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Form 10-Q

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934

For The Quarter Ended                      March 31, 2002

Commission file number                     0-7024

The First Years Inc.
(Exact name of registrant as specified in its charter)

|                                                                             |  |                                                
|---------------------------------------------------------------------------- |  | -----------------------------------------------
|Massachusetts
(State or other jurisdiction of
incorporation or organization) |  | 04-2149581
(I.R.S. Employer
Identification No.)

One Kiddie Drive, Avon,
Massachusetts 02322-1171
(Address of principal executive offices)
(Zip Code)

(508) 588-1220
(Registrants telephone number, including area code)

n/a
(Former name, former address and former fiscal year,
if changed since last report)

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
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes X.     No___.

The number of shares of Registrants common stock outstanding on April 30, 2002
was 8,192,519.



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TABLE OF CONTENTS



|                                                                                                   |                                                                                       |  |  |  |  |  |  | 
|-------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|Condensed Consolidated Balance Sheets                                                             
|Condensed Consolidated Statements of Income Three Months Ended March 31, 2002 and 2001            
|Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2002 and 2001
|Notes to Condensed Consolidated Financial Statements                                              
|                                                                                                   | Part I, Item 2.                                                                      
|                                                                                                   | Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                                                                   | Part I, Item 3.                                                                      
|                                                                                                   | Quantitative and Qualitative Disclosure about Market Risk                            
|PART II  OTHER INFORMATION                                                                       
|SIGNATURES                                                                                        
|EXHIBIT INDEX                                                                                     



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THE FIRST YEARS INC.

INDEX

|                                                                                      |  |     
|------------------------------------------------------------------------------------- |  | ----
|                                                                                      |  | Page
|                                                                                      |  |     
|PART I  FINANCIAL INFORMATION:                                                       |  |     
|                                                                                      |  |     
|Condensed Consolidated Balance Sheets                                                 |  | 1   
|                                                                                      |  |     
|Condensed Consolidated Statements of Income                                           |  | 2   
|                                                                                      |  |     
|Condensed Consolidated Statements of Cash Flows                                       |  | 3   
|                                                                                      |  |     
|Notes to Condensed Consolidated Financial Statements                                  |  | 4-6 
|                                                                                      |  |     
|Managements Discussion and Analysis of Financial
Condition and Results of Operations |  | 7-9 
|                                                                                      |  |     
|Quantitative and Qualitative
Disclosure about
Market Risk                             |  | 10  
|                                                                                      |  |     
|PART II  OTHER
INFORMATION                                                           |  |     
|                                                                                      |  |     
|Other Information                                                                     |  | 11  
|                                                                                      |  |     
|SIGNATURES                                                                            |  | 12  
|                                                                                      |  |     
|EXHIBIT INDEX                                                                         |  | 13  



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THE FIRST YEARS INC.




CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

|                                           |                                                                                                                      |                                      |            |                                      |            |             |            |              |            |  |            | 
|------------------------------------------ | -------------------------------------------------------------------------------------------------------------------- | ------------------------------------ | ---------- | ------------------------------------ | ---------- | ----------- | ---------- | ------------ | ---------- |  | ---------- | 
|                                           |                                                                                                                      |                                      |            |                                      |            | March 31,   |            | December 31,
|                                           |                                                                                                                      |                                      |            |                                      |            | 2002        |            | 2001        
|                                           |                                                                                                                      |                                      |            |                                      |            |             |            |             
|                                           |                                                                                                                      |                                      |            |                                      |            | (Unaudited) |            |              |            | 
|CURRENT ASSETS:                            |                                                                                                                      |                                      |            |                                      |            |             |            |             
|                                           | Cash and cash equivalents                                                                                            |                                      | $          | 3,328,156                            |            |             | $          | 13,310,004   |           
|                                           | Accounts receivable, net                                                                                             |                                      |            | 23,468,788                           |            |             |            | 17,318,497   |           
|                                           | Inventories                                                                                                          |                                      |            | 20,398,800                           |            |             |            | 20,331,823   |           
|                                           | Prepaid expenses and other assets                                                                                    |                                      |            | 1,439,866                            |            |             |            | 1,784,793    |           
|                                           | Deferred tax assets                                                                                                  |                                      |            | 2,156,500                            |            |             |            | 2,156,500    |           
|                                           |                                                                                                                      |                                      |            |                                      |            |             |            |             
|                                           |                                                                                                                      | Total current assets                 |            |                                      | 50,792,110 |             |            |              | 54,901,617 | 
|                                           |                                                                                                                      |                                      |            |                                      |            |             |            |             
|PROPERTY, PLANT, AND EQUIPMENT:            |                                                                                                                      |                                      |            |                                      |            |             |            |             
|                                           | Land                                                                                                                 |                                      |            | 167,266                              |            |             |            | 167,266      |           
|                                           | Building                                                                                                             |                                      |            | 6,160,991                            |            |             |            | 5,309,915    |           
|                                           | Machinery and molds                                                                                                  |                                      |            | 8,336,477                            |            |             |            | 7,809,664    |           
|                                           | Furniture and equipment                                                                                              |                                      |            | 8,025,900                            |            |             |            | 7,826,605    |           
|                                           |                                                                                                                      |                                      |            |                                      |            |             |            |             
|                                           |                                                                                                                      | Total                                |            |                                      | 22,690,634 |             |            |              | 21,113,450 | 
|                                           | Less accumulated depreciation                                                                                        |                                      |            | 11,337,249                           |            |             |            | 10,739,306   |           
|                                           |                                                                                                                      |                                      |            |                                      |            |             |            |             
|                                           |                                                                                                                      | Property, plant, and equipment  net |            |                                      | 11,353,385 |             |            |              | 10,374,144 | 
|                                           |                                                                                                                      |                                      |            |                                      |            |             |            |             
|TOTAL ASSETS                               |                                                                                                                      | $                                    | 62,145,495 |                                      |            | $           | 65,275,761 |             
|                                           |                                                                                                                      |                                      |            |                                      |            |             |            |             
|                                           |                                                                                                                      |                                      |            | LIABILITIES AND STOCKHOLDERS EQUITY |            |            
|CURRENT LIABILITIES:                       |                                                                                                                      |                                      |            |                                      |            |             |            |             
|                                           | Accounts payable and accrued expenses                                                                                |                                      | $          | 9,695,181                            |            |             | $          | 12,824,321   |           
|                                           | Accrued royalty expenses                                                                                             |                                      |            | 250,508                              |            |             |            | 819,286      |           
|                                           | Accrued selling expenses                                                                                             |                                      |            | 1,523,050                            |            |             |            | 3,200,951    |           
|                                           |                                                                                                                      |                                      |            |                                      |            |             |            |             
|                                           |                                                                                                                      | Total current liabilities            |            |                                      | 11,468,739 |             |            |              | 16,844,558 | 
|                                           |                                                                                                                      |                                      |            |                                      |            |             |            |             
|DEFERRED TAX LIABILITY                     |                                                                                                                      |                                      | 1,202,800  |                                      |            |             | 1,202,800  |             
|                                           |                                                                                                                      |                                      |            |                                      |            |             |            |             
|STOCKHOLDERS EQUITY:                      |                                                                                                                      |                                      |            |                                      |            |             |            |             
|                                           | Common stock                                                                                                         |                                      |            | 1,078,934                            |            |             |            | 1,074,840    |           
|                                           | Paid-in-capital                                                                                                      |                                      |            | 9,643,512                            |            |             |            | 9,277,390    |           
|                                           | Retained earnings                                                                                                    |                                      |            | 68,835,285                           |            |             |            | 66,686,505   |           
|                                           | Less treasury stock at cost, 2,596,820
and 2,574,537 shares as of March 31, 2002
and December 31, 2001, respectively |                                      |            | (30,083,775                          | )          |             |            | (29,810,332  | )         
|                                           |                                                                                                                      |                                      |            |                                      |            |             |            |             
|                                           |                                                                                                                      |                                      |            | Total stockholders equity           |            |             | 49,473,956 |              |            |  | 47,228,403 | 
|                                           |                                                                                                                      |                                      |            |                                      |            |             |            |             
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |                                                                                                                      | $                                    | 62,145,495 |                                      |            | $           | 65,275,761 |             
|                                           |                                                                                                                      |                                      |            |                                      |            |             |            |             

See accompanying notes to condensed consolidated financial statements.

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THE FIRST YEARS INC.




CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(Unaudited)

|                                             |  |      |            |      |  |   |            | 
|-------------------------------------------- |  | ---- | ---------- | ---- |  | - | ---------- | 
|                                             |  | 2002 |            | 2001
|                                             |  |      |            |     
|NET SALES                                    |  | $    | 33,310,840 |      |  | $ | 32,458,730 | 
|COST OF PRODUCTS SOLD                        |  |      | 21,682,131 |      |  |   | 21,261,929 | 
|                                             |  |      |            |      |  |   |            | 
|GROSS PROFIT                                 |  |      | 11,628,709 |      |  |   | 11,196,801 | 
|SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES |  |      | 8,009,856  |      |  |   | 7,357,238  | 
|                                             |  |      |            |      |  |   |            | 
|OPERATING INCOME                             |  |      | 3,618,853  |      |  |   | 3,839,563  | 
|INTEREST INCOME                              |  |      | 23,227     |      |  |   | 189,152    | 
|                                             |  |      |            |      |  |   |            | 
|INCOME BEFORE INCOME TAXES                   |  |      | 3,642,080  |      |  |   | 4,028,715  | 
|PROVISION FOR INCOME TAXES                   |  |      | 1,493,300  |      |  |   | 1,651,800  | 
|                                             |  |      |            |      |  |   |            | 
|NET INCOME                                   |  | $    | 2,148,780  |      |  | $ | 2,376,915  | 
|                                             |  |      |            |      |  |   |            | 
|BASIC EARNINGS PER SHARE                     |  | $    | 0.26       |      |  | $ | 0.26       | 
|                                             |  |      |            |      |  |   |            | 
|DILUTED EARNINGS PER SHARE                   |  | $    | 0.25       |      |  | $ | 0.26       | 
|                                             |  |      |            |      |  |   |            | 

See accompanying notes to condensed consolidated financial statements.

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THE FIRST YEARS INC.




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(Unaudited)

|                                                       |                                                                         |                                                 |                             |                                                      |            |         |            |           |            |         |            |  
|------------------------------------------------------ | ----------------------------------------------------------------------- | ----------------------------------------------- | --------------------------- | ---------------------------------------------------- | ---------- | ------- | ---------- | --------- | ---------- | ------- | ---------- | -
|                                                       |                                                                         |                                                 |                             |                                                      |            | 2002    |            | 2001     
|                                                       |                                                                         |                                                 |                             |                                                      |            |         |            |          
|CASH FLOWS FROM OPERATING ACTIVITIES:                  |                                                                         |                                                 |                             |                                                      |            |         |            |          
|                                                       | Net income                                                              |                                                 | $                           | 2,148,780                                            |            |         | $          | 2,376,915 |           
|                                                       | Adjustments to reconcile net income to net cash
provided by operations: |                                                 |                             |                                                      |            |         |            |           |           
|                                                       |                                                                         | Depreciation                                    |                             |                                                      | 597,247    |         |            |           | 532,826    |        
|                                                       |                                                                         | Provision for doubtful accounts                 |                             |                                                      | 7,718      |         |            |           | 5,056      |        
|                                                       |                                                                         | Loss on disposal of equipment                   |                             |                                                      | 710        |         |            |           | 0          |        
|                                                       | Increase (decrease) arising from working
capital items:                 |                                                 |                             |                                                      |            |         |            |           |           
|                                                       |                                                                         | Accounts receivable                             |                             |                                                      | (6,158,009 | )       |            |           | (4,112,546 | )      
|                                                       |                                                                         | Inventories                                     |                             |                                                      | (66,977    | )       |            |           | 1,529,313  |        
|                                                       |                                                                         | Prepaid expenses and other expenses             |                             |                                                      | 358,927    |         |            |           | (738,071   | )      
|                                                       |                                                                         | Accounts payable and accrued expenses           |                             |                                                      | (3,129,140 | )       |            |           | 411,945    |        
|                                                       |                                                                         | Accrued royalties                               |                             |                                                      | (568,778   | )       |            |           | (174,058   | )      
|                                                       |                                                                         | Accrued selling expense                         |                             |                                                      | (1,677,901 | )       |            |           | (1,752,403 | )      
|                                                       |                                                                         |                                                 |                             |                                                      |            |         |            |          
|                                                       |                                                                         |                                                 |                             | Net cash used for
operating activities               |            |         | (8,487,423 | )         |            |         | (1,921,023 | )
|                                                       |                                                                         |                                                 |                             |                                                      |            |         |            |          
|CASH FLOWS FROM INVESTING ACTIVITIES:                  |                                                                         |                                                 |                             |                                                      |            |         |            |          
|                                                       |                                                                         | Expenditures for property, plant, and
equipment |                             |                                                      | (1,577,198 | )       |            |           | (840,237   | )      
|                                                       |                                                                         |                                                 |                             |                                                      |            |         |            |          
|CASH FLOWS FROM FINANCING ACTIVITIES:                  |                                                                         |                                                 |                             |                                                      |            |         |            |          
|                                                       |                                                                         | Common stock issued under stock option
plans    |                             |                                                      | 90,153     |         |            |           | 159,462    |        
|                                                       |                                                                         | Purchase of treasury stock                      |                             |                                                      | (7,380     | )       |            |           | (293,200   | )      
|                                                       |                                                                         |                                                 |                             |                                                      |            |         |            |          
|                                                       |                                                                         |                                                 |                             | Net cash provided by (used for)
financing activities |            |         | 82,773     |           |            |         | (133,738   | )
|                                                       |                                                                         |                                                 |                             |                                                      |            |         |            |          
|DECREASE IN CASH AND CASH EQUIVALENTS                  |                                                                         |                                                 | (9,981,848                  | )                                                    |            |         | (2,894,998 | )        
|                                                       |                                                                         |                                                 |                             |                                                      |            |         |            |          
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD         |                                                                         |                                                 | 13,310,004                  |                                                      |            |         | 21,180,242 |          
|                                                       |                                                                         |                                                 |                             |                                                      |            |         |            |          
|CASH AND CASH EQUIVALENTS, END OF PERIOD               |                                                                         | $                                               | 3,328,156                   |                                                      |            | $       | 18,285,244 |          
|                                                       |                                                                         |                                                 |                             |                                                      |            |         |            |          
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:      |                                                                         |                                                 |                             |                                                      |            |         |            |          
|                                                       |                                                                         | Cash paid for:                                  |                             |                                                      |            |         |            |           |            |        
|                                                       |                                                                         |                                                 |                             | Income taxes                                         |            | $       | 11,147     |           |            |         | 170,000    |  
|                                                       |                                                                         |                                                 |                             |                                                      |            |         |            |          
|SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES: |                                                                         |                                                 |                             |                                                      |            |         |            |          
|                                                       |                                                                         |                                                 | Treasury stock transactions |                                                      | $          | 266,063 |            |           | $          | 132,507 |           
|                                                       |                                                                         |                                                 |                             |                                                      |            |         |            |          

See accompanying notes to condensed consolidated financial statements.

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THE FIRST YEARS INC.




NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.     Amounts in the accompanying balance sheet as of December 31,2001 are
condensed from the Companys audited balance sheet as of that date. All other
condensed financial statements are unaudited but, in the opinion of the
Company, contain all normal recurring adjustments necessary to present fairly
the financial position as of March 31, 2002, and the results of operations and
cash flows for the periods ended March 31, 2002 and 2001. Certain
reclassifications were made to prior year amounts in order to conform to the
current year presentation. 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 disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

2.     The Company has 50,000,000 authorized shares of $.10 par value common stock
with 10,789,339 and 10,748,404 shares issued and 8,192,519 and 8,173,867 shares
outstanding as of March 31, 2002 and December 31, 2001, respectively. The
Company acquired 22,283 shares of its common stock during the first three
months of 2002 through delivery of mature shares by an employee for exercise of
stock options.

3.     Computation of Earnings Per Share (EPS) is as follows:

|                                            |  |                    |           |      |  |   |           | 
|------------------------------------------- |  | ------------------ | --------- | ---- |  | - | --------- | 
|                                            |  | Three Months Ended
|                                            |  | March 31,         
|                                            |  |                   
|                                            |  | 2002               |           | 2001
|                                            |  |                    |           |     
|WEIGHTED AVERAGE SHARES OUTSTANDING         |  |                    | 8,177,564 |      |  |   | 9,177,179 | 
|EFFECT OF DILUTIVE SHARES                   |  |                    | 263,816   |      |  |   | 86,413    | 
|                                            |  |                    |           |      |  |   |           | 
|WEIGHTED AVERAGE DILUTED SHARES
OUTSTANDING |  |                    | 8,441,380 |      |  |   | 9,263,592 | 
|                                            |  |                    |           |      |  |   |           | 
|NET INCOME                                  |  | $                  | 2,148,780 |      |  | $ | 2,376,915 | 
|                                            |  |                    |           |      |  |   |           | 
|BASIC EARNINGS PER SHARE                    |  | $                  | 0.26      |      |  | $ | 0.26      | 
|                                            |  |                    |           |      |  |   |           | 
|DILUTED EARNINGS PER SHARE                  |  | $                  | 0.25      |      |  | $ | 0.26      | 
|                                            |  |                    |           |      |  |   |           | 

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THE FIRST YEARS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

As of March 31, 2002 options to purchase 615,973 shares of common stock were
not included in the computations of diluted EPS because the options exercise
price was greater than the average price of the Companys common stock. The
options, which expire in 2007 to 2012, had exercise prices ranging from $13.01
to $17.00 per share.

As of March 31, 2001 options to purchase 732,829 shares of common stock were
not included in the computation of diluted EPS because the options exercise
price was greater than the average price of the Companys common shares. The
options, which expire in 2003 to 2010 had exercise prices ranging from $9.125
to $17.00 per share.

4.     The results of operations for the three month period ended March 31, 2002
are not necessarily indicative of the results to be expected for the full year.

5.     During the first three months of 2002 and 2001, the Company did not borrow
against its $10,000,000 unsecured line of credit established with a bank.

6.     In 2001, the Emerging Issues Task Force (EITF) reached consensus on Issue
No. 01-09, Accounting for Consideration Given by a Vendor to a Customer. The
consensus in EITF No. 01-09 addresses the income statement classification of
various types of sales incentives, including discounts, consumer coupons,
rebates, and free products as well as slotting fees, cooperative advertising
arrangements and buydowns. The consensus requires these sales incentives be
classified as a reduction of revenue, versus a selling, general, and
administrative expense.

The Company adopted the consensus in EITF Issue No. 01-09 on January 1, 2002.
EITF Issue No. 01-09 was issued to codify and reconcile EITF Nos. 00-14, 00-22,
and 00-25 which address the accounting for consideration given by a vendor to a
customer. With the adoption of this EITF in 2002, approximately $1.5 million
and $1.3 million of sales incentives for the three months ending March 31, 2002
and 2001, respectively, have been reclassified as a reduction to net sales and
a corresponding reduction to selling, general, and administrative expenses in
the consolidated statements of income. These reclassifications had no impact on
operating income and net income.

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS 141 supersedes Accounting Principles Board (APB) Opinion 16
Business Combinations and SFAS No. 38 Accounting for Pre-acquisition
Contingencies and eliminates the pooling-of-interests method of accounting for
business combinations. SFAS No. 141 also includes enhanced criteria for
identifying intangible assets separately from goodwill. The requirements of
SFAS No. 141 were effective for any business combination consummated by the
Company subsequent to June 30, 2001. SFAS No. 142 was effective for the
Company as of January 1, 2002. SFAS No. 142, supersedes APB Opinion no. 17,
Intangible Assets, and requires that goodwill and intangible assets with
indefinite lives no longer be amortized, but reviewed for impairment at least
annually. Intangible assets that are not deemed to have an indefinite life will
continue to be amortized over their useful lives. The adoption of these
statements did not have a material impact on the Companys consolidated
statements of income, consolidated financial position or results of operations.

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THE FIRST YEARS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

In August 2001, the FASB issued Statement No. 144 (SFAS No. 144), Accounting
for the Impairment of and Disposal of Long-Lived Assets. This statement
supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of. The statement retains the
previously existing accounting requirements related to the recognition and
measurement of the impairment of long-lived assets to be held and used while
expanding the measurement requirements of long-lived assets to be disposed of
by sale to include discontinued operations. It also expands the previously
existing reporting requirements for discontinued operations to include a
component of an entity that either has been disposed of or is classified as
held for sale. The Company implemented SAFS No. 144 on January 1, 2002. The
adoption of this statement did not have a material impact on the Companys
consolidated financial position or results of operations.

7.     The Company derives sales from products carrying The First Years brand as
well as products sold under licensing agreements. During the first three
months of 2002 and 2001, net sales of The First Years brand products were
approximately $23,473,000 and $21,756,000, respectively, while net sales
derived from license and specialty products amounted to approximately
$9,838,000 and $10,703,000 in the first three months of 2002 and 2001,
respectively. Net export sales, primarily to Europe, Canada, South America,
and the Pacific Rim, were approximately $4,061,000 and $3,331,000 during the
first three months of 2002 and 2001, respectively.

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THE FIRST YEARS INC.




Part I, Item 2.




Managements Discussion and
Analysis of Financial Condition and Results of Operations

Statements in this Quarterly Report on Form 10-Q that are not strictly
historical are forward looking statements, as defined in the Private
Securities Litigation Reform Act of 1995. Forward-looking statements are
typically identified by the words: believe, expect, anticipate, intend, are
confident, estimate and similar expressions, which by their nature refer to
future events. Actual future results may differ materially from those
anticipated depending on a variety of factors which include, but are not
limited to, trends in sales of The First Years Brand and licensed products
including the effect of slowing economic activity, continued success of new
Disney character refreshed graphics, continued success of market research
identifying new product opportunities, successful introduction of new products,
continued product innovation, the success of new enhancements to the Companys
brand image, growth in international sales, ability to attract and retain key
personnel, and growth in sales and earnings. Information with respect to risk
factors is contained in the Companys most recent Annual Report on Form 10-K as
filed with the Securities and Exchange Commission. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as
of the date hereof. The Company does not intend to update any of the forward
looking statements after the date of this Report to conform these statements to
actual results or changes in our expectations, except as required by law.

Critical Accounting Policies and Estimates

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

Revenue Recognition We recognize revenue when products are shipped to
customers. Common to our industry, customers may be authorized to return
selected products and the Company reduces sales and accounts receivable for
actual returns and estimates future returns based on historical trends and
information available to us, including the pattern of returns immediately
following the reporting period. We also maintain allowances for doubtful
accounts for estimated losses resulting from the inability of our customers to
make required payments. If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.

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

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Sales Incentives Sales incentives offered to customers to promote the
sales of our products include costs related to cooperative advertising
programs, promotions, slotting fees or buydowns, and certain rebates. In
determining these costs, we reflect activity and make estimates of certain
costs of promotional activity based on historical arrangements and information
available to us.

A. Results of Operations 
First Quarter of 2002 Compared with First Quarter of 2001

Net income for the first quarter of 2002 was $2.1 million or $0.25 per
diluted share, compared with $2.4 million or $0.26 per diluted share in 2001.
Net sales for the first quarter of 2002 were $33.3 million, compared with $32.5
million in the comparable period in 2001. The increase in net sales was due
primarily to an increase in The First Years brand sales, partially offset by a
decrease in licensed and specialty sales due, in part, to the impact of the
Kmart bankruptcy.

Cost of products sold for the first quarter of 2002 was $21.7 million, an
increase of $0.4 million from the comparable period in 2001, principally due to
increased sales. As a percentage of sales, cost of products sold for the first
quarter of 2002 decreased to 65% from 66% in the comparable period of 2001,
principally due to product mix and planned product cost savings.

Selling, general, and administrative expenses for the first quarter of
2002 were $8.0 million, an increase of $0.7 million from the comparable period
in 2001. The increase is primarily attributable to increased payroll and
payroll-related costs associated with infrastructure improvements, mainly in
marketing and product development. As a percentage of net sales, selling,
general, and administrative expenses for the first quarter of 2002 increased to
24% from 23% in the comparable period of 2001.

In accordance with generally accepted accounting principles, the Company
provides for income taxes on an interim basis using its anticipated effective
income tax rate.

B. Financial Condition

With respect to the Condensed Consolidated Balance Sheet, consolidated
assets of $62.1 million at March 31, 2002 were $3.1 million lower than at
December 31, 2001.

Our cash and cash equivalents decreased to $3.3 million at March 31,
2002, from $13.3 million at December 31, 2001. The decrease resulted primarily
from $8.5 million and $1.5 million used in operating and investing activities,
respectively, offset by $0.08 million provided by financing activities.

Net cash of $8.5 million used for operating activities consisted primarily
of $2.1 million from net income adjusted for non-cash items, offset by $11.2
million used in working capital and other activities. Net cash used in working
capital and other activities resulted primarily from an increase in accounts
receivables and inventories, along with decreases in accounts payables and
accrued royalty and selling expenses. Days sales outstanding were 56 for the
quarter ended March 31, 2002 and 51 for the year ended December 31, 2001.
Inventory turns were 1.1 for the quarter ended March 31, 2002 and 1.2 for the
comparable period in 2001.

Net cash of $1.6 million used in investing activities resulted from
capital expenditures. Capital expenditures in 2002 consisted primarily of
additions to machinery and molds for new production molds, furniture and
equipment related to computer hardware and software, and building additions to
our executive and administrative offices.

Net cash of $0.08 million was provided by financing activities consisting
of the proceeds on the issuance of common stock under our stock option plans
less treasury stock purchases.

For the remainder of 2002, we expect to fund expenditures for capital
requirements as well as liquidity needs from a combination of available cash
balances, internally generated funds, and financing arrangements. We have an
unsecured line of credit of $10 million, which is subject to annual renewal at
the option of the bank. Any amounts outstanding under the line are payable upon

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demand by the bank. For the quarter ended March 31, 2002 we had no borrowings
under the line of credit and as of December 31, 2001 there were no balances
outstanding.

Recent Accounting Pronouncements

In 2001, the Emerging Issues Task Force (EITF) reached consensus on
Issue No. 01-09, Accounting for Consideration Given by a Vendor to a
Customer. The consensus in EITF No. 01-09 addresses the income statement
classification of various types of sales incentives, including discounts,
consumer coupons, rebates, and free products as well as slotting fees,
cooperative advertising arrangements and buydowns. The consensus requires
these sales incentives be classified as a reduction of revenue, versus a
selling, general, and administrative expense.

The Company adopted the consensus in EITF Issue No. 01-09 on January 1,
2002. EITF Issue No. 01-09 was issued to codify and reconcile EITF Nos. 00-14,
00-22, and 00-25 which address the accounting for consideration given by a
vendor to a customer. With the adoption of this EITF in 2002, approximately
$1.5 million and $1.3 million of sales incentives for the three months ending
March 31, 2002 and 2001, respectively, have been reclassified as a reduction to
net sales and a corresponding reduction to selling, general, and administrative
expenses in the consolidated statements of income. These reclassifications had
no impact on operating income and net income.

In June 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS 141 supersedes Accounting Principles Board (APB)
Opinion 16 Business Combinations and SFAS No. 38 Accounting for
Pre-acquisition Contingencies and eliminates the pooling-of-interests method
of accounting for business combinations. SFAS No. 141 also includes enhanced
criteria for identifying intangible assets separately from goodwill. The
requirements of SFAS No. 141 were effective for any business combination
consummated by the Company subsequent to June 30, 2001. SFAS No. 142 was
effective for the Company as of January 1, 2002. SFAS No. 142, supersedes APB
Opinion no. 17, Intangible Assets, and requires that goodwill and intangible
assets with indefinite lives no longer be amortized, but reviewed for
impairment at least annually. Intangible assets that are not deemed to have an
indefinite life will continue to be amortized over their useful lives. The
adoption of these statements did not have a material impact on the Companys
consolidated statements of income, consolidated financial position or results
of operations.

In August 2001, the FASB issued Statement No. 144 (SFAS No. 144),
Accounting for the Impairment of and Disposal of Long-Lived Assets. This
statement supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of. The statement retains the
previously existing accounting requirements related to the recognition and
measurement of the impairment of long-lived assets to be held and used while
expanding the measurement requirements of long-lived assets to be disposed of
by sale to include discontinued operations. It also expands the previously
existing reporting requirements for discontinued operations to include a
component of an entity that either has been disposed of or is classified as
held for sale. The Company implemented SAFS No. 144 on January 1, 2002. The
adoption of this statement did not have a material impact on the Companys
consolidated financial position or results of operations.

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Part I, Item 3.




Quantitative and Qualitative
Disclosure about Market Risk

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

Foreign Currency Market Risk

Our international operations are subject to certain opportunities and
risks, including currency fluctuations. In the quarter ended March 31, 2002,
international sales accounted for 12% of total net sales and the value of the
United States dollar affects our financial results and changes in exchange
rates may affect our revenues, gross margins, operating expenses, and retained
earnings as expressed in U.S. dollars. At times, we use forward exchange
contracts to hedge cash flows arising from sales denominated in foreign
currencies to limit the impact of currency fluctuations. Principal currencies
hedged include the Euro, the British Pound, and the Canadian dollar. We also
attempt to minimize currency exposure risk through working capital management.
In 2001 and 2000, the impact of foreign exchange gains or losses was not
material. We had no outstanding foreign currency forward exchange contracts as
of March 31, 2002 and December 31, 2001.

In January 1999, certain member countries of the European Union
established irrevocable, fixed conversion rates between their currencies and
European Unions common currency, the Euro. The introduction of the Euro was
phased in over a period ended January 1, 2002, when Euro notes and coins came
into circulation. The replacement of legacy currencies with the Euro did not
have and is not expected to have a material impact on our operations or
Consolidated Financial Statements.

Interest Rate Risks

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

Also see the Companys disclosure regarding Market Risk in Item 7A of its
Annual Report on Form 10K for the fiscal year ended December 31, 2001, as filed
with the SEC.

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THE FIRST YEARS INC.




PART II  OTHER INFORMATION

Item 1: Legal Proceedings

We are not involved
in any legal proceedings that are material to our business or
financial condition.

Item 2: Changes in Securities and Use of Proceeds

Not Applicable

Item 3: Defaults Upon Senior Securities

Not Applicable

Item 4: Submission of Matters to a Vote of Security holders.

No matters were
submitted to a vote of security holders, through solicitation of
proxies or otherwise, during the three months ended March 31,
2002.

Item 5: Not Applicable

Item 6: Exhibits and Reports
on Form 8-K

(a)  Exhibits  The following exhibits are filed as part of this Report:

|    |  |                                                                                                                                                                                                                                           
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1 |  | Restated Articles of Organization of the Company. Filed as Exhibit
3.1 to the Companys Registration Statement on Form S-1 on
October 5, 1995 (File No. 33-62673) and incorporated herein
by reference.                                   
|    |  |                                                                                                                                                                                                                                           
|3.2 |  | By-laws of the Company. Filed as Exhibit (3)(ii) to the Companys
annual report on Form 10-K for the period ended December 31,
1999 and incorporated herein by reference.                                                                 
|    |  |                                                                                                                                                                                                                                           
|4.1 |  | Specimen certificate for shares of Common Stock of the Company. Filed
as Exhibit 4.1 to the Companys Registration Statement on Form S-1
(File No. 33-62673) and incorporated herein by reference.                                        
|    |  |                                                                                                                                                                                                                                           
|4.2 |  | Rights Agreement, dated as of November 19, 2001, between the
Company and EquiServe Trust Company, N.A. Filed as Exhibit 4.1 to the
Companys Registration Statement on Form 8-A on November 20,
2001 and incorporated herein by reference.

(b)  No reports on Form 8-K have been filed during the quarter covered by
this report.

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THE FIRST YEARS INC.




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



| | THE FIRST YEARS INC.
Registrant
| | -------------------------------

Date 5/15/02



| | By: /s/ John R. Beals
John R. Beals, Senior Vice
President and Treasurer,
(Duly Authorized Officer and
Principal Financial Officer)
| | -----------------------------------------------------------------------------------------------------------------------------------

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THE FIRST YEARS INC.




EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                            |  |      |  | 
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- |  | 
|Exhibit |  | Description                                                                                                                                                                                                                                |  | Page
|        |  |                                                                                                                                                                                                                                            |  |     
|3.1     |  | Restated Articles of Organization of the Company. Filed as Exhibit
3.1 to the Companys Registration Statement on Form S-1 on
October 5, 1995 (File No. 33-62673) and incorporated herein
by reference.                                   
|       
|3.2     |  | By-laws of the Company. Filed as Exhibit (3)(ii) to the Companys
annual report on Form 10-K for the period ended December 31,
1999 and incorporated herein by reference.                                                                 
|       
|4.1     |  | Specimen certificate for shares of Common Stock of the Company. Filed
as Exhibit 4.1 to the Companys Registration Statement on Form S-1
(File No. 33-62673) and incorporated herein by reference.                                        
|       
|4.2     |  | Rights Agreement, dated as of November 19, 2001, between the
Company and EquiServe Trust Company, N.A. Filed as Exhibit 4.1 to the
Companys Registration Statement on Form 8-A on November 20,
2001 and incorporated herein by reference.

13