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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                                   FORM 10-Q
 
                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
                      FOR THE QUARTER ENDED MARCH 31, 1999
 
                         COMMISSION FILE NUMBER 0-7024
 
                              THE FIRST YEARS INC.
             (Exact name of registrant as specified in its charter)
 
<TABLE>
<S>                                            <C>
                MASSACHUSETTS                                    04-2149581
       (State or other jurisdiction of                        (I.R.S. Employer
        incorporation or organization)                      Identification No.)
 
    ONE KIDDIE DRIVE, AVON, MASSACHUSETTS                        02322-1171
   (Address of principal executive offices)                      (Zip Code)
</TABLE>
 
                                 (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,
1999 was 10,454,249.
 
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<PAGE>   2
 
                              THE FIRST YEARS INC.
 
                                     INDEX
 
<TABLE>
<S>                                                           <C>
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
     Management's Discussion and Analysis of Financial
      Condition and Results of Operations...................  5 - 6
 
PART II -- OTHER INFORMATION
     Other information......................................      7
 
SIGNATURES..................................................      8
EXHIBIT INDEX...............................................      9
</TABLE>
<PAGE>   3
 
                              THE FIRST YEARS INC.
 
                     CONDENSED CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                               MARCH 31,     DECEMBER 31,
                                                                 1999            1998
                                                              -----------    ------------
                                                              (UNAUDITED)
<S>                                                           <C>            <C>
                                         ASSETS
CURRENT ASSETS:
     Cash and cash equivalents..............................  $16,607,744    $19,776,897
     Accounts receivable, net...............................   23,301,709     19,013,127
     Inventories............................................   19,879,100     18,520,023
     Prepaid expenses and other assets......................      939,433      2,638,634
     Deferred tax assets....................................    1,424,500      1,424,500
                                                              -----------    -----------
          Total current assets..............................   62,152,486     61,373,181
                                                              -----------    -----------
PROPERTY, PLANT, AND EQUIPMENT:
     Land...................................................      167,266        167,266
     Building...............................................    4,803,015      4,199,790
     Machinery and molds....................................    8,707,050      7,878,103
     Furniture and equipment................................    5,094,119      4,571,636
                                                              -----------    -----------
          Total.............................................   18,771,450     16,816,795
     Less accumulated depreciation..........................    9,330,693      8,914,081
                                                              -----------    -----------
       Property, plant, and equipment -- net................    9,440,757      7,902,714
                                                              -----------    -----------
TOTAL ASSETS................................................  $71,593,243    $69,275,895
                                                              ===========    ===========
 
                          LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Accounts payable.......................................  $11,304,671    $ 9,400,966
     Accrued royalty expense................................    2,119,074      2,130,027
     Accrued payroll expenses...............................      472,895      1,200,966
     Accrued selling expenses...............................    1,676,407      3,098,232
                                                              -----------    -----------
          Total current liabilities.........................   15,573,047     15,830,191
                                                              -----------    -----------
DEFERRED TAX LIABILITY......................................      798,300        798,300
                                                              -----------    -----------
STOCKHOLDERS' EQUITY:
     Common stock...........................................    1,052,524      1,046,141
     Paid-In capital........................................    7,765,696      7,472,398
     Retained earnings......................................   47,406,920     44,438,589
     Less treasury stock at cost, 70,994 and 21,394 shares
      as of March 31, 1999 and December 31, 1998,
      respectively..........................................   (1,003,244)      (309,724)
                                                              -----------    -----------
          Total stockholders' equity........................   55,221,896     52,647,404
                                                              -----------    -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................  $71,593,243    $69,275,895
                                                              ===========    ===========
</TABLE>
 
     See accompanying notes to condensed consolidated financial statements.
                                        1
<PAGE>   4
 
                              THE FIRST YEARS INC.
 
                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
               FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                 1999           1998
                                                              -----------    -----------
<S>                                                           <C>            <C>
NET SALES...................................................  $35,246,190    $35,686,605
COST OF PRODUCTS SOLD.......................................   20,520,597     21,437,630
                                                              -----------    -----------
GROSS PROFIT................................................   14,725,593     14,248,975
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES...............    9,903,558     10,388,107
                                                              -----------    -----------
OPERATING INCOME............................................    4,822,035      3,860,868
OTHER INCOME (EXPENSES):
     Interest income........................................      166,696         77,460
                                                              -----------    -----------
INCOME BEFORE INCOME TAXES..................................    4,988,731      3,938,328
PROVISION FOR INCOME TAXES..................................    2,020,400      1,595,000
                                                              -----------    -----------
NET INCOME..................................................  $ 2,968,331    $ 2,343,328
                                                              ===========    ===========
BASIC EARNINGS PER SHARE....................................  $      0.28    $      0.23
                                                              ===========    ===========
DILUTED EARNINGS PER SHARE..................................  $      0.28    $      0.22
                                                              ===========    ===========
</TABLE>
 
     See accompanying notes to condensed consolidated financial statements.
                                        2
<PAGE>   5
 
                              THE FIRST YEARS INC.
 
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                 1999           1998
                                                              -----------    -----------
<S>                                                           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income.............................................  $ 2,968,331    $ 2,343,328
     Adjustments to reconcile net income to net cash
      provided by (used for) operations:
          Depreciation......................................      449,549        444,322
          Provision for doubtful accounts...................       61,089        223,834
  Increase (decrease) arising from working capital items:
     Accounts receivable....................................   (4,349,671)    (1,325,157)
     Inventories............................................   (1,359,077)      (940,119)
     Prepaid expenses and other assets......................    1,699,201        801,926
     Accounts payable and accrued expenses..................    1,903,705      2,332,342
     Accrued royalties......................................      (10,953)       217,519
     Accrued payroll expense................................     (728,071)      (330,102)
     Accrued selling expenses...............................   (1,421,825)      (326,845)
                                                              -----------    -----------
          Net cash provided by operating activities.........     (787,722)     3,441,048
                                                              -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Expenditures for property, plant, and equipment........   (1,987,592)      (303,945)
                                                              -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Common stock issued under stock option plans...........      299,681        951,722
     Purchase of treasury stock.............................     (693,520)            --
                                                              -----------    -----------
          Net cash provided by financing activities.........     (393,839)       951,722
                                                              -----------    -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............   (3,169,153)     4,088,825
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..............   19,776,897      7,697,040
                                                              -----------    -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD....................  $16,607,744    $11,785,865
                                                              ===========    ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid for:
          Income taxes......................................  $         0    $   361,900
                                                              ===========    ===========
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
     Tax benefit of stock option exercises..................  $    71,000    $   490,300
                                                              ===========    ===========
</TABLE>
 
     See accompanying notes to condensed consolidated financial statements.
                                        3
<PAGE>   6
 
                              THE FIRST YEARS INC.
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
     1.  Amounts in the accompanying balance sheet as of December 31, 1998 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 and recurring adjustments necessary to present fairly the
financial position as of March 31, 1999, and the results of operations and cash
flows for the periods ended March 31, 1999 and 1998. Certain reclassifications
were made to prior year amounts in order to conform with the current year
presentation.
 
     2.  The Company has 30,000,000 authorized shares of $.10 par value common
stock with 10,454,249 and 10,440,014 shares issued and outstanding as of March
31, 1999 and December 31, 1998, respectively.
 
On May 6, 1999 the Board of Directors authorized a $0.06 per share annual cash
dividend payable on June 15, 1999 to holders of record at the close of business
on May 28, 1999.
 
During the period ended March 31, 1999, the Company purchased 47,400 shares of
the Company's common stock on the open market. The cost of the shares amounted
to $663,000 and are currently being held as treasury shares.
 
     3.  Computation of the Earnings Per Share ("EPS") in accordance with SFAS
No. 128 are as follows:
 
<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED
                                                            MARCH 31,
                                                    --------------------------
                                                       1999           1998
                                                    -----------    -----------
<S>                                                 <C>            <C>
Average shares outstanding........................   10,439,536     10,192,640
Effect of dilutive shares.........................      250,471        395,898
                                                    -----------    -----------
Average diluted shares outstanding................   10,690,007     10,588,538
                                                    ===========    ===========
Net income........................................  $ 2,968,331    $ 2,343,328
                                                    ===========    ===========
Basic earnings per share..........................  $      0.28    $      0.23
                                                    ===========    ===========
Diluted earnings per share........................  $      0.28    $      0.22
                                                    ===========    ===========
</TABLE>
 
     As of March 31, 1999, options to purchase 1,964, 20,000, 12,000 and 20,000
shares of common stock at $15 15/16, $17 3/4, $17 and $16 1/8 per share,
respectively were not included in the computation of diluted EPS because the
option's exercise price was greater than the average price of the common shares.
The options, which expire in 2008 and 2009 are still outstanding at March 31,
1999.
 
     As of March 31, 1998, options to purchase 708 and 56,290 shares of common
stock at $15 1/16 and $15 9/16 per share, respectively, were not included in the
computation of diluted EPS because the option's exercise price was greater than
the average price of the common shares. The options, which expire in 2008, were
still outstanding at March 31, 1999.
 
     4.  The results of operations for the three month period ended March 31,
1999 and 1998 are not necessarily indicative of the results to be expected for
the full year.
 
     5.  During the first three months of 1999 and 1998, the Company did not
borrow against its unsecured line of credit totaling $10,000,000 available from
a bank
 
     6.  A major licensing agreement which was to expire on March 31, 1999 has
been renewed.
 
     7.  In June 1998, the Financial Accounting Standards Board issued SFAS No.
133 "Accounting for Derivative Instruments and Hedging Activities," which will
require recognition of all derivatives as either assets or liabilities on the
balance sheet at fair value. The Company is currently evaluating the effect of
implementing SFAS No. 133, which will be effective for the year beginning
January 1, 2000.
 
                                        4
<PAGE>   7
 
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS
 
     Statements in this 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 involve risks, uncertainties or
other factors which may cause material differences in actual results or
performance. These factors include, but are not limited to, the ability to
introduce new products, dependence on licensed products, and the renewal of a
major license, reliance upon major customers and foreign suppliers, competitive
marker pressures, changes in consumer preferences and in the retail industry,
risks related to year 2000 compliance and other factors, described more fully in
Exhibit 99 of the Annual Report on Form 10K for the year ended December 31,
1998, filed with the Securities and Exchange Commission.
 
     Net sales for the first three months of 1999 were $35.2 million, a decrease
of $.5 million or 1.2%, as compared to $35.7 million for the comparable period
last year. The decrease was due to delays in both introductions of certain new
products and shipments of phthalate-free replacement products.
 
     A major licensing agreement which was to expire on March 31, 1999 has been
renewed. The Company also currently believes that the growth in licensed
products as a percent of total sales may begin to lessen as demand for licensed
products matures.
 
     Cost of products sold for the first three months of 1999 was $20.5 million,
a decrease of $.9 million or 4.3%, as compared to $21.4 million for the
comparable period last year. As a percentage of sales, cost of products sold in
the first three months of 1999 decreased to 58.2% from 60.1% in the comparable
period of 1998. The decrease was primarily due to sales of higher margin
products and increased operational efficiencies.
 
     Selling, general, and administrative expenses for the first three months of
1999 were $9.9 million, a decrease of $.5 million or 4.7%, as compared to $10.4
million over such expenses for the first three months of 1998. The decrease
resulted primarily from costs related to decreased sales volume; decreased
payroll related costs, and a reduction in advertising expenses. As a percentage
of net sales, selling, general, and administrative expenses for the first three
months of 1999 decreased to 28.1% from 29.1% in the comparable period of 1998.
The decrease reflects the continued effective management of selling, general,
and administrative costs as well as the non-recurrence of certain marketing
related expenses.
 
     Income tax expense as a percentage of pretax income remained consistent at
40.5% for the first three months of 1999 and 1998.
 
     Net working capital increased by $1.0 million in the first three months of
1999 mainly due to profitable operations. Accounts receivable increased by $4.3
million as a result of increased sales late in the quarter compared to the same
period of 1998. Inventories increased by $1.4 million and accrued payroll and
accrued selling expenses decreased $2.1 million due to normal business
fluctuations.
 
     The working capital increases were partially offset by an increase in
accounts payable of $1.9 million and a decrease in prepaid income taxes of $1.7
million, also due to normal business fluctuations. Additional uses of working
capital included the repurchase of treasury stock shares amounting to $.7
million and purchases of $2.0 million for property, plant, and equipment
primarily for product molds, new information technology systems and a new
inventory racking system for the Company's Avon Massachusetts warehouse
facility.
 
     Cash decreased by $3.2 million primarily resulting from the increases in
accounts receivable, inventories and the purchases of property, plant, and
equipment and was partially offset by funds generated from profitable
operations.
 
     An unsecured bank line of credit of $10.0 million is subject to annual
renewal. Amounts outstanding under this line are payable upon demand by the
bank. During the first three months of 1999 and 1998, the Company incurred no
borrowings under the line and had no balances outstanding as of March 31, 1999
and 1998, respectively.
 
     The Company did not incur any other short-term borrowings during the first
three months of 1999 and 1998.
 
                                        5
<PAGE>   8
 
YEAR 2000 ISSUE
 
     The "Year 2000 Issue" (Y2K) relates to problems that may result from the
incorrect processing of information using dates or date sensitive data by
computers and other machines utilizing embedded microprocessors. The problem is
attributable to the computer or software recognizing the year as a two digit
number "00" as opposed to the Year "2000". As Year 2000 approaches, uncertainty
relating to these Y2K issues must be addressed in order to correct the problem
or properly plan contingencies to handle anticipated issues, if any.
 
     The Company started addressing the Y2K issue in 1996 and has been following
a plan, in phases, to identify, inventory, prioritize and correct all known Y2K
issues. The project plan incorporates the various phases and will evaluate both
information technology (IT) related hardware and software as well as non-IT
issues such as facilities operations and product related technology.
 
     The project will also attempt to obtain assurance from mission critical
vendors (banks, transfer agents, manufacturing suppliers, utilities and other
suppliers of critical services to the Company) about their Y2K readiness and
develop contingency plans for issues that may arise from the failure of those
vendors as well as customers to achieve Y2K compliance. The Company has
substantially completed its review of all IT related systems and currently
believes it will be Y2K compliant by the end of the third quarter of 1999.
 
     The Company is currently in the identification and inventory phase of the
review of non-IT systems and mission critical third party relationships, which
is currently expected to be completed during the second quarter of 1999. Based
on the review of responses from third-party vendors, which has been
substantially completed, the Company expects to prioritize the corrective
actions required, if any, and commence the correction phase of the project
during the third quarter of 1999.
 
     The Company has initiated the contingency planning phase of the Y2K
project. A committee, including members of senior management, has been form to
evaluate the responses from mission critical third party regarding assurance of
their Y2K readiness. Additionally, the committee is evaluating general
operational issues that may be affected by Y2K problems not limited to direct
third party relationships and is in the process of incorporating all issues into
a formal contingency plan. The contingency plan development is progressing
according to the overall Y2K plan and is expected to be substantially complete
by the end of the second quarter of 1999.
 
     The costs to address the Y2K Issue has not been and is not expected to be
material to the Company's financial position or have a material impact on
operating results. Since 1996 the Company has incurred expenses of approximately
$100,000 to address the Y2K issue and anticipates incurring an additional
$100,000 related to the Y2K issue. Anticipated additional costs do not consider
costs, if any, related to the failure of third party relationships to become
"Year 2000" compliant. All expenses incurred to date have been recognized as
expense in the Company's consolidated financial statements in the period
incurred. Costs, if any, related to the correction of Y2K issues caused by a
third party's failure to be Y2K compliant would be expensed as incurred.
 
     Based on the Y2K assessment information obtained and corrections
implemented to date, the Company believes that the "Year 2000" Issue will not
have a material adverse effect on its financial position or results of
operations. The Company believes that its most reasonably likely, worst case
scenario may involve non-compliant third parties, including the failure of
suppliers, distributors, shipping carriers, utility companies and other similar
third parties to provide their services to the Company. The Company is currently
inventorying results of a vendor compliance survey which will facilitate the
risk assessment and contingency planning phase of non-IT related issues which
will include planning for worst case scenarios, however, there can be no
assurance that the failure to ensure "Year 2000" capability by a supplier,
customer, or another third party would not have a material adverse effect on the
Company.
 
                                        6
<PAGE>   9
 
                          PART II -- OTHER INFORMATION
 
ITEMS 1 THROUGH 5 -- NOT APPLICABLE
 
ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K
 
     (a) EXHIBITS -- The following exhibits are filed as part of this Report:
 
<TABLE>
<CAPTION>
EXHIBIT       DESCRIPTION
-------       -----------
<C>           <S>
  27          Financial Data Schedule
</TABLE>
 
     (b) No reports on Form 8-K have been filed during the past quarter covered
         by this report.
 
ITEM 7A:  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 
     At March 31, 1999, the Company held foreign currency forward contracts with
a bank whereby the Company is committed to deliver foreign currency at
predetermined rates. The contracts expire within one year. The Company's future
commitment under these contracts totaled approximately $3,738,000 and the fair
market value of the contracts approximated their predetermined rates included
therein.
 
     Also see the discussion of the Company's disclosure regarding Market Risk
in Item 7A of Form 10-K filed with the Securities and Exchange Commission.
 
                                        7
<PAGE>   10
 
                                   SIGNATURE
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                            THE FIRST YEARS INC.
                                            Registrant
 
Date:  5/14/99                                 /s/ JOHN R. BEALS
                                            ---------------------------------
                                            JOHN R. BEALS, SENIOR VICE
                                            PRESIDENT AND TREASURER,
                                            DULY AUTHORIZED OFFICER AND
                                            PRINCIPAL FINANCIAL OFFICER
 
                                        8
<PAGE>   11
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
EXHIBIT    DESCRIPTION                                                 PAGE
-------    -----------                                                 ----
<C>        <S>                                                          <C>
  27       Financial Data Schedule                                       13
</TABLE>
 
                                        9