##### Table of Contents



SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-Q

|    |  |                                                                                                
|--- |  | -----------------------------------------------------------------------------------------------
|[X] |  | QUARTERLY
        REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2001

OR

|      |  |                                                                                                 
|----- |  | ------------------------------------------------------------------------------------------------
|[   ] |  | TRANSITION
        REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _________________ to _________________

Commission File No. 0-22623

OCULAR SCIENCES, INC.
(Exact name of registrant as specified in its charter)

|                                                                               |  |                                                     
|------------------------------------------------------------------------------ |  | ----------------------------------------------------
|Delaware                                                                       |  | 94-2985696                                          
|(State
        or other jurisdiction of
        incorporation or organization) |  | (I.R.S.
        Employer
        Identification No.)

1855 Gateway Boulevard, Suite 700
Concord, California 94520
(Address of principal executive offices, including zip code)

(925) 969-7000
(Registrants telephone number, including area code)

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 [   ].

As of August 6, 2001, there were outstanding 23,373,955 shares of the
registrants Common Stock, par value $0.001 per share.

1



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TABLE OF CONTENTS



|                               |                                                                                               |                                                               |  |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- | ------------------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | Item 1. Financial Statements                                                                 
|                               |                                                                                               | Condensed Consolidated Balance Sheets  (unaudited)          
|                               |                                                                                               | Condensed Consolidated Statements of Income  (unaudited)    
|                               |                                                                                               | Condensed Consolidated Statements of Cash Flows  (unaudited)
|                               |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS         
|                               | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                               | Item 3. Quantitative And Qualitative Disclosures About Market Risk                           
|PART II  OTHER INFORMATION   
|                               | Item 4. Submission of Matters to a Vote of Security Holders                                  
|SIGNATURES                    

OCULAR SCIENCES, INC.

INDEX

|                                       |  |                                                                                                                 |  |     
|-------------------------------------- |  | --------------------------------------------------------------------------------------------------------------- |  | ----
|                                       |  |                                                                                                                 |  | Page
|PART
        I - FINANCIAL INFORMATION |  |                                                                                                                
|                                      
|                                      
|                                      
|                                      
|                                       |  |                                                                                                                 |  |     
|Item 1.                                |  | Financial
        Statements (Unaudited)                                                                        |  |     
|                                      
|                                      
|                                      
|                                      
|                                       |  |                                                                                                                 |  |     
|                                       |  | Condensed
        Consolidated Balance Sheets 
        June 30, 2001 and December 31, 2000                     |  | 3   
|                                      
|                                      
|                                      
|                                      
|                                       |  | Condensed
        Consolidated Statements of Income 
        Three and Six Months Ended June 30, 2001 and 2000 |  | 4   
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                       |  | Condensed
        Consolidated Statements of Cash Flows 
        Six Months Ended June 30, 2001 and 2000       |  | 5   
|                                      
|                                      
|                                      
|                                      
|                                       |  | Notes to
        Condensed Consolidated Financial Statements                                                    |  | 6   
|                                      
|                                      
|                                      
|                                      
|                                       |  |                                                                                                                 |  |     
|Item 2.                                |  | Managements
        Discussion and Analysis of 
        Financial Condition and Results of Operations          |  | 9   
|                                      
|                                      
|                                      
|                                      
|                                       |  |                                                                                                                 |  |     
|Item 3.                                |  | Quantitative
        and Qualitative Disclosures about Market Risk                                              |  | 16  
|                                      
|                                      
|                                      
|                                      
|                                       |  |                                                                                                                 |  |     
|PART
        II -OTHER INFORMATION     |  |                                                                                                                
|                                      
|                                      
|                                      
|                                      
|                                       |  |                                                                                                                 |  |     
|Item 4.                                |  | Submission
        of Matters to a Vote of Security Holders                                                     |  | 16  
|                                      
|                                      
|                                      
|                                      
|                                       |  |                                                                                                                 |  |     
|                                       |  | Signatures                                                                                                      |  | 17  

In this report, we,
us and our refer to Ocular Sciences, Inc. and
its subsidiaries and affiliates.

2



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##### Table of Contents






PART I  FINANCIAL INFORMATION




Item 1. Financial Statements




OCULAR SCIENCES, INC.Condensed Consolidated Balance Sheets  (unaudited)
  (In thousands, except share data)

|                                               |                                                                                                                                                                                      |                                                      |         |          |         |              |         |         |         | 
|---------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------- | ------- | -------- | ------- | ------------ | ------- | ------- | ------- | 
|                                               |                                                                                                                                                                                      |                                                      |         | June 30, |         | December 31,
|                                               |                                                                                                                                                                                      |                                                      |         | 2001     |         | 2000        
|                                               |                                                                                                                                                                                      |                                                      |         |          |         |             
|ASSETS                                         |                                                                                                                                                                                      |                                                      |         |          |         |              |         |        
|                                              
|                                              
|                                              
|                                              
|Current
          Assets:                      |                                                                                                                                                                                      |                                                      |         |          |         |              |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Cash and
          cash equivalents                                                                                                                                                  |                                                      | $       | 12,178   |         |              | $       | 55,109  |        
|                                              
|                                              
|                                              
|                                              
|                                               | Short-term
          investments                                                                                                                                                     |                                                      |         | 1,000    |         |              |         | 9,585   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Accounts
          receivable, less allowance for sales returns and doubtful
          accounts of $1,536 and $1,494 for 2001 and 2000, respectively                                 |                                                      |         | 39,188   |         |              |         | 27,682  |        
|                                              
|                                              
|                                              
|                                              
|                                               | Inventories                                                                                                                                                                          |                                                      |         | 44,944   |         |              |         | 27,748  |        
|                                              
|                                              
|                                              
|                                              
|                                               | Prepaid
          expenses and other current assets                                                                                                                                  |                                                      |         | 19,816   |         |              |         | 15,000  |        
|                                               |                                                                                                                                                                                      |                                                      |         |          |         |              |         |        
|                                               |                                                                                                                                                                                      | Total
          Current Assets                       |         |          | 117,126 |              |         |         | 135,124 | 
|                                              
|                                              
|                                              
|                                              
|Property
          and equipment, net          |                                                                                                                                                                                      |                                                      | 132,838 |          |         |              | 118,645 |        
|                                              
|                                              
|                                              
|                                              
|Intangible
          assets, net               |                                                                                                                                                                                      |                                                      | 41,950  |          |         |              | 7,819   |        
|                                              
|                                              
|                                              
|                                              
|Long-term
          investments                |                                                                                                                                                                                      |                                                      |        |          |         |              | 2,046   |        
|                                              
|                                              
|                                              
|                                              
|Other
          assets                         |                                                                                                                                                                                      |                                                      | 838     |          |         |              | 1,196   |        
|                                               |                                                                                                                                                                                      |                                                      |         |          |         |              |         |        
|                                               |                                                                                                                                                                                      | Total
          Assets                               |         | $        | 292,752 |              |         | $       | 264,830 | 
|                                               |                                                                                                                                                                                      |                                                      |         |          |         |              |         |        
|LIABILITIES
          AND STOCKHOLDERS EQUITY |                                                                                                                                                                                      |                                                      |         |          |         |              |         |        
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                                                                                                                      |                                                      |         |          |         |              |         |        
|Current
          Liabilities:                 |                                                                                                                                                                                      |                                                      |         |          |         |              |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Accounts
          payable                                                                                                                                                           |                                                      | $       | 14,606   |         |              | $       | 6,218   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Accrued
          liabilities                                                                                                                                                        |                                                      |         | 29,801   |         |              |         | 25,346  |        
|                                              
|                                              
|                                              
|                                              
|                                               | Current
          portion of long-term debt                                                                                                                                          |                                                      |         | 1,575    |         |              |         | 1,246   |        
|                                               |                                                                                                                                                                                      |                                                      |         |          |         |              |         |        
|                                               |                                                                                                                                                                                      | Total
          Current Liabilities                  |         |          | 45,982  |              |         |         | 32,810  | 
|                                              
|                                              
|                                              
|                                              
|                                               | Deferred
          income taxes                                                                                                                                                      |                                                      |         | 4,666    |         |              |         | 5,348   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Other
          liabilities                                                                                                                                                          |                                                      |         | 5,559    |         |              |         | 476     |        
|                                              
|                                              
|                                              
|                                              
|                                               | Long-term
          debt, less current portion                                                                                                                                       |                                                      |         | 3,100    |         |              |         | 4,482   |        
|                                               |                                                                                                                                                                                      |                                                      |         |          |         |              |         |        
|                                               |                                                                                                                                                                                      | Total
          Liabilities                          |         |          | 59,307  |              |         |         | 43,116  | 
|                                               |                                                                                                                                                                                      |                                                      |         |          |         |              |         |        
|Commitments
          and contingencies        |                                                                                                                                                                                      |                                                      |         |          |         |              |         |        
|                                              
|                                              
|                                              
|                                              
|Stockholders
          Equity:                |                                                                                                                                                                                      |                                                      |         |          |         |              |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Common
          stock, $0.001 par value; 80,000,000 
          shares authorized; 23,382,045 and 23,051,555 shares
          issued and outstanding for 2001 and 2000, respectively |                                                      |         | 23       |         |              |         | 23      |        
|                                              
|                                              
|                                              
|                                              
|                                               | Additional
          paid-in capital                                                                                                                                                 |                                                      |         | 83,153   |         |              |         | 82,379  |        
|                                              
|                                              
|                                              
|                                              
|                                               | Retained
          earnings                                                                                                                                                          |                                                      |         | 153,973  |         |              |         | 142,101 |        
|                                              
|                                              
|                                              
|                                              
|                                               | Accumulated
          other comprehensive loss                                                                                                                                       |                                                      |         | (2,973   | )       |              |         | (2,058  | )      
|                                              
|                                              
|                                              
|                                              
|                                               | Treasury
          Stock, 62,500 shares                                                                                                                                              |                                                      |         | (731     | )       |              |         | (731    | )      
|                                               |                                                                                                                                                                                      |                                                      |         |          |         |              |         |        
|                                               |                                                                                                                                                                                      | Total
          Stockholders Equity                 |         |          | 233,445 |              |         |         | 221,714 | 
|                                               |                                                                                                                                                                                      |                                                      |         |          |         |              |         |        
|                                               |                                                                                                                                                                                      | Total
          Liabilities and Stockholders Equity |         | $        | 292,752 |              |         | $       | 264,830 | 
|                                               |                                                                                                                                                                                      |                                                      |         |          |         |              |         |        

See accompanying notes to condensed consolidated financial statements.

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##### Table of Contents






OCULAR SCIENCES, INC.Condensed Consolidated Statements of Income 
  (unaudited)
  (In thousands, except share and per share data)

|                                    |                                                                                                              |                        |        |                    |        |                  |         |            |        |      |         |            |        |   |         |            |        | 
|----------------------------------- | ------------------------------------------------------------------------------------------------------------ | ---------------------- | ------ | ------------------ | ------ | ---------------- | ------- | ---------- | ------ | ---- | ------- | ---------- | ------ | - | ------- | ---------- | ------ | 
|                                    |                                                                                                              |                        |        | Three months ended |        | Six months ended
|                                    |                                                                                                              |                        |        | June 30,           |        | June 30,        
|                                    |                                                                                                              |                        |        |                    |        |                 
|                                    |                                                                                                              |                        |        | 2001               |        | 2000             |         | 2001       |        | 2000
|                                    |                                                                                                              |                        |        |                    |        |                  |         |            |        |     
|Net sales                           |                                                                                                              | $                      | 61,377 |                    |        | $                | 42,953  |            |        | $    | 117,934 |            |        | $ | 86,396  |           
|                                   
|                                   
|                                   
|                                   
|Cost of sales                       |                                                                                                              |                        | 23,006 |                    |        |                  | 18,322  |            |        |      | 44,659  |            |        |   | 35,290  |           
|                                    |                                                                                                              |                        |        |                    |        |                  |         |            |        |      |         |            |        |   |         |           
|                                    |                                                                                                              | Gross profit           |        |                    | 38,371 |                  |         |            | 24,631 |      |         |            | 73,275 |   |         |            | 51,106 | 
|                                   
|                                   
|                                   
|                                   
|Selling and marketing expenses      |                                                                                                              |                        | 17,750 |                    |        |                  | 11,094  |            |        |      | 32,998  |            |        |   | 22,517  |           
|                                   
|                                   
|                                   
|                                   
|General and administrative expenses |                                                                                                              |                        | 9,412  |                    |        |                  | 5,789   |            |        |      | 17,324  |            |        |   | 10,830  |           
|                                   
|                                   
|                                   
|                                   
|Research and development expenses   |                                                                                                              |                        | 1,691  |                    |        |                  | 1,015   |            |        |      | 3,219   |            |        |   | 1,991   |           
|                                   
|                                   
|                                   
|                                   
|Acquired in-process R&D expenses    |                                                                                                              |                        | 0      |                    |        |                  | 0       |            |        |      | 4,150   |            |        |   | 0       |           
|                                    |                                                                                                              |                        |        |                    |        |                  |         |            |        |      |         |            |        |   |         |           
|                                    |                                                                                                              | Income from operations |        |                    | 9,518  |                  |         |            | 6,733  |      |         |            | 15,584 |   |         |            | 15,768 | 
|                                   
|                                   
|                                   
|                                   
|Interest expense                    |                                                                                                              |                        | (89    | )                  |        |                  | (97     | )          |        |      | (206    | )          |        |   | (374    | )         
|                                   
|                                   
|                                   
|                                   
|Interest income                     |                                                                                                              |                        | 105    |                    |        |                  | 764     |            |        |      | 704     |            |        |   | 1,265   |           
|                                   
|                                   
|                                   
|                                   
|Other income (expense)              |                                                                                                              |                        | 9      |                    |        |                  | 20,817  |            |        |      | (41     | )          |        |   | 20,822  |           
|                                    |                                                                                                              |                        |        |                    |        |                  |         |            |        |      |         |            |        |   |         |           
|                                    |                                                                                                              | Income before taxes    |        |                    | 9,543  |                  |         |            | 28,217 |      |         |            | 16,041 |   |         |            | 37,481 | 
|                                   
|                                   
|                                   
|                                   
|Income taxes                        |                                                                                                              |                        | (2,491 | )                  |        |                  | (10,740 | )          |        |      | (4,171  | )          |        |   | (12,871 | )         
|                                    |                                                                                                              |                        |        |                    |        |                  |         |            |        |      |         |            |        |   |         |           
|                                    |                                                                                                              | Net income             |        | $                  | 7,052  |                  |         | $          | 17,477 |      |         | $          | 11,870 |   |         | $          | 24,610 | 
|                                    |                                                                                                              |                        |        |                    |        |                  |         |            |        |      |         |            |        |   |         |           
|Net income per share data:          |                                                                                                              |                        |        |                    |        |                  |         |            |        |      |         |            |        |   |         |           
|                                   
|                                   
|                                   
|                                   
|                                    | Net income per share (basic)                                                                                 |                        | $      | 0.30               |        |                  | $       | 0.76       |        |      | $       | 0.51       |        |   | $       | 1.07       |       
|                                    |                                                                                                              |                        |        |                    |        |                  |         |            |        |      |         |            |        |   |         |           
|                                    | Net income per share (diluted)                                                                               |                        | $      | 0.29               |        |                  | $       | 0.75       |        |      | $       | 0.50       |        |   | $       | 1.06       |       
|                                    |                                                                                                              |                        |        |                    |        |                  |         |            |        |      |         |            |        |   |         |           
|                                    | Weighted
          average common
          shares outstanding                                               |                        |        | 23,349,945         |        |                  |         | 23,112,094 |        |      |         | 23,330,614 |        |   |         | 23,058,837 |       
|                                   
|                                   
|                                   
|                                   
|                                    | Weighted
          average shares of stock
          options under the treasury
          stock method       |                        |        | 704,545            |        |                  |         | 213,537    |        |      |         | 488,854    |        |   |         | 265,851    |       
|                                    |                                                                                                              |                        |        |                    |        |                  |         |            |        |      |         |            |        |   |         |           
|                                    | Total
          weighted average common
          and dilutive potential common
          shares outstanding |                        |        | 24,054,490         |        |                  |         | 23,325,631 |        |      |         | 23,819,468 |        |   |         | 23,324,688 |       
|                                    |                                                                                                              |                        |        |                    |        |                  |         |            |        |      |         |            |        |   |         |           

See accompanying notes to condensed consolidated financial statements.

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##### Table of Contents






OCULAR SCIENCES, INC.Condensed Consolidated Statements of Cash Flows  (unaudited)
(In thousands)

|                                                             |                                                                                                        |                                                        |                                                     |         |                  |         |        |         |        |        |  
|------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------ | ------------------------------------------------------ | --------------------------------------------------- | ------- | ---------------- | ------- | ------ | ------- | ------ | ------ | -
|                                                             |                                                                                                        |                                                        |                                                     |         | Six months ended
|                                                             |                                                                                                        |                                                        |                                                     |         | June 30,        
|                                                             |                                                                                                        |                                                        |                                                     |         |                 
|                                                             |                                                                                                        |                                                        |                                                     |         | 2001             |         | 2000  
|                                                             |                                                                                                        |                                                        |                                                     |         |                  |         |       
|Cash flows from operating activities:                        |                                                                                                        |                                                        |                                                     |         |                  |         |        |        
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Net income                                                                                             |                                                        | $                                                   | 11,870  |                  |         | $      | 24,610  |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Adjustments
          to reconcile net income to net cash provided 
          by operating activities: |                                                        |                                                     |         |                  |         |        |         |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                                        | Depreciation and amortization                          |                                                     |         | 8,699            |         |        |         | 5,652  |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                                        | Income tax benefits from stock options exercised       |                                                     |         | 23               |         |        |         |       |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                                        | Provision for sales returns and doubtful accounts      |                                                     |         | 42               |         |        |         | 704    |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                                        | Provision for excess and obsolete inventory            |                                                     |         | 843              |         |        |         | 503    |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                                        | Provision for damaged and scrap products               |                                                     |         |                 |         |        |         | 130    |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                                        | Loss on sale of property and equipment                 |                                                     |         | 38               |         |        |         |       |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                                        | Exchange loss (gain)                                   |                                                     |         | 98               |         |        |         | (70    | )     
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                                        | Acquired in-process research and development           |                                                     |         | 4,150            |         |        |         |       |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                                        | Deferred income taxes                                  |                                                     |         | (682             | )       |        |         |       |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Changes
          in operating assets and liabilities,
          net of effects of acquisition:        |                                                        |                                                     |         |                  |         |        |         |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                                        | Accounts receivable                                    |                                                     |         | (5,335           | )       |        |         | 2,592  |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                                        | Inventories                                            |                                                     |         | (11,506          | )       |        |         | (5,169 | )     
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                                        | Prepaid expenses, other current and non-current assets |                                                     |         | (3,196           | )       |        |         | (2,296 | )     
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                                        | Accounts payable                                       |                                                     |         | 5,691            |         |        |         | 525    |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                                        | Accrued liabilities                                    |                                                     |         | 2,113            |         |        |         | 3,583  |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                                        | Income taxes (refundable) payable                      |                                                     |         | (1,260           | )       |        |         | 10,274 |       
|                                                             |                                                                                                        |                                                        |                                                     |         |                  |         |        |        
|                                                             |                                                                                                        |                                                        | Net cash provided by operating activities           |         |                  | 11,588  |        |         |        | 41,038 |  
|                                                             |                                                                                                        |                                                        |                                                     |         |                  |         |        |        
|Cash flows from investing activities:                        |                                                                                                        |                                                        |                                                     |         |                  |         |        |        
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Purchase of property and equipment                                                                     |                                                        |                                                     | (15,066 | )                |         |        | (15,270 | )     
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Purchase of short and long-term investments                                                            |                                                        |                                                     |        |                  |         |        | (6,607  | )     
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Sales and maturities of short and long-term investments                                                |                                                        |                                                     | 10,614  |                  |         |        | 17,004  |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Loans to officers and employees                                                                        |                                                        |                                                     | (500    | )                |         |        |        |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Payment for Essilor Acquisition, net of cash acquired                                                  |                                                        |                                                     | (48,272 | )                |         |        |        |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Deposits to restricted cash                                                                            |                                                        |                                                     |        |                  |         |        | (6      | )     
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                                        |                                                        | Net cash used in investing activities               |         |                  | (53,224 | )      |         |        | (4,879 | )
|                                                             |                                                                                                        |                                                        |                                                     |         |                  |         |        |        
|Cash flows from financing activities:                        |                                                                                                        |                                                        |                                                     |         |                  |         |        |        
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Repayment of long-term debt                                                                            |                                                        |                                                     | (819    | )                |         |        | (342    | )     
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Repayment of capital lease obligation                                                                  |                                                        |                                                     | (234    | )                |         |        |        |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Proceeds from issuance of common stock                                                                 |                                                        |                                                     | 722     |                  |         |        | 585     |       
|                                                             |                                                                                                        |                                                        |                                                     |         |                  |         |        |        
|                                                             |                                                                                                        |                                                        | Net cash provided by (used in) financing activities |         |                  | (331    | )      |         |        | 243    |  
|                                                             |                                                                                                        |                                                        |                                                     |         |                  |         |        |        
|Effect of exchange rate changes on cash and cash equivalents |                                                                                                        |                                                        | (964                                                | )       |                  |         | (558   | )      
|                                                             |                                                                                                        |                                                        |                                                     |         |                  |         |        |        
|                                                             |                                                                                                        | Net increase (decrease) in cash and cash equivalents   |                                                     |         | (42,931          | )       |        |         | 35,844 |       
|                                                            
|                                                            
|                                                            
|                                                            
|Cash and cash equivalents at beginning of period             |                                                                                                        |                                                        | 55,109                                              |         |                  |         | 10,053 |        
|                                                             |                                                                                                        |                                                        |                                                     |         |                  |         |        |        
|Cash and cash equivalents at end of period                   |                                                                                                        | $                                                      | 12,178                                              |         |                  |         | 45,897 |        
|                                                             |                                                                                                        |                                                        |                                                     |         |                  |         |        |        

See accompanying notes to condensed consolidated financial statements.

5



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##### Table of Contents






OCULAR SCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1  Basis of Preparation

The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not contain all of the
information and footnotes required by accounting principles generally accepted
in the United States of America, for complete financial statements. In the
opinion of management, the accompanying unaudited condensed consolidated
financial statements have been prepared on the same basis as the audited
consolidated financial statements and include all adjustments, consisting only
of normal recurring adjustments, necessary for the fair presentation of our
financial condition as of June 30, 2001 and the results of our operations and
comprehensive income for the three and six month periods ended June 30, 2001
and 2000, and our cash flows for the six month periods ended June 30, 2001 and
2000. These unaudited condensed consolidated financial statements should be
read in conjunction with our audited consolidated financial statements as of
December 31, 2000 and 1999 and for each of the years in the three-year period
ended December 31, 2000, including notes thereto, included in our Annual Report
on Form 10-K and on Form 10-K/A for the year ended December 31, 2000. Operating
results for the three- and six-month periods ended June 30, 2001 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2001.

Note 2  Inventories

Inventories consisted of the following (in thousands):

|                |  |          |        |              |  |   |        | 
|--------------- |  | -------- | ------ | ------------ |  | - | ------ | 
|                |  | June 30, |        | December 31,
|                |  | 2001     |        | 2000        
|                |  |          |        |             
|Raw materials   |  | $        | 1,800  |              |  | $ | 4,396  | 
|               
|               
|               
|               
|Work in process |  |          | 4,107  |              |  |   | 3,339  | 
|               
|               
|               
|               
|Finished goods  |  |          | 39,037 |              |  |   | 20,013 | 
|                |  |          |        |              |  |   |        | 
|                |  | $        | 44,944 |              |  | $ | 27,748 | 
|                |  |          |        |              |  |   |        | 

Note 3  Prepaid Expenses and Other Current Assets and Accrued Liabilities

Prepaid expenses and other current assets consisted of the following (in thousands):

|                      |  |          |        |              |  |   |        | 
|--------------------- |  | -------- | ------ | ------------ |  | - | ------ | 
|                      |  | June 30, |        | December 31,
|                      |  | 2001     |        | 2000        
|                      |  |          |        |             
|Refundable taxes      |  | $        | 691    |              |  | $ | 621    | 
|                     
|                     
|                     
|                     
|Deferred income taxes |  |          | 8,908  |              |  |   | 8,289  | 
|                     
|                     
|                     
|                     
|Prepaid expenses      |  |          | 4,420  |              |  |   | 2,462  | 
|                     
|                     
|                     
|                     
|Other current assets  |  |          | 5,797  |              |  |   | 3,628  | 
|                      |  |          |        |              |  |   |        | 
|                      |  | $        | 19,816 |              |  | $ | 15,000 | 
|                      |  |          |        |              |  |   |        | 

Accrued liabilities consisted of the following (in thousands):

|                                             |  |          |        |              |  |   |        | 
|-------------------------------------------- |  | -------- | ------ | ------------ |  | - | ------ | 
|                                             |  | June 30, |        | December 31,
|                                             |  | 2001     |        | 2000        
|                                             |  |          |        |             
|Accrued expenses                             |  | $        | 21,480 |              |  | $ | 15,781 | 
|                                            
|                                            
|                                            
|                                            
|Accrued cooperative merchandising allowances |  |          | 6,330  |              |  |   | 6,314  | 
|                                            
|                                            
|                                            
|                                            
|Income taxes payable                         |  |          | 1,991  |              |  |   | 3,251  | 
|                                             |  |          |        |              |  |   |        | 
|                                             |  | $        | 29,801 |              |  | $ | 25,346 | 
|                                             |  |          |        |              |  |   |        | 

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Note 4   Comprehensive Income

|                         |                                            |   |                    |     |                  |   |        |      |      |   |        |      |   |   |        |        |  
|------------------------ | ------------------------------------------ | - | ------------------ | --- | ---------------- | - | ------ | ---- | ---- | - | ------ | ---- | - | - | ------ | ------ | -
|                         |                                            |   | Three months ended |     | Six months ended
|                         |                                            |   | June 30,           |     | June 30,        
|                         |                                            |   |                    |     |                 
|                         |                                            |   | 2001               |     | 2000             |   | 2001   |      | 2000
|                         |                                            |   |                    |     |                  |   |        |      |     
|Net Income               |                                            | $ | 7,052              |     |                  | $ | 17,477 |      |      | $ | 11,870 |      |   | $ | 24,610 |       
|                         |                                            |   |                    |     |                  |   |        |      |      |   |        |      |   |   |        |       
|                         | Foreign
          Currency                
|                         | Translation Adjustment                     |   |                    | (61 | )                |   |        | (740 | )    |   |        | (898 | ) |   |        | (1,021 | )
|                        
|                        
|                        
|                        
|                         | Net Unrealized
          gains/(losses) on
|                         | Investments                                |   |                    | (39 | )                |   |        | 25   |      |   |        | (17  | ) |   |        | 118    |  
|                         |                                            |   |                    |     |                  |   |        |      |      |   |        |      |   |   |        |       
|Other Comprehensive Loss |                                            |   | (100               | )   |                  |   | (714   | )    |      |   | (915   | )    |   |   | (901   | )     
|                         |                                            |   |                    |     |                  |   |        |      |      |   |        |      |   |   |        |       
|Comprehensive Income     |                                            | $ | 6,952              |     |                  | $ | 16,762 |      |      | $ | 10,955 |      |   | $ | 23,708 |       
|                         |                                            |   |                    |     |                  |   |        |      |      |   |        |      |   |   |        |       

Note 5   Earnings per Share

In accordance with SFAS No. 128, Earnings Per Share, basic earnings per
share is calculated using the weighted average number of common shares
outstanding during the period. Diluted earnings per share is calculated using
the weighted average number of common shares and dilutive potential common
shares outstanding during the period. Dilutive potential common shares
represent shares issuable upon the exercise of outstanding options and are
calculated using the treasury stock method.

Options to purchase 925,180 and 1,373,290 shares of our common stock were
not included in the computation of diluted earnings per share for the three
and six months ended June 30, 2001 because their exercise prices were greater
than the average market price of our common stock of $20.87 and $18.21 per share,
respectively. Options to purchase 2,889,604 and 2,815,934 shares of our common
stock for the three and six months ended June 30, 2000, were not included in
the computation of diluted earnings per share because their exercise prices were greater than the average market
price of our common stock of $14.70 and $16.12 per share, respectively.

Note 6   Acquisition of the Contact Lens Business from Essilor International S. A.

On February 12, 2001, we acquired the contact lens business of Essilor
International (Compagnie Generale dOptique) S. A. (Essilor). We acquired the
sales and distribution assets of the contact lens business in Europe and the
United States and manufacturing facilities in France, the United Kingdom and
the United States.

We have accounted for the acquisition using the purchase method.
Accordingly, the operating results of Essilor form part of our operating
results from February 1, 2001.

The $48,300,000 purchase price for the assets acquired and liabilities
assumed was comprised of $45,800,000 in cash and $2,500,000 in acquisition costs. There were no
contingent payments, pre-acquisition contingencies or other commitments
specified in the acquisition agreement.

The purchase price was allocated as follows (in thousands):

|                                    |  |   |         |  
|----------------------------------- |  | - | ------- | -
|Tangible assets                     |  | $ | 19,762  |  
|                                   
|                                   
|                                   
|                                   
|Intangible assets                   |  |   | 35,771  |  
|                                   
|                                   
|                                   
|                                   
|In-process research and development |  |   | 4,150   |  
|                                   
|                                   
|                                   
|                                   
|Liabilities                         |  |   | (11,383 | )
|                                    |  |   |         |  
|                                    |  | $ | 48,300  |  
|                                    |  |   |         |  

Included in the liabilities is an accrual for costs associated with
exiting certain activities acquired in the Essilor acquisition, including
estimated costs to discontinue these activities and the estimated

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salaries and benefits owing upon involuntary termination to employees associated with
those discontinued activities.

During the three months ended June 30, 2001, we completed our valuation of
certain tangible assets, which resulted in the revision of our allocation of the
purchase price by decreasing year-to-date cost of sales and
increasing intangible assets by $1,055,000. In addition, an
adjustment was made to year-to-date amortization of intangible assets
in the current period to reflect this change.

The purchase price was more than the fair value of the net assets acquired
of $23,999,000, resulting in goodwill of $24,301,000. Goodwill, customer lists,
assembled work force, existing technology, and trade names are included as
components of intangible assets and are being amortized over their useful lives
as listed in the table below:

|                               |  |         
|------------------------------ |  | --------
|                               |  | Useful  
|Intangible Assets              |  | Life    
|                               |  |         
|Assembled
          Work Force |  | 7 years 
|                              
|                              
|                              
|                              
|Existing
          Technology  |  | 10 years
|                              
|                              
|                              
|                              
|Trade
          Names          |  | 12 years
|                              
|                              
|                              
|                              
|Customer
          Lists       |  | 15 years
|                              
|                              
|                              
|                              
|Goodwill                       |  | 15 years

As a result of the acquisition, we recorded acquired in-process research
and development totaling $4,150,000.

This charge relates to Essilors Fully Molded Toric Lenses and
Photochromic Lenses, all of which were under development on the date of the
acquisition. These projects under development were valued on the premise of
fair market value in continued use employing a version of the income approach
referred to as the discounted cash flow approach. This methodology is based on
discounting to present value, at an appropriate risk-adjusted discount rate,
both the expenditures to be made to complete the development efforts and the
operating cash flows which the applications are projected to generate, less a
return on the assets necessary to generate the operating cash flows.

From these projected revenues, we deducted costs of sales, operating
costs, royalties and taxes to determine net cash flows. We estimated the
percentage of completion of the development efforts for each product by
comparing the estimated costs incurred and portions of the development
accomplished prior to the acquisition date, to the total estimated costs and
total development efforts required to fully develop these products. This
percentage was calculated for each product and was then applied to the net cash
flows that each product was projected to generate. These net cash flows were
then discounted to present values using appropriate risk-adjusted discount
rates in order to arrive at discounted fair values for each product.

The percentage complete and the appropriate risk-adjusted discount rate
for each product were as follows:

|                          |  |            |    |          |  |  |    |  
|------------------------- |  | ---------- | -- | -------- |  |  | -- | -
|                          |  | Percentage |    | Discount
|Assets Under Development  |  | Complete   |    | Rate    
|                          |  |            |    |         
|Fully Molded Toric Lenses |  |            | 60 | %        |  |  | 21 | %
|                         
|                         
|                         
|                         
|Photochromic Lenses       |  |            | 50 | %        |  |  | 21 | %

The rates used to discount the net cash flows to present value were
initially based on the weighted average cost of capital (WACC) of 16%. We
used a discount rate of 21% for valuing the acquired in-process research and
development, 18% for the customer base, 18% for the trade names and 15% for the
existing technologies. The discount rates we used were higher than the
implied WACC due to the inherent uncertainties surrounding the successful
development of the acquired in-process research and development, the useful
life of such in-process research and development, the profitability levels of
such in-process research and development, and the uncertainty of technological
advances that were unknown at the time.

8



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##### Table of Contents



Note 7  Accounting for Derivative Instruments and Hedging Activities

In September 1998, the FASB issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities (SFAS No. 133). SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities. The statement requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The statement generally
provides for matching the timing of gain or loss recognition on the hedging
instrument with the recognition of (a) the changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk or (b) the
earnings effect of the hedged forecasted transaction. We adopted SFAS No. 133
on January 1, 2001, the impact of implementing SFAS No. 133 was not material to
our financial statements.

Note 8  Amendment to the 1997 Equity Incentive Plan

On May 24, 2001,
our 1997 Equity Incentive Plan was
amended to increase the number of shares of common stock available under the
plan by 1,400,000 shares (from 3,000,000 to 4,400,000).




Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto included in Part
I  Item 1 of this Quarterly Report and the audited consolidated financial
statements and notes thereto and Managements Discussion and Analysis of
Financial Condition and Results of Operations contained in our Annual Report on
Form 10-K and on Form 10-K/A for the year ended December 31, 2000.

This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as amended. Such
statements relate to our future performance and plans, results of operations,
capital expenditures, acquisitions and operating improvements and costs. You
can identify forward-looking statements by the use of forward-looking
terminology such as believes, expects, may, will, should, seeks,
approximately, intends, plans, pro forma, estimates or anticipates
or the negative of these words and phrases or similar words or phrases. You can
also identify forward-looking statements by discussions of strategy, plans or
intentions. Forward-looking statements involve numerous risks and uncertainties
and you should not rely upon them as predictions of future events. There is no
assurance that the events or circumstances reflected in forward-looking
statements will be achieved or will occur. Forward-looking statements are
necessarily dependent on assumptions, data, or methods that may be incorrect or
imprecise and we may not be able to realize them. Factors that could cause
actual results and future events to differ materially from those set forth or
contemplated in the forward-looking statements include risks associated with
the overall economic environment, the integration of the Company and Essilor
contact lens business, the impact of competitive products and pricing, product
demand both domestically and overseas, market receptiveness to the new Toric
product launch, extended manufacturing difficulties, customer bad debts,
currency fluctuations, changes in the anticipated earnings of the Company and
acquired contact lens operations during 2001 and other risks detailed in the
sections entitled Item 1, Business  Risk Factors, and Item 7, Managements
Discussion and Analysis of Financial Condition and Results of Operations and
elsewhere in our Annual Report on Form 10-K and on Form 10-K/A for the year
ended December 31, 2000, and from time to time in our other reports filed with
the Securities and Exchange Commission. We caution you not to place undue
reliance on forward-looking statements,

9



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##### Table of Contents



which reflect our analysis only and
speak as of the date of this report or as of the dates indicated in the
statements. Further, we undertake no obligation to revise any of these
forward-looking statements.

ACQUISITION OF THE CONTACT LENS BUSINESS FROM ESSILOR INTERNATIONAL S.A.

On February 12, 2001, we acquired the contact lens business of Paris-based
Essilor International (Compagnie Generale dOptique) S.A. We acquired, among
other things, the sales and distribution assets of the contact lens business in
Europe and the United States and manufacturing facilities in France, United
Kingdom and the United States. We accounted for the acquisition using the
purchase method. Accordingly, the operating results of Essilor form part of our
operating results from February 1, 2001. The $48,300,000 purchase price for the
acquired assets was comprised of $45,800,000 in cash and $2,500,000 in
acquisition costs. Acquired in-process research and development costs of
$4,150,000 were expensed in the six month period ended June 30, 2001 as it was
determined that the technology had no alternative uses. There were no
contingent payments, pre-acquisition contingencies or other commitments
specified in the acquisition agreement.

10



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##### Table of Contents



Results of Operations

Net Sales

|                             |  |                             |            |      |  |          |            |   |  |  |      |  
|---------------------------- |  | --------------------------- | ---------- | ---- |  | -------- | ---------- | - |  |  | ---- | -
|                             |  | Three Months Ended June 30, |            |      |  |         
|                             |  |                             |            |      |  |         
|                             |  | 2001                        |            | 2000 |  | % Change
|                             |  |                             |            |      |  |         
|U.S                          |  | $                           | 37,320,000 |      |  | $        | 29,574,000 |   |  |  | 26.2 | %
|                            
|                            
|                            
|                            
|As a percentage of net sales |  |                             | 60.8       | %    |  |          | 68.9       | % |  |  |      |  
|                            
|                            
|                            
|                            
|International                |  | $                           | 24,057,000 |      |  | $        | 13,379,000 |   |  |  | 79.8 | %
|                            
|                            
|                            
|                            
|As a percentage of net sales |  |                             | 39.2       | %    |  |          | 31.1       | % |  |  |      |  
|                             |  |                             |            |      |  |          |            |   |  |  |      |  
|Net sales                    |  | $                           | 61,377,000 |      |  | $        | 42,953,000 |   |  |  | 42.9 | %
|                             |  |                             |            |      |  |          |            |   |  |  |      |  

|                             |  |                           |             |      |  |          |            |   |  |  |      |  
|---------------------------- |  | ------------------------- | ----------- | ---- |  | -------- | ---------- | - |  |  | ---- | -
|                             |  | Six Months Ended June 30, |             |      |  |         
|                             |  |                           |             |      |  |         
|                             |  | 2001                      |             | 2000 |  | % Change
|                             |  |                           |             |      |  |         
|U.S                          |  | $                         | 73,194,000  |      |  | $        | 60,792,000 |   |  |  | 20.4 | %
|                            
|                            
|                            
|                            
|As a percentage of net sales |  |                           | 62.1        | %    |  |          | 70.4       | % |  |  |      |  
|                            
|                            
|                            
|                            
|International                |  | $                         | 44,740,000  |      |  | $        | 25,604,000 |   |  |  | 74.7 | %
|                            
|                            
|                            
|                            
|As a percentage of net sales |  |                           | 37.9        | %    |  |          | 29.6       | % |  |  |      |  
|                             |  |                           |             |      |  |          |            |   |  |  |      |  
|Net sales                    |  | $                         | 117,934,000 |      |  | $        | 86,396,000 |   |  |  | 36.5 | %
|                             |  |                           |             |      |  |          |            |   |  |  |      |  

Net sales represent gross sales less allowances for returns, trial sets
and prompt payment discounts. We recognize sales upon shipment of products to
our customers. Discounts and allowances for sales returns are accrued at the
time sales are recognized. The increase in net sales for the three- and
six-month periods ended June 30, 2001, compared to the three- and six-month
periods ended June 30, 2000, was attributable to the growth in revenues for our
existing product lines, the added revenues generated by the new entities
acquired in the Essilor acquisition and the revenues generated by our product
lines in Asia. Including the revenues generated by acquired Essilor entities,
our U.S. sales grew by 26.2% and 20.4% for the three- and six-month periods
ending June 30, 2001, respectively, from the same period in 2000. The growth
was primarily attributable to demand of our product line as a result of the
increased effectiveness of our direct sales force. Our international sales
continued to remain strong, growing by 79.8% and 74.7% for the three- and
six-month periods ended June 30, 2001, respectively, from the same period in
2000, reflecting the continued strength in the international marketplace of our
broader product offerings, our inventory availability and additional
distribution channels in Europe, and the continued demand in the Japanese
marketplace for our products. For the three- and six-month periods ended June
30, 2001, as compared to the same periods in 2000, the effect of lower exchange
rates negatively impacted our revenues by $1.0 million and $2.1 million,
respectively.

Unit sales growth of our lenses including units sales generated by the new
entities acquired in the Essilor acquisition increased 16.1% and 19.6% for the
three- and six-month periods ended June 30, 2001, respectively, from the same
period in 2000. A significant portion of this unit sales growth came from
international sales, which grew faster than domestic sales due largely to the
additional product offerings from the acquired Essilor entities and increased
sales of our lenses marketed for disposable regimens in Europe and Asia.

Our overall average selling price per lens remained flat in the United
States during the three- and six-month periods ended June 30, 2001,
respectively, from the same period in 2000. However, the impact of changes in
product mix to higher revenue per unit product offerings of the
Essilor-acquired entities increased the overall average selling prices of our
lenses for the three- and six-month periods
ended June 30, 2001, respectively, from the same period in 2000.

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Gross Profit

|                             |  |                             |            |      |  |          |            |   |  |  |      |  
|---------------------------- |  | --------------------------- | ---------- | ---- |  | -------- | ---------- | - |  |  | ---- | -
|                             |  | Three Months Ended June 30, |            |      |  |         
|                             |  |                             |            |      |  |         
|                             |  | 2001                        |            | 2000 |  | % Change
|                             |  |                             |            |      |  |         
|Gross profit                 |  | $                           | 38,371,000 |      |  | $        | 24,631,000 |   |  |  | 55.8 | %
|                            
|                            
|                            
|                            
|As a percentage of net sales |  |                             | 62.5       | %    |  |          | 57.3       | % |  |  |      |  

|                             |  |                           |            |      |  |          |            |   |  |  |      |  
|---------------------------- |  | ------------------------- | ---------- | ---- |  | -------- | ---------- | - |  |  | ---- | -
|                             |  | Six Months Ended June 30, |            |      |  |         
|                             |  |                           |            |      |  |         
|                             |  | 2001                      |            | 2000 |  | % Change
|                             |  |                           |            |      |  |         
|Gross profit                 |  | $                         | 73,275,000 |      |  | $        | 51,106,000 |   |  |  | 43.4 | %
|                            
|                            
|                            
|                            
|As a percentage of net sales |  |                           | 62.1       | %    |  |          | 59.2       | % |  |  |      |  

Cost of sales is comprised primarily of the labor, overhead and material
costs of production and packaging, freight and duty, inventory reserves, and
amortization of certain intangible assets. The dollar and percentage increase
in gross profit for the three- and six-month periods ended June 30, 2001 from
the three- and six-month periods ended June 30, 2000, was due to the continued
improvement in manufacturing performance and the realization of higher gross
profit margins on products from the acquired Essilor entities.

We are in the process of increasing the number of additional automated
production lines at our United Kingdom and Puerto Rico facilities, which are
designed to further improve our per unit cost of production over
time, although we may
not see such cost reductions until future periods.

Selling and Marketing Expenses

|                               |  |                             |            |      |  |          |            |   |  |  |      |  
|------------------------------ |  | --------------------------- | ---------- | ---- |  | -------- | ---------- | - |  |  | ---- | -
|                               |  | Three Months Ended June 30, |            |      |  |         
|                               |  |                             |            |      |  |         
|                               |  | 2001                        |            | 2000 |  | % Change
|                               |  |                             |            |      |  |         
|Selling and marketing expenses |  | $                           | 17,750,000 |      |  | $        | 11,094,000 |   |  |  | 60.0 | %
|                              
|                              
|                              
|                              
|As a percentage of net sales   |  |                             | 28.9       | %    |  |          | 25.8       | % |  |  |      |  

|                               |  |                           |            |      |  |          |            |   |  |  |      |  
|------------------------------ |  | ------------------------- | ---------- | ---- |  | -------- | ---------- | - |  |  | ---- | -
|                               |  | Six Months Ended June 30, |            |      |  |         
|                               |  |                           |            |      |  |         
|                               |  | 2001                      |            | 2000 |  | % Change
|                               |  |                           |            |      |  |         
|Selling and marketing expenses |  | $                         | 32,998,000 |      |  | $        | 22,517,000 |   |  |  | 46.5 | %
|                              
|                              
|                              
|                              
|As a percentage of net sales   |  |                           | 28.0       | %    |  |          | 26.1       | % |  |  |      |  

Selling and marketing expenses are comprised primarily of cooperative
merchandising allowances, sample diagnostic products provided to eyecare
practitioners without charge, salaries, commissions and benefits for selling
and marketing personnel and postage and freight charges not billed to
customers. Cooperative merchandising allowances are reimbursements to encourage
the fitting and wearing of our lenses marketed for disposable replacement
regimens. Such activities may include, but are not limited to advertising,
in-office promotion, displays and mailings. We limit these allowances to a
percentage of purchases of lenses marketed for disposable replacement regimens
from us. The increase in sales and marketing expenses in dollars and as a
percentage of net sales in the three- and six-month periods ended June 30,
2001, as compared to the three- and six-month periods ended June 30, 2000,
primarily resulted from increased cooperative merchandising allowances,
additional sales and marketing expenses related to our newly acquired entities
in the Essilor acquisition and the completion of our
direct sales force expansion in the United States.

General and Administrative Expenses

|                                    |  |                             |           |      |  |          |           |   |  |  |      |  
|----------------------------------- |  | --------------------------- | --------- | ---- |  | -------- | --------- | - |  |  | ---- | -
|                                    |  | Three Months Ended June 30, |           |      |  |         
|                                    |  |                             |           |      |  |         
|                                    |  | 2001                        |           | 2000 |  | % Change
|                                    |  |                             |           |      |  |         
|General and administrative expenses |  | $                           | 9,412,000 |      |  | $        | 5,789,000 |   |  |  | 62.6 | %
|                                   
|                                   
|                                   
|                                   
|As a percentage of net sales        |  |                             | 15.3      | %    |  |          | 13.5      | % |  |  |      |  

|                                    |  |                           |            |      |  |          |            |   |  |  |      |  
|----------------------------------- |  | ------------------------- | ---------- | ---- |  | -------- | ---------- | - |  |  | ---- | -
|                                    |  | Six Months Ended June 30, |            |      |  |         
|                                    |  |                           |            |      |  |         
|                                    |  | 2001                      |            | 2000 |  | % Change
|                                    |  |                           |            |      |  |         
|General and administrative expenses |  | $                         | 17,324,000 |      |  | $        | 10,830,000 |   |  |  | 60.0 | %
|                                   
|                                   
|                                   
|                                   
|As a percentage of net sales        |  |                           | 14.7       | %    |  |          | 12.5       | % |  |  |      |  

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General and administrative expenses are comprised primarily of salaries
and benefits for distribution, general and administrative personnel,
professional services, consultants fees, non-manufacturing depreciation,
goodwill amortization and facilities costs. For the three- and six-month
periods ended June 30, 2001, general and administrative expenses in dollars and
as a percentage of sales increased, as compared to the three- and six-month
periods ended June 30, 2000, primarily due to higher expenses for the
newly-acquired entities in the Essilor acquisition, higher consulting fees,
goodwill amortization and our additional administrative staffing needs to
support the expanded businesses. We believe that as our net sales grow, our
general and administrative expenses will increase in absolute dollars, but will
decrease as a percentage of net sales on an annualized basis.

Research and Development Expenses

|                                  |  |                             |           |      |  |          |           |   |  |  |      |  
|--------------------------------- |  | --------------------------- | --------- | ---- |  | -------- | --------- | - |  |  | ---- | -
|                                  |  | Three Months Ended June 30, |           |      |  |         
|                                  |  |                             |           |      |  |         
|                                  |  | 2001                        |           | 2000 |  | % Change
|                                  |  |                             |           |      |  |         
|Research and development expenses |  | $                           | 1,691,000 |      |  | $        | 1,015,000 |   |  |  | 66.6 | %
|                                 
|                                 
|                                 
|                                 
|As a percentage of net sales      |  |                             | 2.8       | %    |  |          | 2.3       | % |  |  |      |  

|                                  |  |                           |           |      |  |          |           |   |  |  |      |  
|--------------------------------- |  | ------------------------- | --------- | ---- |  | -------- | --------- | - |  |  | ---- | -
|                                  |  | Six Months Ended June 30, |           |      |  |         
|                                  |  |                           |           |      |  |         
|                                  |  | 2001                      |           | 2000 |  | % Change
|                                  |  |                           |           |      |  |         
|Research and development expenses |  | $                         | 3,219,000 |      |  | $        | 1,991,000 |   |  |  | 61.7 | %
|                                 
|                                 
|                                 
|                                 
|As a percentage of net sales      |  |                           | 2.7       | %    |  |          | 2.3       | % |  |  |      |  

Research and development expenses, excluding acquired in-process research
and development expenses, are comprised primarily of consulting costs for
research and development personnel, in-house labor related to process and new
product development. For the three- and six-month periods ended June 30, 2001,
as compared to the three- and six-month periods ended June 30, 2000, research
and development expenses increased in dollars and as a percentage of revenue
primarily due to our activities related to a number of new manufacturing
process and product development programs. Research and development expenses may
fluctuate based on the timing of new product development projects and the use
of outside resources.

Interest and Other Income, Net

|                               |  |                             |        |      |  |          |            |   |  |  |       |   
|------------------------------ |  | --------------------------- | ------ | ---- |  | -------- | ---------- | - |  |  | ----- | --
|                               |  | Three Months Ended June 30, |        |      |  |         
|                               |  |                             |        |      |  |         
|                               |  | 2001                        |        | 2000 |  | % Change
|                               |  |                             |        |      |  |         
|Interest and other income, net |  | $                           | 25,000 |      |  | $        | 21,484,000 |   |  |  | (99.9 | %)
|                              
|                              
|                              
|                              
|As a percentage of net sales   |  |                             | 0.0    | %    |  |          | 50.0       | % |  |  |       |   

|                               |  |                           |         |      |  |          |            |   |  |  |       |   
|------------------------------ |  | ------------------------- | ------- | ---- |  | -------- | ---------- | - |  |  | ----- | --
|                               |  | Six Months Ended June 30, |         |      |  |         
|                               |  |                           |         |      |  |         
|                               |  | 2001                      |         | 2000 |  | % Change
|                               |  |                           |         |      |  |         
|Interest and other income, net |  | $                         | 457,000 |      |  | $        | 21,713,000 |   |  |  | (97.9 | %)
|                              
|                              
|                              
|                              
|As a percentage of net sales   |  |                           | 0.4     | %    |  |          | 25.1       | % |  |  |       |   

13



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The decrease in interest and other income in dollar and percentage terms
in the three- and six-month periods ended June 30, 2001, as compared to the
three- and six-month periods ended June 30, 2000, resulted primarily from the
$25 million merger termination fee from Wesley Jessen, less merger-related
expenses of $4.2 million, we received in the second quarter of 2000. Our
interest income declined in the quarter ended June 30, 2001 as compared to the
quarter ended June 30, 2000 as a result of the reduced interest bearing cash
and investment balances from the purchase of the contact lens business from
Essilor, for $48.3 million in cash in February 2001.

Income Taxes

|                   |  |                             |           |      |  |          |            |   |  |  |       |   
|------------------ |  | --------------------------- | --------- | ---- |  | -------- | ---------- | - |  |  | ----- | --
|                   |  | Three Months Ended June 30, |           |      |  |         
|                   |  |                             |           |      |  |         
|                   |  | 2001                        |           | 2000 |  | % Change
|                   |  |                             |           |      |  |         
|Income taxes       |  | $                           | 2,491,000 |      |  | $        | 10,740,000 |   |  |  | (76.8 | %)
|                  
|                  
|                  
|                  
|Effective tax rate |  |                             | 26.1      | %    |  |          | 38.1       | % |  |  |       |   

|                   |  |                           |           |      |  |          |            |   |  |  |       |   
|------------------ |  | ------------------------- | --------- | ---- |  | -------- | ---------- | - |  |  | ----- | --
|                   |  | Six Months Ended June 30, |           |      |  |         
|                   |  |                           |           |      |  |         
|                   |  | 2001                      |           | 2000 |  | % Change
|                   |  |                           |           |      |  |         
|Income taxes       |  | $                         | 4,171,000 |      |  | $        | 12,871,000 |   |  |  | (67.6 | %)
|                  
|                  
|                  
|                  
|Effective tax rate |  |                           | 26.0      | %    |  |          | 34.3       | % |  |  |       |   

Our effective tax rate for the three- and six-month periods ended June 30,
2001 decreased, as compared to the three- and six-month periods ended June 30,
2000, due to the U.S. tax on the $25.0 million merger termination fee we
received from Wesley Jessen last year.

Liquidity and Capital Resources

At June 30, 2001, we had cash and cash equivalents of $12.2 million,
compared to cash and cash equivalents of $55.1 million at December 31, 2000.
The decrease in cash and cash equivalents was primarily attributable to the
cash purchase of Essilors contact lens business in February 2001 for $48.3
million. Working capital decreased from $102.3 million at December 31, 2000 to
$71.1 million at June 30, 2001. This decrease was primarily due to cash paid to
complete the Essilor acquisition and for associated acquisition expenses. In
the first six months of 2001, net cash provided by operating activities of
$11.6 million was derived principally from net income of $11.9 million,
acquired in-process research and development charges of $4.2 million,
depreciation and amortization charges of $8.7 million, a decrease in provisions
for product returns, doubtful accounts, excess and obsolete inventory, damaged
and scrap products, and exchange loss of $1.0 million in the aggregate, and
offset by a net decrease in operating assets and liabilities of $13.5 million,
and deferred income tax payments of $0.7 million.

Net cash used in investing activities in the first six months of 2001 was
$53.2 million, consisting primarily of the $48.3 million paid in the Essilor
acquisition, $15.1 million expended to purchase property and equipment, and a
$10.6 million offset of net maturities of short and long-term investments. We
anticipate that capital expenditures will be approximately $30-35 million in
2001 (including the $15.1 million in the first six months) as we continue to
invest to increase capacity and add automated production lines at our
manufacturing facilities. However, the amount of capital expenditures may
increase or decrease, as we may accelerate or delay implementation based on
market conditions and demand for our products.

Net cash used in financing activities in the first six months of 2001 was
$0.3 million. In comparison, in the first six months of 2000 net cash provided
by financing activities was $0.2 million due to an increase in repayments of
long-term debt and capital lease obligations.

In addition to cash, cash equivalents and short and long-term investments,
we have a credit facility with Comerica Bank  California. The Comerica credit
agreement provides for up to $20.0 million of

14



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revolving loans, which mature on June 30, 2002. The loans bear interest at Comerica Banks base rate or at a
margin of 1.00% to 1.25% above the banks eurodollar rate depending on our
ratio of total liabilities to tangible net worth. At June 30, 2001, we had no
revolving loans outstanding under the Comerica credit agreement. In addition,
the Comerica credit agreement provided up to $10.0 million of term loans to
Ocular Sciences Puerto Rico, Inc. (Ocular Sciences Puerto Rico) which had a
drawdown period that expired on May 1, 2000 and bears interest at the banks
base rate or at a margin of 1.25% to 1.50% above the banks eurodollar rate or
negotiated rate depending on our ratio of total liabilities to tangible net
worth. As of June 30, 2001, Ocular Sciences Puerto Rico had $1.2 million in
term loans outstanding under the Comerica credit agreement. Principal
installments of $300,000 are due quarterly and all outstanding principal and
unpaid interest is due and payable on July 31, 2002. The Comerica credit
agreement contains covenants, which, among other things, require us to maintain
certain financial ratios. Borrowings under the Comerica credit agreement are
secured by a pledge of 100% of the outstanding common stock of Ocular Sciences
Puerto Rico and 65% of the outstanding stock of our Barbados and Canadian
subsidiaries. In addition, we and Ocular Sciences Puerto Rico have each
guaranteed the others borrowings under the Comerica credit agreement.

We are obligated to make minimum base payments on non-cancelable operating
leases of $777,000, $500,000 and $432,000 in 2001, 2002 and 2003, respectively.

On July 27, 2000, we announced the approval by our Board of Directors of a
2,000,000 share repurchase program. Under the repurchase plan, we may repurchase our shares, subject to market and business conditions, at
managements discretion on the open market. To the extent that management
elects to repurchase shares, a significant use of cash resources could be
effected. As of June 30, 2001, we had purchased 62,500 shares on the open
market.

We believe that our current cash and cash equivalents, further borrowings
available under our credit facilities and our anticipated net cash flow from
operations, will be sufficient to meet our anticipated cash needs for working
capital, contractual commitments and capital expenditures for the foreseeable
future.

New Accounting Pronouncements

In April 2001, the EITF reached a consensus on Issue 00-25, Vendor Income
Statement Characterization of Consideration to a Purchaser of the Vendors
Products or Services. EITF 00-25 addresses the income statement classification
of consideration, from a vendor to a reseller, or another party that purchases
the vendors products. Among its requirements, the consensus will require
certain of our customer promotional incentive payments, primarily cooperative
merchandising allowances, currently classified as marketing costs to be
classified as a reduction of revenue. We are currently assessing the impact of
adopting Issue 00-25 but expect that the majority of our promotional expenses
may be required to be classified as a reduction of revenue. Annual promotional
expenses classified as marketing costs were $21.0 million in fiscal year 2000
and $11.6 million for the six-months ended June 30, 2001. This change, if
applicable, will be effective for periods beginning after December 15, 2001.

In July 2001, the Financial Accounting Standards Board approved the
issuance of SFAS No. 141, Business Combinations, and SFAS No.
142, Goodwill and Other Intangible Assets. SFAS No. 141 will provide guidance
on the accounting for a business combination at the date a business combination
is completed. The statement requires the use of the purchase method of
accounting for all business combinations initiated after June 30, 2001, thereby
eliminating use of the pooling-of-interests method. We adopted this statement
as of July 1, 2001. SFAS No. 142 will provide guidance on how to account for
goodwill and intangible assets after an acquisition is completed. The most
substantive change is that goodwill will no longer be amortized but instead
will be tested for impairment periodically. This statement will apply to
existing goodwill and intangible assets, beginning with fiscal years starting
after December 15, 2001. Early adoption of this statement is

15



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##### Table of Contents



permitted for companies with fiscal years beginning after March 15, 2001, for which first
quarter financial statements have not been issued. We expect to adopt this
statement at the beginning of fiscal 2002.




Item 3. Quantitative And Qualitative Disclosures About Market Risk

We have short-term debt outstanding, which is carried at cost, with an
interest rate which is referenced to market rates. Interest rate changes
generally do not affect the fair value of variable rate debt instruments, but
do impact future earnings and cash flows. As of June 30, 2001, the outstanding
balance under the Comerica term loan was $1.2 million and is payable in
quarterly installments of $300,000, with any remaining balance to be paid on
July 31, 2002. The commencement of the loan repayments will impact future
earnings and cash flows and will reduce our exposure to changes in interest
rates as the loan balance is reduced.

Unless otherwise noted above, there has been no additional material change
in our assessment of our sensitivity to market risk from the information set
forth in Item 7A, Quantitative and Qualitative Disclosures About Market Risk
in our Annual Report on Form 10-K and on Form 10-K/A for the fiscal year ended
December 31, 2000.




PART II  OTHER INFORMATION




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

We held our Annual Meting of Stockholders on May 24, 2001. Two matters
were voted upon. A description of each matter and a tabulation of votes
follows:

1.     To elect six (6) directors, each to serve until the next annual meeting
of stockholders and until his successor has been duly elected and qualified.

The stockholders votes with respect to the election of directors were as
follows:

|                                 |  |       |            |                             |  |                         |         |                          |  |  |   |  |  |  |   | 
|-------------------------------- |  | ----- | ---------- | --------------------------- |  | ----------------------- | ------- | ------------------------ |  |  | - |  |  |  | - | 
|                                 |  | Votes
|                                 |  |      
|                                 |  | For   |            | Against or
        Withheld |  | Votes
        Abstained |         | Broker
        Non-Votes
|                                 |  |       |            |                             |  |                         |         |                         
|John D.
          Fruth          |  |       | 12,541,822 |                             |  |                         | 390,681 |                          |  |  |  |  |  |  |  | 
|                                
|                                
|                                
|                                
|Edgar
          J. Cummins       |  |       | 12,852,796 |                             |  |                         | 79,707  |                          |  |  |  |  |  |  |  | 
|                                
|                                
|                                
|                                
|Terence
          M. Fruth       |  |       | 12,852,796 |                             |  |                         | 79,707  |                          |  |  |  |  |  |  |  | 
|                                
|                                
|                                
|                                
|William
          R. Grant       |  |       | 12,852,796 |                             |  |                         | 79,707  |                          |  |  |  |  |  |  |  | 
|                                
|                                
|                                
|                                
|Francis
          R. Tunney, Jr. |  |       | 12,852,796 |                             |  |                         | 79,707  |                          |  |  |  |  |  |  |  | 
|                                
|                                
|                                
|                                
|Terrance
          H. Gregg      |  |       | 12,852,796 |                             |  |                         | 79,707  |                          |  |  |  |  |  |  |  | 

2.     To amend our 1997 Equity Incentive Plan to increase the number of
shares of common stock available under the plan by 1,400,000 shares (from
3,000,000 to 4,400,000).

The stockholders votes with respect to the amendment of our 1997 Equity
Incentive Plan were as follows:

|           |  |                     |           |                 |  |                  |           |  |  |  |   | 
|---------- |  | ------------------- | --------- | --------------- |  | ---------------- | --------- |  |  |  | - | 
|Votes     
|          
|For        |  | Against
or Withheld |           | Votes
Abstained |  | Broker
Non-Votes
|           |  |                     |           |                 |  |                 
|10,604,932 |  |                     | 1,242,248 |                 |  |                  | 1,085,323 |  |  |  |  | 

16



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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.

|                                |  |                                                 
|------------------------------- |  | ------------------------------------------------
|                                |  | OCULAR
          SCIENCES, INC.                 
|                               
|                               
|                               
|                               
|                                |  | (Registrant)                                    
|                               
|                               
|                               
|                               
|                                |  |                                                 
|Date: August 14,
          2001 |  | /s/ Sidney
          B. Landman                 
|                               
|                               
|                               
|                               
|                                |  |                                                 
|                                |  | Sidney
          B. Landman                     
|                               
|                               
|                               
|                               
|                                |  | Vice-President
          Finance,               
|                               
|                               
|                               
|                               
|                                |  | Chief
          Financial Officer,              
|                               
|                               
|                               
|                               
|                                |  | Treasurer
          and Secretary               
|                               
|                               
|                               
|                               
|                                |  | (Duly
          Authorized Officer and Principal
|                               
|                               
|                               
|                               
|                                |  | Financial
          and Accounting Officer)     

17