SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d )

                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2003   Commission file number  1-8689
                          ------------------                           ------

                            DIXON TICONDEROGA COMPANY
--------------------------------------------------------------------------------
             (Exact name of  Company as specified in its charter)
Form 10-K
---------

 X    Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
---   Act of 1934 (Fee Required) for the fiscal year ended September 30, 2003.


      Transition  Report  Pursuant  to Section 13 or 15 (d) of the  Securities
      Exchange  Act of 1934  (No Fee  Required)  for  the  transaction  period
---   from  _____ to _____.

                  Delaware                                 23-0973760
---------------------------------------------  ---------------------------------
      (State or other jurisdiction of                   (I.R.S. Employer
       incorporation or organization)                Identification Number)

  195 International Parkway, Heathrow, FL                     32746
---------------------------------------------  ---------------------------------
  (Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code (407) 829-9000
                                                   --------------

          Title of each class         Name of each exchange on which registered

    Common Stock, $1.00 par value               American Stock Exchange
    -----------------------------               -----------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the company was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.                       Yes [ X ]        No [ ]

Based on the closing sales price on December 9, 2003, the aggregate market value
of the voting stock held by non-affiliates of the Company was $7,760,188.

Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of December 9, 2003:  3,202,149  shares of common stock,  $1.00
Par Value.

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 Form 10-K or any amendment to this Form
10-K. [ ]

Documents  Incorporated  by  Reference:
Proxy statement to security  holders  incorporated  into Part III for the fiscal
year ended September 30, 2003.


<PAGE>


                                     PART I
                                     ------

ITEM 1.  BUSINESS
         --------

                      RECENT EVENTS AND BUSINESS STRATEGIES
                      -------------------------------------

     Dixon   Ticonderoga   Company    (hereinafter   the   "Company")   achieved
significantly  improved  operating  results  in  fiscal  2003 as a result of its
strategic   initiatives   over  the  past  several   years  aimed  at  improving
profitability through the rationalization of manufacturing  operations and other
cost reduction efforts.  The Company's operating income increased  approximately
$1.8 million in the current fiscal year.
     The Company has  continued  its emphasis on debt  reduction  following  the
successful  restructuring  of its senior and subordinated  debt  arrangements in
early fiscal 2003.  Total  long-term debt and notes payable have been reduced by
approximately $9 million or 21% since the end of fiscal 2001.
     The final phase of the  Company's  aggressive  manufacturing  consolidation
initiative was also  completed in fiscal 2003,  resulting in the shutdown of its
Sandusky,  Ohio manufacturing facility. As a further cost reduction strategy, in
fiscal 2003 the Company  entered into a  distribution  arrangement  with a third
party logistics partner located in Statesville, North Carolina.
     In addition,  the Company's  China  subsidiary,  Beijing Dixon  Ticonderoga
Stationery  Company,  Ltd.,  continued its expansion in 2003. The subsidiary not
only increased  further its production of wood slats used by the U.S. and Mexico
in pencil manufacturing,  but also began to produce colored and graphite pencils
for export sale. This entity also acts as a sourcing arm,  providing certain new
and innovative  products for  international  sale,  while  assisting in securing
other critical raw materials used in production in the U.S. and Mexico.
     Effective July 2003, the Company  completed the sale of its last Industrial
Group business, its New Castle Refractories  division, to local management.  The
Company received  proceeds of  approximately  $3 million,  used to reduce senior
debt,  and a  note  receivable  in the  amount  of  $500,000.  (See  Note  13 to
Consolidated Financial Statements.)
     Further  information  regarding these matters is included elsewhere in this
Annual Report on Form 10-K.


<TABLE>
<CAPTION>

                                 COMPANY ORGANIZATION
                                 --------------------
                              Dixon Ticonderoga Company
                                       (Parent)
<S>                    <C>             <C>                   <C>              <C>

       -----------------------------------------------------------------------
       |               |                |                    |                |
       |               |                |                    |                |
       |               |                |                    |                |
     Dixon           Dixon        Dixon Industrial      Beijing Dixon     Ticonderoga
 Ticonderoga,    Europe, Ltd.   Mexico, S.A. de C.V.     Ticonderoga       Graphite,
  Inc. Canada   (Wholly-Owned) /Inactive(Wholly-Owned)   Stationery      Inc./Inactive
(Wholly-Owned)                                          Company, Ltd.    (Wholly-Owned)
                                                       (Wholly-Owned)
       |
       |
 Grupo Dixon,
 S.A. de C.V.
and subsidiaries
 (97% Owned)
</TABLE>



<PAGE>

                                INDUSTRY SEGMENTS
                                -----------------

     The Company has one principal  continuing  business  segment:  its Consumer
Group. This segment's primary operations are the manufacture and sale of writing
and drawing  pencils,  pens,  artist  materials,  felt tip  markers,  industrial
markers, lumber crayons, correction materials and allied products.
     Certain financial information regarding net revenues, operating profits and
identifiable  assets for the years ended  September 30, 2003,  2002 and 2001, is
contained in Note 12 to Consolidated Financial Statements.

CONSUMER GROUP
--------------

     The Company  manufactures its leading brand  Ticonderoga(R) and a full line
of pencils  in  Versailles,  Missouri.  The  Company  manufactures  and  markets
advertising specialty pencils, pens and markers through its promotional products
division. The Company also manufactures and markets Wearever(R) and Dixon(R) pen
writing  products  as well as  Prang(R)  and  Ticonderoga(R)  lines of  markers,
mechanical pencils and allied products.
     Through fiscal 2002, the Company  manufactured  some or all of its Prang(R)
brand of soy-bean based and wax crayons,  chalks, dry and liquid tempera,  water
colors and art materials,  in Sandusky,  Ohio.  Commencing in fiscal 2003, these
products are  manufactured  by the Company's  majority-owned  (97%)  subsidiary,
Grupo Dixon, S.A. de C.V. (Grupo Dixon).
     Under a licensing agreement with NASCAR(R), The Company markets pencils and
pens with the NASCAR brand and features  certain top  NASCAR(R)  drivers.  Also,
under an agreement with Warner Bros. Consumer Products, the Company also markets
in Canada a line of pencils,  pens and  related  products  featuring  the famous
Looney Tunes(R) and Scooby Doo(R) characters.
     Dixon  Ticonderoga  Inc., a  wholly-owned  subsidiary  with a  distribution
center in Newmarket,  Ontario,  and a manufacturing plant in Acton Vale, Quebec,
Canada,  is engaged in the sale in Canada of black and color writing and drawing
pencils, pens, lumber crayons,  correction materials,  erasers, rubber bands and
allied products.  It also  distributes  certain of the school product lines. The
Acton Vale plant also  produces  eraser  products and  correction  materials for
distribution by the U.S. Consumer group.
     Grupo Dixon is engaged,  through its  subsidiaries,  in the manufacture and
sale in Mexico  of black  and color  writing  and  drawing  pencils,  correction
materials, lumber crayons and allied products. Grupo Dixon also manufactures and
sells  in  Mexico,  under  its  Vinci(R)  brand,  certain  products  of the type
previously manufactured at the Sandusky facility, as well as marker products and
modeling clay. Grupo Dixon also manufactures special markers for industrial use,
all of which are marketed and sold together with the Prang(R) products discussed
above, by the U.S. Consumer division.
     Dixon Europe, Limited, a wholly-owned subsidiary of the Company, is engaged
in the  distribution  of many Dixon consumer  products in the United Kingdom and
other European countries.
     Beijing  Dixon  Ticonderoga   Stationery  Company,   Ltd.,  a  wholly-owned
subsidiary of the Company,  is  principally  engaged in the  manufacture of wood
slats for pencil  manufacturing  and the  sourcing and  distribution  of certain
consumer  products  for  international  sale by the Company.  In  addition,  the
subsidiary has recently begun to  manufacture  colored and graphite  pencils for
export sale.
     The  Company's  international  operations  are  subject  to  certain  risks
inherent  in  carrying  on  business  abroad,  including  the  risk of  currency
fluctuations,   currency  remittance   restrictions  and  unfavorable  political
conditions.  It is the  Company's  opinion that there are  presently no material
political  risks  involved  in doing  business in the  foreign  countries  (i.e.
Mexico, Canada, Europe and China) in which its operations are being conducted.



<PAGE>


INDUSTRIAL GROUP (DISCONTINUED OPERATIONS)
------------------------------------------

     Effective  July  2003,  the  Company  completed  its sale of the New Castle
Refractories division, the last business of its Industrial Group. This division,
with plants located in Ohio,  Pennsylvania  and West Virginia,  had manufactured
various types of non-graphitic refractory kiln furniture used by the ceramic and
glass industries; firebrick, silicon-carbide brick, various types and designs of
non-graphitic  refractory  special  shapes  for  ferrous  and  nonferrous  metal
industries;  refractory  shapes  for  furnace  linings  and  industrial  furnace
construction; various grades of insulating firebrick and graphite stopper heads.
(See Note 13 to Consolidated Financial Statements.)

                                  DISTRIBUTION
                                  ------------

     Consumer products  manufactured and/or marketed in the U.S. are distributed
nationally  through wholesale,  commercial and retail stationers,  school supply
houses,  industrial supply houses,  blueprint and reproduction supply firms, art
material  distributors  and  retailers.  In an effort to enhance  service levels
(especially with large retail  customers),  the Company entered into a strategic
distribution  arrangement  with a  third-party  located  in  Statesville,  North
Carolina  early in  fiscal  2003.  The  consumer  products  manufactured  and/or
marketed  by  the  Canada,   Mexico  and  Europe  subsidiaries  are  distributed
nationally  in  these   countries  from  leased   facilities  and  sold  through
wholesalers, distributors, school supply houses and retailers.

                                  RAW MATERIALS
                                  -------------

     Wood slats for pencil  manufacturing  can be  considered  a  strategic  raw
material for the Company's  business and are purchased from various suppliers in
the U.S.,  Indonesia  and China  (including  the  Company's  wholly-owned  China
subsidiary). There were no significant raw material shortages of any consequence
during 2003 nor are any expected in the near future.

                       TRADEMARKS, PATENTS AND COPYRIGHTS
                       ----------------------------------

     The Company  owns a large  number of  trademarks,  patents  and  copyrights
related to products  manufactured  and  marketed by it,  which have been secured
over many  years.  These  have been of value in the growth of the  business  and
should  continue  to be of value in the future.  However,  in the opinion of the
Company, its business generally is not dependent upon or at risk with respect to
the  protection  of any patent or patent  application  or the  expiration of any
patent.

                        SEASONAL ASPECTS OF THE BUSINESS
                        --------------------------------

     Greater portions  (approximately  61% in 2003) of the Company's sales occur
in the  third  and  fourth  fiscal  quarters  of the  year due to  shipments  of
back-to-school  orders to its  distribution  network.  This  practice as well as
certain extended  customer payment terms,  which are standard for this industry,
requires the Company to increase its bank  borrowings  during the period between
shipment and payment.

                                   COMPETITION
                                   -----------

     The Company is engaged in a highly  competitive  business  with a number of
competitors,  some of whom  are  larger  and  have  greater  resources  than the
Company.  Important  to the  Company's  market  position  are  the  quality  and
performance of its products,  its marketing,  customer  service and distribution
systems and the  reputation  developed  over the many years that the Company has
been in business.



<PAGE>


                            RESEARCH AND DEVELOPMENT
                            ------------------------

     The Company employs  approximately 32 full-time  professional  employees in
the area of quality control and product  development.  For accounting  purposes,
research and  development  expenses in any year  presented  in the  accompanying
Consolidated Financial Statements represent less than 1% of revenues.

                                    EMPLOYEES
                                    ---------

     The total number of persons employed by the Company was approximately 1,596
of which 294 were employed in the United States. The Company does not unlawfully
discriminate  on the basis of race,  color,  creed,  pregnancy,  religion,  sex,
national  origin,  age,  disability,  veteran  status,  marital  status or other
characteristics protected by law.


ITEM 2.  PROPERTIES
         ----------

     The properties of the Company,  set forth in the following  table are owned
and  are  collateralized  under  the  Company's  senior  and  subordinated  debt
agreements.  The  Heathrow,  Florida,  property,  is also  subject to a separate
mortgage agreement.  (See Note 4 to Consolidated  Financial Statements.) Most of
the buildings are of steel frame and masonry or concrete construction.

                                                                  SQUARE FEET
                             LOCATION                           OF FLOOR SPACE
  ------------------------------------------------------------- --------------
  Heathrow, Florida (Corporate Headquarters)                           33,000

  Versailles, Missouri                                                120,000

  Sandusky, Ohio (Idle)                                               276,000

  Acton Vale, Quebec, Canada (Dixon Ticonderoga Inc.)                  32,000

  Beijing, China (Beijing Dixon Ticonderoga Stationery Company, Ltd.)  25,000


     The Company's Mexico subsidiary leases a 300,000 square-foot  facility near
Mexico City, used for distribution and certain manufacturing operations, as well
as its corporate  headquarters.  The Company's Canada  subsidiary  leases 12,000
square feet in Newmarket,  Ontario and its Europe subsidiary leases 3,000 square
feet in Peterborough, England for distribution and office space.


ITEM 3.  LEGAL PROCEEDINGS
         -----------------

     The Company  believes  that there are no pending  actions which will have a
material  adverse  effect on the  Company's  financial  condition  or results of
operations. (Also see Note 14 to Consolidated Financial Statements.)


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

     None.



<PAGE>


                                     PART II
                                     -------


ITEM 5.  MARKET FOR THE COMPANY'S COMMON STOCK AND
         -----------------------------------------

         RELATED SECURITY HOLDER MATTERS
         -------------------------------

     Dixon  Ticonderoga  Company  common stock is traded on the  American  Stock
Exchange under the symbol "DXT". The following table sets forth the low and high
per share  prices as per the  American  Stock  Exchange  closing  prices for the
applicable quarter.


                                        FISCAL             FISCAL
              QUARTER ENDING             2003               2002
              --------------             ----               ----

                                     LOW      HIGH     LOW      HIGH
                                     ---      ----     ---      ----
         December 31                $1.15    $1.95    $1.10     $2.50
         March 31                    1.35     1.95     1.62      1.75
         June 30                     1.62     3.50     1.45      2.00
         September 30                2.84     4.05     1.10      1.63


     The Board of Directors has indefinitely  suspended the payment of dividends
which is also restricted under the Company's new debt agreements. (See Note 4 to
Consolidated Financial Statements.)
     The number of record  holders of the Company's  common stock at December 5,
2003 was 412.


<PAGE>

<TABLE>
<CAPTION>


                   DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                   FOR THE FIVE YEARS ENDED SEPTEMBER 30, 2003
                    (in thousands, except per share amounts)
<S>                               <C>          <C>         <C>         <C>          <C>
                                   2003        2002        2001        2000       1999
                                ----------  ----------  ----------  ----------  ----------
REVENUES                         $ 88,838    $ 88,591    $ 88,319    $ 88,867    $ 95,041
                                ==========  ==========  ==========  ==========  ==========
INCOME (LOSS) FROM
  CONTINUING OPERATIONS          $   (849)   $   (683)   $    620    $   (733)   $    399

INCOME (LOSS) FROM
  DISCONTINUED OPERATIONS            (579)        123      (1,100)        (65)      6,283
                                ----------  ----------  ----------  ----------  ----------

NET INCOME (LOSS)                $ (1,428)   $   (560)   $   (480)   $   (798)   $  6,682
                                ==========  ==========  ==========  ==========  ==========

EARNINGS (LOSS) PER
  COMMON SHARE (BASIC):
  CONTINUING OPERATIONS          $   (.27)   $   (.22)   $    .20    $   (.23)   $    .12

  DISCONTINUED OPERATIONS            (.18)        .04        (.35)       (.02)       1.83
                                ----------  ----------  ----------  ----------  ----------

  NET INCOME (LOSS)              $   (.45)   $   (.18)   $   (.15)   $   (.25)   $   1.95
                                ==========  ==========  ==========  ==========  ==========

EARNINGS (LOSS) PER
  COMMON SHARE (DILUTED):
  CONTINUING OPERATIONS          $   (.27)   $   (.22)   $    .20    $   (.23)   $    .12

  DISCONTINUED OPERATIONS            (.18)        .04        (.35)       (.02)       1.83
                                ----------  ----------  ----------  ----------  ----------

  NET INCOME (LOSS)              $   (.45)   $   (.18)   $   (.15)   $   (.25)   $   1.95
                                ==========  ==========  ==========  ==========  ==========

TOTAL ASSETS                     $ 72,034    $ 79,409    $ 86,091    $ 86,718    $ 92,888
                                ==========  ==========  ==========  ==========  ==========

LONG-TERM DEBT                   $ 12,511    $ 16,383 3  $  2,018 2  $ 30,210    $ 39,400 1
                                ==========  ==========  ==========  ==========  ==========

DIVIDENDS PER
  COMMON SHARE                   $    -      $   -       $   -       $   -       $   -
                                ==========  ==========  ==========  ==========  ==========
</TABLE>

1The increase in long-term debt in 1999 is  attributable  to the  refinancing of
the Company's previous revolving credit agreement under a five-year facility.
2The  reduction in long-term  debt is due to  reclassification  of the Company's
senior credit facility and subordinated notes to current maturities of long-term
debt while in default.
3The  increase in  long-term  debt in 2002 is  attributable  to the October 2002
restructuring  of the Company's  subordinated  notes,  previously  classified as
current  maturities  of  long-term  debt in 2001.  (See  Note 4 to  Consolidated
Financial Statements.)



<PAGE>


ITEM 7.  MANAGEMENT ' S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         -----------------------------------------------------------------

         RESULTS OF OPERATIONS
         ---------------------

SUMMARY  OF  RESULTS  OF  OPERATIONS
------------------------------------

Discontinued operations:
------------------------

     Effective  July  2003,  the  Company  completed  its sale of the New Castle
Refractories division, the last business of its Industrial group. The Industrial
Group had revenues of $8,021,000,  $9,169,000  and $9,529,000 in 2003,  2002 and
2001,   respectively.   Income  (loss)  from  discontinued   operations  (before
provisions  in 2001 for  loss on  disposal,  described  below)  was  ($578,000),
$123,000 and ($56,000) in 2003, 2002 and 2001,  respectively  (including pre-tax
gains on sales of assets of $208,000 and $1,202,000 in 2002 and 2001, and income
tax benefit (expense) of ($77,000) and $29,000 in 2002 and 2001,  respectively).
Interest  expense of  $270,000,  $342,000  and  $427,000  has been  allocated to
discontinued operations in 2003, 2002 and 2001, respectively.
     In fiscal 2001, the Company also recorded an  anticipated  loss on disposal
of $1,570,000 (or $1,044,000 after tax benefit) including  provisions for a loss
on the  sale  of the New  Castle  Refractories  division  of  $468,000,  for the
termination  of that  division's  pension  plans of $432,000  and for  operating
losses of $670,000.  For financial reporting purposes, the Company is accounting
for the disposition of its Industrial  Segment as a discontinued  operation and,
accordingly,   its   statements  of  operations   present  the  results  of  the
discontinued  Industrial  Segment  separately  from the  results  of  continuing
operations.  Since a discussion of the results of the Industrial  Segment is not
meaningful  to  an  understanding  of  the  continuing  Consumer  business,  all
discussions  comparing  the  results  of  operations  refer  to  the  continuing
operations of the U.S. and Foreign divisions of the Consumer Group. (For further
information  regarding  discontinued  operations,  see  Note 13 to  Consolidated
Financial Statements.)

Continuing operations:
----------------------

2003 vs 2002:
-------------

     Income  from  continuing  operations  before  taxes and  minority  interest
improved  by  $3,128,000  in 2003.  Special  items,  including  the  effects  of
restructuring and related costs; debt refinancing costs;  investment banking and
related  costs;  and other  income,  net are set  forth in the  table  below (in
thousands):

                                                    2003           2002
                                               ------------   -----------

 Income (loss) from continuing operations before
  income taxes and minority interest              $ 1,937       $ (1,191)

 Restructuring and related costs                      487          1,573

 Debt refinancing costs                               625            -

 Investment banking and related costs                 483            -

 Other income, net                                 (1,052)          (253)
                                               ------------   -----------
                                                  $ 2,480       $    129
                                               ============   ===========
<PAGE>


     Restructuring costs decreased $1,086,000 in 2003 as the Company entered the
final completion stage of its plant consolidation  initiative.  Debt refinancing
costs  consists of the write-off of costs from the former debt  arrangements  in
connection  with the  Company's  October  2002  debt  restructuring.  Investment
banking and related costs were incurred in connection with unconsummated mergers
and acquisition  activity pursued through the Company's  investment bankers. For
further  information  regarding  special  items,  see  Notes  8,  9  and  10  to
Consolidated Financial Statements.
     U.S.  Consumer  accounted for the majority of this net improvement,  as the
Company's  manufacturing  consolidation  efforts led to  significantly  improved
gross  margins.  Higher  revenues  and a decrease of  approximately  $400,000 in
interest  costs  also  contributed  to the U.S.  improvement.  Foreign  Consumer
operating income also improved in all geographic areas due principally to higher
gross margins from lower pencil raw materials  costs and improved  manufacturing
overhead efficiencies.

2002 vs. 2001:
--------------

     Income  before  taxes,   minority  interest  and  discontinued   operations
decreased  $2,159,000.  Restructuring  costs  increased  $705,000 as the Company
announced its final phase of plant consolidations.  (See Note 10 to Consolidated
Financial Statements.)  Administrative costs in the U.S. increased primarily due
to  higher  bank  financing  costs and the prior  year  administrative  expenses
reflecting  a  $575,000   reduction  for   settlement   of  a  lawsuit.   Higher
administrative  expenses  were  partially  offset  by  lower  interest  costs as
interest expense decreased $300,000 in 2002.

REVENUES
--------

     Revenues in 2003 increased $247,000 over the prior year. The changes are as
follows:
                       Decrease             % Increase (Decrease)
                   (in thousands)        Total    Volume  Price / Mix
                   --------------        ----------------------------
      U.S.           $  1,401              3        5         (2)
      Foreign          (1,154)            (3)      (7)         4

     U.S. Revenue increased primarily in the educational market. Foreign revenue
decreases  were  primarily in Mexico where an  approximate  10% reduction in the
value of the peso  resulted in a decline of  approximately  $2.7  million.  This
decrease  was  partially  offset by Mexico price  increases,  an increase in the
value of the Canadian dollar and higher volume in Europe.

     Overall 2002 revenues  increased  $271,000 from the prior year. The changes
are as follows:
                Increase (Decrease)        % Increase (Decrease)
                  (in thousands)         Total    Volume  Price / Mix
                   --------------        ----------------------------
      U.S.           $ (3,153)            (6)      (3)        (3)
      Foreign           3,424             10       13         (3)

     U.S. Revenue decreased in the educational and promotional  products markets
primarily due to customer  consolidations and their related inventory  reduction
efforts.  Revenue  increased in the retail  channel,  principally  in the office
supply superstores,  partially offsetting reductions in other channels.  Foreign
revenue  increased  primarily in Mexico due to higher  volume with existing mass
market customers and additional government business.
     While  the  Company  has  operations  in  Canada,   Mexico  and  the  U.K.,
historically only the operating results in Mexico have been materially  impacted
by  currency  fluctuations.  There  has been a  significant  devaluation  of the
Mexican peso at least once in each of the last three decades, the last one being
in  August  of  1998.  In the  short  term  after  such  devaluations,  consumer
confidence has been shaken, leading to an immediate reduction in revenues in the
months  following the  devaluation.  Then, after the immediate shock, and as the
peso  stabilizes,  revenues tend to grow.  Selling  prices tend to rise over the
long term to offset any  inflationary  increases in costs.  The peso, as well as
any currency  value,  depends on many  factors  including  international  trade,
investor  confidence  and  government  policy,  to name a few. These factors are
<PAGE>

impossible for the Company to predict, and thus, an estimate of potential effect
on results of operations  for the future  cannot be made.  This currency risk in
Mexico is presently managed through  occasional  foreign currency hedges,  local
currency financing and by export sales to the U.S. denominated in U.S. dollars.

OPERATING  INCOME
-----------------

     In 2003,  operating  income  increased  $1,826,000 as compared to the prior
year. Special items, including restructuring and related costs; debt refinancing
costs;  and  investment  banking and related costs are as set forth in the table
below (in thousands):

                                                   2003              2002
                                             ----------------  ----------------
Operating income                                 $ 4,470           $ 2,644

Restructuring and related costs                      487             1,573

Debt refinancing costs                               625               -

Investment banking and related costs                 483               -
                                             ----------------  ----------------
                                                 $ 6,065           $ 4,217
                                             ================  ================

     For further  information  regarding the  aforementioned  special items, see
Notes 8 and 10 to Consolidated Financial Statements.
     U.S. operating income improved  approximately $1.1 million  principally due
to the  aforementioned  manufacturing  cost  savings  from  plant  consolidation
efforts and higher revenue  resulting in gross margin increases of approximately
$800,000.  In addition,  selling and administrative  expenses decreased overall,
despite  significantly  higher  legal,  tax and  audit  professional  fees.  The
reduction was principally due to lower sales and marketing  salaries and related
expenses, reflecting recent cost reduction activities.  Foreign operating profit
increased $700,000 as savings from consolidation efforts in Mexico and lower raw
material costs and increased production resulted in higher profits in China. All
of the aforementioned  manufacturing  efficiencies and costs savings contributed
to a decrease  in  overall  consolidated  cost of sales  (61.9% of  revenues  as
compared to 64.5% in the prior year).
     Operating  income  decreased  $2,712,000 in 2002 from the prior year.  U.S.
operating income decreased $2,998,000 (excluding  restructuring  charges) due to
the  aforementioned  lower  revenues and increased  administrative  costs.  U.S.
administrative costs also increased principally due to the prior year reflecting
a reduction  for legal  settlements  of $575,000 and  significantly  higher bank
financing  costs   (approximately   $417,000).   These  factors  were  primarily
responsible for an increase in selling and administrative  costs (30.5% of sales
as  compared  to 28.7% of sales in the prior  year).  Restructuring  and related
costs  increased  $705,000  as the  Company  announced  its  final  phase of its
consolidation  plan. Foreign operating profit increased  $1,111,000  principally
due to higher revenue described above.

INCOME TAXES
------------

     As more fully described in Note 5 to Consolidated Financial Statements,  in
fiscal 2003 the Company  provided  additional  valuation  allowances for certain
U.S.  deferred tax assets in the amount of $2,232,000.  Despite the  significant
improvement in U.S. operating results in 2003 described above, the Company again
incurred tax losses in the U.S. Accordingly, the Company recorded the additional
valuation  allowances with respect to the related tax assets as of September 30,
2003.


<PAGE>


MINORITY INTEREST
-----------------

     Minority  interest  represents  3% of the net  income  of the  consolidated
subsidiary,  Grupo Dixon, S.A. de C.V., ($42,000,  $51,000 and $31,000 in fiscal
2003, 2002 and 2001,  respectively),  equivalent to the extent of the investment
of the minority shareholders.

CURRENT ECONOMIC ENVIRONMENT AND EVENTS
---------------------------------------

     Although  not  directly  impacted by recent  events in the U.S. and abroad,
management  believes that softening  economic  conditions have recently affected
and could  continue  to affect the retail  mass or other  markets  served by the
Company's  Consumer Group and thus could lead to reduced  overall  revenues.  In
addition,  certain  expenses which have risen recently (such as insurance costs)
could continue to trend  significantly  higher in the coming years due to recent
events.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

     Despite significantly improved results from operations,  the Company's cash
flows used in operating  activities  approximated  $400,000 in fiscal 2003.  The
Company has generated annual cash flows from operating  activities  exceeding $4
million on average for the previous three fiscal years.  After significant prior
year reductions in inventories  from its strict  inventory  management plan, the
Company did not significantly  reduce  inventories in 2003, except from the sale
of its New Castle  Refractories  division.  Certain  safety  stock  levels  were
increased as new  manufacturing  processes were implemented in Mexico.  However,
the  Company  did  extinguish  certain   significant   liabilities   aggregating
approximately $3.3 million in 2003 (consisting  principally of deferred interest
and restructuring  charges).  Cash flows from accounts receivable also decreased
approximately  $1.2 million in 2003 due to large Mexico government sales late in
the fiscal year having payment terms extending beyond September 30, 2003.
     The Company's 2003 investing activities provided approximately $3.3 million
in cash flows as  compared  with 2002 when $1.3  million in cash flows were used
for  purchase of plant and  equipment,  net of the effects of  disposals.  Major
capital  projects  are   discretionary  in  nature  with  no  material  purchase
commitments.  Capital  expenditures  are  usually  funded  from  operations  and
existing  lending and leasing  arrangements.  In 2003, the Company's net capital
expenditures were only $427,000, due to shrinking manufacturing facilities. Cash
flows were  provided  from the sale of the  aforementioned  division  assets and
proceeds  from  the  sale  of  securities   received  from   insurance   company
demutualizations.
     In October 2002,  the Company  completed a financing  agreement  with a new
senior lender and its existing  subordinated  lenders to restructure its present
U.S.  debt  through  fiscal  2005.  Foothill  Capital  Corporation   provided  a
three-year  $28 million  senior  debt  facility  which  replaced  the  Company's
previous  senior  debt  with a  consortium  of  lenders.  The  new  senior  debt
arrangement  provided  approximately  $5 million in  increased  working  capital
liquidity for operations and to make certain subordinated debt payments.
     The senior debt facility includes a $25 million revolving loan, which bears
interest at either the prime rate (4.0% at September 30, 2003),  plus 0.75%,  or
the prevailing LIBOR rate (approximately 1.3% at September 30, 2003), plus 3.5%.
Borrowings  under the  revolving  loan are based upon 85% of eligible  U.S.  and
Canada  accounts  receivable,  as defined;  50% of certain  accounts  receivable
having extended payment terms; and varying advance rates for U.S. and Canada raw
materials and finished goods inventories.  The facility also includes term loans
aggregating an initial  amount of $3 million,  which bear interest at either the
prime rate, plus 1.5%, or the prevailing LIBOR rate, plus 4.25%. These loans are
payable in monthly installments of $50,000, plus interest,  with the balance due
in a  balloon  payment  in  October  2005.  The  loan  agreement  also  contains
restrictions  regarding  the payment of dividends as well as  subordinated  debt
payments  (discussed  below),  a  requirement  to  maintain  a minimum  level of
earnings before interest, taxes, depreciation and amortization and net worth and
a limitation on the amount of annual capital expenditures. To better balance and
manage  overall  interest  rate  exposure,  the Company  previously  executed an
interest rate swap agreement that  effectively  fixed the rate of interest on $8
million of its senior debt at 8.98% through August 2005.
     These  financing  arrangements  are  collateralized  by  the  tangible  and
intangible  assets  of  the  U.S.  and  Canada  operations  (including  accounts


<PAGE>


receivable,  inventories, property, plant and equipment, patents and trademarks)
and a guarantee by and pledge of capital stock of the Company's subsidiaries. As
of September 30, 2003, the Company had approximately $14 million of unused lines
of credit available.
     In October  2002,  the Company also reached  agreement  with the holders of
$16.5 million of Senior  Subordinated Notes to restructure the notes,  extending
the  maturity  date to  2005.  The  Company  is  only  required  to pay  monthly
installments  of  $50,000  through  December  2003 and  $150,000  per month from
January 2004 through the maturity date. However,  the Company paid $1 million in
principal  (and $2.1  million of accrued  interest) at closing of the new senior
debt  facility  and made  additional  payments  to its  subordinated  lenders of
approximately $2.1 million in fiscal 2003. Payments to the subordinated  lenders
are subject to certain  restrictions  imposed  under the senior  debt  facility.
Interest on the balance of subordinated  debt is paid quarterly.  If the Company
is unable to make scheduled and additional  excess payments totaling at least $8
million by 2005 (due to restrictions  imposed under the new senior debt facility
or otherwise) the noteholders will receive warrants  equivalent to approximately
1.6% of the  diluted  common  shares  outstanding  for each $1 million in unpaid
principal. The Company made sufficient payments in fiscal 2003 and expects to do
so in fiscal 2004 to avoid the issuance of any such  warrants,  at least through
that date. Any warrants received or earned will be relinquished if the notes are
paid in full during the term of the new agreement. The agreement also grants the
subordinated  lenders a lien on Company assets (junior in all aspects to the new
senior debt collateral  agreements  described  above).  The interest rate on the
notes is 12.5%  through  maturity in October  2005.  The new  subordinated  note
agreement  includes certain other provisions,  including  restrictions as to the
payment of dividends and the  elimination  or adjustment of financial  covenants
contained  in the original  agreement  to conform to those  contained in the new
senior debt agreements.
     In addition,  the Company's  Mexican  subsidiary  had  approximately  $12.5
million in bank lines of credit ($6 million  unused) as of  September  30, 2003,
currently  expiring at various  dates from January 2004 through  December  2004,
which bear interest at a rate based upon either a floating U.S. bank rate or the
rate  of  certain  Mexican  government  securities.  The  Company  is  presently
reviewing other debt proposals for this  subsidiary.  The Company relies heavily
upon  the  availability  of the  lines of  credit  in the U.S.  and  Mexico  for
liquidity in its operations.
     The Company believes that amounts  available from its lines of credit under
its senior debt and under lines of credit  available  to its Mexican  subsidiary
are sufficient to fulfill all current and anticipated operating  requirements of
its business through 2005. The Company's  Mexican  subsidiary cannot assure that
each of its lines of credit will continue to be available after their respective
expiration dates, or that replacement lines of credit will be secured.  However,
the Company  believes  there should be sufficient  amounts  available  under its
present  or  future  facilities  or  lines of  credit  to  cover  any  potential
shortfalls due to any expiring lines of credit.
     Refer to Notes 3 and 4 to  Consolidated  Financial  Statements  for further
description of the aforementioned financing arrangements.
     The  Company  has been  assisted by  investment  bankers and certain  other
outside  consultants to advise it in evaluating certain strategic  alternatives,
including capital restructuring, mergers and acquisitions, and/or other measures
designed to maximize  shareholder  value. (See Note 8 to Consolidated  Financial
Statements.)


<PAGE>


RECENT  ACCOUNTING  PRONOUNCEMENTS
----------------------------------

     In April 2003, the FASB issued  Statement No. 149,  "Amendment of Statement
133 on Derivative Instruments and Hedging Activities" which amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative  instruments  embedded in other  contacts and for hedging  activities
under FASB Statement No. 133, "Accounting for Derivative instruments and Hedging
Activities".   Statement  No.  149  provides   greater   clarification   of  the
characteristics  of a  derivative  instrument  so that  contracts  with  similar
characteristics will be accounted for consistently. In general, the statement is
effective  for  contracts  with similar  characteristics  will be accounted  for
consistently.  In general, the statement is effective for contracts entered into
or modified after June 30, 2003, and for hedging relationships  designated after
June 30, 2003. The Company did not enter into or modify any of their  derivative
financial  instruments  (which consists of only an interest rate swap agreement)
since June 30,2 003 and thus the adoption of Statement  No. 149 did not have any
impact on the Company's consolidated financial statements.
     In May 2003,  the FASB issued  Statement No. 150,  "Accounting  for Certain
Financial  Instruments  with  Characteristics  of both  Liabilities and Equity",
which  clarifies  the  accounting  for  certain   financial   instruments   with
characteristics   of  both  liabilities  and  equity  and  requires  that  those
instruments be classified as  liabilities  in statements of financial  position.
Previously,  many of those  financial  instruments  were  classified  as equity.
Statement  No.  150 is  effective  for  financial  instruments  entered  into or
modified  after May 31, 2003 and  otherwise is effective a the  beginning of the
first interim period beginning after June 15, 2003. As the Company does not have
any of these  financial  instruments,  the adoption of Statement  No. 150 is not
expected to have any impact on the Company's consolidated financial statements.

CRITICAL ACCOUNTING POLICIES
----------------------------

     The  preparation  of  financial   statements  and  related  disclosures  in
conformity with accounting  principles  generally  accepted in the United States
requires  management to make estimates and assumptions  that affect the reported
amounts of assets and  liabilities  at the date of the financial  statements and
revenue  and  expenses  during the period  reported.  The  following  accounting
policies require  management to make estimates and assumptions.  These estimates
and  assumptions  are reviewed  periodically  and the effects of  revisions  are
reflected  in the period that they are  determined  to be  necessary.  If actual
results  differ  significantly  from  management's   estimates,   the  financial
statements could be materially impacted.
     The Company  promotes its products with significant  marketing  activities,
including  advertising,  consumer  incentives and trade promotions.  Advertising
costs are expensed as incurred. The Company records consumer incentive and trade
promotion  costs as a reduction of revenues in the year in which these  programs
are offered,  based upon estimates of utilization and redemption  rates that are
developed from historical information.
     Accounts receivable is recorded net of allowance for doubtful accounts. The
Company  regularly  reviews the  adequacy of its accounts  receivable  allowance
after considering the size of the accounts receivable,  the age of each invoice,
each  customer's  expected  ability to pay and the collection  history with each
customer.  The  allowance for doubtful  accounts  represents  management's  best
estimate,  but changes in  circumstances  relating to  accounts  receivable  may
result in a requirement for additional allowances in the near future.
     Inventories  are  stated  at the  lower  of cost  or  market.  The  Company
regularly  reviews  inventory  quantities  on hand and records a  provision  for
excess  and  obsolete  inventory  based  primarily  on the  Company's  estimated
forecast of product demand.  The Company's estimate of forecasted product demand
may prove to be  inaccurate,  in which case the Company may have  understated or
overstated  the  provision  required for excess and obsolete  inventory.  In the
future, if the company's  inventory is determined to be overvalued,  the Company
would be required to recognize  such costs in its cost of goods sold at the time
of such  determination.  Likewise if the Company's inventory is determined to be
undervalued,  the Company may have over-reported costs of goods sold. Therefore,
although the Company  makes every effort to ensure the accuracy of its forecasts
of future product demand, any significant  unanticipated changes in demand could
have a significant  impact on the value of inventory and the Company's  reported
operating results.


<PAGE>


     Long-lived assets, such as property,  plant and equipment, are reviewed for
impairment when events and circumstances indicate that the carrying amount of an
asset may not be recoverable.  When such events occur,  the Company compares the
carrying amount of the assets to undiscounted expected future cash flows. Should
this  comparison  indicate  that  there  is an  impairment,  the  amount  of the
impairment is calculated  using  discounted  expected  future cash flows. If the
estimate of an asset's  future cash flows is  significantly  different  from the
asset's actual cash flows, the Company may over- or under-estimate  the value of
an asset's  impairment.  A long-lived  asset's value is also  dependent upon its
estimated  useful life. A change in the useful life of a long-lived  asset could
result in higher or lower depreciation and amortization  expense. If the asset's
actual life is different than its estimated life, the asset could be over-valued
or under-valued.
     Restructuring  and related costs  reserves are recorded in connection  with
the  restructuring  initiatives  as they are announced.  These reserves  include
estimates  pertaining to employee severance costs, the settlement of contractual
obligations  and  other  matters.   Although   management  does  not  anticipate
significant changes, the actual costs may differ from these estimates, resulting
in further charges or reversals of previously recorded charges.
     The carrying  value of the Company's  net deferred tax assets  assumes that
the Company will be able to generate sufficient future taxable income in certain
jurisdictions,  based on  estimates  and  assumptions.  If these  estimates  and
related  assumptions change in the future, the Company may be required to record
additional  valuation  allowances  against its deferred tax assets  resulting in
additional  income  tax  expense  in the  Company's  Consolidated  Statement  of
Operations.  Management  evaluates the recoverability of the deferred tax assets
quarterly and assesses the need for additional valuation  allowances  quarterly.
In fiscal 2003, the Company provided additional valuation allowances for certain
U.S.  deferred  tax  assets,  as more  fully  described  above  and in Note 5 to
Consolidated Financial Statements.


FORWARD-LOOKING STATEMENTS
--------------------------

     The  statements  in this  Annual  Report on Form  10-K that are not  purely
historical are "forward-looking statements" within the meaning of section 27A of
the  Securities  Act of 1933 and section 21E of the  Securities  Exchange Act of
1934, including statements about the Company's expectations, beliefs, intentions
or  strategies   regarding  the  future.   Forward-looking   statements  include
statements regarding,  among other things, the effects of the devaluation of the
Mexican peso; the sufficiency and continued  availability of the Company's lines
of credit and its ability to meet its current and  anticipated  obligations  and
operating  requirements,  including  payments due under its  subordinated  debt;
management's  expectation  as to the Company's  ability to avoid the issuance of
warrants to its subordinated  lenders;  management's  expectation for continuing
savings from the restructuring and cost-reduction program; the Company's ability
to increase revenues in its core businesses;  and its expectations regarding the
Company's  ability to utilize  certain tax  benefits in the future.  Readers are
cautioned that any such forward-looking  statements are not guarantees of future
performance and involve known and unknown risks, uncertainties and other factors
that could cause the actual results to differ materially from those expressed or
implied by such  forward-looking  statements.  Such risks  include  (but are not
limited  to) the risk that the  shareholders  ownership  will be  diluted by the
issuance of common stock to the Company's  subordinated  lenders;  the Company's
lenders will not continue to fund the Company in the future; the cancellation of
the lines of credit available to the Company's Mexico subsidiary;  the inability
to maintain and/or secure new sources of capital;  manufacturing inefficiencies;
difficulties  encountered with the  consolidation  and  cost-reduction  program;
increased competition; decreases in revenues; U.S. and foreign economic factors;
foreign  currency  exchange  risk;  interest  rate  fluctuation  risk;  and  the
inability  to generate  taxable  income to utilize  certain tax  benefits in the
future, among others.


<PAGE>


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
          ----------------------------------------------------------

     As discussed  elsewhere,  the Company is exposed to the following principal
market risks (i.e.  risks of loss arising from adverse changes in market rates):
foreign exchange rates and interest rates on debt.
     The  Company's  exposure  to  foreign  currency  exchange  rate risk in its
international  operations  is  principally  limited to Mexico  and,  to a lesser
degree, Canada. Approximately 39% of the Company's fiscal 2003 net revenues were
derived in Mexico and Canada,  combined (exclusive of intercompany  activities).
Foreign  exchange  transaction  gains and losses arise from monetary  assets and
liabilities  denominated in currencies other than the business unit's functional
local  currency.  It is estimated that a 10% change in both the Mexican peso and
Canadian  dollar  exchange  rates  would  impact  reported  operating  profit by
approximately  $500,000.  This  quantitative  measure has  inherent  limitations
because  it does not take  into  account  the  changes  in  customer  purchasing
patterns or any adjustment to the Company's financing or operating strategies in
response to such a change in rates.  Moreover,  this  measure does not take into
account  the  possibility  that  these  currency  rates  can  move  in  opposite
directions, such that gains from one may offset losses from another.
     In addition,  the Company's  cash flows and earnings are subject to changes
in interest  rates. As of September 30, 2003,  approximately  47% of total short
and long-term debt is fixed,  at rates between 8% and 12.5%.  The balance of the
Company debt is variable,  principally based upon the prevailing U.S. bank prime
rate or LIBOR rate. An interest rate swap, which expires in 2005, fixes the rate
of  interest  on $8  million  of this  debt at 8.98%.  A change  in the  average
prevailing  interest  rates of the remaining  debt of 1% would have an estimated
impact of $100,000 upon the  Company's  pre-tax  results of operations  and cash
flows. This quantitative measure does not take into account the possibility that
the prevailing rates (U.S. bank prime and LIBOR) can move in opposite directions
and that the  Company  has,  in most  cases,  the option to elect  either as the
determining interest rate factor.


<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
         -------------------------------------------

                  DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                  ------------------------------------------

           INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
           --------------------------------------------------------

                                                                   PAGE

  Report of Independent Certified Public Accountants                17

  Consolidated Balance Sheets as of September 30, 2003 and 2002     18

  Consolidated Statements of Operations For the Years Ended
  September 30, 2003, 2002 and 2001                                 19

  Consolidated Statements of Comprehensive Loss For the
  Years Ended September 30, 2003, 2002 and 2001                     20

  Consolidated Statements of Shareholders' Equity For the
  Years Ended September 30, 2003, 2002 and 2001                     21

  Consolidated Statements of Cash Flows For the
  Years Ended September 30, 2003, 2002 and 2001                    22-23

  Notes to Consolidated Financial Statements                       24-42

  Schedule For the Years Ended September 30, 2003, 2002 and 2001:

          II. Valuation and Qualifying Accounts                     43

          Information  required by other schedules  called for under  Regulation
          S-X is  either  not  applicable  or is  included  in the  Consolidated
          Financial Statements or Notes thereto.


<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
               --------------------------------------------------

Shareholders and Board of Directors of
Dixon Ticonderoga Company

In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects,  the financial position of Dixon
Ticonderoga Company and its subsidiaries at September 30, 2003 and 2002, and the
results of their  operations and their cash flows for each of the three years in
the period ended  September 30, 2003 in conformity  with  accounting  principles
generally accepted in the United States of America. In addition, in our opinion,
the financial  statement  schedule  listed in the  accompanying  index  presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.  These financial
statements  and  financial  statement  schedule  are the  responsibility  of the
Company's  management;  our  responsibility  is to  express  an opinion on these
financial  statements and financial  statement  schedule based on our audits. We
conducted our audits of these  statements in accordance with auditing  standards
generally  accepted in the United States of America,  which 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,  assessing the accounting  principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.


PricewaterhouseCoopers LLP
Orlando, Florida
December 12, 2003


<PAGE>


                   DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                   ------------------------------------------

                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------

                           SEPTEMBER 30, 2003 AND 2002
                           ---------------------------
<TABLE>
<CAPTION>
<S>                                                   <C>              <C>
                                                      2003             2002
                                                  -------------   -------------
         ASSETS:
         -------

CURRENT ASSETS:
  Cash and cash equivalents                        $ 1,032,974     $ 2,589,493
  Receivables, less allowance for doubtful
    accounts of $1,429,222 in 2003 and
    $1,381,780 in 2002                              28,326,743      29,179,803
  Inventories                                       26,439,361      28,761,337
  Other current assets                               2,350,813       3,914,817
                                                  -------------   -------------
      Total current assets                          58,149,891      64,445,450
                                                  -------------   -------------

PROPERTY, PLANT AND EQUIPMENT:
  Land and buildings                                 6,737,943      10,881,021
  Machinery and equipment                            8,288,647      16,948,612
  Furniture and fixtures                             1,307,980       1,607,449
                                                  -------------   -------------
                                                    16,334,570      29,437,082
                                                  -------------   -------------
      Less accumulated depreciation                 (8,225,067)    (19,641,894)
                                                  -------------   -------------
                                                     8,109,503       9,795,188
                                                  -------------   -------------
OTHER ASSETS                                         5,774,649       7,872,957
                                                  -------------   -------------
                                                   $72,034,043     $82,113,595
                                                  =============   =============

      LIABILITIES AND SHAREHOLDERS' EQUITY:
      ------------------------------------


CURRENT LIABILITIES:
  Notes payable                                    $ 6,382,065     $ 7,463,458
  Current maturities of long-term debt              13,227,965      12,341,735
  Accounts payable                                   9,102,711       8,819,499
  Accrued liabilities                                8,496,182      12,485,494
                                                  -------------   -------------
      Total current liabilities                     37,208,923      41,110,186
                                                  -------------   -------------

LONG-TERM DEBT                                      12,510,860      16,383,106
                                                  -------------   -------------

DEFERRED INCOME TAXES AND OTHER                        894,601       1,183,467
                                                  -------------   -------------

MINORITY INTEREST                                      578,530         583,841
                                                  -------------   -------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
  Preferred stock, par $1, authorized 100,000
    shares, none issued                                   -                -
  Common stock, par $1, authorized 8,000,000
    shares, issued 3,710,309 shares in
    2003 and 2002                                    3,710,309       3,710,309
  Capital in excess of par value                     3,547,567       3,593,826
  Retained earnings                                 23,679,772      25,107,752
  Accumulated other comprehensive loss              (6,238,403)     (5,640,262)
                                                  -------------   -------------
                                                    24,699,245      26,771,625
  Less shareholder loans                              (557,721)       (557,721)
  Less treasury stock, at cost (508,160 shares
    in 2003 and 517,477 shares in 2002)             (3,300,395)     (3,360,909)
                                                  -------------   -------------
                                                    20,841,129      22,852,995
                                                  -------------   -------------
                                                   $72,034,043     $82,113,595
                                                  =============   =============
</TABLE>
               The accompanying notes are an integral part of the
                       consolidated financial statements.
<PAGE>


<TABLE>
<CAPTION>
                   DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                   ------------------------------------------

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      -------------------------------------

              FOR THE YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
              -----------------------------------------------------

                                                     2003             2002             2001
                                                --------------   --------------   --------------
<S>                                             <C>            <C>            <C>           <C>
REVENUES                                         $ 88,837,615     $ 88,590,730     $ 88,319,455
                                                --------------   --------------   --------------

COSTS AND EXPENSES:
  Cost of goods sold                               54,978,678       57,132,999       56,732,494
  Selling and administrative expenses              27,793,534       27,240,511       25,363,628
  Provision for restructuring and related costs       486,866        1,573,235          867,666
  Debt refinancing costs                              624,662             -                -
  Investment banking and related costs                483,493             -                -
                                                --------------   --------------   --------------
                                                   84,367,233       85,946,745       82,963,788
                                                --------------   --------------   --------------
OPERATING INCOME                                    4,470,382        2,643,985        5,355,667

OTHER INCOME, NET                                   1,052,500          252,676             -

INTEREST EXPENSE                                   (3,585,729)      (4,087,731)      (4,387,700)
                                                --------------   --------------   --------------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
  INCOME TAXES (BENEFIT) AND MINORITY INTEREST      1,937,153       (1,191,070)         967,967

INCOME TAXES (BENEFIT)                              2,744,420         (559,064)         316,933
                                                --------------   --------------   --------------
                                                     (807,267)        (632,006)         651,034
MINORITY INTEREST                                      42,221           51,214           31,267
                                                --------------   --------------   --------------

INCOME (LOSS) FROM CONTINUING OPERATIONS             (849,488)        (683,220)         619,767

INCOME (LOSS) FROM DISCONTINUED OPERATIONS,
  NET OF APPLICABLE INCOME TAXES (BENEFIT)           (578,492)         123,297       (1,099,639)
                                                --------------   --------------   --------------

NET LOSS                                         $ (1,427,980)    $   (559,923)    $   (479,872)
                                                ==============   ==============   ==============

EARNINGS (LOSS) PER COMMON SHARE (BASIC):
   Continuing operations                         $       (.27)    $       (.22)    $        .20
   Discontinued operations                               (.18)             .04             (.35)
                                                --------------   --------------   --------------
   Net loss                                      $       (.45)    $       (.18)    $       (.15)
                                                ==============   ==============   ==============

EARNINGS (LOSS) PER COMMON SHARE (DILUTED):
   Continuing operations                         $       (.27)    $       (.22)    $        .20
   Discontinued operations                               (.18)             .04             (.35)
                                                --------------   --------------   --------------
   Net loss                                      $       (.45)    $       (.18)    $       (.15)
                                                ==============   ==============   ==============
</TABLE>
                  The accompanying notes are an integral part
                   of the consolidated financial statements.


<PAGE>


<TABLE>
<CAPTION>
                  DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                  ------------------------------------------

                CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
                ---------------------------------------------

            FOR THE YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
            -----------------------------------------------------
<S>                                             <C>            <C>            <C>           <C>

                                           2003             2002              2001
                                      ---------------  ---------------  ---------------

NET LOSS                               $ (1,427,980)    $  (559,923)     $  (479,872)

OTHER COMPREHENSIVE LOSS:

  Cumulative effect adjustment to
    recognize fair value of cash
    flow hedge                                  -               -            (54,205)

   Adjustment to recognize fair value
     of cash flow hedge                    (138,672)       (115,934)        (451,388)

   Foreign currency translation
   adjustments                             (459,469)     (1,422,647)        (502,511)
                                      ---------------  ---------------  ---------------

TOTAL COMPREHENSIVE LOSS                $(2,026,121)    $(2,098,504)     $(1,487,976)
                                      ===============  ===============  ===============


</TABLE>

                   The accompanying notes are an integral part
                    of the consolidated financial statements.



<PAGE>


<TABLE>
<CAPTION>
                   DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                   ------------------------------------------

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                 -----------------------------------------------

              FOR THE YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
              -----------------------------------------------------
<S>                          <C>          <C>          <C>          <C>                <C>            <C>          <C>         <C>

                               Common      Capital in                  Accumulated Other
                              Stock $1     Excess of       Retained      Comprehensive    Shareholder     Treasury
                             Par Value     Par Value       Earnings       Income (Loss)      Loans          Stock         Total
                             ------------ ------------- ------------- ------------------ -------------- ------------- -------------
BALANCE, September 30, 2000  $ 3,710,309   $ 3,700,272   $26,147,547     $ (3,093,577)     $  (557,721)  $(3,521,884)  $26,384,946
  Net loss                                                  (479,872)                                                     (479,872)
  Other comprehensive loss                                                 (1,008,104)                                  (1,008,104)
  Employee Stock Purchase
   Plan (9,415 shares)                         (30,137)                                                       61,150        31,013
                             ------------ ------------- ------------- ------------------ -------------- ------------- -------------

BALANCE, September 30, 2001    3,710,309     3,670,135    25,667,675       (4,101,681)        (557,721)   (3,460,734)   24,927,983
  Net loss                                                  (559,923)                                                     (559,923)
  Other comprehensive loss                                                 (1,538,581)                                  (1,538,581)
  Employee Stock Purchase
   Plan (15,370 shares)                        (76,309)                                                       99,825        23,516
                             ------------ ------------- ------------- ------------------ -------------- ------------- -------------

BALANCE, September 30, 2002    3,710,309     3,593,826    25,107,752       (5,640,262)        (557,721)   (3,360,909)   22,852,995
  Net loss                                                (1,427,980)                                                   (1,427,980)
  Other comprehensive loss                                                   (598,141)                                    (598,141)
  Employee Stock Purchase
   Plan (9,317 shares)                         (46,259)                                                       60,514        14,255
                             ------------ ------------- ------------- ------------------ -------------- ------------- -------------

BALANCE, September 30, 2003  $ 3,710,309   $ 3,547,567   $23,679,772     $ (6,238,403)     $  (557,721)  $(3,300,395)  $20,841,129
                             ============ ============= ============= ================== ============== ============= =============

                           The accompanying notes are an integral part of the consolidated financial statements.

</TABLE>
<PAGE>


<TABLE>
<CAPTION>

                  DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                  ------------------------------------------

                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                    -------------------------------------

            FOR THE YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
            -----------------------------------------------------
<S>                                                  <C>           <C>            <C>

                                                     2003            2002            2001
                                                --------------  --------------  --------------
Cash flows from operating activities:

Net income (loss) from continuing operations     $  (849,488)    $  (683,220)    $   619,767

Net income (loss) from discontinued operations      (578,492)        123,297      (1,099,639)

Adjustments to reconcile net income (loss) to
 net cash provided by operating activities:
   Depreciation and amortization                   2,414,819       2,322,692       2,219,658
   Deferred taxes                                  2,504,854      (2,334,000)       (534,000)
   Provision for doubtful accounts receivable        315,026         193,979         151,263
   Debt refinancing costs                            624,662            -               -
   Gain on sale of assets                               -           (208,290)     (1,202,448)
   Gain on sale of securities received from
      insurance companies demutualizations          (672,291)           -               -
   Income attributable to minority interest           42,221          51,214          31,267
   (Income) loss attributable to
      foreign currency exchange                     (433,461)       (215,955)         52,071
   Changes in assets [(increase)decrease] and
      liabilities [increase (decrease)]:
   Receivables, net                               (1,230,691)         (7,574)       (660,434)
   Inventories                                      (348,379)      6,226,836         474,990
   Other current assets                             (109,737)       (457,698)       (134,308)
   Accounts payable and accrued liabilities       (3,278,476)      3,673,182       1,039,899
   Other assets                                    1,191,249        (250,686)        210,519
                                                --------------  --------------  --------------

Net cash provided by (used in) operating
  activities                                        (408,184)      8,433,777       1,168,605
                                                --------------  --------------  --------------

Cash flows from investing activities:

   Purchases of plant and equipment, net            (426,775)     (1,520,088)     (2,009,467)
   Proceeds on sale of assets                      2,988,616         208,290       1,276,063
   Proceeds on sale of securities received from
      insurance companies demutualizations            737,321           -               -
                                                --------------  --------------  --------------
Net cash provided by (used in) investing
 activities                                        3,299,162      (1,311,798)       (733,404)
                                                --------------  --------------  --------------


<PAGE>


                                                     2003            2002            2001
                                                --------------  --------------  --------------
Cash flows from financing activities:

Proceeds from long-term debt                      14,449,123            -            138,566
Proceeds from (principal reductions of)
  notes payable                                     (564,975)      1,716,828       2,779,894
Principal reductions of long-term debt           (17,435,139)     (6,101,200)     (2,728,952)
Deferred refinancing costs                          (549,193)       (955,628)           -
Other non-current liabilities                       (100,545)         40,736           6,759
Employee Stock Purchase Plan                          14,255          23,516          31,013
                                                --------------  --------------  --------------
Net cash provided by (used in) financing
 activities                                       (4,186,474)     (5,275,748)        227,280
                                                --------------  --------------  --------------
Effect of exchange rate changes on cash             (261,023)       (101,037)       (266,634)
                                                --------------  --------------  --------------
Net increase (decrease) in cash and
  cash equivalents                                (1,556,519)      1,745,194         395,847

Cash and cash equivalents, beginning of year       2,589,493         844,299         448,452
                                                --------------  --------------  --------------

Cash and cash equivalents, end of year           $ 1,032,974     $ 2,589,493     $   844,299
                                                ==============  ==============  ==============

Supplemental disclosures:

Cash paid during the year for:
   Interest                                      $ 5,684,833     $ 3,033,931     $ 4,647,079
Income taxes                                         882,246       1,677,478       2,434,487
</TABLE>


Non-cash investing and financing activities:

     In fiscal 2003, the Company  accepted a note  receivable due August 2010 in
the amount of $500,000 as partial  consideration  for the sale of its  Newcastle
Refractories division.

     In fiscal 2001, the Company  accepted a note receivable due May 2006 in the
amount of $1.64  million as  consideration  for the sale of an idle  building in
Deer Lake, Pennsylvania.














                   The accompanying notes are an integral part
                    of the consolidated inancial statements.


<PAGE>


                   DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                   ------------------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
     -------------------------------------------

     Business:
     ---------

     Dixon  Ticonderoga  Company is a diversified  manufacturer  and marketer of
     writing  and art  products.  Its  largest  customers  are  school  products
     distributors and mass  merchandisers,  although none account for over 8% of
     revenues.

     Principles of consolidation:
     ----------------------------

     The  consolidated  financial  statements  include  the  accounts  of  Dixon
     Ticonderoga  Company  and  all of its  subsidiaries  (the  "Company").  All
     significant intercompany  transactions and balances have been eliminated in
     consolidation.  Minority  interest  represents  the minority  shareholders'
     proportionate  share (3%) of the equity of the Company's Grupo Dixon,  S.A.
     de C.V. subsidiary.

     Revenue recognition:
     --------------------

     Revenues  are  comprised  of gross  sales from the  shipment  of product to
     customers, net of provisions for product returns,  customer discounts (such
     as volume  rebates),  co-op  advertising and other related  discounts.  The
     Company  recognizes  sales when the following  has occurred:  evidence of a
     sales arrangement exists; shipment of product to the customer; the price is
     fixed  or  determinable;  and  collectibility  is  reasonably  assured.  An
     estimate of sales returns and allowances is recorded in the period that the
     related product is shipped.

     Estimates:
     ----------

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  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  dates  of the
     financial  statements,  and the  reported  amounts of revenues and expenses
     during the  reporting  periods.  Actual  results  could  differ  from those
     estimates.

     Translation of foreign currencies:
     ----------------------------------

     In accordance with Financial  Accounting  Standards Board (FASB)  Statement
     No.  52,  the  Company  has  determined  that  each  foreign   subsidiary's
     functional currency is their local currency. All assets and liabilities are
     translated  at  period-end  exchange  rates.  All revenues and expenses are
     translated  using average  exchange  rates during that period.  Translation
     gains  and  losses  are   reflected  as  a  separate   component  of  other
     comprehensive loss. Gains and losses from foreign currency transactions are
     included in the accompanying  Consolidated  Statement of Operations.  Total
     foreign currency  exchange gains (losses) included in operating income were
     approximately $433,000,  $216,000 and ($52,000) for fiscal years 2003, 2002
     and 2001.

     Cash and cash equivalents:
     --------------------------

     Cash and cash equivalents include investment instruments with a maturity of
     three months or less at time of purchase.


<PAGE>


     Inventories:
     ------------

     Inventories  are  stated  at the  lower  of cost  or  market.  The  Company
     regularly reviews inventory  quantities on hand and records a provision for
     excess and obsolete  inventory based primarily on the estimated forecast of
     product demand.

     Certain  inventories  amounting to $7,512,000 and  $13,034,000 at September
     30,  2003 and 2002,  respectively,  are  stated on the  last-in,  first-out
     (LIFO) method of determining inventory costs. Under the first-in, first-out
     (FIFO) method of  accounting,  these  inventories  would be ($266,000)  and
     $1,007,000 (lower) higher at September 30, 2003 and 2002, respectively. All
     other inventories are valued for using the FIFO method.

     Inventories consist of (in thousands):

                                              September 30,
                                             2003       2002
                                           ---------  ---------
            Raw material                    $10,486    $11,014
            Work in process                   2,198      2,718
            Finished goods                   13,755     15,029
                                           ---------  ---------
                                            $26,439    $28,761
                                           =========  =========

     Property, plant and equipment:
     ------------------------------

     Property,  plant and equipment are stated at cost. Depreciation is provided
     principally on a straight-line basis over the estimated useful lives of the
     respective  assets.  The  range  of  estimated  useful  lives  by  class of
     property, plant and equipment are as follows:

            Buildings and improvements             10 - 25 years
            Machinery and equipment                 5 - 15 years
            Furniture and fixtures                  3 -  5 years

     When  assets  are  sold or  retired,  their  cost and  related  accumulated
     depreciation are removed from the accounts. Any gain or loss is included in
     income.

     Impairment of long-lived assets:
     --------------------------------

     Long-lived  assets  used in the  Company's  operations,  including  cost in
     excess of net assets of businesses  acquired,  are reviewed for  impairment
     when events and circumstances indicate that the carrying amount of an asset
     may not be recoverable.  The primary  indicators of recoverability  are the
     associated current and forecasted  undiscounted operating cash flows. Asset
     impairments  in connection  with the Company's  restructuring  programs are
     identified  and  measured  using the  estimated  net  proceeds  from  their
     ultimate sale or  abandonment.  (See Note 10.) The  Company's  policy is to
     record an impairment loss when it is determined that the carrying amount of
     the asset exceeds its fair value.

     Stock-based compensation:
     -------------------------

     The Company  accounts  for  compensation  cost  related to  employee  stock
     options  and other  forms of  employee  stock-based  compensation  plans in
     accordance  with the  requirements  of  Accounting  Principles  Board (APB)
     Opinion 25 and related  interpretations.  APB 25 requires compensation cost
     for  stock-based   compensation   plans  to  be  recognized  based  on  the
     difference,  if any, between the fair market value of the stock on the date
     of grant and the option exercise  price.  The Company  provides  additional
     proforma  disclosures as required under FASB Statement No. 123, "Accounting
     For  Stock-Based  Compensation",  as amended  by FASB  Statement  No.  148,
     "Accounting for Stock-Based Compensation-Transition and Disclosure".


<PAGE>


     Pro forma net loss and net loss per share would have been as follows if the
     fair value estimates were used to record compensation expense:

                                        2003           2002          2001
                                     ------------   ------------  ------------

      Net loss, as reported          $(1,427,980)   $ (559,923)   $ (479,872)


      Deduct: total stock-based
        employee compensation
        expense determined under the
        fair value based method, net
        of related tax effects           (73,601)     (102,431)      (25,409)
                                     ------------   ------------  ------------

      Pro forma net loss             $(1,501,581)   $ (662,354)   $ (505,281)
                                     ============   ============  ============

      Loss per share:
          Basic, as reported         $      (.45)   $     (.18)   $     (.15)
                                     ============   ============  ============
          Basic, pro forma           $      (.47)   $     (.21)   $     (.16)
                                     ============   ============  ============
          Diluted, as reported       $      (.45)   $     (.18)   $     (.15)
                                     ============   ============  ============
          Diluted, pro forma         $      (.47)   $     (.21)   $     (.16)
                                     ============   ============  ============

     Income taxes:
     -------------

     The Company  recognizes  deferred tax assets and  liabilities  based on the
     differences  between the financial  statement  carrying amounts and the tax
     bases of assets and liabilities. The Company regularly reviews its deferred
     tax assets, by taxing  jurisdiction,  for  recoverability and establishes a
     valuation  allowance based on historical  taxable income,  projected future
     taxable  income,  and the  expected  timing of the  reversals  of  existing
     temporary  differences.  If  there  is a  material  change  in  the  actual
     effective  tax rates or time period within which the  underlying  temporary
     differences become taxable or deductible,  the Company could be required to
     establish further valuation allowances against all or a significant portion
     of its  deferred  tax assets  resulting  in a  substantial  increase in the
     Company's  effective  tax  rate  and a  material  negative  impact  on  its
     operating  results and  financial  position.  In fiscal  2003,  the Company
     provided  additional  valuation  allowances  for certain U.S.  deferred tax
     assets, as more fully described in Note 5.

     Derivative instruments and hedging activities:
     ----------------------------------------------

     The Company  adopted FASB  Statement  No.133,  "Accounting  for  Derivative
     Instruments and Hedging  Activities",  as amended by FASB Statement No.137,
     "Accounting for Derivative Instruments and Hedging Activities - Deferral of
     the  Effective  Date of FASB  Statement  No.  133",  an  amendment  of FASB
     Statement  No.133,  and  FASB  Statement  No.138  "Accounting  for  Certain
     Derivative  Instruments  and Certain Hedging  Activities",  an amendment of
     Statement  No. 133 (referred to hereafter as "FAS 133") on October 1, 2000.
     As a result,  the Company  records  the fair value of  interest  rate swaps
     designated as cash flow hedges in other  liabilities with the offset in the
     other comprehensive  income (loss) component of shareholders'  equity. Upon
     adoption,  the Company recorded its interest rate swap designated as a cash
     flow  hedge  with a fair  value  of  $86,314  in other  liabilities.  Other
     comprehensive loss was increased $54,205 (net of tax benefit of $32,109) as
     a cumulative effect adjustment for this accounting change. During the years
     ended  September 30, 2003,  2002 and 2001,  the Company also  recognized an
     adjustment to increase (decrease) the fair value of this cash flow hedge of
     ($203,408),  $184,309 and  $718,773,  respectively,  in other  liabilities.
     Other comprehensive loss was increased $138,672, $115,934 and $451,388 (net
     of  tax  expense   (benefit)  of  $342,080,   ($68,375)   and   ($267,385),
     respectively) during these periods.


<PAGE>


     The Company  utilizes  interest rate swap agreements to provide an exchange
     of interest  payments  computed on  notional  amounts  that will offset any
     undesirable  change in cash flows or fair value  resulting from market rate
     changes on designated hedged bank borrowings. The Company limits the credit
     risks of the interest rate agreements by initiating the  transactions  with
     counterparties  with  significant   financial  positions,   such  as  major
     financial institutions.

     FAS 133 requires  companies to recognize all of its derivative  instruments
     as either assets or  liabilities  in the balance  sheet at fair value.  The
     accounting  for  changes  in the fair  value  (i.e.,  gains or losses) of a
     derivative  instrument  depends  on  whether  it has  been  designated  and
     qualifies as part of a hedging  relationship  and  further,  on the type of
     hedging relationship.  For those derivative instruments that are designated
     and qualify as hedging  instruments,  a Company must  designate the hedging
     instrument,  based upon the exposure  being hedged,  as either a fair value
     hedge,  cash  flow  hedge  or a  hedge  of a net  investment  in a  foreign
     operation.  For derivative instruments that are designated and qualify as a
     cash flow hedge (such as the Company's interest rate swap agreements),  the
     effective  portion  of the  gain or loss on the  derivative  instrument  is
     reported as a component of other  comprehensive  loss and reclassified into
     earnings in the same period or periods during which the hedged  transaction
     affects earnings.  The remaining gain or loss on the derivative  instrument
     in excess of the  cumulative  change in the  present  value of future  cash
     flows of the hedged item, if any, is recognized in current  earnings during
     the period of the change in fair values.  For  derivative  instruments  not
     designated  as  hedging  instruments,  the  gain or loss is  recognized  in
     current earnings during the period of the change in fair values.

     The Company has entered into an interest rate swap agreement through August
     2005 that effectively  converts $8 million of its  floating-rate  debt to a
     fixed-rate  basis,  thus  reducing the impact of  interest-rate  changes on
     future interest  expense.  The fair values of interest rate instruments are
     estimated by obtaining  quotes from brokers and are the  estimated  amounts
     that the Company would  receive or pay to terminate  the  agreements at the
     reporting  date,  taking  into  account  current  interest  rates and other
     relevant factors.

     Recent accounting pronouncements:
     ---------------------------------

     In April 2003, the FASB issued  Statement No. 149,  "Amendment of Statement
     133 on  Derivative  Instruments  and Hedging  Activities"  which amends and
     clarifies  financial  accounting and reporting for derivative  instruments,
     including certain  derivative  instruments  embedded in other contracts and
     for  hedging  activities  under FASB  Statement  No. 133,  "Accounting  for
     Derivative Instruments and Hedging Activities".  Statement No. 149 provides
     greater  clarification of the characteristics of a derivative instrument so
     that  contracts  with  similar   characteristics   will  be  accounted  for
     consistently.  In general, the statement is effective for contracts entered
     into or  modified  after  June  30,  2003,  and for  hedging  relationships
     designated  after June 30,  2003.  The Company did not enter into or modify
     any of their derivative  financial  instruments  (which consists of only an
     interest rate swap agreement)  since June 30, 2003 and thus the adoption of
     Statement  No.  149 did not have any impact on the  Company's  consolidated
     financial statements.

     In May 2003,  the FASB issued  Statement No. 150,  "Accounting  for Certain
     Financial Instruments with Characteristics of both Liabilities and Equity",
     which  clarifies the  accounting  for certain  financial  instruments  with
     characteristics  of both  liabilities  and equity and  requires  that those
     instruments  be  classified  as  liabilities  in  statements  of  financial
     position.  Previously,  many of those financial instruments were classified
     as equity. Statement No. 150 is effective for financial instruments entered
     into or  modified  after May 31, 2003 and  otherwise  is  effective  at the
     beginning of the first interim period beginning after June 15, 2003. As the
     Company does not have any of these financial  instruments,  the adoption of
     Statement  No.  150 is not  expected  to have any  impact on the  Company's
     consolidated financial statements.

     Reclassifications:
     ------------------

     Certain  prior year  amounts  have been  reclassified  to conform  with the
     current year classifications.


<PAGE>


(2)  ACCRUED LIABILITIES:
     --------------------

     The major components of accrued liabilities are as follows (in thousands):

                                               September 30,
                                              2003       2002
                                           ---------  ---------

            Interest (see Note 4)           $ 1,180    $ 2,844
            Salaries and wages                1,014      1,110
            Employee benefit plans              417        540
            Income taxes                      2,965      3,174
            Other                             2,920      4,817
                                           ---------  ---------
                                            $ 8,496   $ 12,485
                                           =========  =========


(3)  NOTES PAYABLE:
     --------------

     The  Company's  Mexico   subsidiary  had  bank  lines  of  credit  totaling
     approximately $12.5 million, under which $6.4 and $7.5 million of unsecured
     notes  payable  were  outstanding  as  of  September  30,  2003  and  2002,
     respectively.  The notes,  which  currently  mature at  varying  dates from
     January  2004  through  December  2004,  bear  interest  (weighted  average
     interest  rate of  approximately  7.4% and 4.5% at  September  30, 2003 and
     2002, respectively) based upon either a floating U.S. bank rate or the rate
     of certain Mexican government securities and are renewable annually.


(4)  LONG-TERM DEBT:
     ---------------

     Long-term debt consists of the following (in thousands):

                                               September 30,
                                              2003       2002
                                           ---------  ---------

            Senior Subordinated Notes      $ 13,342   $ 16,500
            Bank notes payable                8,348      8,208
            Bank term loan                    2,216      2,025
            Building mortgage                 1,833      1,992
                                           ---------  ---------
                                             25,739     28,725
            Less current maturities         (13,228)   (12,342)
                                           ---------  ---------
                                           $ 12,511   $ 16,383
                                           =========  =========


<PAGE>


     In October 2002,  the Company  completed a financing  agreement  with a new
     senior  lender and its existing  subordinated  lenders to  restructure  its
     present U.S. debt through fiscal 2005.  Foothill  Capital  Corporation  has
     provided a three-year  $28 million  senior debt facility which replaces the
     Company's previous senior debt (bank notes payable and bank term loan) with
     a  consortium  of  lenders.   The  new  senior  debt  arrangement  provides
     approximately  $5  million  in  increased  working  capital  liquidity  for
     operations and to make certain subordinated debt payments.

     The senior debt facility includes a $25 million revolving loan, which bears
     interest at either the prime rate (4.0% at September 30, 2003), plus 0.75%,
     or the prevailing  LIBOR rate  (approximately  1.3% at September 30, 2003),
     plus  3.5%.  Borrowings  under the  revolving  loan are  based  upon 85% of
     eligible U.S. and Canada accounts  receivable,  as defined;  50% of certain
     accounts  receivable  having  extended  payment terms;  and varying advance
     rates for U.S. and Canada raw materials and finished goods inventories. The
     facility  also  includes  term loans  aggregating  an initial  amount of $3
     million,  which bear  interest at either the prime rate,  plus 1.5%, or the
     prevailing  LIBOR  rate,  plus  4.25%.  These  loans are payable in monthly
     installments of $50,000,  plus interest,  with the balance due in a balloon
     payment in October 2005.  The loan  agreement  also  contains  restrictions
     regarding  the payment of dividends as well as  subordinated  debt payments
     (discussed  below),  a requirement  to maintain a minimum level of earnings
     before interest,  taxes,  depreciation and amortization and net worth and a
     limitation on the amount of annual capital expenditures.  To better balance
     and manage overall interest rate exposure,  the Company previously executed
     an interest note swap agreement that effectively fixed the rate of interest
     on $8 million of its senior debt at 8.98% through August 2005.

     These  financing  arrangements  are  collateralized  by  the  tangible  and
     intangible  assets of the U.S. and Canada  operations  (including  accounts
     receivable,   inventories,  property,  plant  and  equipment,  patents  and
     trademarks) and a guarantee by and pledge of capital stock of the Company's
     subsidiaries.  The new senior  debt  agreements  include  provisions  which
     suggest  the  debt  could  become   payable   upon  demand  under   certain
     circumstances and thus, this debt has been classified as current maturities
     of long-term  debt. As of September 30, 2003 the Company had  approximately
     $14 million of unused lines of credit available.

     In October  2002,  the Company also reached  agreement  with the holders of
     $16.5  million  of Senior  Subordinated  Notes to  restructure  the  notes,
     extending the maturity date to 2005. The Company is required to pay monthly
     installments of $50,000  through  December 2003 and $150,000 per month from
     January  2004  through the  maturity  date.  However,  the Company  paid $1
     million in principal  (and $2.1 million of accrued  interest) at closing of
     the  new  senior  debt  facility  and  made  additional   payments  to  its
     subordinated lenders of approximately $2.2 million in fiscal 2003. Payments
     to the  subordinated  lenders are subject to certain  restrictions  imposed
     under the senior debt  facility.  Interest  on the balance of  subordinated
     debt is paid  quarterly.  If the  Company is unable to make  scheduled  and
     additional  excess  payments  totaling  at least $8 million by 2005 (due to
     restrictions  imposed under the new senior debt facility or otherwise)  the
     noteholders will receive warrants  equivalent to approximately  1.6% of the
     diluted common shares  outstanding for each $1 million in unpaid principal.
     Any warrants  received or earned will be relinquished if the notes are paid
     in full during the term of the new agreement. The agreement also grants the
     subordinated lenders a lien on Company assets (junior in all aspects to the
     new senior debt collateral  agreements  described above). The interest rate
     on the  subordinated  notes is 12.5%  through  maturity in October 2005. In
     addition,   the  Company  has  due  in  October  2005  previously  deferred
     payable-in-kind  (PIK)  interest  in the amount of  $642,000,  included  in
     accrued  interest at September 30, 2003. (See Note 2). The new subordinated
     note agreement includes certain other provisions, including restrictions as
     to the payment of dividends and the  elimination or adjustment of financial
     covenants contained in the original agreement to conform to those contained
     in the new senior debt agreements.


<PAGE>


     The Company also has a mortgage  agreement  with  respect to its  corporate
     headquarters  building in Heathrow,  Florida. The mortgage (in the original
     amount of $2.73  million) is for a period of 15 years and bears interest at
     8.1%.

     Carrying values of the Senior  Subordinated  Notes,  the bank notes payable
     and term loan are reasonable  estimates of fair value as interest rates are
     based on prevailing market rates.

     Aggregate maturities of long-term debt are as follows (in thousands):


                                 2004           $ 13,228
                                 2005              3,437
                                 2006              7,802
                                 2007                219
                                 Thereafter        1,053
                                               ----------
                                                $ 25,739
                                               ==========


(5)  INCOME TAXES:
     -------------

     The  components of net deferred tax asset  recognized  in the  accompanying
     consolidated balance sheet are as follows (in thousands):

                                                       2003          2002
                                                    ------------  ------------
      U.S. current deferred tax assets (included
         in other current assets)                    $     -       $   1,514
      Foreign current deferred tax liability
         (included in accrued liabilities)              (1,455)         (818)
      U.S. and foreign, noncurrent deferred tax
         asset (included in other assets and
         deferred income taxes and other)                  602         2,829
                                                    ------------  ------------
         Net deferred tax asset (liability)          $    (853)    $   3,525
                                                    ============  ============
      Deferred tax assets:
         U.S. tax credit carryforwards               $     -       $   2,610
         Provisions for losses from discontinued
           operations                                       48           174
         Depreciation                                      157           214
         Accrued pension                                   683           653
         Interest                                          266           386
         Other accrued expenses                            481           430
         Installment sale and related expenses            (248)         (197)
         Other items, net                                  289            96
         Foreign net operating loss carryforward           602           512
         Valuation allowance                            (1,676)         (512)
                                                    ------------  ------------
         Total deferred tax asset                          602         4,366
                                                    ------------  ------------
      Deferred tax liabilities:
         Inventories                                      (791)         (748)
         Property, plant and equipment                    (108)          (93)
         Valuation allowance                              (556)           -
                                                    ------------  ------------
         Total deferred tax liability                   (1,455)         (841)
                                                    ------------  ------------
      Net deferred tax asset (liability)             $    (853)    $   3,525
                                                    ============  ============


<PAGE>


     It is the  policy  of the  Company  to  accrue  deferred  income  taxes  on
     temporary  differences  related to the financial statement carrying amounts
     and tax bases of investments in foreign  subsidiaries which are expected to
     reverse in the  foreseeable  future.  In fiscal 2003, the Company  provided
     additional valuation allowances for certain U.S. deferred tax assets in the
     amount of $2,232,000 due to continuing  U.S.  taxable  losses.  The Company
     again  incurred  tax losses in the U.S.,  partially  due to  certain  costs
     (Notes  8  and  10)  and  discontinued  operations,  among  other  factors.
     Accordingly,  the Company recorded the additional valuation allowances with
     respect to the related tax assets as of September 30, 2003.

     At  September  30,  2003 and 2002,  the Company  had  valuation  allowances
     against  certain  deferred tax assets  totaling  $2,232,000  and  $512,000,
     respectively.   These  valuation   allowances   relate  to  tax  assets  in
     jurisdictions  where there is significant  probability  that the benefit of
     the assets will not be realized in the associated tax returns.

     The  provision  (benefit)  for income taxes from  continuing  operations is
     comprised of the following (in thousands):

                                               2003       2002       2001
                                             ---------   --------  ---------
              Current:
                 U.S. Federal                $   -       $  640    $  (352)
                 State                            95        (40)       (12)
                 Foreign                         474      1,175      1,215
                                             ---------   --------  ---------
                                                 569      1,775        851
                                             ---------   --------  ---------
              Deferred:
                 U.S. Federal                  2,050     (2,081)      (199)
                 State                           -         (206)       (71)
                 Foreign                         125        (47)       264
                                             ---------   --------  ---------
                                               2,175     (2,334)      (534)
                                             ---------   --------  ---------
                                             $ 2,744     $ (559)   $   317
                                             =========   ========  =========

     Foreign  deferred  tax  provision  (benefit) is  comprised  principally  of
     temporary differences related to Mexico asset purchases.  The U.S. deferred
     expense  in  2003  principally  reflects  the  establishment  of  valuation
     allowances  against certain net deferred  assets,  as discussed  above. The
     U.S.  deferred  (benefit) in 2002 and 2001 result  primarily  from expenses
     accrued but not yet deductible for taxes and tax credit carryforwards.


<PAGE>


     The  differences  between the  provision  (benefit)  for income  taxes from
     continuing  operations  computed at the U.S.  statutory  federal income tax
     rate  and  the  provision  (benefit)  from  continuing  operations  in  the
     accompanying   consolidated   financial   statements  are  as  follows  (in
     thousands):

                                               2003       2002       2001
                                             --------   --------  ---------

     Amount computed using statutory rate    $   659    $  (533)  $    329

     Foreign income                             (518)      (178)       (28)

     State taxes, net of federal benefit          63       (162)       (54)

     Permanent differences                       -          149        168

     Valuation allowances                      2,232        -          -

     Other                                       308        165        (98)
                                             --------   --------  ---------

     Provision (benefit) for income taxes    $ 2,744    $  (559)  $    317
                                             ========   ========  =========


(6)  EMPLOYEE BENEFIT PLANS:
     -----------------------

     Prior to 2002, the Company maintained several defined benefit pension plans
     covering  substantially  all union  employees.  During 2002,  several plans
     related to the Company's  Industrial Group  (discontinued  operations) were
     terminated,  leaving  one  defined  benefit  plan  covering  the  remaining
     Company's U.S.  Consumer  division union employees.  The benefits are based
     upon fixed dollar  amounts per years of service.  The assets of the various
     plans (principally corporate stocks and bonds, insurance contracts and cash
     equivalents) are managed by independent trustees. The policy of the Company
     is  to  fund  the  minimum  annual  contributions  required  by  applicable
     regulations.


<PAGE>


     The  following  tables  set  forth  the  plans'  funded  status  and  other
     information  for the fiscal  years  ended  September  30, 2003 and 2002 (in
     thousands):

                                                       September 30,
                                                       -------------
                                                      2003         2002
                                                   ----------   ----------
      Change in benefit obligation:

      Obligation at beginning of year                $1,762       $3,831

      Service cost                                       50           90

      Interest cost                                     118          123

      Actuarial gain                                    179          154

      Benefit payments                                 (294)      (2,436)
                                                   ----------   ----------
      Obligation at end of year                      $1,815       $1,762
                                                   ==========   ==========

      Change in market value of plan assets:

      Market value at beginning of year              $2,108       $3,489

      Actual return on plan assets                      251          445

      Employer contributions                            146          610

      Benefit payments                                 (294)      (2,436)
                                                   ----------   ----------
      Market value at end of year                    $2,211       $2,108
                                                   ==========   ==========
      Prepaid pension asset:

      Projected benefit obligation                  $(1,815)     $(1,762)

      Plan assets at market value                     2,211        2,108
                                                   ----------   ----------
      Projected benefit obligation less than plan
      assets                                            396          346

      Unrecognized net (gain) loss from past
         experience different from assumptions           37          (69)

      Unrecognized net obligation being
         recognized over periods from 10 to
         16 years                                         2          164
                                                   ----------   ----------
      Prepaid pension asset                          $  435       $  441
                                                   ==========   ==========
<PAGE>


     Net periodic pension costs include the following components (in thousands):

                                                  2003       2002        2001
                                              ---------  ----------  ----------

         Service  costs  -  benefits  earned
         during period                          $  50        $ 90       $ 178

         Interest cost on projected  benefit
         obligation                               118         123         245

         Expected return on plan assets          (186)       (153)       (248)

         Curtailment loss                         162         -           -

         Net amortization and deferral            -            12          76
                                              ---------  ----------  ----------

         Net periodic pension cost              $ 144        $ 72       $ 251
                                              =========  ==========  ==========

     In  determining  the projected  benefit  obligation,  the weighted  average
     discount  rates  utilized  were 6.5%,  6.4% and 6.4% for the periods  ended
     September 30, 2003,  2002 and 2001,  respectively.  The expected  long-term
     rates of return on assets used in  determining  net  periodic  pension cost
     ranged  from 7.5 % to 8.0 % in all  years  presented  above.  There  are no
     assumed rates of increase in compensation  expense in any year, as benefits
     are fixed and do not vary with compensation levels.

     The Company also  maintains two  defined-contribution  plans (401k) for all
     non-union  domestic  employees and certain union employees who meet minimum
     service requirements,  as well as a supplemental deferred contribution plan
     for certain executives.  Company contributions under the plans consist of a
     basic amount of up to 3% of the  compensation of participants  for the plan
     year,   and  for  those   participants   who  elected  to  make   voluntary
     contributions to the plan,  matching  contributions up to an additional 4%,
     as specified  in the plan.  Charges to  operations  for these plans for the
     years ended September 30, 2003,  2002 and 2001 were $240,000,  $243,000 and
     $588,000, respectively.

     In  addition,  the Company has a defined  benefit  retirement  plan,  which
     provides  supplemental  benefits for certain key executive  officers,  upon
     retirement, disability or death. The benefits are similar to those provided
     under the 401(k) plans, but are funded through the purchase of certain life
     insurance  products.  As of September 30, 2003 and 2002,  the net liability
     under  the  plan  (included  in  accrued  liabilities),  was  $633,000  and
     $504,000,  respectively.  Amounts charged to expense under the plan totaled
     $93,000  and  $118,000  in 2003 and  2002,  respectively.  There was no net
     expense under this plan in 2001.


(7)  SHAREHOLDERS' EQUITY:
     ---------------------

     The Company  provides an Employee Stock Purchase Plan under which shares of
     its common  stock can be issued to eligible  employees.  Among the terms of
     this plan,  eligible  employees  may purchase  through  payroll  deductions
     shares of the Company's  common stock up to 10 % of their  compensation  at
     the  lower of 85 % of the fair  market  value of the  stock on the first or
     last day of the plan year (May 1 and April 30).  On May 1,  2003,  2002 and
     2001, 9,317, 15,370 and 9,415 shares, respectively,  were issued under this
     plan. At September 30, 2003,  there are 47,619 shares  available for future
     purchases under the plan.

     The Company has also granted non-qualified options to key employees,  under
     the 1988 Dixon Ticonderoga Company Executive Stock Plan, to purchase shares
     of its  common  stock at the market  price on the date of grant.  Under the
     1988 Plan (as  amended)  options  vest 25 % after one year;  25 % after two
     years; and 50 % after three years,  and remain  exercisable for a period of
     five years from the date of vesting.  All options expire three months after
     termination  of  employment.  At  September  30,  2003,  there were 183,000
     options  outstanding  and no shares  available  for future grants under the
     1988 Plan.


<PAGE>


     In  addition,  the Dixon  Ticonderoga  Company  1999 Stock Option Plan (the
     "1999  Plan") was  adopted  in fiscal  1999,  covering a maximum  aggregate
     300,000 shares.  Under the 1999 Plan,  qualified incentive stock options or
     non-qualified stock options can be granted to employees at the market price
     on the date of grant and which will vest on the same basis as the 1988 Plan
     described  above.  Non-qualified  options  under  the 1999 Plan may also be
     issued to Company  outside  directors  at the  market  price on the date of
     grant and which may vest over varying  periods.  In 2001,  159,800  options
     were granted to employees  under the 1999 Plan. At September 30, 2003 there
     were 171,600 options  outstanding  and 128,400 shares  available for future
     grants under the 1999 Plan.

     The following  table  summarizes  the combined  stock options  activity for
     2003, 2002 and 2001.

<TABLE>
<CAPTION>
                             2003                  2002                 2001
                      --------------------  -------------------  --------------------
                       Number    Option      Number    Option     Number    Option
                      of Shares   Price     of Shares  Price     of Shares   Price
                      --------------------  -------------------  --------------------

<S>                       <C>       <C>        <C>        <C>        <C>       <C>
   Options outstanding
    at beginning of year
                                                                    27,000    $8.63
                                              21,250      6.75      34,125     6.75
                          2,500      7.13      2,500      7.13      10,750     7.13
                        231,000      8.88    231,000      8.88     258,000     8.88
                                               2,500     12.88       2,500    12.88
                         10,000     11.38     10,000     11.38      10,000    11.38
                         25,000     11.00     25,000     11.00      30,000    11.00
                          5,000      4.25      5,000      4.25       7,500     4.25
                                               2,500      3.81
                        147,300      3.70    147,300      3.70
                         10,000      4.75     10,000      4.75
   Options granted
                                                                    10,000     4.75
                                                                     2,500     3.81
                                                                   147,300     3.70
   Options expired
      or canceled

                        (5,000)      4.25                          (2,500)     4.25
                                                                  (27,000)     8.63
                                            (21,250)      6.75    (12,875)     6.75
                       (59,250)      8.88                         (27,000)     8.88
                        (1,250)      7.13                          (8,250)     7.13
                        (5,000)     11.00                          (5,000)    11.00
                                             (2,500)     12.88
                                             (2,500)      3.81
                        (5,700)      3.70
                      ----------            ---------            ----------
                        354,600              430,800               457,050
                      ==========            =========            ==========
</TABLE>

     The Company has adopted the  disclosure-only  provisions of FASB  Statement
     No. 123, as amended by FASB Statement No. 148,  "Accounting for Stock-Based
     Compensation - Transition and  Disclosure"  and,  accordingly,  there is no
     compensation expense recognized for its stock option plans.

     Pro forma information related to the fair value of stock-based compensation
     is presented  in Note 1. The pro forma  amounts  were  estimated  using the
     Black-Scholes valuation model assuming no dividends, expected volatility of
     36% for all years presented, an average risk-free interest rate of 4.7% for
     all years presented and expected lives of  approximately  six years for all


<PAGE>


     grants prior to 2001 and eight years thereafter. No options were granted in
     2002 or 2003. The weighted  average fair value estimates of options granted
     in 2001 was $2.47. The weighted average  remaining lives of options granted
     in 2001 were 5.5 years.

     In the past, the Company made loans under the  aforementioned  stock option
     plans to certain shareholders who are executive officers,  for the purchase
     of Company  common  stock  pursuant to the exercise of stock  options.  The
     loans must be repaid at the time the underlying  shares of common stock are
     sold.  Interest  on a portion of the loans  accrues at a rate of 8%.  Total
     shareholder loans approximated  $558,000 at September 30, 2003 and 2002. No
     such loans have been granted since late 1999.

     In 1995,  the Company  declared a dividend  distribution  of one  Preferred
     Stock Purchase Right on each share of Company common stock. Each Right will
     entitle  the  holder to buy  one-thousandth  of a share of a new  series of
     preferred  stock  at a price  of  $30.00  per  share.  The  Rights  will be
     exercisable  only if a person or group (other than the Company's  chairman,
     Gino  N.  Pala,  and  his  family  members)  acquires  20% or  more  of the
     outstanding  shares of common  stock of the  Company or  announces a tender
     offer following which it would hold 30% or more of such outstanding  common
     stock.  The Rights  entitle the holders other than the acquiring  person to
     purchase  Company  common  stock  having a market  value of two  times  the
     exercise prices of the Right.  If, following the acquisition by a person or
     group of 20% or more of the Company's  outstanding  shares of common stock,
     the Company were acquired in a merger or other business  combination,  each
     Right  would be  exercisable  for that  number of the  acquiring  Company's
     shares  of common  stock  having a market  value of two times the  exercise
     prices of the  Right.  The  Company  may  redeem the Rights at one cent per
     Right at any time until ten days  following the occurrence of an event that
     causes the Rights to become exercisable for common stock. The Rights expire
     ten years from the date of distribution.


(8)  OTHER COSTS:
     ------------

     In  connection  with the  completion of its debt  restructuring  in October
     2002, the Company  expensed  approximately  $625,000 of deferred  financing
     costs associated with its previous senior debt with a consortium of lenders
     (which was repaid) and its previous  subordinated  debt  agreements  (which
     were substantially modified).  This expense is included in operating income
     as  debt  refinancing  costs  in the  accompanying  Consolidated  Financial
     Statements.

     The Company also incurred  approximately  $483,000 in professional fees and
     other costs  related to  unconsummated  mergers and  acquisitions  activity
     pursued by the Company  through  its  investment  bankers.  These costs are
     included in operating income as investment banking and related costs in the
     accompanying Consolidated Financial Statements.


<PAGE>


(9)  OTHER INCOME:
     -------------

     Other income,  net in fiscal 2003 includes  $672,000 of gains from the sale
     of  securities  received by the  Company as a  policyholder  following  the
     demutualizations of certain insurance companies.  Additionally, the Company
     received  $380,000  and  $253,000 in import duty  rebates in 2003 and 2002,
     respectively.


(10) RESTRUCTURING AND RELATED COSTS:
     --------------------------------

     The Company  began fiscal 2001 with reserves of  approximately  $1 million,
     previously provided in connection with its Restructuring and Cost Reduction
     Program, which was intended to improve overall financial performance in the
     future. The program included manufacturing plant closure and consolidation,
     as well as personnel  reduction in  manufacturing,  sales and marketing and
     corporate  activities.   Approximately  300  employees  (principally  plant
     workers)  were  affected by the prior phases of the  program.  The carrying
     amount  of  property  and   equipment   held  for  disposal  at  that  time
     approximated $3.1 million. Management disposed of these remaining assets in
     2001.

     In fiscal  2001,  the  Company  incurred  approximately  $868,000  in costs
     (principally in Mexico) directly related to the restructuring program which
     were not eligible for  recognition  in prior  periods and thus  expensed as
     incurred in 2001.

     In fiscal  2002,  the  Company  provided  $418,000 in  additional  charges,
     principally  for  lease  termination  and  employee  costs  related  to the
     completion of prior phases of the restructuring program.

     Also in fiscal 2002,  the Company  provided  approximately  $1,155,000  for
     restructuring  and  improvement  related costs in connection with the final
     phase of its  Restructuring  and Cost Reduction  Program,  which included a
     plant closure and further  consolidation  of its  manufacturing  operations
     into the Company's  Mexico  facility and additional  personnel  reductions,
     primarily in  manufacturing  and corporate  activities.  An additional  120
     employees  (principally  plant workers) were affected by the final phase of
     the program.  The carrying amount of additional  property held for disposal
     from this final phase is approximately $200,000.

     In  fiscal  2003,   the  Company   incurred  an   additional   $487,000  in
     restructuring  costs  related  primarily  to  holding  costs  of  a  closed
     manufacturing  facility (not accruable in advance) and additional severance
     related to personnel reductions in 2003.


<PAGE>


     The restructuring and impairment related charges and subsequent utilization
     for the three fiscal years ended  September 30, 2003 are  summarized  below
     (in thousands):

<TABLE>
<CAPTION>

                                                           Losses from
                                           Employee      impairment, sale
                                          severance      and abandonment
                                          and related      of property
                                            costs         and equipment      Total
                                        --------------  -----------------  ----------
<S>                                 <C>               <C>                <C>        <C>
Reserve balances at September 30, 2000    $   673          $   312          $  985
2001 restructuring and impairment
  related charges                             -                868             868
Utilized in fiscal 2001                      (334)          (1,180)         (1,514)
                                        --------------  -----------------  ----------
Reserve balances at September 30, 2001        339              -               339
                                        --------------  -----------------  ----------

Additional fiscal 2002 provisions             135              283             418
2002 restructuring and impairment
  related charges                           1,110               45           1,155
                                        --------------  -----------------  ----------
Total 2002 restructuring and
  impairment related charges                1,245              328           1,573
Utilized in fiscal 2002                      (474)            (283)           (757)
                                        --------------  -----------------  ----------
Reserve balances at September 30, 2002      1,110               45           1,155
                                         --------------  -----------------  ----------

2003 restructuring and impairment
  related charges                             163              324             487
Utilized in fiscal 2003                    (1,183)            (369)         (1,552)
                                        --------------  -----------------  ----------
Reserve balances at September 30, 2003    $    90          $   -            $   90
                                        ==============  =================  ==========

</TABLE>

(11) EARNINGS PER COMMON SHARE:
     --------------------------

     Basic earnings (loss) per common share is calculated by dividing net income
     (loss)  by the  weighted  average  number of  shares  outstanding.  Diluted
     earnings  per common  share is based upon the  weighted  average  number of
     shares outstanding,  plus the effects of potentially dilutive common shares
     [consisting of stock options (Note 7) and stock warrants (Note 4)]. For the
     years ended  September  30,  2003,  2002 and 2001,  options and warrants to
     purchase 354,600, 730,800 and 607,250 shares of common stock, respectively,
     were excluded from the computation of diluted  earnings (loss) per share as
     such options and warrants were anti-dilutive.

     Weighted  average common shares used in the  calculation of earnings (loss)
     per share are as follows:

              Year                 Basic      Diluted
              ----               ----------  ----------
              2003               3,196,714   3,196,714
              2002               3,183,866   3,183,866
              2001               3,171,190   3,176,609


<PAGE>


(12) LINE OF BUSINESS REPORTING:
     ---------------------------

     Due to the Company's sale of its Industrial  Group (Note 13), the Company's
     continuing  operations only consist of one principal business segment - its
     Consumer Group.  The following  information  sets forth certain  additional
     data  pertaining to its operations as of September 30, 2003,  2002 and 2001
     for the years then ended (in thousands).

                                              Operating        Identifiable
                              Revenues       Profit (Loss)        Assets
                            ------------    --------------   ----------------
       2003:
          United  States     $ 53,087        $   (910)          $ 35,844
          Canada                8,705             914              6,414
          Mexico               25,569           3,731             25,965
          United Kingdom        1,321             107              1,277
          China                   156             628              2,534

       2002:
          United  States     $ 51,685        $ (1,747)          $ 41,127
          Canada                8,694             792              5,879
          Mexico               27,098           3,445             26,120
          United Kingdom        1,094              29                642
          China                    20             125              1,435

       2001:
          United  States     $ 54,837        $  2,076           $ 44,598
          Canada                8,435             527              5,673
          Mexico               23,813           2,849             29,012
          United Kingdom        1,046             (26)               674
          China                   188             (70)             1,363



(13) DISCONTINUED OPERATIONS:
     ------------------------

     In September  2001,  the Company  formalized its decision to offer for sale
     its New Castle Refractories  division,  the last business of its Industrial
     Group. Accordingly,  related operating results of the Industrial Group have
     been reported as discontinued  operations in the accompanying  Consolidated
     Financial  Statements  for all periods  presented.  In December  2002,  the
     Company   entered  into  an  agreement  to  sell  this  division  to  local
     management. The transaction closed effective July 31, 2003. At closing, the
     Company  received  consideration  of $500,000  in the form of a  seven-year
     amortizing  note  receivable  and net cash  proceeds  of  approximately  $3
     million,  utilized to reduce its senior debt. The Company  retained tax and
     certain other net liabilities of approximately $800,000.


<PAGE>


     Net revenues and income (loss) from discontinued  operations are as follows
     (in thousands):

                                              2003        2002        2001
                                           ----------  ----------  ----------
      Net revenues                          $ 8,021     $ 9,169     $ 9,529
                                           ==========  ==========  ==========
      Income   (loss)  from   discontinued
        operations before income taxes      $  (578)    $   200     $   (85)
      Income tax benefit (expense)              -           (77)         29
                                           ----------  ----------  ----------
                                               (578)        123         (56)
                                           ----------  ----------  ----------
      Loss on disposal of Industrial Group      -           -        (1,570)
      Income tax benefit                        -           -           526
                                           ----------  ----------  ----------
                                                -           -        (1,044)
                                           ----------  ----------  ----------
      Income   (loss)  from   discontinued  $  (578)    $   123     $(1,100)
                                           ==========  ==========  ==========
      Earnings (loss) per share (basic)     $ (0.18)    $   .04     $ (0.35)
                                           ==========  ==========  ==========
      Earnings (loss) per share (diluted)   $ (0.18)    $   .04     $ (0.35)
                                           ==========  ==========  ==========

     Income (loss) from discontinued  operations includes pre-tax gains on sales
     of assets of $208 and $1,202 in 2002 and 2001,  respectively,  attributable
     to the sale of the Company's Graphite and Lubricants division. In addition,
     interest expense of $270, $342 and $427 has been allocated to income (loss)
     from discontinued  operations in 2003, 2002 and 2001,  respectively,  based
     upon the identifiable  assets of such  operations.  The loss on disposal in
     2001  includes  the  anticipated  loss  on  the  sale  of  the  New  Castle
     Refractories  division of $468,  a provision  for the  termination  of that
     division's pension plans of $432, and a provision for anticipated operating
     losses of $670.

     Assets and liabilities relating to discontinued operations, included in the
     accompanying  Consolidated  Balance  Sheet as of September  30, 2002 are as
     follows (in thousands):

           Current assets                           $ 3,905
           Property, plant and equipment, net           386
           Current liabilities                       (1,254)
           Long-term liabilities and other, net        (813)
                                                  ------------
           Net assets of discontinued operations    $ 2,224
                                                  ============


(14) COMMITMENTS AND CONTINGENCIES:
     ------------------------------

     The Company has entered into  employment  agreements  with four  executives
     which provide for the continuation of salary (currently aggregating $68,700
     per  month)  and  related  employee  benefits  for a  period  of 24  months
     following their  termination of employment under certain changes in control
     of the Company.  In  addition,  all options  held by the  executives  would
     become  immediately  exercisable  upon the date of  termination  and remain
     exercisable  for 90 days  thereafter.  The  Company has also  entered  into
     various  agreements  with  six  additional   employees  which  provide  for
     continuation of salaries  (averaging  $6,800 each per month) for periods up
     to 16 months under certain circumstances.

     In  December  2002,  the  Company  entered  into a  strategic  distribution
     arrangement  with a  third-party  logistics  partner  to  provide  turn-key
     distribution of the Company's  products to its U.S.  customers through June
     2005. The Company incurred approximately $933,000 under this arrangement in
     2003.  The  minimum  remaining  payments  under the  related  contract  are
     approximately $945,000 in 2004 and $709,000 in 2005.

     The  Company  leases  certain  manufacturing  equipment  under a  five-year
     noncancelable  operating lease  arrangement.  The rental expense under this
     lease  was  $433,000,  $410,000  and  $372,000  in  2003,  2002  and  2001,
     respectively.  Annual  future  minimum  rental  payments are  approximately
     $372,000 per year in 2004 and $93,000 in 2005.


<PAGE>

     The  Company,  in the  normal  course  of  business,  is party  in  certain
     litigation.  In 1996, a decision was rendered by the Superior  Court of New
     Jersey in Hudson County finding the Company  responsible  for $1.94 million
     in certain  environmental  clean-up  costs  relating  to a claim  under New
     Jersey's  Environmental  Clean-Up  Responsibility  Act  (ECRA)  by  a  1984
     purchaser of industrial  property from the Company.  All subsequent appeals
     were denied and as a result of the judgment,  the Company paid $3.6 million
     in 1998 to satisfy this claim in full, including all accrued interest.  The
     Company continued to pursue other responsible  parties for  indemnification
     and/or  contribution  to the  payment of this claim and in fiscal  2000 the
     Company reached  settlements with its various insurers for reimbursement of
     legal costs. In 2001, a pending malpractice suit against its previous legal
     counsel  was  settled and the Company  received  $575,000  (reflected  as a
     reduction in selling and administrative expenses).

     The  Company is  involved  in various  legal  proceedings  incident  to the
     conduct of its  business.  The Company does not expect the  proceedings  to
     have a material  effect on the  Company's  future  results of operations or
     financial position.

     The  Company  assesses  the extent of  environmental  matters on an ongoing
     basis. In the opinion of management  (after taking into account accruals of
     approximately  $269,000 as of September 30, 2003),  the resolution of these
     matters  will  not  materially  affect  the  Company's  future  results  of
     operations or financial position.


(15) RELATED PARTY TRANSACTIONS
     --------------------------

     A member of the  Company's  board of  directors  is a partner of a law firm
     which represents the Company in various legal matters. The Company incurred
     approximately  $241,000,  $33,000  and $20,000  for  professional  services
     rendered by this firm in the fiscal years ended  September  30, 2003,  2002
     and 2001, respectively.


<PAGE>


(16) SUMMARY  OF  QUARTERLY  FINANCIAL  INFORMATION  (UNAUDITED)
     -----------------------------------------------------------
     (In Thousands, Except Per Share Data):
     --------------------------------------
<TABLE>
<CAPTION>

               2003:                         First     Second     Third    Fourth
               -----                       ---------  ---------  --------- --------
<S>                                       <C>        <C>        <C>       <C>
Revenues (a)                                $15,870    $18,893    $26,940   $27,135
Income (loss) from continuing operations       (933)       146      1,850    (1,912) (c)
Income (loss) from discontinued operations       -        (252)       (59)     (267) (c)
Net income (loss)                              (933)      (106)     1,791    (2,179) (c)

Earnings (loss) per share: (b)
  Continuing operations:
   Basic                                       (.29)       .04        .58      (.60)
   Diluted                                     (.29)       .04        .58      (.60)
  Discontinued operations:
   Basic                                         -        (.07)      (.02)     (.08)
   Diluted                                       -        (.07)      (.02)     (.08)
  Net income (loss):
   Basic                                       (.29)      (.03)       .56      (.68)
   Diluted                                     (.29)      (.03)       .56      (.68)

               2002:                         First     Second     Third    Fourth
               -----                       ---------  ---------  --------- --------
Revenues (a)                                $17,496    $17,928    $28,148   $25,019
Income (loss) from continuing operations       (775)      (656)     1,358      (610)
Income (loss) from discontinued operations       -         131         -         (8)
Net income (loss)                              (775)      (525)     1,358      (618)

Earnings (loss) per share: (b)
  Continuing operations:
   Basic                                       (.24)      (.21)       .43      (.19)
   Diluted                                     (.24)      (.21)       .43      (.19)
  Discontinued operations:
   Basic                                         -         .04         -         -
   Diluted                                       -         .04         -         -
  Net income (loss):
   Basic                                       (.24)      (.17)       .43      (.19)
   Diluted                                     (.24)      (.17)       .43      (.19)
</TABLE>

(a)  Certain reclassifications were made to classify certain sales incentives as
     reductions of gross  revenues  and/or  increases in cost of goods sold that
     were previously  classified as selling expenses (See Note 1 to Consolidated
     Financial Statements).
(b)  Calculated independently for each period, and consequently,  the sum of the
     quarters may differ from the annual amount.
(c)  The fourth  quarter of fiscal 2003  reflects  the impact of  providing  for
     additional  valuation allowances for the Company's U.S. deferred tax assets
     in the amounts of $2,232 and $190, included in  continuing  operations  and
     discontinued operations, respectively (see Note 5).


<PAGE>


                   DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                   ------------------------------------------

                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
                ------------------------------------------------

           FOR THE THREE YEARS ENDED SEPTEMBER 30, 2001, 2000 and 1999
           -----------------------------------------------------------


                       Balance at    Additions      Additions to       Balance
                       Beginning      Charged     (Deductions From)   at  Close
    Description        of Period     to Income        Reserves        of Period
--------------------  ------------  ------------   ---------------   -----------

Allowance for Doubtful Accounts:

Year Ended
  September 30, 2003  $ 1,381,780   $   315,026    $ (267,584) (1)   $ 1,429,222
                      ============  ============   ===============   ===========

Year Ended
  September 30, 2002  $ 1,482,524   $   193,979    $ (294,723) (1)   $ 1,381,780
                      ============  ============   ===============   ===========

Year Ended
  September 30, 2001  $ 1,418,908   $   151,263    $  (87,647) (1)   $ 1,482,524
                      ============  ============   ===============   ===========
(1) Write-off of accounts considered to be uncollectible (net of recoveries).



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
-------------------------------------------------------------------
        AND FINANCIAL DISCLOSURES
        -------------------------

     None.


ITEM 9A. CONTROLS AND PROCEDURES
--------------------------------

     Within the 90-day  period prior to the date of this report,  the  Company's
     Co-Chief Executive  Officers,  Chief Financial Officer and Chief Accounting
     Officer  evaluated  the  effectiveness  of the design and  operation of the
     Company's  disclosure  controls  and  procedures  and  concluded  that such
     disclosure  controls  and  procedures  are  effective.  There  have been no
     significant  changes in internal controls or in other factors,  which could
     significantly  affect  internal  controls  subsequent  to the date that the
     officers carried out their evaluations.



<PAGE>


                                    PART III
                                    --------


ITEM 10. DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  COMPANY
--------------------------------------------------------------

     Certain information  required under this Item with respect to Directors and
     Executive Officers will be contained in the Company's 2003 Proxy Statement,
     pursuant to Regulation 14A, which is incorporated herein by reference.

     The  following  table  sets  forth  the  names  and  ages of the  Company's
     Executive  Officers,  together with all positions and offices held with the
     Company by such Executive  Officers.  All Executive Officers are subject to
     re-election  or  re-appointment  by the  Board of  Directors  at the  first
     Directors' Meeting succeeding the next Annual Meeting of shareholders.

             Name                  Age                     Title
             ----                  ---                     -----

Gino N. Pala                        75  Chairman  of the  Board  since  February
(Father-in-law of Richard F. Joyce)     1989;   President  and  Chief  Executive
                                        Officer or  Co-Chief  Executive  Officer
                                        since 1978.

Richard F. Joyce                    48  Vice   Chairman   of  the  Board   since
(Son-in-law of Gino N. Pala)            January  1990;  President  and  Co-Chief
                                        Executive   Officer  since  March  1999;
                                        prior   thereto   President   and  Chief
                                        Operating   Officer,   Consumer   Group,
                                        since    March, 1996;   Executive   Vice
                                        President  and  Chief  Legal   Executive
                                        since February 1991;  Corporate  Counsel
                                        since July 1990.

Richard A. Asta                     47  Executive  Vice President of Finance and
                                        Chief  Financial  Officer since February
                                        1991;    prior   thereto   Senior   Vice
                                        President - Finance and Chief  Financial
                                        Officer  since March 1990;  and Director
                                        since May 1999.

Leonard D. Dahlberg, Jr.            52  Executive  Vice  President of Operations
                                        since   August  2000;   Executive   Vice
                                        President  of  Procurement  since  April
                                        1999;   prior  thereto   Executive  Vice
                                        President,   Industrial   Group,   since
                                        March 1996;  Executive Vice President of
                                        Manufacturing / Consumer        Products
                                        division since August 1995;  Senior Vice
                                        President   of    Manufacturing    since
                                        February   1993;   Vice   President   of
                                        Manufacturing since March 1990.

John Adornetto                      62  Vice President and Corporate  Controller
                                        since   January   1991;   prior  thereto
                                        Corporate   Controller  since  September
                                        1978.

Diego Cespedes Creixell             45  President,  Grupo  Dixon  S.A.  de C.V.,
                                        since  August  1996 and  Director  since
                                        May 2000.


<PAGE>


ITEM 11. EXECUTIVE COMPENSATION
-------------------------------

     Information  required  under this Item will be contained  in the  Company's
2003 Proxy Statement which is incorporated herein by reference.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------

     Information  required  under this Item will be contained  in the  Company's
2003 Proxy Statement which is incorporated herein by reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------

     Information  required  under this Item will be contained  in the  Company's
2003 Proxy Statement which is incorporated herein by reference.


ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
-----------------------------------------------

     Information  required  under this Item will be contained  in the  Company's
2003 Proxy Statement which is incorporated herein by reference.


<PAGE>


                                     PART IV
                                     -------

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
------------------------------------------------------------------------

(a) Documents filed as part of this report:

      1.   Financial statements

           See index under Item 1. Financial Information.

      2.   Exhibits

           The following exhibits are required to be filed as part of this
           Annual Report on Form 10-K:

           (2)   a. Share Purchase  Agreement by and among Dixon  Ticonderoga de
                 Mexico,  S.A.  de C.V.,  and by Grupo Ifam,  S.A. de C.V.,  and
                 Guillermo  Almazan  Cueto with respect to the capital  stock of
                 Vinci de Mexico, S.A. de C.V., (English translation). 4

           (2)   b. Asset  Purchase  Agreement  dated  February 9, 1999,  by and
                 between  Dixon  Ticonderoga   Company,  as  Seller  and  Asbury
                 Carbons, Inc., as Buyer. 6

           (2)   c. Asset Purchase  Agreement  dated December 23, 2002,  between
                 Dixon   Ticonderoga   Company,   as  Seller   and  New   Castle
                 Refractories Company, Inc., Inc., as Buyer with addenda.

           (3)   (i) Restated Certificate of Incorporation2

           (3)   (ii) Amended and Restated Bylaws1

           (4)   a. Specimen Certificate of Company Common Stock2

           (4)   b. Amended and Restated Stock Option Plan3

           (10)  a. First  Modification of Amended and Restated Revolving Credit
                 Loan and  Security  Agreement  by and among  Dixon  Ticonderoga
                 Company,  Dixon  Ticonderoga,   Inc.,  First  Union  Commercial
                 Corporation, First National Bank of Boston and National Bank of
                 Canada1

           (10)  b. 12.00% Senior Subordinated Notes, Due 2003, Note and Warrant
                 Purchase Agreement1

           (10)  c. 12.00% Senior  Subordinated  Notes,  Due 2003,  Common Stock
                 Purchase Warrant Agreement1

           (10)  d.  License and  Technological  Agreement  between  Carborundum
                 Corporation and New Castle Refractories  Company, a division of
                 Dixon Ticonderoga Company1

           (10)  e. Equipment Option and Purchase Agreement between  Carborundum
                 Corporation and New Castle Refractories  Company, a division of
                 Dixon Ticonderoga Company1

           (10)  f. Product Purchase Agreement between  Carborundum  Corporation
                 and New  Castle  Refractories  Company,  a  division  of  Dixon
                 Ticonderoga Company1

           (10)  g.Second  Modification of Amended and Restated Revolving Credit
                 Loan and  Security  Agreement  by and among  Dixon  Ticonderoga

<PAGE>

                 Company,  Dixon  Ticonderoga,   Inc.,  First  Union  Commercial
                 Corporation, First National Bank of Boston and National Bank of
                 Canada5

           (10)  h. Third  Modification of Amended and Restated Revolving Credit
                 Loan and Security  Agreement,  Amendment to Loan  Documents and
                 Assignment  by  and  among  Dixon  Ticonderoga  Company,  Dixon
                 Ticonderoga,   Inc.,   First  Union   Commercial   Corporation,
                 BankBoston, N.A., National Bank of Canada and LaSalle Bank.7

           (10)  i.  First  Modification  of  Amended  and  Restated  Term  Loan
                 Agreement  and  Assignment  by  and  among  Dixon   Ticonderoga
                 Company,  Dixon  Ticonderoga,   Inc.,  First  Union  Commercial
                 Corporation,  BankBoston,  N.A.,  National  Bank of Canada  and
                 LaSalle Bank.7

           (10)  j.  Amendment No. 1 to 12.00% Senior  Subordinated  Notes,  Due
                 2003, Note and Warrant Purchase Agreement.7

           (10)  k. Fourth Modification of Amended and Restated Revolving Credit
                 Loan and Security Agreement.8

           (10)  l.  Second  Modification  of  Amended  and  Restated  Term Loan
                 Agreement.8

           (10)  m. Amendment No. 2 to Note and Warrant Purchase Agreement.8

           (10)  n. Loan and Security  Agreement by and among Dixon  Ticonderoga
                 Company   and   its    Subsidiaries    and   Foothill   Capital
                 Corporation.10

           (10)  o. Dixon  Ticonderoga  Company  Amended and  Restated  Note and
                 Warrant Purchase  Agreement,  12.5% Senior  Subordinated Notes,
                 due October 3, 2005.10

           (21)  Subsidiaries of the Company.

           (23)  Consent of Independent Certified Public Accountants.

           (31.1)Chairman   of  the  Board  and   Co-Chief   Executive   Officer
                 Certification  pursuant to Exchange  Act Rule 13a-14 as adopted
                 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

           (31.2)Vice  Chairman  of the Board  and  Co-Chief  Executive  Officer
                 Certification  pursuant to Exchange  Act Rule 13a-14 as adopted
                 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

           (31.3)Executive  Vice  President  of  Finance  and  Chief   Financial
                 Officer  Certification  pursuant to Exchange Act Rule 13a-14 as
                 adopted  pursuant to Section 302 of the  Sarbanes-Oxley  Act of
                 2002.

           (32.1)Chairman   of  the  Board  and   Co-Chief   Executive   Officer
                 Certification  pursuant to 18 U.S.C.  Section  1350, as adopted
                 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

           (32.2)Vice  Chairman  of the Board  and  Co-Chief  Executive  Officer
                 Certification  pursuant to 18 U.S.C.  Section  1350, as adopted
                 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

           (32.3)Executive  Vice  President  of  Finance  and  Chief   Financial
                 Officer  Certification  pursuant to 18 U.S.C.  Section 1350, as
                 adopted  pursuant to Section 906 of the  Sarbanes-Oxley  Act of
                 2002.
<PAGE>

1Incorporated  by reference to the Company's  Annual Report on Form 10-K for the
year ended September 30, 1996, file number 0-2655, filed in Washington, D.C.

2Incorporated  by reference to the Company's  Quarterly  Report on Form 10-Q for
the period ended March 31, 1997, file number 0-2655, filed in Washington, D.C.

3Incorporated  by reference to Appendix 3 to the Company's Proxy Statement dated
January 27, 1997, filed in Washington, D.C.

4Incorporated  by reference to the  Company's  Current  Report on Form 8-K dated
December 12, 1997, filed in Washington D.C.

5Incorporated  by reference to the Company's  Annual Report on Form 10-K for the
year ended September 30, 1998, file number 0-2655, filed in Washington, D.C.

6Incorporated  by reference to the  Company's  Current  Report on Form 8-K dated
March 2, 1999, filed in Washington D.C.

7Incorporated  by reference to the Company's  Annual Report on Form 10-K for the
year ended September 30, 1999, file number 0-2655, filed in Washington, D.C.

8Incorporated  by reference to the Company's  Annual Report on Form 10-K for the
year ended September 30, 2000, file number 0-2655, filed in Washington, D.C.

9Incorporated  by reference to the Company's  Annual Report on Form 10-K for the
year ended September 30, 2002, file number 0-2655, filed in Washington, D.C.

10Incorporated  by reference to the Company's  Quarterly Report on Form 10-Q for
the period ended  December 31, 2002,  file number  0-2655,  filed in Washington,
D.C.

(b) Reports on Form 8-K:

          On August 15, 2003,  the Company filed a Form 8-K which included as an
          exhibit its press  release dated August 13, 2003,  regarding its third
          fiscal quarter results.


<PAGE>

                                   SIGNATURES
                                   ----------

     Pursuant to the  requirements  of Section 15(d) of the Securities  Exchange
Act of 1934,  the Company has duly caused this Annual  Report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                      DIXON TICONDEROGA COMPANY


                                      /s/  Gino N. Pala
                                      -----------------------------
                                      Gino N. Pala, Chairman of Board and
                                      Co-Chief Executive Officer

     Pursuant to the Securities Exchange Act of 1934, this Annual Report on Form
10-K has been signed below by the following  persons on behalf of the Company in
the capacities indicated.




        /s/  Gino N. Pala
        ----------------------------
        Gino N. Pala                Chairman of Board, Co-Chief
                                    Executive Officer and Director
                                    Date:  December 29, 2003
        /s/  Richard F. Joyce
        ----------------------------
        Richard F. Joyce            Vice Chairman of Board,
                                    Co-Chief Executive Officer,
                                    President and Director
                                    Date:  December 29, 2003
        /s/  Richard A. Asta
        ----------------------------
        Richard A. Asta             Executive Vice President of
                                    Finance, Chief Financial
                                    Officer and Director
                                    Date:  December 29, 2003
        /s/  Diego Cespedes Creixell
        ----------------------------
        Diego Cespedes Creixell     President, Grupo Dixon S.A. de
                                    C.V., and Director
                                    Date:  December 29, 2003
        /s/  Philip M. Shasteen
        ----------------------------
        Philip M. Shasteen          Director
                                    Date:  December 29, 2003
        /s/  Ben Berzin, Jr.
        ----------------------------
        Ben Berzin, Jr.             Director
                                    Date:  December 29, 2003
        /s/  Kent Kramer
        ----------------------------
        Kent Kramer                 Director
                                    Date:  December 29, 2003
        /s/  John Ritenour
        ----------------------------
        John Ritenour               Director
                                    Date:  December 29, 2003
        /s/  Wesley D. Scovanner
        ----------------------------
        Wesley D. Scovanner         Director
                                    Date:  December 29, 2003