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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2003

For the transition period from              to                                                           Commission file number 1-5881

BNS Co.

(Exact name of Registrant as specified in its charter)

25 Enterprise Center, Suite 103, Middletown, Rhode Island 02842

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code 401-848-6300

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

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

CLASS B COMMON STOCK—PAR VALUE $.01

(Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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  ¨.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x.

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and ask price of such common equity as of the last business day of the registrant’s most recently completed second fiscal quarter. $15,137,220.

There were 3,004,490 Shares of Class A Common Stock and 29,954 Shares of Class B Common Stock, each having a par value of $.01 per share, outstanding as of February 23, 2004.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 2004 Annual Meeting of Stockholders (the “Proxy Statement”), to be filed within 120 days of the end of the fiscal year ended December 31, 2003, are incorporated by reference in Part III hereof. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as part hereof.

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BNS Co.

INDEX

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PART I

ITEM 1—BUSINESS

THE BUSINESS OF THE COMPANY

General

Prior to the sale of its Metrology Business in 2001, the sale of its interest in its development stage measuring software subsidiary, Xygent Inc., in 2002 and the sale of its North Kingstown, Rhode Island property which consisted of an industrial and office building along with the adjoining acreage in 2003, BNS Co. (the “Company”), which was founded in 1833, was previously engaged in the Metrology Business and the design, manufacture and sale of precision measuring tools and instruments and manual and computer controlled measuring machines.

The Company is at present a real estate management company deriving royalty revenues from an owned gravel extraction and landfill property in the United Kingdom (since December 2003 only a landfill property). As previously disclosed, it is the Company’s intention to sell its remaining assets and then liquidate or seek other strategic alternatives.

Subsequent to December 31, 2003, the Company has entered into an agreement to sell its real estate holdings in the U.K. for 5.5 million British Pounds. The transaction will be in the form of the sale of the stock of the Company’s U.K. subsidiary that holds title to the property and the sale of the Company’s note receivable from the U.K. subsidiary. There will also be a post-closing adjustment for the subsidiary’s net working capital at the time of closing. The sale of the U.K. subsidiary is deemed to constitute the sale of substantially all assets of the Company within the meaning of the Delaware General Corporation Law and therefore requires stockholder approval.

Sale of Metrology Business, Xygent and North Kingstown Property

On August 26, 2003, pursuant to a Purchase and Sales Agreement dated as of April 28, 2003, as amended between the Company and Wasserman RE Ventures LLC (“Wasserman”), the Company sold the North Kingstown property which consisted of an industrial and office building along with the adjoining acreage (a total of approximately 169 acres, all in Rhode Island) and reported a gain of $15.3 million net of expenses on the sale. The Company received proceeds of $18.7 million net of expenses. Additionally, the Company established an environmental escrow in the amount of $.3 million to cover certain environmental remediation costs. This escrow account is presented as restricted cash on the consolidated balance sheet except for the interest earned which is presented as part of the unrestricted cash. The purchase price was determined by arms-length negotiation between representatives of the Company and representatives of Wasserman. In connection with the sale of the North Kingstown property, the Company relocated its headquarters to its present business location in Middletown, Rhode Island.

On August 16, 2002, the Company entered into a Securities Purchase Agreement with a subsidiary of Hexagon AB of Stockholm, Sweden for the purchase of the Company’s 77% interest in Xygent Inc. (“Xygent”), a development stage measuring software business unit.

Hexagon paid the Company $2.3 million in cash on August 20, 2002, and was obligated to pay the Company a deferred purchase price of up to $.8 million subject to possible adjustment relating to an Xygent equity value calculation as of August 16, 2002, as specified in the Securities Purchase Agreement. Hexagon subsequently disputed the equity value calculation. The dispute was submitted to arbitration, as required by the Securities Purchase Agreement, and the arbitration determined a deferred purchase price payment of

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$.6 million, which was paid on January 22, 2003. In connection with the sale of Xygent, the Company was released from its lease in Warwick, Rhode Island and relocated its headquarters to the Company’s North Kingstown property.

Real Estate Management Business and Sale of U.K. Property

The United Kingdom property consists of approximately 86.5 acres of land adjacent to the Heathrow airport. Until December 2003 the property was operated as a gravel extraction and landfill facility, for which the Company receives royalties. By the end of 2003, the gravel had been depleted and the facility is currently operated solely as a landfill. The property is subject to zoning restrictions which limit its development potential. The royalties are shared with the adjacent land owner under the terms of a partnership agreement. The operator of the property is responsible for restoring the property after the gravel extraction and landfill is complete. In the years 2003, 2002 and 2001, the Company’s revenues from this property were approximately $ .9 million, $1.0 million and $ .9 million, respectively.

As indicated above, subsequent to December 31, 2003 the Company has entered into an agreement to sell its real estate holdings in the U.K. for 5.5 million British Pounds (the “U.K. Agreement”). The transaction, which is subject to satisfaction of specified closing conditions, will be in the form of the sale of the stock of the Company’s U.K. subsidiary that holds title to the property and the sale of the Company’s note receivable from the U.K. subsidiary (together, sometimes referred to as the sale of the “U.K. subsidiary”. There will also be a post-closing adjustment for the subsidiary’s net working capital at the time of closing. The sale to Buyer under the U.K. Agreement is deemed to constitute the sale of substantially all assets of the Company within the meaning of the Delaware General Corporation Law and therefore requires stockholder approval.

Strategic Alternatives

The sale of the North Kingstown property and the pending sale of U.K. property are part of the Company’s plan to sell its remaining assets and then liquidate or seek other strategic alternatives. Such plan may involve one of the following alternatives: a) the sale of the Company through a merger or other change in control transaction; b) a liquidation, either through a dissolution, formation of a liquidating trust and liquidation proceedings in the Chancery Court in Delaware, or in a Chapter 11 federal bankruptcy reorganization proceeding, both of which would involve provisions for payments to creditors (including contingent claims) and contemplated distributions to stockholders; or c) continuation of the Company as a going-concern for either a limited or longer period of time while the Company devotes energies to resolving its contingent liabilities and makes investments which are permitted without requiring the Company to register as an “investment company” under the Investment Company Act of 1940. Such investments may include possible acquisitions of other operating businesses.

Competition

Since the Company is presently engaged in the real estate management business consisting of the United Kingdom property and has agreed to sell this property, the Company is not in significant direct competition with any other specific business. However, the Company may be deemed to be in competition generally with other businesses seeking to provide land fill services in the United Kingdom.

Employees

At February 28, 2004 the Company had one full time and one part time employee located in its corporate headquarters Middletown, Rhode Island, plus its President, CEO, and CFO, who is a consultant to the Company. The Company uses other outside consultants and contractors to provide certain management services for the Company, including accounting, information technology and managing the landfill operations for the Company in the United Kingdom. This compares with a total of 5 employees and the President, CEO, and CFO consultant as well as other outside consultants at December 31, 2002.

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Availability of Filings with the SEC

In order to reduce expenses, the Company has decided not to maintain a web site. The Company’s filings with the Securities and Exchange Commission, including its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, may be found on the SEC’s web site, which is www.sec.gov, or by contacting Michael Warren, President and Chief Executive Officer at the Company’s headquarters or by telephone (401) 848-6300.

ITEM 2—PROPERTIES

The following table sets forth certain information concerning the Company’s facilities:

The Middletown, RI offices are leased for a term of three years commencing on July 1, 2003.

ITEM 3—LEGAL PROCEEDINGS

Environmental Matters

Subsequent to the 2002 sale of Xygent to Hexagon as discussed above, the nature of the Company’s operations are not affected by environmental laws, rules and regulations relating to these businesses. However, because the Company and its subsidiaries and predecessors, prior to the sale of the Company’s Metrology Business to Hexagon on April 27, 2001 (and prior to sales of other divisions made in prior years) conducted manufacturing operations in locations at which, or adjacent to which, other industrial operations were conducted, from time to time the Company is subject to environmental claims. As with any such operations that involved the use, generation, and management of hazardous materials, it is possible that prior practices, including practices that were deemed acceptable by regulatory authorities in the past, may have created conditions which could give rise to liability under current or future environmental laws.

A Phase II environmental investigation on the North Kingstown property, completed in June 2002, indicated certain environmental problems on the property. The results of the study showed that certain contaminants in the soil under the property and minor groundwater issues exceeded environmental standards set by the Rhode Island Department of Environmental Management (“RIDEM”). After extensive testing, the Company submitted a Remedial Action Work Plan (“RAWP”) to RIDEM, and on November 7, 2002, RIDEM issued a letter approving the RAWP.

In April 2003 the Company awarded a contract for the remediation work and engaged an environmental engineering firm to supervise the remediation work and perform ongoing monitoring of the affected areas. The remediation work was substantially complete as of September 2003, and in connection with the August 26, 2003 sale of the North Kingstown property to Wasserman the Company established an escrow account in the amount of $.3 million to cover any additional remediation costs that may arise. The Company has obtained insurance against additional known and unknown environmental liabilities at the North Kingstown site. However, there is no assurance that the Company will not incur additional costs for remediation above the escrowed amount and insurance limits, and that ongoing monitoring of contaminants will not indicate further environmental problems.

The Company has obtained contaminated land insurance coverage to insure against unknown environmental issues relating to its United Kingdom property. In addition, the Company received a report dated October 2000,

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which was updated in July 2003, from an independent environmental consulting firm indicating no evidence of environmental issues relating to the property. As mentioned above, the Company has signed an agreement to sell its U.K. subsidiary which holds the property. The Company has made no environmental representations or indemnifications under this agreement.

Product Liability and Other Matters

The Company receives claims from time to time for toxic tort injuries related to past products manufactured by the Company and other business activities. Most of these claims are toxic tort claims resulting primarily from the use of small internal seals that allegedly contained asbestos and were used in small fluid pumps manufactured by the Company’s former pump division, which was sold in 1992. There have also been tort claims brought by owners and users of machine tools manufactured and sold by a division that was sold in 1993, and a few miscellaneous claims relating to employment activities, environmental issues, sales tax audits and personal injury claims. The Company has insurance coverage, but in general the coverage available has limitations. The Company expects, based on past experience, that it will continue to be subject to additional toxic tort claims in the future. As a matter of Delaware law, the directors are required to take the probability of future claims into consideration and provide for final resolution of them in any liquidation strategy. Thus far these claims have not resulted in any material exposure, but there is no assurance that this will be the result of all such future claims. Because the law in this area is developing rapidly, and because such environmental laws are subject to amendment and widely varying degrees of enforcement, the Company may be subject to, and cannot predict with any certainty the nature and amount of potential environmental liability related to these operations or locations (including its North Kingstown facility and property on which the North Kingstown facility is located, which was sold on August 26, 2003, and its Heathrow U.K. property which is agreed to be sold) that the Company may face in the future.

Litigation

During the year 2002, the Company reached settlement of an arbitration proceeding with executives as to the amounts due them under their 1999 Change-In-Control contracts that were triggered by the 2001 Hexagon transaction and their subsequent termination of employment, and in January 2003 made a payment to its former CEO and CFO settling a dispute as to the amount due him to settle a compensation arrangement which had not been finalized but was in the process of being finalized and to resolve a severance dispute at the same time. The settlement of these claims did not have a material effect on the Company’s consolidated results of operations or financial condition.

The Company is a defendant in a variety of legal claims that arise in the normal course of business, including toxic tort claims, other product liability claims, and the miscellaneous claims noted above. Since 1994 the Company has been named as a defendant in a total of 375 known toxic tort claims (as of February 23, 2004) relating to pumps used at customer facilities. In many cases these claims involve more than 100 other defendants. Fifty-four of those claims were filed prior to December 31, 2001. However, in 2002 the Company was named in 98 additional claims; in 2003 there were a total of 192 new claims filed; and the Company has received notice of another 31 claims through February 23, 2004. In 2002, 42 claims were settled for an aggregate amount of $30,000 exclusive of attorney’s fees, and in January 2004, a plaintiff’s attorney agreed to settle one claim for $500 and file for dismissal in another 67 claims. There are currently 265 claims that are open and active. However, under certain circumstances, some of the settled claims may be reopened.

The Company believes it has significant defenses to any liability for toxic tort claims on the merits. It should be noted that, to date, none of these toxic tort claims have gone to trial and therefore there can be no assurance that these defenses will prevail. Settlement and defense costs to date have been insignificant. However, there can be no assurance that the number of future claims and the related costs of defense, settlements or judgments will be consistent with the experience to date of existing claims.

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It has become apparent that the uncertain prospect of additional toxic tort claims being asserted in the future, and the impact of this uncertainty on the valuation of the Company, has had and will continue to have, at least for the short term, some adverse effects on the Company’s ability to determine prospective distributions to shareholders or to negotiate a satisfactory merger or other change in control transaction with a third party. These claims also affect the ability of the Company to carry out a fairly rapid liquidation proceeding, either through a dissolution, formation of a liquidating trust and liquidation proceedings in the Chancery Court in Delaware, or in a Chapter 11 federal bankruptcy reorganization proceeding, both of which would involve provisions for payments to creditors and contemplated distributions to stockholders. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Factors.”

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

Not applicable

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PART II

ITEM 5—MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The Company’s Class A Common Stock is listed on the Boston Stock Exchange and is traded on the NASD Over-the-Counter Bulletin Board, where market makers and other dealers provide bid and ask quotations. In each case, the Class A Common Stock trades under the symbol “BNSXA.” Prior to its delisting on February 8, 2002, the Class A Common Stock was listed on the New York Stock Exchange and traded under the symbol “BNS”. At December 31, 2003, the Company had approximately 1,432 shareholders of record of its Class A Common Stock and 579 shareholders of record of its Class B Common Stock. Set forth below are the high and low closing prices for the Class A Common Stock on the New York Stock Exchange, up through February 8, 2002 and then on the OTC Bulletin Board onwards (The volume of trades of the Company’s stock on the Boston Stock Exchange since February 11, 2002 has not been significant.)

In May of 2001 the Company made a cash distribution to shareholders following the sale of the Metrology Business to Hexagon. No other dividends or distributions have been paid by the Company since 1990. Currently, the Company intends to sell its remaining assets and then liquidate or seek other strategic alternatives. See also “Liquidity and Capital Resources” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this Report.

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ITEM 6—SELECTED FINANCIAL DATA

The following selected data should be reviewed in conjunction with Part II, Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and Notes thereto in Item 8 of this Annual Report.

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company is at present a real estate management company deriving royalty revenues from an owned gravel extraction and landfill property (from December 2003 only a landfill property) in the United Kingdom. As previously disclosed, it is the Company’s intention to sell its remaining assets and then liquidate or seek other strategic alternatives. See “Business—Strategic Alternatives” for discussion of strategic alternatives. In accordance with the above strategy, the Company signed an agreement on February 5, 2004 to sell the U.K. Property for 5.5 million British Pounds. The transaction will be in the form of the sale of the stock of the Company’s U.K. subsidiary that holds title to the property and the sale of the Company’s note receivable from the U.K. subsidiary. There will also be a post-closing adjustment for the subsidiary’s net working capital at the time of closing.

On November 16, 2000, the Company entered into an Acquisition Agreement with Hexagon AB of Stockholm, Sweden (Hexagon) for the sale of the Metrology Business assets, including the assumption of most related liabilities, which closed on April 27, 2001. On August 16, 2002, the Company entered into a Securities Purchase Agreement with a subsidiary of Hexagon for the sale of the Company’s interest in Xygent Inc. (“Xygent”), a development stage measuring software business. On August 26, 2003, pursuant to a Purchase and Sales Agreement dated as of April 28, 2003, as amended, between the Company and Wasserman, the Company sold the North Kingstown property which consisted of an industrial and office building along with the adjoining acreage (a total of approximately 169 acres, all in Rhode Island).

The accompanying financial statements present the North Kingstown property, Xygent and the Metrology Business as discontinued operations. The financial statements for prior periods have been restated. The discussions below relate only to the continuing operations of the Company, unless otherwise noted.

Forward-Looking Statements

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as other portions of this Report contain forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve a number of assumptions, risks, and uncertainties that could cause the actual results of the Company to differ materially from those matters expressed in or implied by such forward-looking statements. They involve known and unknown risks, uncertainties, and other factors, which are in some cases beyond the control of the Company. Additional information regarding these risk factors and uncertainties is described more fully in the Company’s SEC filings. A copy of all filings may be obtained from the SEC’s EDGAR web site, www.sec.gov, or by contacting: Michael Warren, President and Chief Executive Officer, at the Company’s headquarters or by telephone (401) 848-6300. The Company does not maintain a web site. This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the Company’s Consolidated Financial Statements and the Notes thereto included elsewhere in this Report.

Critical Accounting Policies

Management’s discussion and analysis of financial condition and results of operations are based upon the consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The accounting policies used in reporting the financial results are reviewed on a regular basis. The preparation of these financial statements requires the use of estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, estimates, including those related to accounts receivable, contingencies and litigation are evaluated. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other

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sources. Results may differ from these estimates due to actual outcomes being different from those on which we based our assumptions. These estimates are reviewed by management on an on-going basis. The following critical accounting policies affect the more significant judgments and estimates used in the preparation of the consolidated financial statements.

Off-Balance Sheet Arrangements

The Company had no “off balance sheet arrangements” (as defined in the applicable SEC rule) during fiscal 2003.

Contractual Obligations

The following table summarizes our contractual obligations (as defined in the applicable SEC rule) as of December 31, 2003 and the anticipated effect of these obligations on our liquidity in future years (in thousands):

Allowance for Doubtful Accounts

Allowances for doubtful accounts are maintained for estimated losses resulting from the inability of customers to make required payments. If the financial condition of customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Contingencies

The Company periodically records the estimated impacts of various conditions, situations or circumstances involving uncertain outcomes. These events are called “contingencies,” and the Company’s accounting for such events is prescribed by SFAS 5, “Accounting for Contingencies.” SFAS 5 defines a contingency as “an existing condition, situation, or set of circumstances involving uncertainty as to possible gain or loss to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur.”

SFAS 5 does not permit the accrual of gain contingencies under any circumstances. For loss contingencies, the loss must be accrued if (1) information is available that indicates it is probable that the loss has been incurred, given the likelihood of the uncertain future events; and (2) that the amount of the loss can be reasonably estimated.

The accrual of a contingency involves considerable judgment on the part of management. The Company uses its internal expertise, and outside experts (such as lawyers, tax specialists, insurance specialists and engineers), as necessary, to help estimate the probability that a loss has been incurred and the amount (or range) of the loss. To date incurred losses have not exceeded management’s estimates.

The Company is currently involved in certain legal disputes and environmental proceedings, including toxic tort claims, other product liability claims and claims relating to other business activities. See “Litigation” in Item 3 of this Report. An estimate of the probable costs for the resolution of these existing claims in the amount of $.4 million has been accrued. This estimate has been developed in consultation with outside counsel and other experts and is based upon an analysis of potential results, including a combination of litigation and settlement

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strategies. It is believed that these existing proceedings will not have a material adverse effect on our consolidated results of operations or financial condition. It is possible, however, that future results of operations for any particular quarterly or annual period could be materially affected by changes in our assumptions, or the effectiveness of our strategies, related to these proceedings. It is also possible that future results of operations for any particular quarterly or annual period could be materially affected by additional claims against the Company arising from new legal disputes, including future toxic tort claims, and environmental proceedings.

Recent Accounting Pronouncements

In January 2003 FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” was issued. This interpretation requires a company to consolidate a variable interest entity (“VIE”) if the enterprise is a primary beneficiary (holds a majority of the variable interest) of the VIE and the VIE passes specific characteristics. It also requires additional disclosures for parties involved with VIE’s. The provisions of this interpretation are effective in 2003. Accordingly, the Company adopted FASB Interpretation No. 46 effective for fiscal 2003 and does not expect the adoption of this interpretation will have an impact on its consolidated financial position or results of operations.

In December 2003, the FASB issued a revision of Interpretation No. 46 (the “Revised Interpretation 46”). Revised Interpretation 46 codifies both the proposed modifications and other decisions previously issued through certain FASB Staff Positions and supersedes the original Interpretation No. 46 to include: (1) deferring the effective date of the Interpretation’s provisions for certain variable interests, (2) providing additional scope exceptions for certain other variable interests, (3) clarifying the impact of troubled debt restructurings on the requirement to reconsider (a) whether an entity is a VIE or (b) which party is the primary beneficiary of a VIE, and (4) revising Appendix B of the Interpretation to provide additional guidance on what constitutes a variable interest. Accordingly, the Company will adopt Revised Interpretation No. 46 effective the first quarter 2004 and does not expect the adoption of this interpretation will have an impact on its consolidated financial position or results of operations.

Results of Operations

2003 Compared to 2002

The Company recorded net income of $12.9 million in 2003 and a net loss of $5.9 million in 2002. The 2003 and 2002 results include the following:

The loss from continuing operations in 2003 and 2002 includes the Company’s corporate headquarters activities, including legal and consulting fees associated with the investigation of strategic alternatives and activities associated with the proposed sale of the U.K. property, along with royalties from the gravel extraction and landfill property in the United Kingdom.

Gravel and landfill royalty revenue of $1.0 million in 2003 is approximately the same as that of 2002 of $1.0 million. Although the Company has decreased recurring general and administrative expenses, general and administrative expenses during 2003 were slightly higher than in 2002. In 2003 this increase was predominantly due to expenses of $.4 million for advisory services and commission related to the ongoing marketing of the U.K. property and the ongoing development of strategic alternatives for the remainder of the Company.

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Interest expense amounted to $.1 million in 2003 compared with $.1 million in 2002. As a result of the rental operations of the North Kingstown facility being reclassified to discontinued operations, interest expense consists substantially of interest owed on an outstanding pension benefit liability owed to a former CEO of the Company and the settlement of a state sales and use tax examination. Interest expense attributable to the declining balance owed to the former CEO and the fact that the Company paid the entire balance due to the former CEO in the third quarter of 2003 resulted in a decrease of interest expense. However, this was offset by the interest paid related to the state sales and use tax examination.

Other income, net amounted to $.1 million in 2003. This is compared with $.2 million in 2002. Other income, net, consists predominantly of interest income. During 2002, other income, net contained a gain of $.1 million related to the receipt of shares received as a result of the demutualization of an insurance company.

Income tax expense represents United Kingdom income taxes associated with the subsidiary owning the gravel extraction and landfill facility. No income taxes are provided for the continuing U.S. operation as the Company has net operating losses.

Discontinued operations amounted to income of $15.6 million for the year 2003. This is compared with losses of $3.5 million in 2002. The loss reported in 2002 contains the loss from the Xygent operations along with the income from rental operations of the North Kingstown facility. The gain from the sale of the North Kingstown property is $15.3 million, recorded in the third quarter of 2003, related to the sale of the North Kingstown property. This gain has been recorded net of an income tax expense of $.2 million. Although the Company has sufficient net operating losses, this tax is attributable to the federal alternative minimum tax.

2002 Compared to 2001

In 2002 and 2001, the Company recorded a net loss of $5.9 million and net income of $21.2 million, respectively. The 2002 and 2001 results include the following:

The loss from continuing operations in 2002 and 2001 includes the Company’s corporate headquarters activities, along with royalties from the gravel extraction and landfill property in the United Kingdom.

Gravel and landfill royalty revenue of $1.0 million in 2002 is approximately the same as that of 2001.

Due to the sale of Xygent in August 2002 and the Metrology Business in April 2001, the Company has reduced the general and administrative (“G&A”) function of the Company, by eliminating corporate overhead expenses not otherwise reclassified as a part of “discontinued operations”. After the sale of Xygent, and conclusion in December 2002 of an arbitration proceeding to determine the deferred purchase price from the sale of Xygent in August 2002, the Company replaced the previous CEO on January 24, 2003 with a new CEO who has significant real estate management experience. In connection with this, the Company made a payment of approximately $1.7 million (as described in detail under Item 11) to the former chief executive officer to settle a compensation arrangement which had not yet been finalized but was in the process of being finalized and to resolve a severance dispute. The Company recorded additional charges of $.5 million during 2002 to increase the accrual related to the amount owed to a former CEO to an aggregate amount of $1.7 million at December 31, 2002.

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Interest expense of $.1 million in 2002 decreased from 2001 by $.7 million. As a result of the rental operations of the North Kingstown Facility being reclassified to discontinued operations, interest expense consists substantially of interest owed on an outstanding pension benefit liability to a former CEO of the Company. The decrease in the amount of the interest expense is attributable to the declining balance owed to the former CEO. The only remaining debt of the Company at December 31, 2002 was the mortgage on the North Kingstown facility. The interest expense related to this mortgage is included in the income (loss) from discontinued operations.

Other income, net of $.2 million in 2002 decreased by approximately $1.0 million from 2001 primarily due to a reduction in interest income. This decrease in interest income is the result of a decrease in invested cash and cash equivalents along with a decrease in interest rates.

Results from continuing operations in 2002 included a $.3 million tax provision. This tax provision relates to the taxable income generated by the Company’s subsidiary owning the United Kingdom property. In prior years this asset was owned by a subsidiary of the Company that had losses available to shelter such income. As a result of the sale of the Metrology Business, this asset was retained and transferred to a new subsidiary that had no such losses available.

Liquidity and Capital Resources

Until the sale of the Company’s Metrology Business on April 27, 2001, the Company was obligated under a $50 million private placement of senior notes with principal payments due from November 2001 to November 2007 as well as other long-term debt amounting to $11 million. The Company also had, until April 27, 2001, a $30 million three-year syndicated multi-currency revolving Credit Agreement with four banks.

As a result of the sale of the Metrology Business to Hexagon on April 27, 2001, the Company paid all of the $50 million private placement notes, including accumulated interest and prepayment penalties totaling $8 million, and the balance of the $30 million Revolving Credit Agreement. In addition, all of the foreign short-term and long-term debt was assumed by Hexagon. After the sale of the Metrology Business and of the North Kingstown property, the Company has no external debt.

The Company had unrestricted cash of approximately $14.4 million at December 31, 2003. This is a significant increase from the cash balance at December 31, 2002 of $4.4 million. The increase is principally the result of the receipt of the net proceeds from the sale of North Kingstown property of $18.7 million, less the payment of $1.7 million to its former CEO relating to settlement of a compensation and severance dispute and termination of his 1999 Change-in-Control Agreement, the payment to another former CEO of the Company representing an unfunded pension liability of $1.9 million, and the payment of interest and the remaining principal balance of a mortgage on the North Kingstown property of $2.4 million.

There is no assurance that the future months’ expenses of the Company will not be greater than anticipated, or that its expected cash flow will not be less than anticipated, and that a liquidity problem may not arise as a result of poor economic conditions, lower investment returns, environmental problems, expenses and liabilities associated with product liability claims or expenses of maintaining the Company as a “public” reporting company (see Risk Factors: Liquidity Risk; There may not be adequate resources for funding the operations of the Company).

The Company’s ability to continue as a going-concern relies on its ability to achieve positive cash flow from the landfill operations on its United Kingdom property and from investment earnings on its undistributed cash, or possibly from earnings that may be generated by a business that may be acquired. See “Business—Strategic Alternatives” for discussion of strategic alternatives. Upon completion of the sale of the United Kingdom property, the Company will no longer have an active trade or business and may no longer continue as a going concern.

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As previously disclosed, it is the Company’s intention to sell its remaining assets and then liquidate or seek other strategic alternatives.

Cash Flow

Net cash used in operations in 2003 was $7.2 million compared with $2.9 million in 2002 and $9.5 million in 2001. In the calculation of net cash used in operations for the year ended December 31, 2003, the net income of $12.9 million was reduced by gain on sale of the North Kingstown property of $15.3 million, by the establishment of environmental escrow of $.3 million, by the payment of $1.7 million settlement of a compensation and severance dispute to its former CEO and $1.9 million plus interest to another former CEO of the Company representing pension benefits. In the calculation of net cash used in operations for the year ended December 31, 2002, the net loss of $5.9 million was increased by the loss on the sale of Xygent of $.9 million, by the loss from the discontinued operations of $2.6 million and decreased by the payment of pension obligations of $.7 million. In the calculation of cash used in operations for the year ended December 31, 2001, the net income of $21.2 million was reduced by the gain on the sale of the Metrology Business of $47.1 million, by the loss from the discontinued operations of $14.0 million, increased by the extraordinary item related to the extinguishment of debt of $6.6 million and decreased by the payment of pension obligations of $4.4 million. Cash flows from working capital decreased in 2002 from 2001 by $1.9 million. This change was predominately due to the settlement of the compensation dispute with a former executive as discussed in Footnote 17 of the financial statements included in Item 8.

Net cash provided by investing transactions for 2003 was $19.5 million which included $.6 million as the final settlement of the Company received from Hexagon related to the sale of Xygent, $18.7 million from proceeds of the sale of the North Kingstown property, $.4 million as the final settlement received by the Company related to the disposal of the Electronics Division and $.1 million from the disposal of the available for sale securities. Net cash provided by investment transactions in 2002 was $2.0 million which included proceeds from the disposal of Xygent of $2.3 million offset by a net payment of $.3 million to complete the sale of the Metrology Business. Net cash provided by investment transactions in 2001 was $141.3 million which was the proceeds from the disposal of the Metrology Business in 2001.

Cash used in financing activities in 2003 was $2.4 million which pertains to the payment of the entire outstanding mortgage liability. Cash used in financing activities in 2002 was $.1 million. Financing transactions during 2002 consisted of $.9 million repayment on the mortgage offset by the April 2002 purchase of a net minority interest in Xygent by Hexagon of $1 million. Cash used in financing activities in 2001 was $126.2 million. Financing transactions during 2001 consisted of repayment of the $27.4 million principal balance due under the Company’s $30 million Revolving Credit Facility and the repayment of the long-term senior notes (including prepayment penalties) of $56.6 million; payment on the mortgage of $.9 million; distribution to the stockholders of $44.5 million; and equity contributions related to the exercise of stock options of $1.8 million; offset by proceeds from the purchase of a net minority interest in Xygent by Hexagon of $1.4 million.

Cash used by the discontinued operations amounted to $3.3 million and $5.8 million in 2002 and 2001, respectively.

Working Capital

The United Kingdom property has been classified as held for sale at December 31, 2003 as a result of the Company’s expressed intention to sell the property and the signing of an agreement on February 5, 2004 to sell the property. Excluding the assets related to discontinued operations and assets held for sale, the Company had working capital related to the continuing operations of $14.3 million at December 31, 2003 and $2.0 million at December 31, 2002. This increase in working capital is primarily the result of proceeds associated with the sale of the North Kingstown property.

The Company’s sole source of cash in the future is the royalty revenue from the United Kingdom property, until the U.K. subsidiary is sold, and the earnings on the Company’s cash balance and investments.

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RISK FACTORS

After completing the sale of its Metrology Business to Hexagon on April 27, 2001, and after completing the sale on August 20, 2002 to a subsidiary of Hexagon of its interest in its Xygent development stage measuring software business, in which the Company had then held a 77% equity interest (with Hexagon holding the balance), and after completing the sale of the North Kingstown property to Wasserman on August 26, 2003, the Company now derives revenues only from royalty income from a landfill property (through December 2003, a gravel extraction and landfill property) in the United Kingdom which the Company is holding for sale under the U.K. Agreement (as defined earlier in this Report).

In addition to the foregoing, the risks remaining with respect to the Company’s sale of its former Metrology Business, the former development stage Xygent measuring software business, and the North Kingstown property are that the Company might have to make an indemnification payment to the respective buyers with respect to the Company’s representations and warranties concerning the businesses respectively sold or a payment to a third party with respect to a retained liability.

Risk of not Receiving Acceptable Offers for the Purchase of its United Kingdom Property

A principal risk facing the Company overall is the risk that continuing poor economic conditions (perhaps aggravated by international conditions) may prevent the Company from completing the sale of the Company’s U.K. subsidiary at an acceptable price. However, the Board believes that the price under the U.K. Agreement, which will be presented for stockholder approval at the Company’s Annual Meeting, is a fair and acceptable price to the Company.

Also, the Company faces an exchange risk with respect to the purchase price under the Agreement, which is denominated in British Pounds, should the U.S. dollar increase in value against the British Pound. The Company has not obtained hedging protection against such an exchange risk.

Environmental and Product Liability Risks

Subsequent to the sale of Xygent to Hexagon in 2002 as discussed above, the nature of the Company’s operations have not been affected by environmental laws, rules and regulations relating to these businesses. However, because the Company and its subsidiaries and predecessors, prior to the sale to Hexagon on April 27, 2001 (and prior to sales of other divisions made in prior years) conducted manufacturing operations in locations at which, or adjacent to which, other industrial operations were conducted from time to time by the Company, the Company is subject to environmental claims. As with any such operations that involved the use, generation, and management of hazardous materials, it is possible that prior practices, including practices that were deemed acceptable by regulatory authorities in the past, may have created conditions which could give rise to liability under current or future environmental laws. Because the law in these areas is developing rapidly, and because environmental laws are subject to amendment and widely varying degrees of enforcement, the Company may be subject to, and cannot predict with any certainty, the nature and amount of environmental and product liability claims related to these operations or locations including its North Kingstown property, which was sold on August 26, 2003 (but with certain environmental liabilities retained) that may arise in the future.

The Company has obtained contaminated land insurance coverage to insure against unknown environmental issues relating to the United Kingdom property. In addition, the Company received a report dated October 2000, which was updated in July 2003, from an independent environmental consulting firm indicating no evidence of environmental issues relating to that property. However, there is no assurance that such issues will not be identified in the future, through the actions or negligence of the land fill operator or the contemplated buyer of the U.K. subsidiary or other factors, as the Company or the buyer continues to operate the property as a land fill. Should the U.K. subsidiary be sold, there is no assurance that there will be no retained liabilities relating to the property, although the Company is not making any environmental representations or indemnifications under the U.K. Agreement.

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In addition, as previously disclosed by the Company, the Company receives claims from time to time for toxic tort injuries related to the use of asbestos material in pumps sold by its hydraulic pump operations, and other product liability claims relating to the use of machine tools sold by a division of the Company which was itself sold many years ago. There have also been a few miscellaneous claims relating to employment activities, environmental issues, sales tax audits and personal injury claims. Most of these suits are toxic tort claims resulting primarily from the use of small internal seals that allegedly contained asbestos and were used in small fluid pumps manufactured by the Company’s former pump division, which was sold in 1992. The Company has insurance coverage, but in general the coverage available has limitations. The Company expects that it will continue to be subject to additional toxic tort claims in the future. As a matter of Delaware law the directors are required to take the probability of future claims into its consideration of various matters.

The contingent claims relating to the former pump division pose the most uncertainty. The Company has limited information concerning the number and location of pumps manufactured and, therefore, is unable to estimate the aggregate number of claims which might be filed in the future, which is necessary in order to reliably estimate any financial exposure. This product line was introduced in the late 1800’s. The materials alleged to contain asbestos were used for an undetermined period of time ending in the late 1960’s. The claims relate to exposure to this asbestos material. The Company sold its pump division in 1992 but remains subject to claims related to products manufactured prior to that date.

Since 1994 the Company has been named as a defendant in a total of 375 known claims (as of February 23, 2004) relating to these pumps. In many cases these claims involve more than 100 other defendants. Fifty-four of those claims were filed prior to December 31, 2001. However, in 2002 the Company was named in 98 additional claims; in 2003 there were a total of 192 new claims filed; and the Company has received notice of another 31 claims through February 23, 2004. In 2002, 42 claims were settled for an aggregate of $30,000 exclusive of attorney’s fees, and in January a plaintiff’s attorney agreed to settle one claim for $500 and file for dismissal in another 67 claims. There are currently 265 claims that are open and active. However, under certain circumstances, some of the settled claims may be reopened.

The Company believes it has significant defenses to any liability for toxic tort claims on the merits. It should be noted that, to date, none of these toxic tort claims have gone to trial and therefore there can be no assurance that these defenses will prevail. Settlement and defense costs to date have been insignificant. However, there can be no assurance that the number of future claims and the related costs of defense, settlements or judgments will be consistent with the experience to date of existing claims.

It has become apparent that the uncertain prospect of additional toxic tort claims being asserted in the future, and the impact of this uncertainty on the valuation of the Company, has had and will continue to have, at least for the short term, some adverse effects on the Company’s ability to determine prospective distributions to shareholders or to negotiate a satisfactory sale, merger or other change in control transaction with a third party. These claims would also affect the ability of the Company to carry out a fairly rapid liquidation proceeding, either through a dissolution, formation of a liquidating trust and liquidation proceedings in the Chancery Court in Delaware, or in a Chapter 11 federal bankruptcy reorganization proceeding, both of which would involve provisions for payments to creditors and contemplated distributions to stockholders. See “Business—Strategic Alternatives” for discussion of strategic alternatives.

Trading of the Company’s Class A Common Stock on the OTC Bulletin Board

The Company’s Class A Common Stock was de-listed from the New York Stock Exchange on February 8, 2002 and commenced trading on the OTC Bulletin Board under the Symbol “BNSXA” and was listed on the Boston Stock Exchange on February 11, 2002. There is no assurance that there will continue to be a sufficient number of securities firms prepared to make an active trading market in our stock, and the public perception of the value of the Class A Common Stock could be materially adversely affected.

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The market price of the Company’s Common Stock could decline as a result of sales of shares by the Company’s existing shareowners, as a result of the Company’s possible failure to meet the listing standards of the Boston Stock Exchange.

The Company’s cumulative net operating losses (“NOL’s”) may become significantly limited

The Company had NOL’s of approximately $45 million at December 31, 2003, which were available to offset taxable earnings in the future. In the event of a “change of ownership” within the meaning of Section 382 of the Internal Revenue Code, the ability of the Company to use these NOL’s to offset future taxable earnings becomes significantly limited. While the Company’s management and tax advisors believe the Company has not, as of February 11, 2004, experienced such a “change of ownership,” based on their examination of public shareholder documents filed with the SEC, it appears that the Company is very close to the threshold for such a change.

“Going Concern” Qualifications in Audit Opinion

The Company received a report from its independent auditors for the year ended December 31, 2003, containing an explanatory paragraph stating that the Company’s recurring operating losses from continuing operations and the Company’s intention to sell its remaining assets and liquidate or seek other strategic alternatives raise substantial doubt about the Company’s ability to continue as a going concern.

Liquidity Risk: There may not be Adequate Resources for Funding the Operations of the Company

There is no assurance that the future expenses of the Company (including the expenses of maintaining the Company as a “public” reporting Company under SEC regulations and the expenses and liabilities associated with toxic tort asbestos claims against the Company, as discussed above) will not be greater than anticipated, or that the expected cash flow from its United Kingdom property (until its sale) and investment earnings (which are, as a practical matter, limited by the Company’s inability to make investments that would require it to register as an “investment company” under the Investment Company Act of 1940) on net proceeds of the contemplated sale of the United Kingdom property and the net proceeds of prior sales of assets (or the profits from any operating business that the Company may seek to acquire with such net proceeds) will not thereafter be less than anticipated and that, as a result, a liquidity problem may not arise.

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ITEM 7A—QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has no derivative financial instruments or derivative commodity instruments. Since August 2003 the Company has had no long-term debt (the mortgage on the North Kingstown property was repaid when that property was sold on August 26, 2003. The Company does have exposure to fluctuations in foreign exchange rates relating to the sale of the United Kingdom property, the sales price of which is denominated in British Pounds.

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ITEM 8—FINANCIAL STATEMENT AND SUPPLEMENTARY DATA

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Report of Independent Auditors

To the Shareholders and Directors

of BNS Co.

We have audited the accompanying consolidated balance sheets of BNS Co. as of December 31, 2003 and 2002, and the related consolidated statements of operations, shareowners’ equity, and cash flows for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of BNS Co. at December 31, 2003 and 2002, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that BNS Co. will continue as a going concern. As more fully described in Note 2, the Company has recurring operating losses from continuing operations. Additionally, the Company’s intention is to sell its remaining assets and liquidate or seek other strategic alternatives. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments to reflect the possible future effects of the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

/s/ ERNST & YOUNG LLP

Providence, Rhode Island

February 13, 2004

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PART I. FINANCIAL INFORMATION

Item 1.    FINANCIAL STATEMENTS*

BNS Co.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2003, 2002 and 2001

(dollars in thousands, except per share data)

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Item 1.    FINANCIAL STATEMENTS*

BNS Co.

CONSOLIDATED BALANCE SHEETS

December 31, 2003 and 2002

(dollars in thousands, except share data)

* The accompanying notes are an integral part of the financial statements

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BNS Co.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2003, 2002, and 2001

(dollars in thousands)

The accompanying notes are an integral part of the financial statements

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BNS Co.

CONSOLIDATED STATEMENTS OF SHAREOWNERS’ EQUITY

For the Years Ended December 31, 2003, 2002, and 2001

(in thousands)