to exclude from the market
products that are found to be hazardous and to require a manufacturer to
repurchase such products under certain circumstances. The CPSC's determination
is subject to court review. In addition, the Federal Flammable Fabrics Act
empowers the CPSC to regulate and enforce flammability standards for fabrics
used in consumer products. Similar laws and regulations exist in various
international markets in which our products may be sold. While we oversee a
quality control program designed to ensure that our products comply with laws
and regulations, no assurance can be made that defects will not be found in our
products, resulting in product liability claims, recalls of a product, loss of
revenue, diversion of resources, damage to our reputation or increased warranty
costs, any of which could have a material adverse effect on our business,
financial condition, and results of operation.

Recent Developments

    On January 6, 2004, we announced that several months prior to that time, we
had retained the services of Goldman, Sachs & Co., as our financial advisor, to
assist us in our analysis and consideration of various strategic alternatives
that may be available to our company to expand our growth opportunities and
maximize stockholder value. There can be no assurance that, if any transaction
is commenced, it will be completed or as to the value that any such transaction
might have for our stockholders. We do not intend to update this information
until such time, if


                                      I-5
<PAGE>

ever, as we enter into a definitive agreement with a third party or parties in
connection with any such transaction or series of transactions or determine to
terminate this strategic process.

Item 2. Properties

    We own and manage our executive and administrative offices and East Coast
warehouse located within a 114,000 square-foot facility at One Kiddie Drive,
Avon, Massachusetts. We lease from unrelated third parties our sales offices in
New Jersey, Missouri, Arkansas, California, and Cirencester, England.

    We use public warehouses in Mississauga, Canada, Ontario, California, Ghent,
Belgium, and Widnes, England for product distribution.

    All owned and leased properties are in good condition and sufficient to
handle our facility needs for at least the next few years. We believe that we
could lease additional property at favorable rates.

Item 3. Legal Proceedings

    We are involved in legal proceedings which have arisen in the ordinary
course of business. We believe that there are no claims or litigation pending,
the outcome of which could have a material adverse effect on our financial
condition or operating results.

Item 4. Submission of Matters to a Vote of Security Holders

    No matter was submitted during the fourth quarter of the fiscal year covered
by this report to a vote of our security holders.


                                      I-6
<PAGE>

                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

Market Information

    Our common stock is traded on the Nasdaq National Market under the symbol
"KIDD". Below is a summary of the high and low sales prices of our common stock
for each quarter of 2003 and 2002 as reported by Nasdaq.

                                      2003

Quarter                                                        Low       High
-------                                                     --------   --------
First...................................................    $  8.300   $ 11.750
Second..................................................    $ 10.400   $ 13.760
Third...................................................    $ 12.120   $ 14.189
Fourth..................................................    $ 12.800   $ 14.960

                                      2002

Quarter                                                        Low       High
-------                                                     --------   --------
First...................................................    $ 11.560   $ 13.970
Second..................................................    $ 10.360   $ 12.490
Third...................................................    $  9.600   $ 11.200
Fourth..................................................    $  6.900   $ 10.990

    These prices reflect high and low intraday sales prices for our common stock
each quarter. They represent inter-dealer prices, without retail mark-up,
markdown or commission and may not necessarily represent actual transactions.

Dividend Policy

    On May 15, 2003, the Board of Directors raised our cash dividend on our
common stock to $0.24 per share and announced that dividends would be paid on a
quarterly basis. Quarterly dividend payments of $.06 per share were made on June
15, 2003, September 15, 2003 and December 15, 2003. In 2002, we paid an annual
cash dividend on our common stock in the amount of $0.10 per share, which was
paid on June 15, 2002. We currently expect that we will continue to pay cash
dividends in the future. However, the declaration and payment of any such cash
dividends in the future will depend upon our earnings, financial condition,
capital needs, and other factors deemed relevant by the Board of Directors.

Stock Repurchase Program

    We have a stock repurchase program approved by our Board of Directors on
October 25, 1998 and extended on October 26, 2000, pursuant to which we are
authorized to purchase up to an aggregate of $20 million of issued and
outstanding shares of our common stock. This authority may be exercised from
time to time and in such amounts as market conditions warrant. In 2003, we
repurchased 8,200 shares of our common stock at an aggregate purchase price of
$93,227, and in 2002, we repurchased 2,600 shares of our common stock at an
aggregate purchase price of $25,823. We had approximately $4 million of
remaining availability for repurchases under the program as of December 31,
2003.

Approximate Number of Equity Security Holders

    As of March 9, 2004, we had approximately 189 holders of record of our
common stock.


                                      II-1
<PAGE>

Item 6. Selected Financial Data

<TABLE>
<CAPTION>
                                                   2003             2002             2001             2000             1999
                                               ------------     ------------     ------------     ------------     ------------
<S>                                            <C>              <C>              <C>              <C>              <C>
Selected Income Statement Data:
Net sales* ...............................     $135,614,017     $134,391,487     $125,783,770     $128,753,574     $130,367,749
Cost of products sold ....................       85,448,357       88,281,741       83,777,994       85,799,934       86,811,017
Selling, general and administrative
  expenses* ..............................       35,223,252       32,790,120       32,073,559       29,210,337       28,854,239
Interest expense .........................               --               --               --               --               --
Interest income ..........................          206,175          134,089          664,071          743,260          582,640
Income before income taxes ...............       15,149,123       13,453,715       10,596,288       14,486,563       15,285,133
Provision for income taxes ...............        5,367,300        5,516,000        4,344,500        5,835,600        6,190,500
Net income ...............................        9,781,823        7,937,715        6,251,788        8,650,963        9,094,633
Basic earnings per share .................     $       1.18     $       0.97     $       0.68     $       0.91     $       0.89
Diluted earnings per share ...............     $       1.16     $       0.95     $       0.67     $       0.90     $       0.87
Dividends paid per share .................     $       0.18     $       0.10     $       0.06     $       0.06     $       0.06
Basic weighted average number
  of shares outstanding ..................        8,264,554        8,200,624        9,151,540        9,500,726       10,226,470
Diluted weighted average number
  of shares outstanding ..................        8,462,178        8,368,882        9,304,272        9,619,928       10,402,297

Selected Balance Sheet Data:
Total assets .............................     $ 84,664,755     $ 75,751,900     $ 65,275,761     $ 71,694,380     $ 67,913,856
Long-term debt ...........................               --               --               --               --               --
Stockholders' equity .....................       63,945,658       54,616,590       47,228,403       54,902,789       51,702,426
Stockholders' equity per share ...........     $       7.56     $       6.53     $       5.08     $       5.71     $       4.97
</TABLE>

----------
*   Amounts prior to 2002 were adjusted as a result of our adoption of Emerging
    Issues Task Force (EITF) No. 01-09, "Accounting for Consideration Given by a
    Vendor to a Customer" in 2002.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

Cautionary Note Regarding Forward-Looking Statements

    Included in this report are certain "forward-looking" statements, involving
risks and uncertainty, which are covered by the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Such statements are based on
management's current expectations and are subject to certain factors, risks and
uncertainties that may cause actual results, events and performance to differ
materially from those referred to or implied by such statements. In addition,
actual future results may differ materially from those anticipated, depending on
a variety of factors, which include, but are not limited to, the success of our
market research identifying new product opportunities, trends in sales of The
First Years(R) brand and licensed and specialty products, the continued success
of new enhancements to our brand image, continued success of new Disney
character refreshed graphics, successful introduction of new products, continued
product innovation, growth in international sales, our ability to attract and
retain key personnel, conditions affecting consumer spending, including
uncertainties relating to global political conditions such as terrorism, our
relationships with our suppliers and manufacturers, sales and earnings results
and the outcome of, and the uncertainties related to, our review of the
strategic alternatives available to our company. Information with respect to
important factors that should be considered is contained in the "Factors That
May Affect Financial Condition and Future Results" in this Report on Form 10-K.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. We do not intend to update
any of the forward-looking statements after the date of this report to conform
these statements to actual results or to changes in our expectations, except as
may be required by law.


                                      II-2
<PAGE>

Overview

    The First Years is a leading developer and international marketer of
parenting products for newborns, infants and toddlers. We market our products
primarily under The First Years brand in addition to a licensed products
business that is co-branded with two top juvenile product licenses, Disney and
Sesame Street. Leveraging these brands, we market a broad range of products in
three categories: Feeding & Soothing, Play & Discover, and Care & Safety.

    Net sales for 2003 were $135.6 million, up 1% as compared to net sales of
$134.4 million in 2002. We market products through our sales organization, which
is comprised of an internal sales staff and a network of independent sales
representatives and distributors. Our three largest customers in 2003 were
Wal*Mart, Toys "R" Us, and Target, which accounted for 65% of our sales. Our
products are sold to approximately 700 customers in more than 41 countries, with
international sales comprising 14% of our total 2003 net sales. As such, our
results are impacted by general economic conditions affecting retailers,
including, but not limited to, competitive pressures, consumer demand, and
inventory management.

    Net income for 2003 increased 23% to $9.8 million or $1.16 per diluted
share, compared to $7.9 million or $0.95 per diluted share in 2002. The growth
in 2003 net income was driven principally by improved gross margins and impacted
by the favorable resolution of a state tax matter, partially offset by higher
selling, general, and administrative costs. Gross margin improvements were the
result of cost reductions, product mix, changes in transportation arrangements
for a key retailer, and, to a lesser extent, foreign exchange gains. A
non-recurring tax benefit of $465,100 related to the favorable settlement of a
state tax matter also impacted earnings positively. Selling, general, and
administrative expenses increased 7% in 2003 compared to 2002 principally due to
increased marketing and product development efforts, combined with higher legal
costs related to proxy and other matters and higher insurance costs.

    Critical Accounting Policies and Estimates

    This discussion and analysis of our financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires management
to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues, expenses, and related notes. Some of these estimates
require difficult, subjective and/or complex judgments about matters that are
inherently uncertain and, as a result, actual results may differ from those
estimates. Due to the judgment and estimation involved, the following summarized
accounting policies and their application are considered to be critical to
understanding the business operations, financial condition, and results of
operations of The First Years.

    Revenue Recognition -- We recognize revenue when products are shipped or
delivered and substantial risk of ownership transfers to the customer, a firm
sales agreement is in place, and collectibility of the fixed or determinable
sales price is reasonably assured. Common to our industry, customers may be
authorized to return selected products. We reduce sales and accounts receivable
for actual returns and estimate future returns based on historical trends and
information available to us, including the pattern of returns immediately
following the reporting period. We also maintain allowances for doubtful
accounts for estimated losses resulting from the inability of our customers to
make required payments. If the financial condition of our customers
deteriorates, resulting in an impairment of their ability to make payments,
additional allowances may be required.

    Inventories -- Inventories, consisting of finished goods, unpackaged
components, and supplies, are stated at the lower of cost or market with cost
determined using the first-in, first-out method. We make certain obsolescence
and other assumptions to adjust inventory based on historical experience and
current information. We write down inventory for estimated obsolete or
unmarketable inventory equal to the difference between the costs of inventory
and estimated market value, based upon assumptions about future demand and
market conditions. In the event of a write down of inventory, we also review
molds associated with those products to determine whether there has been a
significant impairment to the carrying value of the asset. If the carrying value
of these assets is considered not to be recoverable, such assets are written
down as appropriate. These assumptions, although consistently applied, can have
a significant impact on current and future operating results and financial
position.


                                      II-3
<PAGE>

    Sales Incentives -- Sales incentives offered to customers to promote the
sales of our products include costs related to cooperative advertising programs,
promotions, slotting fees or buydowns, and certain rebates. In determining these
costs, we reflect activity and make estimates of certain costs of promotional
activity based on historical arrangements and information available to us. Costs
associated with sales incentives are, depending upon the nature of the sales
incentive, accrued as revenue is recognized or accrued upon completion of a
sales-related activity giving rise to an obligation, and are reflected as a
reduction of revenue.

    For further information concerning accounting policies refer to Note 1 of
our Consolidated Financial Statements.

    The following table sets forth our statement of operations expressed as a
percentage of net sales for the periods indicated. This table and subsequent
discussions should be read in conjunction with the Company's audited
consolidated financial statements and notes thereto.

                                                  As a Percentage of Net Sales
                                                     Year ended December 31,

                                                   2003       2002       2001
                                                   ----       ----       ----
Net sales                                         100.0%     100.0%     100.0%
Cost of products sold                              63.0       65.7       66.6
                                                  -----      -----      -----
Gross Profit                                       37.0       34.3       33.4
Selling, general and administrative expenses       26.0       24.4       25.5
                                                  -----      -----      -----
Operating Margin                                   11.0        9.9        7.9
Interest income                                      .2         .1         .5
                                                  -----      -----      -----
Income before income taxes                         11.2       10.0        8.4
Provision for income taxes                          4.0        4.1        3.4
                                                  -----      -----      -----
Net income                                          7.2%       5.9%       5.0%
                                                  =====      =====      =====

Results of Operations

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

Net Sales
    Consolidated net sales for 2003 were $135.6 million, an increase of $1.2
million or 1%, as compared to net sales of $134.4 million in 2002. Domestic
sales declined slightly in 2003 due in part to the timing of pipeline fills and
inventory reductions by a number of retailers. This decline was offset by an
increase in international sales driven primarily by increased distribution in
Canada, our continued focus on key customers in principal international markets,
and favorable exchange rates. In 2003, net sales of The First Years brand
products increased 4% due to the introduction and expansion of key product
programs, including gates, monitors, and our award-winning line of "Take &
Toss(R)" products, a line of semi-disposable feeding products. Net sales of
licensed and specialty products decreased by 5% due to pipeline fills in 2002,
which were not repeated, and the discontinuation of a specialty program by a key
retailer at the end of 2002.

    As a percentage of net sales, sales of licensed and specialty products
decreased to 30% in 2003 from approximately 32% in 2002. Net sales of The First
Years brand products increased to 70% in 2003 from approximately 68% in 2002 due
primarily to the success of key items noted in the previous paragraph.
International net sales as a percentage of total net sales increased to 14% in
2003 from 13% in 2002 primarily due to improved Canadian and European sales
performance.

Cost of Sales and Gross Profit

    Cost of products sold in 2003 was $85.4 million, a decrease of $2.9 million
or 3%, as compared to $88.3 million in 2002. As a percentage of net sales, cost
of products sold in 2003 decreased to 63% from 66% in 2002 and gross profit
improved from 34% to 37% in 2003. Gross profit in 2003 was positively impacted
by several factors, including cost reductions, product mix changes,
modifications in transportation arrangements with a key retailer,


                                      II-4
<PAGE>

and, to a lesser extent, foreign exchange gains. Specifically, cost savings
realized in product and sales-related expenses, increasing gross profit by
approximately 120 basis points or 1.2%, were driven by operational improvements
and success in our sourcing strategies. A change in transportation arrangements
with a key retailer effective in February 2003 increased gross profit percentage
by approximately 80 basis points. Margins related to the 2003 product mix were
also favorably affected by the discontinuation of a specialty program by a key
retailer at the end of 2002, resulting in a margin improvement of approximately
70 basis points. Foreign exchange gains were $.6 million in 2003, as compared to
$.1 million in 2002, or a margin improvement of approximately 40 basis points,
and were impacted by the decline in the U.S. dollar relative to the Canadian
dollar, British pound, and Euro in 2003.

    We have experienced significant cost reductions and other events which have
benefited our gross profits. There can be no assurance that, in spite of our
past success in sourcing, that we will sustain these cost reductions or
experience these events in the future. In addition, should current economic
conditions deteriorate affecting the demand for our products, or pricing
pressures associated with competition worsen, gross profits could be adversely
impacted.

Selling, General, and Administrative Expenses

    Selling, general, and administrative expenses in 2003 were $35.2 million, an
increase of $2.4 million or 7%, as compared to $32.8 million in 2002. As a
percentage of net sales, selling, general, and administrative costs increased
from 24% to 26% in 2003. This increase was primarily due to an increase in
salaries and related costs associated with increased marketing and product
development efforts, increased legal costs related to proxy and other matters,
insurance, and higher product development costs, partially offset by cost
containment measures affecting general expenditures. We are continuing to focus
our efforts on achieving additional operating efficiencies by reviewing and
improving upon existing business processes and evaluating our cost structure.

Net Income

    Net income for 2003 increased 23% to $9.8 million or $1.16 per diluted
share, compared with $7.9 million or $0.95 per diluted share in 2002. As a
percentage of net sales, net income increased from 6% to 7% in 2003. The
increase in net income is a result of improved gross profits and the favorable
resolution of a state tax matter, partially offset by increased selling,
general, and administrative expenses and reduced income tax costs. Income tax
expense as a percentage of pretax income was 35.4% in 2003 compared to 41.0% in
2002. This decrease reflects the impact of the Company's 2003 state tax rate
planning initiatives and a $465,100 non-recurring tax benefit resulting from the
favorable resolution of a state tax matter. Excluding this tax benefit, the
Company's annual effective tax rate was 38.5% at December 31, 2003.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Net Sales

    We reported 2002 consolidated net sales of $134.4 million, an increase of
$8.6 million or 7%, as compared to net sales of $125.8 million in 2001. Despite
general economic weakness and the strength of private label programs in some
large retailers, our multi-year program to improve product development and
marketing processes and organization positively impacted our growth in net
sales. In 2002, net sales of The First Years brand products increased 9% due to
new product development efforts and solid sales in a number of existing key
items, including the "Hands Free Gate," "4-Stage Bath System," "4-Stage
Reclining Feeding Seat," and products in our "Take & Toss" program. After a
number of years of substantial decline, net sales of licensed and specialty
products increased by 2% as a result of successful new licensed product programs
introduced into key retail accounts. In addition, in 2002, we developed
exclusive, customized programs for customers driven by new licensed products,
which contributed significantly to product sales in this area in 2002.

    As a percentage of net sales, sales of licensed and specialty products
decreased to 32% in 2002 from approximately 33% in 2001. Net sales of The First
Years brand products increased to 68% in 2002 from approximately 67% in 2001 due
primarily to the success of key items noted in the prior paragraph.
International net sales as a percentage of total net sales increased to 13% in
2002 from 12% in 2001 primarily due to improved European, Canadian, and Latin
American sales performance.


                                      II-5
<PAGE>

Cost of Sales and Gross Profit

    Cost of products sold in 2002 was $88.3 million, an increase of $4.5 million
or 5%, as compared to $83.8 million in 2001. As a percentage of net sales, cost
of products sold in 2002 decreased to 66% from 67% in 2001 and gross profit
increased from 33% to 34% in 2002. The increase in gross profit was primarily
due to product mix and product cost reduction programs.

Selling, General, and Administrative Expenses

    Selling, general, and administrative expenses in 2002 were $32.8 million, an
increase of $0.7 million, or 2%, as compared to $32.1 million in 2001. As a
percentage of net sales, selling, general, and administrative expenses decreased
to 24% in 2002 from approximately 26% in 2001. This decrease was primarily due
to a reduction in bad debt expense from 2001 and cost containment measures
affecting general expenditures, partially offset by an increase in salaries and
related costs associated with infrastructure building in marketing and product
development.

Net Income

    Net income for 2002 increased 27% to $7.9 million from $6.3 million in 2001.
As a percentage of net sales, net income increased from 5% to 6% in 2002. Net
income was impacted by increased gross profits as a percentage of net sales
resulting from product mix, partially offset by reduced selling, general, and
administrative costs principally related to lower bad debt expenses. Income tax
expense as a percentage of pretax income was 41% in 2002 and 2001.

Liquidity and Capital Resources

    We believe our ability to generate cash from operations to reinvest in our
business is one of our fundamental financial strengths. We anticipate that our
operating activities in 2004 will continue to provide us with cash flows to
assist in our business expansion and to meet financial commitments.

    Our cash and cash equivalents increased to $24.7 million at December 31,
2003, from $22.0 million at December 31, 2002. The increase resulted primarily
from $5.6 million provided by operating activities, offset by $2.2 million and
$.6 million used in investing and financing activities, respectively.

    Net cash of $5.6 million provided by operating activities consisted
primarily of $13.3 million from net income adjusted for non-cash items and $7.7
million used by changes in working capital and other activities. Net cash used
by changes in working capital and other activities resulted primarily from an
increase in accounts receivable and inventories and from decreases in accounts
payable and accrued selling expenses, which were partly offset by increases in
prepaid expenses and accrued royalties. Days sales outstanding were 64 and 53
for 2003 and 2002, respectively. The increase in days sales outstanding is due
principally to higher fourth quarter sales in 2003 and an unusual payment delay
by a key retailer at December 31, 2003, which was resolved subsequent to
year-end. Inventory turns were 4.7 and 4.8 in 2003 and 2002, respectively.

    Net cash of $2.2 million used in investing activities resulted from capital
expenditures, net of disposals of capital assets. Capital expenditures in 2003
consisted primarily of additions to molds for new production molds, building
improvements, machinery, and furniture and equipment related to computer
hardware and software.

    Net cash of $.6 million used in financing activities consisted of the
payment of dividends to stockholders and common stock repurchases, partially
offset by the proceeds on issuance of common stock under our stock option plans.

    Estimated uses of cash in 2004 include capital expenditures for building,
machinery and molds, and equipment of approximately $3 - $4 million. We expect
to fund expenditures for capital requirements as well as liquidity needs from a
combination of available cash balances, internally generated funds, and
financing arrangements. We have an unsecured line of credit of $10 million,
which is subject to annual renewal at the option of the bank. Any amounts
outstanding under the line are payable upon demand by the bank. During 2003 and
2002, we had no borrowings under the line of credit and as of December 31, 2003
there were no balances outstanding. We believe that we will be able to renew our
line of credit under similar terms.


                                      II-6
<PAGE>

Contractual Obligations

    The following table provides a summary of our contractual obligations at
December 31, 2003.

<TABLE>
<CAPTION>
                                                                     Payments due by period
                                                       -----------------------------------------------------
                                                         Less than                                More than
    Contractual Obligations                  Total        1 Year     1 - 3 Years    3 - 5 Years    5 Years
    -----------------------              ------------  ------------ -------------  -------------  ----------
<S>                                       <C>           <C>            <C>          <C>            <C>
    Minimum Royalty Payments (a) .....    $3,727,000    $3,496,000     $231,000          --          --
    Purchase Obligations (b) .........     2,153,000     2,153,000           --          --          --
                                         -------------------------------------------------------------------
                                          $5,880,000    $5,649,000     $231,000          --          --
                                         ===================================================================
</TABLE>

    (a) Licensing agreements with key licensors contain provisions for the
        payment of guaranteed or minimum royalty amounts. See Note 5 to the
        consolidated financial statements for additional information.
    (b) Under the Company's purchase arrangements with certain manufacturers,
        the Company is obligated to purchase production sufficient to meet its
        safety stock inventory requirements.

Dividends

    On May 15, 2003, the Board of Directors raised our cash dividend on our
common stock to $0.24 per share and announced that dividends would be paid on a
quarterly basis. Quarterly dividend payments of $.06 per share were made on June
15, 2003, September 15, 2003 and December 15, 2003. In 2002, we paid an annual
cash dividend on our common stock in the amount of $0.10 per share, which was
paid on June 15, 2002. We expect sufficient cash flow in 2004 to continue our
current dividend policy; however, the declaration and payment of cash dividends
in the future will depend upon such other factors deemed relevant by the Board
of Directors from time to time.

Off-Balance Sheet Arrangements

    During the years ended December 31, 2003 and 2002, we did not have any
relationships with unconsolidated entities or financial partnerships, such as
entities often referred to as structured finance, variable interest or special
purpose entities, which would have the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes. As such, we are
not exposed to any financing, liquidity, market or credit risk that could arise
if we had engaged in such relationships.

Inflation and Changing Prices

    Inflation has not had a material effect on our operating results during
recent periods.

Factors That May Affect Financial Condition and Future Results

    The assumptions, risks and uncertainties included in this section are not
exclusive. Other sections of this report may include additional factors, which
could adversely impact our business and financial performance. We operate in a
very competitive environment. New risk factors emerge from time to time and
management cannot predict all such risk factors, nor can it assess the impact of
all such risk factors on our business or the extent to which any factor or
combination of factors may cause actual results to differ materially from those
contained in any forward-looking statements. See Cautionary Note Regarding
Forward-Looking Statements.

    If we do not make timely introductions to the market of new and innovative
products, we may not be able to maintain or improve our market share and keep
pace with our competitors.

    Our growth depends in part upon our ability to create new and innovative
products and to introduce new products to the market in a timely fashion. We may
not continue to generate new product ideas or successfully introduce such
products to the market in a timely fashion. Additionally, our new products may
not be well received by retailers or consumers. Our future growth also depends,
in part, on the successful introduction of products that


                                      II-7
<PAGE>

generate sufficient margins. We may not be able to successfully develop and
introduce such products. In addition, we are under pressure to introduce new and
innovative products more often and more quickly because the life cycle of many
products has shortened over the last several years. This is due partly to the
ability of competitors to introduce similar products that compete directly with
our successful new products. As a result, the inability to introduce products in
a timely fashion with sufficient margins could have a material adverse impact on
our sales.

We depend on sales of products featuring licensed characters and if we lose all
or a significant part of our third party licenses, our revenues may decrease.

    We derive a significant portion of our revenues from sales of products
featuring characters licensed from other parties, including Winnie the Pooh(R)
and Mickey Mouse(R) and other related characters licensed from Disney
Enterprises, Inc., and Sesame Street characters licensed from the Sesame
Workshop, in the United States and in various foreign countries. These licenses
have fixed terms and limit the type of products that may be sold under the
licenses. One of our significant licensing agreements with Disney Enterprises,
Inc. was renewed in 2002 and will expire at the end of 2004. Sales of products
licensed under this non-exclusive license amounted to 22% of our total net sales
for the year ended December 31, 2003. While our management currently expects
this licensing agreement to be renewed at the end of its term, non-renewal of
this major licensing agreement or renewal on terms not favorable to us could
have a material adverse effect on our business. In addition, the Disney
licensing agreement is non-exclusive and Disney has granted a license to a
retailer that includes the same types of products covered under our license. In
the future, Disney may grant licenses for the same products covered under our
license to additional retailers and other parties, which could have a material
adverse impact on our business.

    If we do not enhance our brand recognition, our product sales may decrease.

    A company's brand is very important to consumers of juvenile products. Some
of our competitors have more recognizable brands than we do. We intend to
continue to try to enhance our brand recognition with consumers, but we may not
be able to do so. If we do not continue to enhance our brand recognition, our
sales could be negatively impacted.

    We must be able to identify and adapt to changing consumer preferences in
order to keep consumers interested in our products.

    The success of our business depends in part on continued consumer demand for
our products and our ability to anticipate, gauge, and respond to changing
consumer demands for juvenile products in a timely manner. Changes in consumer
preferences, such as consumers abandoning traditional retailers, shopping on the
internet, general economic decline, or less favorable demographic trends related
to childbirth, among other factors, could have a material adverse effect on our
sales and earnings.

    We depend heavily on major customers, the loss of which would have a
material adverse effect on our results of operations.

    Our three largest customers, Wal*Mart, Toys "R" Us, and Target, accounted
for approximately 27%, 20% and 18% of net sales in 2003, respectively. A
significant reduction of purchases by any one of these customers could have a
material adverse effect on our sales. Additionally, our largest ten customers
accounted for 75% of our net sales in 2003. There could also be a negative
effect on our business if any significant customer becomes insolvent or
otherwise fails to pay its debts.


                                      II-8
<PAGE>

    Conditions affecting the retail industry generally may affect our results of
operations.

    We could be materially adversely affected by conditions in the retail
industry in general, including the continuing consolidation in the retail
industry, the resulting decline in the number of retailers and cyclical economic
trends. Also, changes in the way retailers and mass merchandisers do business,
such as the creation of competing private-label brands by retailers, could
result in a significant reduction of purchases of our products by those
retailers, which would have a material adverse effect on our sales and earnings.

    We are exposed to economic, political, and other risks through our worldwide
operations.

    We are subject to the economic and political risks inherent in international
operations and their impact on the United States economy in general, including
the risks associated with ongoing uncertainties and political and economic
instability in many countries around the world as well as the economic
disruption from acts of terrorism, particularly in the aftermath of the
terrorist attacks of September 11, 2001 and the response to them by the United
States and its allies. These risks include air transportation disruptions,
expropriation, currency controls and changes in currency exchange rates, tax and
tariff rates, freight rates and social and political unrest.

    The market for juvenile products is intensely competitive and our
competitors may be stronger than we are.

    We compete with many other companies, both domestic and foreign, some of
which have diversified product lines, well-known brands and financial,
distribution, and marketing resources that are substantially greater than ours.
Other major factors that affect competition in the markets in which we compete
include prices for products and placement of product with major retailers. Also,
a major technological breakthrough or marketing success by a competitor could
adversely affect our competitive position. In addition, in countries where the
juvenile products market is mature, particularly in the United States, sales
growth partly depends on our ability to increase our market share at the expense
of our competitors. We may not be able to continue to compete effectively in the
juvenile products market.

    We do not own or operate our own manufacturing facilities and a majority of
our products are manufactured outside of the United States by independent
manufacturers, thus currency exchange rates and any significant problems that we
experience with our independent manufacturers could have a material adverse
effect on our results of operations.

    We depend upon independent manufacturers located in the Far East, primarily
China and Hong Kong, and Canada to produce high-quality products for us in a
timely manner. As a result, we are subject to currency conversion and currency
fluctuation risks normally associated with purchasing goods that are
manufactured overseas. These risks include sudden and severe changes in foreign
currency exchange rates and our ability to pass price increases for our products
due to foreign currency fluctuation on to our customers. Also, we rely upon the
availability of sufficient production capacity at our existing manufacturers or
the ability to utilize alternative sources of supply. Timely product
introductions are essential in the juvenile products industry because our orders
are cancelable by customers and, in some cases, subject to monetary penalties
imposed by customers, if agreed-upon delivery dates are not met. We may not be
able to maintain sufficient inventory levels if our independent manufacturers
fail to provide the required production capacity. A failure by one or more of
our significant manufacturers to meet established criteria for pricing, product
quality or timeliness could also negatively impact our sales and profitability.
We have no long-term manufacturing agreements with our suppliers and we compete
with other juvenile product companies, including companies that are much larger
than us, for access to production facilities. In 2003, our largest supplier,
which is located in China, manufactured products that represented approximately
13% of our sales. The loss of or significant problems with this supplier could
have a material adverse impact on our results of operations.

    Many of our products are manufactured in China and we may experience
difficulty or increased expense in shipping these products back into the United
States or Europe.

    A substantial portion of our products sold in 2003 was manufactured in Asia.
Foreign manufacturing is subject to a number of risks including transportation
delays and interruptions, the imposition of tariffs, quotas, and other


                                      II-9
<PAGE>

import or export controls, currency fluctuations, misappropriation of
intellectual property, political and economic disruptions, and changes in
governmental policies. From time to time, the United States Congress has
attempted to impose additional restrictions on trade with China. China gained
Permanent Normal Trade Relations (PNTR) status with the United States when it
acceded to the World Trade Organization, effective January 1, 2002. The United
States imposes the lowest applicable tariffs on exports from PNTR countries to
the United States. In order to maintain its WTO membership, China has agreed to
several requirements, including the elimination of caps on foreign ownership of
Chinese companies, lowering tariffs and publicizing its laws. No assurance can
be given that China will meet these requirements and remain a member of the WTO,
or that its PNTR trading status will be maintained. If China's WTO membership is
withdrawn or if PNTR status for goods produced in China were removed, there
could be a substantial increase in tariffs imposed on goods of Chinese origin
entering the United States, including those manufactured by us, which could
adversely impact our business. The European Community has enacted a quota and
tariff system with respect to the importation into the EC of certain toy
products originating in China. Although we continue to evaluate alternative
sources of supply outside of China, we may not be able to develop alternative
sources of supply in a timely and cost-effective manner.

    We may have difficulty obtaining sufficient amounts of a particular product
or disposing of excess inventory if we miscalculate the amount of a product that
we will be able to sell.

    Many of our products have relatively long lead times for design and
production of product or are manufactured by suppliers in foreign countries. As
a result, we must commit to production tooling and to production in advance of
orders. If we fail to accurately forecast consumer demand or if there are
changes in consumer preferences or market demand after we have made such
production commitments, we may encounter difficulty in filling customer orders
or in liquidating excess inventory; may find that retailers are canceling orders
or returning product; and may have to write off the cost of molds for certain
unsuccessful products, all of which may have a material adverse effect on our
sales, margins, profit, and brand image.

    If the cost of the raw materials used in our products or the cost of
transportation of those products increases, we may not be able to sustain our
gross profits.

    Plastic, paperboard, other materials, and shipping and transportation costs
for our products and packaging constitute significant costs to us. The primary
resource used in most manufacturing plastics is petroleum, and the cost and
availability of plastic for use in our products varies with the price of
petroleum. The cost of transporting our products also varies with the cost of
oil. High transportation costs or the inability of our suppliers to acquire
sufficient plastic, paperboard, and other materials at reasonable prices could
adversely affect our ability to sustain our gross profit.

    Our international sales are significant to us, and international markets are
subject to a number of risks.

    Our international sales in 2003 accounted for approximately 14% of our total
net sales. In foreign markets, particularly the United Kingdom, France, Germany,
and Canada, we compete against long-established companies with well-known brand
names. In countries where the juvenile products markets are mature, our sales
growth depends on our ability to increase our market share at the expense of
well-established local competitors. International sales are also subject to
economic downturns and fluctuations in the currencies of foreign countries, and
resulting changes in the buying power of consumers in foreign markets,
particularly in Asia, and Latin and South America. Although at times we enter
into foreign currency forward exchange contracts in order to hedge our exposure
to currency fluctuations, we may still encounter unfavorable exchange rates in
our transactions with companies in foreign countries. We may not be successful
in expanding or sustaining our international sales operations.

    Our products for small children and babies are subject to stringent
government regulations, which we must comply with or face recalls of our
products or fines.

    Consumer products in general, and in particular products for babies and
infants, are subject to regulation both domestically and internationally. In
addition, consumer activist groups put pressure on governments around the world
to increase their regulations regarding the safety of the materials used to make
products for babies and infants,


                                     II-10
<PAGE>

such as certain kinds of plastic. Our products are subject to the provisions of
the Federal Consumer Safety Act, the Federal Hazardous Substances Act, the
Federal Flammable Fabrics Act, and the Child Safety Protection Act and the
regulations promulgated thereunder. These laws authorize the Consumer Product
Safety Commission (CPSC) to protect the public from products that present a
substantial risk of injury. The CPSC can require the repurchase or recall by the
manufacturer of articles that are found to be defective, and impose fines or
penalties on the manufacturer, or recommend the recall of products containing
chemicals or other materials deemed by the CPSC to be harmful to children and
infants. Similar laws exist in some states and cities and in foreign countries
where we market our products. Any recall of our products could have a material
adverse effect on our earnings, depending on the particular product.

    If our products for small children and infants are faulty, we may be subject
to negative publicity and product liability claims that exceed our insurance
coverage.

    Our juvenile products are developed for and used by small children and
infants. If our products have safety problems that we are not aware of or the
CPSC recalls a product, we may experience negative publicity that could
adversely impact our reputation and our sales. Additionally, we could be subject
to product liability suits. We carry product liability insurance in amounts
which management deems adequate to cover risks associated with this use;
however, existing or future insurance coverage may not be sufficient to cover
all product liability risks.

    Our intellectual property is very important to us and we may face litigation
based on challenges to our intellectual property and our commercial activities.

    We believe our products embody innovation and creativity in design and
function. We take steps to protect our intellectual property, and may from time
to time be involved in litigation to enforce our rights in such intellectual
property against others. At present, we are not engaged in any material active
or pending litigation with respect to our intellectual property.

    As a supplier of a wide range of products in various markets, we are, and in
the future may be, involved in litigation defending our activities against
allegations of infringement of the intellectual property of others. We may incur
substantial costs in defending such legal actions. To our knowledge, however,
there are no pending material challenges to our ongoing or planned commercial
activities.

    If we do not retain our key personnel, our ability to execute our business
strategy will be limited.

    Our success depends to a significant extent upon the continued service of
our executive officers and key management, and our ability to continue to
attract, retain, and motivate qualified personnel. Competition for qualified
personnel can be intense. The loss of the services of key personnel or the
inability to attract and retain additional qualified personnel could have an
adverse effect on our operations.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

    We are exposed to certain market risks, which include changes in United
States and international interest rates as well as changes in currency exchange
rates as measured against the United States dollar and each other. We attempt to
reduce material risks by using foreign currency forward exchange contracts and
managing our working capital to minimize currency and interest rate exposure.

Foreign Currency Market Risk

    Our international operations are subject to certain opportunities and risks,
including currency fluctuations. Our international sales in 2003 accounted for
14% of total net sales. The value of the United States dollar affects our
financial results, and changes in exchange rates may affect our revenues, gross
margins, operating expenses, and retained earnings as expressed in United States
dollars. At times, we use forward exchange contracts to hedge cash flows arising
from sales denominated in foreign currencies to limit the impact of currency
fluctuations. Principal currencies hedged include the Euro, the British Pound,
and the Canadian dollar. We also attempt to minimize currency exposure risk
through working capital management. During 2003 and 2002, the Company recognized


                                     II-11
<PAGE>

foreign exchange gains of $.6 million in 2003 and $.1 million in 2002. There
were no outstanding foreign currency forward exchange contracts as of December
31, 2003 and 2002.

Interest Rate Risks

    Changes in interest rates affect interest income earned on our cash
equivalents and short-term investments, composed primarily of United States
treasury obligations and short-term money market instruments. We do not attempt
to reduce or eliminate our market exposure to changes in interest rates in the
United States or in international operations.

Item 8. Financial Statements and Supplementary Data

    Financial Statements listed under Item 15(a) 1. are included in Part IV of
this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure

    None.

Item 9A. Controls and Procedures

We have established disclosure controls and procedures to ensure that material
information relating to us, including our consolidated subsidiaries, is made
known to the officers who certify our financial reports and to other members of
senior management and the Board of Directors.

9(a)  Evaluation of disclosure controls and procedures. Our management, with the
      participation of our principal executive officer and principal financial
      officer, has evaluated the effectiveness of the design and operation of
      our disclosure controls and procedures (as defined in Rules 13a-15(e) and
      15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the
      end of the period covered by this Annual Report on Form 10-K. Based on
      this evaluation, our principal executive officer and principal financial
      officer concluded that these disclosure controls and procedures are
      effective and designed to ensure that the information required to be
      disclosed in our reports filed or submitted under the Securities Exchange
      Act of 1934 is recorded, processed, summarized and reported within the
      requisite time periods.

9(b)  Changes in internal controls. There was no change in our internal control
      over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
      under the Securities Exchange Act of 1934, as amended) that occurred
      during our last fiscal quarter that has materially affected, or is
      reasonably likely to materially affect, our internal control over
      financial reporting.


                                     II-12
<PAGE>

                                    PART III

Item 10. Directors and Executive Officers of the Registrant

    The information required by this item will be included in our definitive
proxy statement for the 2004 Annual Meeting of Stockholders, or in an amendment
to this Form 10-K, and is incorporated herein by reference.

Item 11. Executive Compensation

    The information required by this item will be included in our definitive
proxy statement for the 2004 Annual Meeting of Stockholders, or in an amendment
to this Form 10-K, except that the sections in any definitive proxy statement
entitled "Board Compensation Committee Report on Executive Compensation", "Audit
Committee Report" and the "Stock Performance Chart" shall not be deemed
incorporated herein by reference to this Annual Report on Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and Management and
         Related Shareholder Matters

    The information required by this item will be included in our definitive
proxy statement for the 2004 Annual Meeting of Stockholders, or in an amendment
to this Form 10-K, and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

    The information required by this item will be included in our definitive
proxy statement for the 2004 Annual Meeting of Stockholders, or in an amendment
to this Form 10-K, and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

    The information required by this item will be included in our definitive
proxy statement for the 2004 Annual Meeting of Stockholders, or in an amendment
to this Form 10-K, and is in incorporated herein by reference.


                                      III-1
<PAGE>

                                     PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

15(a) 1. Consolidated Financial Statements

         Independent Auditors' Report

         Consolidated Balance Sheets as of December 31, 2003 and 2002

         Consolidated Statements of Income for the Years Ended December 31,
         2003, 2002, and 2001

         Consolidated Statements of Stockholders' Equity for the Years Ended
         December 31, 2003, 2002, and 2001

         Consolidated Statements of Cash Flows for the Years Ended December 31,
         2003, 2002, and 2001

         Notes to Consolidated Financial Statements

15(a) 2. Schedule II -- Valuation and Qualifying Accounts for the Years Ended
         December 31, 2003, 2002, and 2001

         Other schedules are omitted because of the absence of conditions under
         which they are required or because the required information is given in
         the financial statements or notes thereto.

15(a) 3. Exhibits

Exhibit                             Description
-------                             -----------

3.1.1    Restated Articles of Organization of the Company. Filed as Exhibit
         3.1 to the Company's Registration Statement on Form S-1 on October
         5, 1995 (File No. 33-62673) and incorporated herein by reference.

3.1.2    Articles of Amendment to Restated Articles of Organization of the
         Company filed herewith.

3.2      By-laws of the Company. Filed as Exhibit (3)(ii) to the Company's
         annual report on Form 10-K for the period ended December 31, 1999
         and incorporated herein by reference.

4.1      Specimen certificate for shares of Common Stock of the Company.
         Filed as Exhibit 4.1 to the Company's Registration Statement on Form
         S-1 (File No. 33-62673) and incorporated herein by reference.

4.2      Rights Agreement, dated as of November 19, 2001, between the Company
         and EquiServe Trust Company, N. A. Filed as Exhibit 4.1 to the
         Company's Registration Statement on Form 8-A on November 20, 2001
         and incorporated herein by reference.

10.1*    Agreement with the Children's Television Workshop dated July 1, 1996
         regarding the licensing of Sesame Street characters. Filed as
         Exhibit (10)(g) to the Company's annual report on Form 10-K for the
         period ended December 31, 1996 and incorporated herein by reference.

10.2*    Letter agreement with Children's Television Workshop dated as of
         July 1, 1999 regarding the renewal of licensing of Sesame Street
         characters. Filed as Exhibit (10)(d) to the Company's annual report
         on Form 10-K for the period ended December 31, 1999 and incorporated
         herein by reference.

10.3*    Letter agreement with Sesame Workshop dated July 1, 2001 regarding
         the renewal of licensing of Sesame Street characters. Filed as
         Exhibit 10.3 to the Company's quarterly report on Form 10-Q for the
         period ended September 30, 2002 and incorporated herein by
         reference.


                                      IV-1
<PAGE>

Exhibit                             Description
-------                             -----------

10.4*    Agreement with Disney Enterprises, Inc. dated as of August 1, 2000
         relating to the licensing of Winnie the Pooh, Disney Classics and
         Disney Standard characters. Filed as Exhibit (10)(w) to the
         Company's quarterly report on Form 10-Q for the period ended
         September 30, 2000 and incorporated herein by reference.

10.5     The First Years Inc. 2002 Amended and Restated Equity Incentive
         Plan, filed as Exhibit 10.5 to the Company's Annual Report on Form
         10-K for the period ended December 31, 2003 and incorporated herein
         by reference.

10.6     The First Years Inc. 2002 Amended and Restated Stock Option Plan for
         Directors, filed herewith, filed as Exhibit 10.6 to the Company's
         Annual Report on Form 10-K for the period ended December 31, 2003
         and incorporated herein by reference.

10.7     Letter Agreement between The First Years Inc. and Jerome M. Karp
         dated August 8, 1999. Filed as Exhibit (10)(v) to the Company's
         quarterly report on Form 10-Q for the period ended September 30,
         1999, and incorporated herein by reference.

10.8     Employment Agreement between The First Years Inc. and Ronald J.
         Sidman dated September 30, 1999. Filed as Exhibit (10)(u) to the
         Company's quarterly report on Form 10-Q for the period ended
         September 30, 1999, and incorporated herein by reference.

10.9     Agreement between The First Years Inc. and Bruce Baron dated July
         10, 1997. Filed as Exhibit (10)(p) to the Company's annual report on
         Form 10-K for the period ended December 31, 1998, and incorporated
         herein by reference.

10.10    Non-Compete Agreement between The First Years Inc. and Richard F.
         Schaub Jr. dated August 29, 2000. Filed as Exhibit (10)(m) to the
         Company's annual report on Form 10-K for the period ended December
         31, 2000, and incorporated herein by reference.

10.11    Change of Control Agreement between The First Years Inc. and Richard
         F. Schaub Jr. dated August 29, 2000. Filed as Exhibit (10)(n) to the
         Company's annual report on Form 10-K for the period ended December
         31, 2000, and incorporated herein by reference.

10.12    Promissory Note and Agreement between The First Years Inc. and
         Richard F. Schaub Jr. dated September 28, 2000. Filed as Exhibit
         (10)(o) to the Company's annual report on Form 10-K for the period
         ended December 31, 2000, and incorporated herein by reference.

10.13    Promissory Note and Agreement between The First Years Inc. and
         Richard F. Schaub Jr. dated March 21, 2001. Filed as Exhibit 10.14
         to the Company's Annual Report on Form 10-K for the period ended
         December 31, 2001 and incorporated herein by reference.

10.14    Agreement between The First Years Inc. and James A. Connors, Jr.
         dated May 8, 2000. Filed as Exhibit (10)(p) to the Company's annual
         report on Form 10-K for the period ended December 31, 2000, and
         incorporated herein by reference.

10.15    Employee Contract between The First Years Inc. and John R. Beals
         dated September 30, 2002. Filed as Exhibit 10.2 to the Company's
         quarterly report on Form 10-Q for the period ended September 30,
         2002 and incorporated herein by reference.

10.16    Employee Contract between The First Years Inc. and Barry Boehme
         dated January 12, 2003, filed herewith, filed as Exhibit 10.16 to
         the Company's Annual Report on Form 10-K for the period ended
         December 31, 2003 and incorporated herein by reference.

10.17*   Consumer Products License -- Disney Properties, dated as of June 4,
         2002, between the Company and Disney Enterprises, Inc. Filed as
         Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the
         period ending September 30, 2002 and incorporated herein by
         reference.


                                      IV-2
<PAGE>

Exhibit                             Description
-------                             -----------

10.18    Change of Control Agreement between The First Years Inc. and Barry
         Boehme, dated January 21, 2004 and filed herewith.

10.19    Change of Control Agreement between The First Years Inc. and James
         Connors, Jr., dated January 21, 2004 and filed herewith.

10.20    Change of Control Agreement between The First Years Inc. and John
         Beals, dated January 21, 2004 and filed herewith.

10.21    Change of Control Agreement between The First Years Inc. and Bruce
         Baron, dated January 21, 2004 and filed herewith.

10.22    Change of Control Agreement between The First Years Inc. and Ron
         Cardone, dated January 21, 2004 and filed herewith.

10.23    Form of Indemnification Agreement dated February 5, 2004 between
         The First Years Inc. and each of the following Directors: Ronald
         Sidman, Richard Wenz, Walker Wallace, Fred Page, Benjamin Peltz,
         Evelyn Sidman, Lewis Weston, Beth Kaplan, and Kenneth Sidman, filed
         herewith.

14       The First Years Inc. -- Corporate Code of Conduct and Ethics, filed
         herewith.

21.1     List of Subsidiaries of the Registrant.

23.1     Consent of Deloitte & Touche LLP.

31.1     Certification of Chief Executive Officer pursuant to Section 302 of
         the Sarbanes-Oxley Act of 2002.

31.2     Certification of Chief Financial Officer pursuant to Section 302 of
         the Sarbanes-Oxley Act of 2002.

32       Certification of Officers pursuant to 18 U.S.C. Section 1350, as
         adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

----------
*   Confidential Treatment has been granted with respect to portions of this
    document by the Securities and Exchange Commission.

15(b)    Report on Form 8-K

During the fourth quarter of 2003, the Company furnished a report on Form 8-K on
October 24, 2003 and dated as of that date. Item 12. Disclosure of Results of
Operations and Financial Condition: Press release issued by the Company on
October 24, 2003.

During the fourth quarter of 2003, the Company furnished a report on Form 8-K
dated November 19, 2003 and filed on November 20, 2003. Item 9. Regulation FD
Disclosure: Press release issued by the Company on November 19, 2003 to announce
its quarterly dividend.


                                      IV-3
<PAGE>

                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) 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.

                                         THE FIRST YEARS INC.
                       ---------------------------------------------------------
                                              (Registrant)

                       By:               /s/ RONALD J. SIDMAN
                           -----------------------------------------------------
                              Ronald J. Sidman, Chief Executive Officer,
                           Chairman of the Board of Directors, and President

Date: March 15, 2004

                       By:                 /s/ JOHN R. BEALS
                           -----------------------------------------------------
                           John R. Beals, Treasurer and Senior Vice President --
                                 Finance (Chief Financial Officer and
                                       Chief Accounting Officer)

Date: March 15, 2004

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

       Signature                      Title                             Date
       ---------                      -----                             ----

/s/ RONALD J. SIDMAN    Chief Executive Officer, Chairman         March 11, 2004
---------------------   of the Board of Directors and President
   Ronald J. Sidman

  /s/ EVELYN SIDMAN     Director                                  March 11, 2004
---------------------
     Evelyn Sidman

 /s/ BENJAMIN PELTZ     Director                                  March 11, 2004
---------------------
    Benjamin Peltz

  /s/ FRED T. PAGE      Director                                  March 11, 2004
---------------------
     Fred T. Page

/s/ KENNETH R. SIDMAN   Director                                  March 11, 2004
---------------------
   Kenneth R. Sidman

 /s/ LEWIS M. WESTON    Director                                  March 11, 2004
---------------------
    Lewis M. Weston

/s/ WALKER J. WALLACE   Director                                  March 11, 2004
---------------------
   Walker J. Wallace

 /s/ BETH J. KAPLAN     Director                                  March 11, 2004
---------------------
    Beth J. Kaplan

                        Director                                  March 11, 2004
---------------------
     Richard Wenz


                                      IV-4
<PAGE>

                              THE FIRST YEARS INC.

                 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
                          FINANCIAL STATEMENT SCHEDULE

                                                                            Page
                                                                            ----

Independent Auditors' Report..............................................  IV-6
Consolidated Financial Statements:
  Consolidated Balance Sheets as of December 31, 2003 and 2002............  IV-7
  Consolidated Statements of Income for the Years Ended
    December 31, 2003, 2002, and 2001.....................................  IV-8
  Consolidated Statements of Stockholders' Equity for the Years Ended
   December 31, 2003, 2002, and 2001......................................  IV-9
  Consolidated Statements of Cash Flows for the Years Ended
    December 31, 2003, 2002, and 2001..................................... IV-10
  Notes to Consolidated Financial Statements.............................. IV-11
Financial Statement Schedule II-- Valuation and Qualifying Accounts
  for the Years Ended December 31, 2003, 2002, and 2001................... IV-21


                                      IV-5
<PAGE>

                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of
The First Years Inc.
Avon, Massachusetts

    We have audited the accompanying consolidated balance sheets of The First
Years Inc. and subsidiary as of December 31, 2003 and 2002, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 2003. Our audits also
included the financial statement schedule listed in the Index at Item 15(a) 2.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements and financial statement schedule based on
our audits.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

    In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of The First Years Inc. and
subsidiary as of December 31, 2003 and 2002, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2003 in conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.

/s/  DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 5, 2004


                                      IV-6
<PAGE>

                              THE FIRST YEARS INC.

                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                                       2003            2002
                                                                                   ------------    ------------

<S>                                                                                <C>             <C>
                                     ASSETS

Current Assets:
   Cash and cash equivalents (Notes 1 and 8) ...................................   $ 24,730,265    $ 21,989,782
   Accounts receivable (less allowance for doubtful accounts of
      $250,000 in 2003 and 2002) (Note 8) ......................................     25,891,057      21,995,564
   Inventories (Note 1) ........................................................     20,298,164      16,171,842
   Prepaid expenses and other assets ...........................................        801,566       1,631,942
   Deferred tax asset (Notes 1 and 3) ..........................................      2,157,200       2,196,400
                                                                                   ------------    ------------
      Total current assets .....................................................     73,878,252      63,985,530
                                                                                   ------------    ------------

Property, Plant, and Equipment (Note 1):
   Land ........................................................................        167,266         167,266
   Building and improvements ...................................................      6,798,774       6,692,722
   Machinery and molds .........................................................     10,075,203       9,395,859
   Furniture and equipment .....................................................      8,795,739       8,478,858
                                                                                   ------------    ------------
      Total ....................................................................     25,836,982      24,734,705
   Less accumulated depreciation ...............................................     15,050,479      12,968,335
                                                                                   ------------    ------------
      Property, plant, and equipment -- net ....................................     10,786,503      11,766,370
                                                                                   ------------    ------------
      Total Assets .............................................................   $ 84,664,755    $ 75,751,900
                                                                                   ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Accounts payable and accrued expenses .......................................   $ 14,788,716    $ 15,259,792
   Accrued royalty expense (Note 5) ............................................      1,431,051       1,361,836
   Accrued selling expenses ....................................................      3,107,430       3,251,482
                                                                                   ------------    ------------
      Total current liabilities ................................................     19,327,197      19,873,110
                                                                                   ------------    ------------
Deferred Tax Liability (Notes 1 and 3) .........................................      1,391,900       1,262,200
                                                                                   ------------    ------------

Commitments and Contingencies (Notes 5 and 8)

Stockholders' Equity (Notes 4, 6, and 9):
Common stock -- authorized, 50,000,000 shares; issued 10,944,970 and
  10,818,464; outstanding, 8,337,350 and 8,219,044 as of December 31, 2003
  and 2002, respectively .......................................................      1,094,497       1,081,846
Paid-in-capital ................................................................     11,073,595       9,854,632
Retained earnings ..............................................................     82,091,793      73,804,237
Deferred compensation ..........................................................        (96,875)
Less treasury stock at cost, 2,607,620 and 2,599,420 shares as of December 31,
  2003 and 2002, respectively ..................................................    (30,217,352)    (30,124,125)
                                                                                   ------------    ------------
      Total stockholders' equity ...............................................     63,945,658      54,616,590
                                                                                   ------------    ------------
      Total Liabilities and Stockholders' Equity ...............................   $ 84,664,755    $ 75,751,900
                                                                                   ============    ============
</TABLE>


                                      IV-7
<PAGE>

                              THE FIRST YEARS INC.

                        CONSOLIDATED STATEMENTS OF INCOME
                  YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001

<TABLE>
<CAPTION>
                                                                2003           2002           2001
                                                            ------------   ------------   ------------
<S>                                                         <C>            <C>            <C>
Net Sales (Notes 1 and 8) ...............................   $135,614,017   $134,391,487   $125,783,770
Cost of Products Sold (Note 1) ..........................     85,448,357     88,281,741     83,777,994
                                                            ------------   ------------   ------------
Gross Profit ............................................     50,165,660     46,109,746     42,005,776
Selling, General, and Administrative Expenses (Note 1) ..     35,223,252     32,790,120     32,073,559
                                                            ------------   ------------   ------------
Operating Income ........................................     14,942,408     13,319,626      9,932,217
Interest Income .........................................        206,715        134,089        664,071
                                                            ------------   ------------   ------------
Income Before Income Taxes ..............................     15,149,123     13,453,715     10,596,288
Provision for Income Taxes (Notes 1 and 3) ..............      5,367,300      5,516,000      4,344,500
                                                            ------------   ------------   ------------
Net Income (Note 11) ....................................   $  9,781,823   $  7,937,715   $  6,251,788
                                                            ============   ============   ============

Earnings Per Share (Notes 1 and 9)
  Basic .................................................   $       1.18   $       0.97   $       0.68
                                                            ============   ============   ============
  Diluted ...............................................   $       1.16   $       0.95   $       0.67
                                                            ============   ============   ============
</TABLE>

                 See notes to consolidated financial statements.


                                      IV-8
<PAGE>

                              THE FIRST YEARS INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001

<TABLE>
<CAPTION>
                                           Common Stock
                                     ------------------------    Paid-in      Retained      Deferred                   Comprehensive
                                        Shares      Par Value    Capital      Earnings    Compensation  Treasury Stock    Income
                                     ----------    ----------  -----------  ------------  ------------  --------------   --------

<S>                                  <C>           <C>         <C>          <C>             <C>         <C>              <C>
Balance, December 31, 2000 ........   9,175,765    $1,067,934  $ 8,714,711  $ 60,985,483          --    $(15,865,339)          --
  Stock issued under stock option
    plans (Note 6) ................      69,067         6,906      454,379            --          --              --           --
  Tax benefit derived from option
    compensation deduction ........          --            --       48,300            --          --              --           --
  Compensation charge related to
    grant of common stock option ..          --            --       60,000            --          --              --           --
  Dividends paid ..................          --            --           --      (550,766)         --              --           --
  Repurchase of 1,070,965 shares
    for treasury ..................  (1,070,965)           --           --            --          --     (13,944,993)          --
  Net income ......................          --            --           --     6,251,788          --              --           --
                                     ----------    ----------  -----------  ------------    --------    ------------     --------
Balance, December 31, 2001 ........   8,173,867     1,074,840    9,277,390    66,686,505          --     (29,810,332)          --
                                     ----------    ----------  -----------  ------------    --------    ------------     --------
  Stock issued under stock option
    plans (Note 6) ................      70,060         7,006      545,742            --          --              --           --
  Tax benefit derived from option
    compensation deduction ........          --            --       31,500            --          --              --           --
  Dividends paid ..................          --            --           --      (819,983)         --              --           --
  Repurchase of 24,883 shares for
    treasury ......................     (24,883)           --           --            --          --        (313,793)          --
  Net income ......................          --            --           --     7,937,715          --              --           --
                                     ----------    ----------  -----------  ------------    --------    ------------     --------
Balance, December 31, 2002 ........   8,219,044     1,081,846    9,854,632    73,804,237          --     (30,124,125)          --
                                     ----------    ----------  -----------  ------------    --------    ------------     --------
  Stock issued under stock option
    plans (Note 6) ................     111,506        11,151      947,063            --          --              --           --
  Tax benefit derived from option
    compensation deduction ........          --            --      133,900            --          --              --           --
  Dividends paid ..................          --            --           --    (1,494,267)         --              --           --
  Repurchase of 8,200 shares for
    treasury ......................      (8,200)           --           --            --          --         (93,227)          --
  Restricted stock awards (RSA) ...      15,000         1,500      138,000  $   (139,500)         --              --
  Amortization of RSA .............          --            --           --            --      42,625              --           --
  Comprehensive income (loss):
    Change in fair value of cash
      flow hedges, net of tax .....          --            --           --            --          --              --     $(43,195)
    Amounts reclassified into
      results of operations .......          --            --           --            --          --              --       43,195
  Net income ......................          --            --           --     9,781,823          --              --           --
                                     ----------    ----------  -----------  ------------    --------    ------------     --------
Balance, December 31, 2003 ........   8,337,350    $1,094,497  $11,073,595  $ 82,091,793    $(96,875)   $(30,217,352)    $     --
                                     ==========    ==========  ===========  ============    ========    ============     ========
</TABLE>

                 See notes to consolidated financial statements.


                                      IV-9
<PAGE>

                              THE FIRST YEARS INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001

<TABLE>
<CAPTION>
                                                                     2003            2002            2001
                                                                 ------------    ------------    ------------
<S>                                                              <C>             <C>             <C>
Cash Flows from Operating Activities:
  Net income .................................................   $  9,781,823    $  7,937,715    $  6,251,788
  Adjustments to reconcile net income to net cash provided
   by operating activities:
    Depreciation .............................................      2,849,678       2,556,453       2,227,389
    Stock compensation expense ...............................         42,625               0          60,000
    Provision for doubtful accounts ..........................        107,018         116,825       1,217,405
    Write-down of equipment ..................................        338,444         616,170         552,527
    Change in deferred income taxes ..........................        168,900          19,500        (100,000)
    Increase (decrease) arising from working capital items:
     Accounts receivable .....................................     (4,002,511)     (4,793,892)        991,527
     Inventories .............................................     (4,126,322)      4,159,981      (1,888,110)
     Prepaid expenses and other assets .......................        964,276         184,351        (980,136)
     Accounts payable ........................................       (471,076)      2,435,471       1,219,081
     Accrued royalty expense .................................         69,215         542,550        (127,337)
     Accrued selling expenses ................................       (144,052)         50,531         177,423
                                                                 ------------    ------------    ------------
       Net cash provided by operating activities .............      5,578,018      13,825,655       9,601,557
                                                                 ------------    ------------    ------------

Cash Flows from Investing Activities:
  Purchase of property, plant, and equipment .................     (2,208,255)     (4,564,849)     (3,437,321)
                                                                 ------------    ------------    ------------
Cash Flows from Financing Activities:
  Dividends paid .............................................     (1,494,267)       (819,983)       (550,766)
  Purchase of treasury stock .................................        (93,227)        (47,730)    (13,812,486)
  Common stock issued under stock option plans ...............        958,214         286,685         328,778
                                                                 ------------    ------------    ------------
       Net cash used for financing activities ................       (629,280)       (581,028)    (14,034,474)
                                                                 ------------    ------------    ------------
Increase (decrease) in Cash and Cash Equivalents .............      2,740,483       8,679,778      (7,870,238)
Cash and Cash Equivalents, Beginning of Year .................     21,989,782      13,310,004      21,180,242
                                                                 ------------    ------------    ------------
Cash and Cash Equivalents, End of Year .......................   $ 24,730,265    $ 21,989,782    $ 13,310,004
                                                                 ============    ============    ============

Supplemental Disclosures of Cash Flow Information
  Cash paid during the year for:
       Interest ..............................................   $          0    $          0    $          0
                                                                 ============    ============    ============
       Income taxes ..........................................   $  5,774,627    $  4,543,347    $  4,848,491
                                                                 ============    ============    ============

Supplemental Schedule of Noncash Financing Activities:
  Treasury stock transactions ................................   $          0    $    266,063    $    132,507
                                                                 ============    ============    ============
</TABLE>

                 See notes to consolidated financial statements.


                                     IV-10
<PAGE>

                              THE FIRST YEARS INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Summary of Significant Accounting Policies

    Business -- The First Years Inc., a Massachusetts corporation (the
"Company"), is a developer, marketer, and distributor of basic accessories and
related products for infants and toddlers. The Company was founded and
incorporated in 1952. Since its inception, the Company has engaged in this
single line of business, with one class of similar products. The following is a
summary of the Company's significant accounting policies.

    Basis of Reporting -- The consolidated financial statements include the
accounts of The First Years Inc. and the Company's wholly owned subsidiary. All
significant intercompany accounts and transactions have been eliminated.

    Use of Estimates -- The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. The primary estimates
underlying the Company's consolidated financial statements include allowances
for doubtful accounts, obsolete inventories, and sales returns. Actual results
could differ from those estimates.

    Revenue Recognition -- The Company recognizes revenue when products are
shipped or delivered and substantial risks of ownership transfer to the
customer, a firm sales agreement is in place, and collectibility of the fixed or
determinable sales price is reasonably assured. Common to our industry,
customers may be authorized to return selected products and the Company reduces
sales and accounts receivables for actual returns and estimates future returns
based on historical trends and information available to us, including the
pattern of returns immediately following the reporting period. Amounts billed to
customers for shipping and handling are included in net sales.

    Sales Incentives -- Costs associated with sales incentives to promote the
Company's products, including costs related to cooperative advertising programs,
slotting fees or buydowns, and certain rebates, are, depending upon the nature
of the sales incentive, accrued as revenue is recognized or accrued upon
completion of a sales-related activity giving rise to an obligation, and are
reflected as a reduction of revenue.

    Cash and Cash Equivalents -- Highly liquid investments with a maturity of
three months or less when purchased have been classified as cash and cash
equivalents. Such investments are carried at cost, which approximates market
value.

    Inventories -- Inventories are stated at the lower of cost (first-in,
first-out) or market. Inventories consist principally of finished goods,
unpackaged components, and supplies.

    Property, Plant, and Equipment -- Property, plant, and equipment is stated
at cost. Depreciation is provided based on the estimated useful lives of the
various classes of assets (building and improvements, 15 to 40 years; machinery
and molds, 5 to 10 years; furniture and equipment, 5 to 10 years) using the
straight-line method. Molds are amortized using the straight-line method over 3
years. In the event of a write down of inventory, we also review the molds
associated with those products to determine whether there has been a significant
impairment to the carrying value of the asset. If the carrying value of these
assets is considered not to be recoverable, such assets are written down as
appropriate.

    Income Taxes -- In determining income for financial statement purposes, we
must make certain estimates and judgments. These estimates and judgments occur
in the calculation of certain tax liabilities and in the determination of the
recoverability of certain of the deferred tax assets, which arise from temporary
differences between the tax and financial statement recognition of revenue and
expense. As of December 31, 2003, we believe that all of our recorded deferred
tax assets will ultimately be recovered. In addition, the calculation of our tax
liabilities involves dealing with uncertainties in the application of complex
tax regulations. We recognize potential liabilities for


                                     IV-11
<PAGE>

                              THE FIRST YEARS INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

anticipated tax audit issues in the U.S. and other tax jurisdictions based on
our estimate of whether, and the extent to which, additional taxes will be due.
If payment of these amounts ultimately proves to be unnecessary, the reversal of
the liabilities would result in tax benefits being recognized in the period when
we determine the liabilities are no longer necessary. If our estimate of tax
liabilities proves to be less than the ultimate assessment, a further charge to
expense would result.

    Stock-Based Compensation -- In December 2002, the FASB issued SFAS No. 148,
Accounting for Stock-Based Compensation -- Transition and Disclosure -- an
amendment of SFAS No. 123, which provides optional transition guidance for those
companies electing to voluntarily adopt the accounting provisions of SFAS No.
123. The Company continues to use Accounting Principles Board Opinion No.25 (APB
No. 25), Accounting for Stock Issued to Employees, to account for equity grants
and awards to employees, officers and directors and has adopted the
disclosure-only provisions of SFAS No. 148. In accordance with APB No. 25, the
Company recognizes compensation expense in income based on the excess, if any,
of the quoted stock prices at the grant date of the award or other measurement
date over the amount an employee must pay to acquire the stock. The Company's
stock option plans are more fully described in Note 6.

    In accordance with APB No. 25, compensation cost for stock options is
recognized in income based on the excess, if any, of the quoted market price of
the stock at the grant date of the award or other measurement date over the
amount an employee must pay to acquire the stock. Generally, the exercise price
for stock options granted to employees equals or exceeds the fair market value
of the Company's common stock at the date of grant, thereby resulting in no
recognition of compensation expense by the Company.

    The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions of SFAS
No. 123 to stock-based employee compensation. The fair value of the options
granted under the Company's stock option plans during 2003, 2002, and 2001 was
estimated on the date of grant using the Binomial option-pricing model.

<TABLE>
<CAPTION>
                                                                    Years Ended December 31
                                                           ---------------------------------------
                                                               2003          2002          2001
                                                           -----------   -----------   -----------
<S>                                                        <C>           <C>           <C>
    Net income -- as reported...........................   $ 9,781,823   $ 7,937,715   $ 6,251,788
    Add: Stock-based compensation expense included
      in reported net income, net of tax ...............        26,214             0        35,400
                                                           -----------   -----------   -----------

    Less: Stock-based employee compensation
      expense determined under fair value based
      method, net of tax................................    (1,303,087)   (1,561,779)   (1,725,582)
                                                           -----------   -----------   -----------
    Net income -- pro forma.............................   $ 8,504,950   $ 6,375,936   $ 4,561,606
                                                           ===========   ===========   ===========

    Earnings per share
      Basic -- as reported..............................   $      1.18   $      0.97   $      0.68
      Basic -- pro forma................................   $      1.03   $      0.78   $      0.50
      Diluted -- as reported............................   $      1.16   $      0.95   $      0.67
      Diluted -- pro forma..............................   $      1.01   $      0.77   $      0.50
</TABLE>

    For purposes of the above pro forma disclosures, key assumptions used to
apply this pricing model are as follows:

<TABLE>
<CAPTION>
                                                            2003         2002         2001
                                                         ----------   ----------   ----------
<S>                                                      <C>          <C>          <C>
    Risk free interest rate..........................        2.88%        4.54%        4.78%
    Expected life of option grants...................    6.04 years   7.74 years   7.67 years
    Expected volatility of underlying stock..........       24.29%       36.74%       43.45%
    Expected dividend payment rate...................        0.85%        0.85%        0.85%
</TABLE>


                                     IV-12
<PAGE>

                              THE FIRST YEARS INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

    Earnings Per Share -- Basic earnings per share is computed by dividing net
income by the weighted-average number of shares outstanding. Diluted earnings
per share includes the dilutive effect of stock options.

    Product Development Costs -- Product development costs are expensed as
incurred. During 2003, 2002, and 2001, product development costs approximated
$7,522,000, $6,387,000, and $4,970,000, respectively.

    Foreign Currency Remeasurement -- The Company's functional currency is the
U.S. dollar. Accordingly, monetary assets and liabilities of the Company's
foreign operations are remeasured from the respective local currency to the U.S.
dollar using year-end exchange rates while non-monetary items are remeasured at
historical rates. Income and expense accounts are remeasured at the average
rates in effect during the year. Accordingly, remeasurement adjustments and
transaction gains and losses are recognized as income (loss) in the year of
occurrence and are recorded as a component of cost of products sold.

    Derivative Instruments -- From time to time, the Company uses derivative
financial instruments in the form of foreign currency forward exchange contracts
to manage foreign currency risks on future cash flows emanating from sales
denominated in foreign currencies. Foreign currency forward exchange contracts
are used to offset changes in the fair value of certain assets and liabilities
resulting from transactions with third parties denominated in foreign
currencies. It is the Company's policy to execute such instruments with
creditworthy banks and not to enter into derivative financial instruments for
speculative purposes.

    Currency contracts are designated as, and the Company believes are highly
effective as, hedges of anticipated sales in specific currencies. Prior to an
anticipated transaction closing, the gain or loss on the forward exchange
contract is accumulated in other comprehensive income and reclassified against
revenue when the hedged transaction occurs. Subsequent changes in the value of
the contract are recorded in the income statement, generally as an offset to
gains or losses on the receivables generated by the sales transactions. We had
no outstanding foreign currency forward exchange contracts as of December 31,
2003 and 2002.

    Fair Value of Financial Instruments -- The fair value of the Company's
assets and liabilities which constitute financial instruments as defined in SFAS
No. 107, Disclosures about Fair Values of Financial Instruments, approximate
their recorded value.

    Treasury Stock -- Shares of common stock repurchased by the Company are
recorded at cost as treasury stock and result in a reduction of stockholders'
equity in the consolidated balance sheet.

    Reporting Comprehensive Income -- Comprehensive income was equal to net
income for the years ended December 31, 2003, 2002 and 2001.

    Reclassifications -- Certain reclassifications were made to prior year
amounts in order to conform with the current year presentation. See New
Accounting Pronouncements.

New Accounting Pronouncements

    The Company adopted FASB Interpretation No. 45 ("FIN 45"), Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, on December 31, 2001. FIN 45 requires a
guarantor to recognize, at the inception of a guarantee, a liability for the
fair value of the obligation undertaken in issuing the guarantee. This
interpretation applies to guarantees issued or modified after December 31, 2001
and has had no impact on the Company's consolidated statements of income,
consolidated financial position or results of operation.


                                     IV-13
<PAGE>

                              THE FIRST YEARS INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

    In January and December 2003, the FASB issued FASB Interpretation No. 46
("FIN 46") and No. 46, revised ("FIN 46R"), Consolidation of Variable Interest
Entities. These statements, which address accounting for entities commonly known
as special-purpose or off-balance-sheet entities, require consolidation of
certain interests or arrangements by virtue of holding a controlling financial
interest in such entities. Certain provisions of FIN 46R related to interests in
special purpose entities were applicable for the period ended December 31, 2003.
The Company must apply FIN 46R to its interests in all entities subject to the
interpretation as of the first interim or annual period ending after March 15,
2004. Adoption of both of these standards is not expected to have a material
impact on the Company's consolidated statements of income, consolidated
financial position or results of operation.

    On December 17, 2003, the Staff of the Securities and Exchange Commission
(SEC) issued Staff Accounting Bulletin No. 104 ("SAB 104"), Revenue Recognition,
which supersedes Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue
Recognition in Financial Statements. SAB 104's primary purpose is to rescind
accounting guidance contained in SAB 101 related to multiple element revenue
arrangements, superseded as a result of the issuance of EITF No. 00-21.
Additionally, SAB 104 rescinds the SEC's Revenue Recognition in Financial
Statements Frequently Asked Questions and Answers (the FAQ) issued with SAB 101
that had been codified in SEC Topic 13, Revenue Recognition. Selected portions
of the FAQ have been incorporated into SAB 104. While the wording of SAB 104 has
changed to reflect the issuance of EITF 00-21, "Revenue Arrangements with
Multiple Deliverables", the revenue recognition principles of SAB 101 remain
largely unchanged by the issuance of SAB 104. The adoption of SAB 104 did not
materially affect the Company's revenue recognition policies, or the Company's
consolidated statements of income, consolidated financial position or results of
operation.

2.  Debt

    During 2003 and 2002, the Company had available an unsecured line of credit
totaling $10,000,000 with a bank. The line is subject to annual renewal at the
option of the bank and requires no compensating balances. The line bears
interest at the prime rate or the LIBOR rate plus 1.75%. No short-term
borrowings were incurred by the Company during 2003 or 2002. As of December 31,
2003 and 2002, no balance was outstanding. Unless renewed or extended
beforehand, the line of credit is scheduled to expire in November, 2004.

3.  Income Taxes

    Components of the Company's net deferred tax asset at December 31 are as
follows:

<TABLE>
<CAPTION>
                                                                                  2003             2002
                                                                               ----------       ----------
<S>                                                                            <C>              <C>
    Deferred tax assets:
      Expenses not currently deductible....................................    $  267,300       $  310,200
      Packaging costs not currently deductible.............................       703,400        1,026,600
      Inventory costs not currently deductible.............................       775,500          657,700
      Other................................................................       411,000          201,900
                                                                               ----------       ----------
                                                                                2,157,200        2,196,400
                                                                               ----------       ----------
    Deferred tax liabilities:
      Excess tax depreciation over financial reporting depreciation........     1,391,900        1,262,200
                                                                               ----------       ----------
    Net deferred tax asset.................................................    $  765,300       $  934,200
                                                                               ==========       ==========
</TABLE>

    There was no valuation allowance at December 31, 2003 and 2002.


                                     IV-14
<PAGE>
                              THE FIRST YEARS INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

The provision for income taxes consists of the following:

                                           2003          2002           2001
                                        ----------    ----------    -----------
    Federal:
      Current ......................    $4,818,000    $4,248,200    $ 3,273,600
      Deferred .....................       130,400         5,600        (49,400)
                                        ----------    ----------    -----------
              Total federal ........     4,948,400     4,253,800      3,224,200
                                        ----------    ----------    -----------
    State:
      Current ......................       845,500     1,248,300      1,170,900
      Deferred .....................        38,500        13,900        (50,600)
                                        ----------    ----------    -----------
              Total state ..........       884,000     1,262,200      1,120,300
                                        ----------    ----------    -----------

    Provision for income taxes .....    $5,832,400    $5,516,000    $ 4,344,500
                                        ==========    ==========    ===========

    In 2003, the Company recorded a non-recurring tax benefit of $465,100
resulting from the favorable resolution of a state tax matter. Excluding this
tax benefit, the Company's annual effective tax rate was 38.5% at December 31,
2003.

    A reconciliation of the statutory federal income tax rate and the effective
tax rate as a percentage of pretax income is as follows:

<TABLE>
<CAPTION>
                                                                  2003     2002     2001
                                                                  ----     ----     ----

<S>                                                               <C>      <C>      <C>
    Statutory rate ...........................................    35.0%    35.0%    34.0%
    State income taxes, net of federal income tax benefit ....     4.0      6.5      6.1
    Other ....................................................    (0.5)    (0.5)     0.9
                                                                  ----     ----     ----
    Effective tax rate .......................................    38.5%    41.0%    41.0%
                                                                  ====     ====     ====
</TABLE>

4.  Stockholders' Equity

    In 2003 and 2002, the Company purchased 8,200 and 2,600 shares,
respectively, of its common stock at an aggregate purchase price of $93,227 and
$25,823, respectively under its standing stock repurchase program. In 2002, the
Company acquired 22,283 shares through delivery of mature shares by an employee
for the exercise of stock options.

    In November 2001, the Board of Directors authorized the Company to
repurchase up to 900,000 shares of the Company's common stock through a modified
"Dutch Auction" tender offer, and, in the event of an over-subscription within a
specified range, to accept shares on a pro rata basis at a price range of $10.65
to $12.65. The Company completed repurchases under this authorization during
2001 and purchased 1,014,498 shares of common stock, representing approximately
11% of the shares outstanding prior to the tender offer, at an aggregate
purchase price of $12,833,400. The costs associated with this transaction
totaled $584,088, of which $21,877 was incurred in 2002.

5.  Commitments and Contingencies

    Other Commitments -- At December 31, 2003 and 2002, the Company had no
letters of credit outstanding.

    Royalties -- The Company enters into license agreements with inventors,
designers and others for the use of intellectual property in its products. These
agreements provide for the payment of royalties on sales of certain character
and patent licensed products. Existing agreements have terms ranging from one to
three years. Royalty expenses were $5,393,000, $5,386,000, and $5,377,000 in
2003, 2002, and 2001, respectively, and are reflected in cost of products sold
in the accompanying consolidated statements of income.


                                     IV-15
<PAGE>

                              THE FIRST YEARS INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

    Also, certain of these agreements contain provisions for the payment of
guaranteed or minimum royalty amounts. Such amounts are subject to change based
upon actual sales performance in each period. Total required minimum royalty
payments were approximately $4,245,000 and $3,890,000 for the periods ended
December 31, 2003 and 2002, respectively. Under terms of existing agreements,
and after giving effect to the renewal of our most significant domestic
agreement (see Note 7), the Company may, provided the other party meets their
contractual commitment, be required to pay amounts estimated as follows:

    2004.........................................................  $3,496,000
    2005.........................................................     231,000
    2006.........................................................           0
    2007.........................................................           0
    2008.........................................................           0
                                                                   ----------
                                                                   $3,727,000
                                                                   ==========

    At December 31, 2003, the Company had approximately $2,153,285 in
outstanding inventory purchase commitments.

    During 1999, the Company entered into an employment agreement with an
executive officer which provides for annual base salary of $364,000 through
September 30, 2004, subject to any increases approved from time to time at the
discretion of the Compensation Committee of the Board of Directors. In the event
of termination, the agreement provides for certain payments depending on the
nature of the termination.

    The Company has entered into employment agreements with certain other
executive officers. The various agreements provide for payments related to
change of control events, agreements not to compete with the Company, and
severance payments depending on the nature of the executive's termination.

    Contingencies -- The Company is involved in legal proceedings which have
arisen in the ordinary course of business. Management believes the outcome of
these proceedings will not have a material adverse impact on the Company's
financial condition or operating results.

6.  Benefit Plans

    Defined Contribution Plans -- The Company has a defined contribution
trusteed benefit plan covering eligible employees, requiring annual
contributions based upon certain percentages of salaries of employees. Company
contributions aggregated approximately $842,000, $753,000, and $504,000 in 2003,
2002, and 2001, respectively. The Company sponsors a 401(k) defined contribution
plan covering substantially all Company employees pursuant to which the Company
is obligated to match, up to specified amounts, employee contributions. Company
contributions to this plan were not material for the periods presented.

    Stock Option Plans -- The Company has stock option plans under which
officers, employees, non-employees, and non-employee directors may be granted
options to purchase shares of the Company's authorized but unissued common
stock. As of December 31, 2003, substantially all of our employees were
participants in The First Years Inc. 2002 Amended and Restated Equity Incentive
Plan and all non-employee directors were participants in The First Years Inc.
2002 Amended and Restated Stock Option Plan for Directors (collectively, the
Option Plans). All stock option grants are made after a review by, and with the
approval of, the Compensation Committee of the Board of Directors.

    The Company's Board of Directors has reserved 2,980,000 shares for issuance
under the Option Plans. As of December 31, 2003, there are 512,361 options
available for future grant under the Option Plans. The exercise price for the
incentive stock options granted under the Option Plans may not be less than the
fair market value of the common stock at the date of grant, 110% of fair market
value in the case of options granted to a 10% stockholder.

    In 2003, the Company granted 15,000 shares of restricted stock to an officer
under the Option Plans which resulted in deferred compensation of $139,500. The
15,000 shares of restricted stock vest over three years. The


                                     IV-16
<PAGE>

                              THE FIRST YEARS INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

deferred compensation is being amortized ratably over the three year vesting
period and resulted in compensation expense of approximately $42,625 for the
year ended December 31, 2003.

    In 2001, a director of the Company received options to purchase 12,766
shares of the Company's Common Stock at an exercise price of $8.25 per share as
compensation for consulting services. The Company recorded a charge to
operations of $60,000 in 2001 for the compensation expense related to the stock
option grants.

    Under the Option Plans, employees of the Company may purchase stock on the
exercise of their options through the delivery of existing shares of the
Company's common stock. The shares delivered to the Company by the employee must
have been outstanding for at least six months. The Company acquired 22,283
shares of its common stock for the years ended December 31, 2002 through the
delivery of mature shares by an employee for the exercise of stock options.

    Options granted must be exercised within the period prescribed by the
Compensation Committee; the options vest in accordance with the vesting
provisions prescribed at the time of grant.

    A summary of activity of stock options granted under the Option Plans is as
follows:

                                                                    Weighted
                           Weighted                                  Average
                            Average                                 Exercise
                           Exercise    Number of                    Price for
                           Price Per    Options       Options        Options
                             Share    Outstanding   Exercisable    Exercisable
                             -----    -----------   -----------    -----------

December 31, 2000.......  $   10.43    1,054,739      532,601      $   11.49
  Granted...............       9.22      292,322
  Canceled..............       9.71      (69,965)
  Exercised.............       6.71      (69,067)
                                       ---------

December 31, 2001.......      10.39    1,208,029      726,338      $   11.43
  Granted...............      12.36      290,683
  Canceled..............      10.88      (31,145)
  Exercised.............       7.43      (70,060)
                                       ---------

December 31, 2002.......      10.90    1,397,507      919,122      $   11.01
  Granted...............      10.49      167,714
  Canceled..............      13.22      (98,006)
  Exercised.............       8.60     (111,504)
                                       ---------

December 31, 2003.......  $   10.87    1,355,711    1,034,867      $   10.77
                                       =========

The grant date fair value for options granted in 2003, 2002, and 2001 was $3.29,
$6.37, and $5.19, respectively. The following table sets forth information
regarding stock options outstanding at December 31, 2003 under the Stock Option
Plans as described above:


                                     IV-17
<PAGE>

                              THE FIRST YEARS INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

                                                                     Weighted
                                                          Number      Average
  Number                     Weighted    Weighted      Currently     Exercise
of Options      Range of      Average     Average     Exercisable    Price for
Outstanding     Exercise     Exercise    Remaining        at          Options
at 12/31/03      Prices        Price       Life        12/31/03     Exercisable
-----------  ------------   ---------    ---------    -----------   -----------
     6,000       $2.81      $   2.81          0.42         6,000    $      2.81
    26,000    4.22--6.33        4.63          1.42        26,000           4.63
   508,365    6.33--9.49        8.39          6.17       436,074           8.26
   712,074    9.49--14.24      12.28          6.89       470,793          12.58
   103,272   14.24--17.00      15.45          4.44        96,000          15.48
----------                  --------     ---------    ----------    -----------
 1,355,711                  $  10.87          6.30     1,034,867    $     10.77
==========                  ========     =========    ==========    ===========

7.  Derivative Instruments

    From time to time, the Company uses derivative financial instruments in the
form of forward foreign currency exchange contracts to manage foreign currency
risks on future cash flows emanating from sales denominated in foreign
currencies and the receipt of cash from such transactions. It is the Company's
policy to execute such instruments with creditworthy banks and not to enter into
derivative financial instruments for speculative purposes. Currency contracts
are designated as, and the Company believes are highly effective as, hedges of
anticipated sales in specific currencies. Prior to an anticipated transaction
closing, the gain or loss on the forward exchange contract is accumulated in
other comprehensive income and reclassified against revenue when the hedged
transaction occurs. Subsequent changes in the value of the contract are recorded
in the income statement, generally as an offset to gains or losses on the
receivables generated by the sales transactions.

    All foreign currency forward exchange contracts are denominated in
currencies of major industrial countries. During the year ended December 31,
2003, the Company entered into forward contracts maturing at various dates
through the end of 2003 to sell a notional amount of approximately $10,713,000
consisting of various currencies such as the Euro, the British Pound, and the
Canadian Dollar, at contracted rates. As of December 31, 2003 all these
contracts were settled and all unrealized losses accumulated in other
comprehensive income during 2003 have been recognized in the statement of income
as the underlying hedged transactions have settled. During 2002 the Company did
not designate the forward exchange contracts it entered into as hedges for
accounting purposes.

8.  Vulnerability Due to Certain Concentrations

    Concentrations of Credit Risk -- Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of cash
equivalents, trade receivables and forward foreign currency exchange contracts
(see Note 7). The Company's cash equivalents consist of money market funds
placed with major banks and financial institutions. The Company's trade
receivables principally include amounts due from retailers who are
geographically dispersed. The Company's three largest customers accounted for
75% and 69% of the trade receivables outstanding at December 31, 2003 and 2002,
respectively. The Company routinely assesses the financial strength of its
customers. The Company purchases credit insurance for certain of its foreign
customers to limit its potential exposure to foreign trade receivable credit
risks. The Company routinely assesses the financial strength of the bank which
is the counterparty to the forward exchange contracts and as of December 31,
2003 management believes it had no significant exposure to credit counterparty
risks.

    Major Customers and Export Sales -- The Company derived 10% or more of its
net sales from its three largest customers. The Company's largest customer
accounted for net sales of approximately $36,369,000, $32,339,000, and
$29,833,000 in 2003, 2002, and 2001, respectively. The Company's second largest
customer accounted for net sales of approximately $27,695,000, $27,630,000, and
$24,892,000 in 2003, 2002, and 2001, respectively. The Company's third largest
customer accounted for net sales of approximately $24,352,000, $22,978,000, and


                                     IV-18
<PAGE>

                              THE FIRST YEARS INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

$20,015,000 in 2003, 2002, and 2001, respectively. No other customer accounted
for 10% or more of the Company's sales. Net export sales, primarily to Europe,
Canada, South America, and the Pacific Rim, were approximately $19,479,000,
$17,312,000, and $14,813,000, in 2003, 2002, and 2001, respectively.

    Reliance on Licensed Products -- The Company derives a significant portion
of its net sales from products under license. Net sales of products licensed
under the most significant domestic licensing agreement amount to approximately
$29,624,000, $28,194,000, and $28,432,000 or 20%, 21%, and 23% of the Company's
total net sales for the years ended December 31, 2003, 2002, and 2001,
respectively. This licensing agreement was renewed in 2002 and will expire at
the end of 2004.

    Reliance on Foreign Manufacturers -- The Company does not own or operate its
own manufacturing facilities. In 2003, 2002, and 2001, the Company derived
approximately 76%, 74%, and 69%, respectively, of its net sales from products
manufactured by others in the Far East, primarily in China. A change in
suppliers could cause a delay in manufacturing and a possible loss of sales,
which could affect operating results adversely, depending on the particular
product.

9.  Computation of Earnings per Share

    Computation of the earnings per share (EPS) in accordance with SFAS No. 128
is as follows:

<TABLE>
<CAPTION>
                                                             2003          2002          2001
                                                          ----------    ----------    ----------
<S>                                                       <C>           <C>           <C>
    Weighted average shares outstanding................    8,264,554     8,200,624     9,151,540

    Effect of dilutive shares..........................      197,624       168,258       152,732
                                                          ----------    ----------    ----------
    Weighted average diluted shares outstanding........    8,462,178     8,368,882     9,304,272
                                                          ==========    ==========    ==========
    Net income.........................................   $9,781,823    $7,937,715    $6,251,788
                                                          ==========    ==========    ==========
    Basic earnings per share...........................   $     1.18    $     0.97    $     0.68
                                                          ----------    ----------    ----------
    Diluted earnings per share.........................   $     1.16    $     0.95    $     0.67
                                                          ----------    ----------    ----------
</TABLE>

    As of December 31, 2003, options to purchase 103,272 shares of common stock
were not included in the computation of diluted EPS because the options'
exercise price was greater than the average price of the common shares. The
options, which expire in 2004 to 2009, had exercise prices ranging from $15.00
to $17.00 per share.

    As of December 31, 2002, options to purchase 1,119,950 shares of common
stock were not included in the computation of diluted EPS because the options'
exercise price was greater than the average price of the common shares. The
options, which expire in 2003 to 2012, had exercise prices ranging from $9.00 to
$17.00 per share. The options were still outstanding at the end of 2002.

    As of December 31, 2001, options to purchase 426,487 shares of common stock
were not included in the computation of diluted EPS because the options'
exercise price was greater than the average price of the common shares. The
options, which expire in 2004 to 2009, had exercise prices ranging from $13.50
to $17.00 per share.

10. Segment Information

    The Company operates in one business segment. It engages in the single line
of business of developing and marketing one class of similar products for
infants and toddlers distributed through the same channels. Within this
operating segment, the Company had net sales of approximately $94,922,000,
$91,653,000, and $84,046,000 related to The First Years brand sales and
approximately $40,692,000, $42,739,000, and $41,738,000 related to licensed and
specialty sales in 2003, 2002, and 2001, respectively.


                                     IV-19
<PAGE>

                              THE FIRST YEARS INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

    For marketing purposes, the Company's product line consists of three
categories, Feeding & Soothing, Play & Discover, and Care & Safety. Net sales by
product category for the year ended December 31 is as follows (in thousands):

    Product Category                              2003        2002        2001
    ----------------                            --------    --------    --------
    Feeding & Soothing.......................   $ 56,747    $ 51,065    $ 44,625
    Play & Discover..........................     29,723      34,003      33,962
    Care & Safety............................     49,144      49,323      47,197

    As of December 31, 2003 and 2002, the Company has $2,860,605 and $2,054,028,
respectively, of molds located in various foreign countries which are considered
long-lived assets.

11. Selected Quarterly Financial Data (Unaudited)

    Selected quarterly financial data for the years ended December 31, 2003 and
2002 is as follows:

<TABLE>
<CAPTION>
                                                                                  Basic        Diluted
                                                      Gross           Net        Earnings      Earnings
    Calendar Quarter                 Net Sales        Profit         Income     Per Share     Per Share
    ----------------                 ---------        ------         ------     ---------     ---------

<S>                                 <C>             <C>            <C>            <C>           <C>
    2003
      First...................      $33,886,704     $12,213,754    $2,291,958     $0.28         $0.28
      Second..................       33,944,876      12,100,128     2,042,815      0.25          0.24
      Third...................       32,525,660      12,665,632     2,954,066      0.36          0.35
      Fourth..................       35,256,777      13,186,146     2,492,984      0.30          0.29

    2002
      First...................      $33,310,840     $11,628,709    $2,148,780     $0.26         $0.25
      Second..................       34,766,239      12,370,713     2,188,033      0.27          0.26
      Third...................       33,955,088      11,759,045     2,211,854      0.27          0.26
      Fourth..................       32,359,320      10,351,279     1,389,048      0.17          0.17
</TABLE>

    Basic and diluted earnings per share are computed independently for each of
the periods presented. Accordingly, the sum of the quarterly earnings per share
amounts may not agree to the total for the year.

                                   * * * * * *


                                     IV-20
<PAGE>

                                                                     SCHEDULE II

                              THE FIRST YEARS INC.

                        VALUATION AND QUALIFYING ACCOUNTS
                  Years Ended December 31, 2003, 2002, and 2001

<TABLE>
<CAPTION>
                                                                    Additions
                                                      Balance,      Charged to
                                                    Beginning of    Costs and                           Balance
Description                                             Year        Expenses         Deductions       End of Year
-----------                                         ------------    ----------       ----------       -----------

<S>                                                   <C>           <C>              <C>               <C>
Valuation Accounts Deducted from Assets
  to which they Apply--

     Allowance for doubtful accounts:
          2003...................................     $250,000      $  107,018       $  107,108(1)     $250,000
                                                      ========      ==========       ==========        ========
          2002...................................     $250,000      $  116,825       $  116,825(1)     $250,000
                                                      ========      ==========       ==========        ========
          2001...................................     $270,000      $1,217,405(2)    $1,237,405(1,2)   $250,000
                                                      ========      ==========       ==========        ========

     Allowance for obsolete inventory:
          2003...................................     $200,000      $  100,000       $        0        $300,000
                                                      ========      ==========       ==========        ========
          2002...................................     $200,000      $  150,000       $  150,000        $200,000
                                                      ========      ==========       ==========        ========
          2001...................................     $300,000      $        0       $  100,000        $200,000
                                                      ========      ==========       ==========        ========
</TABLE>

----------
(1) Net accounts written off.

(2) Includes write-off of certain Kmart receivables of approximately $952,000.


                                     IV-21
<PAGE>

                              THE FIRST YEARS INC.

                                  EXHIBIT INDEX

Exhibit                            Description
-------                            -----------

3.1.1     Restated Articles of Organization of the Company. Filed as Exhibit
          3.1 to the Company's Registration Statement on Form S-1 on October 5,
          1995 (File No. 33-62673) and incorporated herein by reference.

3.1.2     Articles of Amendment to Restated Articles of Organization of the
          Company filed herewith.

3.2       By-laws of the Company. Filed as Exhibit (3)(ii) to the Company's
          annual report on Form 10-K for the period ended December 31, 1999 and
          incorporated herein by reference.

4.1       Specimen certificate for shares of Common Stock of the Company. Filed
          as Exhibit 4.1 to the Company's Registration Statement on Form S-1
          (File No. 33-62673) and incorporated herein by reference.

4.2       Rights Agreement, dated as of November 19, 2001, between the Company
          and EquiServe Trust Company, N. A. Filed as Exhibit 4.1 to the
          Company's Registration Statement on Form 8-A on November 20, 2001 and
          incorporated herein by reference.

10.1*     Agreement with the Children's Television Workshop dated July 1, 1996
          regarding the licensing of Sesame Street characters. Filed as Exhibit
          (10)(g) to the Company's annual report on Form 10-K for the period
          ended December 31, 1996 and incorporated herein by reference.

10.2*     Letter agreement with Children's Television Workshop dated as of July
          1, 1999 regarding the renewal of licensing of Sesame Street
          characters. Filed as Exhibit (10)(d) to the Company's annual report on
          Form 10-K for the period ended December 31, 1999 and incorporated
          herein by reference.

10.3*     Letter agreement with Sesame Workshop dated July 1, 2001 regarding the
          renewal of licensing of Sesame Street characters. Filed as Exhibit
          10.3 to the Company's quarterly report on Form 10-Q for the period
          ended September 30, 2002 and incorporated herein by reference.

10.4*     Agreement with Disney Enterprises, Inc. dated as of August 1, 2000
          relating to the licensing of Winnie the Pooh, Disney Classics and
          Disney Standard characters. Filed as Exhibit (10)(w) to the Company's
          quarterly report on Form 10-Q for the period ended September 30, 2000
          and incorporated herein by reference.

10.5      The First Years Inc. 2002 Amended and Restated Equity Incentive Plan,
          filed as Exhibit 10.5 to the Company's Annual Report on Form 10-K for
          the period ended December 31, 2003 and incorporated herein by
          reference.

10.6      The First Years Inc. 2002 Amended and Restated Stock Option Plan for
          Directors, filed herewith, filed as Exhibit 10.6 to the Company's
          Annual Report on Form 10-K for the period ended December 31, 2003 and
          incorporated herein by reference.

10.7      Letter Agreement between The First Years Inc. and Jerome M. Karp dated
          August 8, 1999. Filed as Exhibit (10)(v) to the Company's quarterly
          report on Form 10-Q for the period ended September 30, 1999, and
          incorporated herein by reference.

10.8      Employment Agreement between The First Years Inc. and Ronald J. Sidman
          dated September 30, 1999. Filed as Exhibit (10)(u) to the Company's
          quarterly report on Form 10-Q for the period ended September 30, 1999,
          and incorporated herein by reference.

10.9      Agreement between The First Years Inc. and Bruce Baron dated July 10,
          1997. Filed as Exhibit (10)(p) to the Company's annual report on Form
          10-K for the period ended December 31, 1998, and incorporated herein
          by reference.


                                     IV-22
<PAGE>

Exhibit                            Description
-------                            -----------

10.10     Non-Compete Agreement between The First Years Inc. and Richard F.
          Schaub Jr. dated August 29, 2000. Filed as Exhibit (10)(m) to the
          Company's annual report on Form 10-K for the period ended December
          31, 2000, and incorporated herein by reference.

10.11     Change of Control Agreement between The First Years Inc. and Richard
          F. Schaub Jr. dated August 29, 2000. Filed as Exhibit (10)(n) to the
          Company's annual report on Form 10-K for the period ended December
          31, 2000, and incorporated herein by reference.

10.12     Promissory Note and Agreement between The First Years Inc. and
          Richard F. Schaub Jr. dated September 28, 2000. Filed as Exhibit
          (10)(o) to the Company's annual report on Form 10-K for the period
          ended December 31, 2000, and incorporated herein by reference.

10.13     Promissory Note and Agreement between The First Years Inc. and
          Richard F. Schaub Jr. dated March 21, 2001. Filed as Exhibit 10.14 to
          the Company's Annual Report on Form 10-K for the period ended
          December 31, 2001 and incorporated herein by reference.

10.14     Agreement between The First Years Inc. and James A. Connors, Jr.
          dated May 8, 2000. Filed as Exhibit (10)(p) to the Company's annual
          report on Form 10-K for the period ended December 31, 2000, and
          incorporated herein by reference.

10.15     Employee Contract between The First Years Inc. and John R. Beals
          dated September 30, 2002. Filed as Exhibit 10.2 to the Company's
          quarterly report on Form 10-Q for the period ended September 30, 2002
          and incorporated herein by reference.

10.16     Employee Contract between The First Years Inc. and Barry Boehme dated
          January 12, 2003, filed herewith, filed as Exhibit 10.16 to the
          Company's Annual Report on Form 10-K for the period ended
          December 31, 2003 and incorporated herein by reference.

10.17*    Consumer Products License -- Disney Properties, dated as of June 4,
          2002, between the Company and Disney Enterprises, Inc. Filed as
          Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the
          period ending September 30, 2002 and incorporated herein by reference.

10.18     Change of Control Agreement between The First Years Inc. and Barry
          Boehme, dated January 21, 2004 and filed herewith.

10.19     Change of Control Agreement between The First Years Inc. and James
          Connors, Jr., dated January 21, 2004 and filed herewith.

10.20     Change of Control Agreement between The First Years Inc. and John
          Beals, dated January 21, 2004 and filed herewith.

10.21     Change of Control Agreement between The First Years Inc. and Bruce
          Baron, dated January 21, 2004 and filed herewith.

10.22     Change of Control Agreement between The First Years Inc. and Ron
          Cardone, dated January 21, 2004 and filed herewith.

10.23     Form of Indemnification Agreement dated February 5, 2004 between
          The First Years Inc. and each of the following Directors: Ronald
          Sidman, Richard Wenz, Walker Wallace, Fred Page, Benjamin Peltz,
          Evelyn Sidman, Lewis Weston, Beth Kaplan, and Kenneth Sidman, filed
          herewith.

14        The First Years Inc. -- Corporate Code of Conduct and Ethics, filed
          herewith.


                                     IV-23
<PAGE>

21.1      List of Subsidiaries of the Registrant.

23.1      Consent of Deloitte & Touche LLP.

31.1      Certification of Chief Executive Officer pursuant to Section 302 of
          the Sarbanes-Oxley Act of 2002.

31.2      Certification of Chief Financial Officer pursuant to Section 302 of
          the Sarbanes-Oxley Act of 2002.

32        Certification of Officers pursuant to 18 U.S.C. Section 1350, as
          adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

----------
*   Confidential Treatment has been granted with respect to portions of this
    document by the Securities and Exchange Commission.


                                     IV-24