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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, 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 September 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
(State or other jurisdiction of
incorporation or organization) |  | 94-2985696
(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 November 6, 2001, there were outstanding 23,379,384 shares of the
registrants Common Stock, par value $0.001 per share.



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TABLE OF CONTENTS



|                               |                                                                                               |                                                               |  |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- | ------------------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | ITEM I. 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 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                    
|Exhibit Index                 
|Employment Agreement          



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##### Table of Contents



OCULAR SCIENCES, INC.
 Table of Contents

|                               |                                                                                                       |      |    |  | 
|------------------------------ | ----------------------------------------------------------------------------------------------------- | ---- | -- |  | 
|PART I  FINANCIAL INFORMATION |                                                                                                       | Page
|                               |                                                                                                      
|Item 1.                        | Financial Statements (Unaudited)                                                                      |     
|                              
|                               | Condensed Consolidated Balance Sheets 
        September 30, 2001 and December 31, 2000              |      | 3  | 
|                              
|                               | Condensed Consolidated Statements of Income 
Three and Nine Months Ended September 30, 2001 and 2000 |      | 4  | 
|                              
|                               | Condensed Consolidated Statements of Cash Flows 
Nine Months Ended September 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 6.                        | Exhibits                                                                                              |      | 16 | 
|                              
|                               | Signatures                                                                                            |      | 18 | 

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



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##### Table of Contents






PART I  FINANCIAL INFORMATION




ITEM I. Financial Statements




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

|                                     |                                                                                                                                                       |                                            |         |               |         |              |         |         |         | 
|------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ------------- | ------- | ------------ | ------- | ------- | ------- | 
|                                     |                                                                                                                                                       |                                            |         | September 30, |         | December 31,
|                                     |                                                                                                                                                       |                                            |         | 2001          |         | 2000        
|                                     |                                                                                                                                                       |                                            |         |               |         |             
|                                    
|ASSETS                               |                                                                                                                                                       |                                            |         |               |         |              |         |        
|                                    
|Current Assets:                      |                                                                                                                                                       |                                            |         |               |         |              |         |        
|                                     | Cash and cash equivalents                                                                                                                             |                                            | $       | 8,668         |         |              | $       | 55,109  |        
|                                     | Short-term investments                                                                                                                                |                                            |         |              |         |              |         | 9,585   |        
|                                     | Accounts receivable, less allowance for sales returns and doubtful
accounts of $2,870 and $1,494 for 2001 and 2000, respectively                      |                                            |         | 46,897        |         |              |         | 27,682  |        
|                                     | Inventories                                                                                                                                           |                                            |         | 44,494        |         |              |         | 27,748  |        
|                                     | Prepaid expenses and other current assets                                                                                                             |                                            |         | 16,900        |         |              |         | 15,000  |        
|                                     |                                                                                                                                                       |                                            |         |               |         |              |         |         |        
|                                     |                                                                                                                                                       | Total Current Assets                       |         |               | 116,959 |              |         |         | 135,124 | 
|Property and equipment, net          |                                                                                                                                                       |                                            | 144,419 |               |         |              | 118,645 |        
|Intangible assets, net               |                                                                                                                                                       |                                            | 41,042  |               |         |              | 7,819   |        
|Long-term investments                |                                                                                                                                                       |                                            |        |               |         |              | 2,046   |        
|Other assets                         |                                                                                                                                                       |                                            | 429     |               |         |              | 1,196   |        
|                                     |                                                                                                                                                       |                                            |         |               |         |              |         |         |        
|                                     |                                                                                                                                                       | Total Assets                               |         | $             | 302,849 |              |         | $       | 264,830 | 
|                                     |                                                                                                                                                       |                                            |         |               |         |              |         |        
|                                    
|                                    
|                                    
|                                    
|LIABILITIES AND STOCKHOLDERS EQUITY |                                                                                                                                                       |                                            |         |               |         |              |         |        
|                                    
|Current Liabilities:                 |                                                                                                                                                       |                                            |         |               |         |              |         |        
|                                     | Accounts payable                                                                                                                                      |                                            | $       | 14,007        |         |              | $       | 6,218   |        
|                                     | Accrued liabilities                                                                                                                                   |                                            |         | 29,416        |         |              |         | 25,346  |        
|                                     | Current portion of long-term debt                                                                                                                     |                                            |         | 1,278         |         |              |         | 1,246   |        
|                                     |                                                                                                                                                       |                                            |         |               |         |              |         |        
|                                     |                                                                                                                                                       | Total Current Liabilities                  |         |               | 44,701  |              |         |         | 32,810  | 
|                                     | Deferred income taxes                                                                                                                                 |                                            |         | 4,805         |         |              |         | 5,348   |        
|                                     | Other liabilities                                                                                                                                     |                                            |         | 5,332         |         |              |         | 476     |        
|                                     | Long-term debt, less current portion                                                                                                                  |                                            |         | 3,570         |         |              |         | 4,482   |        
|                                     |                                                                                                                                                       |                                            |         |               |         |              |         |         |        
|                                     |                                                                                                                                                       | Total Liabilities                          |         |               | 58,408  |              |         |         | 43,116  | 
|                                     |                                                                                                                                                       |                                            |         |               |         |              |         |        
|Commitments and contingencies        |                                                                                                                                                       |                                            |         |               |         |              |         |        
|                                     | Stockholders Equity:                                                                                                                                 |                                            |         |               |         |              |         |         |        
|                                     | Common stock, $0.001 par value; 80,000,000
shares authorized; 23,448,474 and 23,051,555 shares
issued and outstanding for 2001 and 2000, respectively |                                            |         | 23            |         |              |         | 23      |        
|                                     | Additional paid-in capital                                                                                                                            |                                            |         | 84,477        |         |              |         | 82,379  |        
|                                     | Retained earnings                                                                                                                                     |                                            |         | 163,541       |         |              |         | 142,101 |        
|                                     | Accumulated other comprehensive loss                                                                                                                  |                                            |         | (2,869        | )       |              |         | (2,058  | )      
|                                     | Treasury Stock, 62,500 shares                                                                                                                         |                                            |         | (731          | )       |              |         | (731    | )      
|                                     |                                                                                                                                                       |                                            |         |               |         |              |         |         |        
|                                     |                                                                                                                                                       | Total Stockholders Equity                 |         |               | 244,441 |              |         |         | 221,714 | 
|                                     |                                                                                                                                                       |                                            |         |               |         |              |         |         |        
|                                     |                                                                                                                                                       | Total Liabilities and Stockholders Equity |         | $             | 302,849 |              |         | $       | 264,830 | 
|                                     |                                                                                                                                                       |                                            |         |               |         |              |         |        

See accompanying notes to condensed consolidated financial statements.



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

|                                    |                                                                                |                        |        |                    |        |                   |        |            |        |      |         |            |         |   |         |            |        | 
|----------------------------------- | ------------------------------------------------------------------------------ | ---------------------- | ------ | ------------------ | ------ | ----------------- | ------ | ---------- | ------ | ---- | ------- | ---------- | ------- | - | ------- | ---------- | ------ | 
|                                    |                                                                                |                        |        | Three months ended |        | Nine months ended
|                                    |                                                                                |                        |        | September 30,      |        | September 30,    
|                                    |                                                                                |                        |        |                    |        |                  
|                                    |                                                                                |                        |        | 2001               |        | 2000              |        | 2001       |        | 2000
|                                    |                                                                                |                        |        |                    |        |                   |        |            |        |     
|Net sales                           |                                                                                | $                      | 68,857 |                    |        | $                 | 47,790 |            |        | $    | 186,788 |            |         | $ | 134,186 |           
|Cost of sales                       |                                                                                |                        | 27,722 |                    |        |                   | 19,660 |            |        |      | 72,380  |            |         |   | 54,949  |           
|                                    |                                                                                |                        |        |                    |        |                   |        |            |        |      |         |            |         |   |         |           
|                                    |                                                                                | Gross profit           |        |                    | 41,135 |                   |        |            | 28,130 |      |         |            | 114,408 |   |         |            | 79,237 | 
|Selling and marketing expenses      |                                                                                |                        | 18,058 |                    |        |                   | 12,659 |            |        |      | 51,055  |            |         |   | 35,175  |           
|General and administrative expenses |                                                                                |                        | 9,418  |                    |        |                   | 5,226  |            |        |      | 26,741  |            |         |   | 16,057  |           
|Research and development expenses   |                                                                                |                        | 1,290  |                    |        |                   | 1,297  |            |        |      | 4,509   |            |         |   | 3,288   |           
|Acquired in-process R&D expenses    |                                                                                |                        |       |                    |        |                   |       |            |        |      | 4,150   |            |         |   |        |           
|                                    |                                                                                |                        |        |                    |        |                   |        |            |        |      |         |            |         |   |         |           
|                                    |                                                                                | Income from operations |        |                    | 12,369 |                   |        |            | 8,948  |      |         |            | 27,953  |   |         |            | 24,717 | 
|Interest expense                    |                                                                                |                        | (131   | )                  |        |                   | (78    | )          |        |      | (337    | )          |         |   | (453    | )         
|Interest income                     |                                                                                |                        | 92     |                    |        |                   | 1,049  |            |        |      | 795     |            |         |   | 2,314   |           
|Other income (expense)              |                                                                                |                        | (515   | )                  |        |                   | (191   | )          |        |      | (556    | )          |         |   | 20,631  |           
|                                    |                                                                                |                        |        |                    |        |                   |        |            |        |      |         |            |         |   |         |           
|                                    |                                                                                | Income before taxes    |        |                    | 11,815 |                   |        |            | 9,728  |      |         |            | 27,855  |   |         |            | 47,209 | 
|Income taxes                        |                                                                                |                        | (2,245 | )                  |        |                   | (2,238 | )          |        |      | (6,415  | )          |         |   | (15,109 | )         
|                                    |                                                                                |                        |        |                    |        |                   |        |            |        |      |         |            |         |   |         |           
|                                    |                                                                                | Net income             |        | $                  | 9,570  |                   |        | $          | 7,490  |      |         | $          | 21,440  |   |         | $          | 32,100 | 
|                                    |                                                                                |                        |        |                    |        |                   |        |            |        |      |         |            |         |   |         |           
|Net income per share data:          |                                                                                |                        |        |                    |        |                   |        |            |        |      |         |            |         |   |         |           
|                                    | Net income per share (basic)                                                   |                        | $      | 0.41               |        |                   | $      | 0.32       |        |      | $       | 0.92       |         |   | $       | 1.39       |       
|                                    |                                                                                |                        |        |                    |        |                   |        |            |        |      |         |            |         |   |         |           
|                                    | Net income per share (diluted)                                                 |                        | $      | 0.40               |        |                   | $      | 0.32       |        |      | $       | 0.90       |         |   | $       | 1.37       |       
|                                    |                                                                                |                        |        |                    |        |                   |        |            |        |      |         |            |         |   |         |           
|                                    | Weighted average common
shares outstanding                                     |                        |        | 23,407,685         |        |                   |        | 23,242,364 |        |      |         | 23,356,586 |         |   |         | 23,120,459 |       
|                                    | Weighted average shares of stock
options under the treasury
stock method       |                        |        | 728,610            |        |                   |        | 108,079    |        |      |         | 466,840    |         |   |         | 272,771    |       
|                                    |                                                                                |                        |        |                    |        |                   |        |            |        |      |         |            |         |   |         |           
|                                    | Total weighted average common
and dilutive potential
common
shares outstanding |                        |        | 24,136,295         |        |                   |        | 23,350,443 |        |      |         | 23,823,426 |         |   |         | 23,393,230 |       
|                                    |                                                                                |                        |        |                    |        |                   |        |            |        |      |         |            |         |   |         |           

See accompanying notes to condensed consolidated financial statements.



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

|                                                             |                                                                                   |                                                         |                                                                         |                                                      |         |                                 |         |        |         |        |         |  
|------------------------------------------------------------ | --------------------------------------------------------------------------------- | ------------------------------------------------------- | ----------------------------------------------------------------------- | ---------------------------------------------------- | ------- | ------------------------------- | ------- | ------ | ------- | ------ | ------- | -
|                                                             |                                                                                   |                                                         |                                                                         |                                                      |         | Nine months ended September 30,
|                                                             |                                                                                   |                                                         |                                                                         |                                                      |         |                                
|                                                             |                                                                                   |                                                         |                                                                         |                                                      |         | 2001                            |         | 2000  
|                                                             |                                                                                   |                                                         |                                                                         |                                                      |         |                                 |         |       
|Cash flows from operating activities:                        |                                                                                   |                                                         |                                                                         |                                                      |         |                                 |         |       
|                                                             | Net income                                                                        |                                                         | $                                                                       | 21,440                                               |         |                                 | $       | 32,100 |        
|                                                             | Adjustments to reconcile net income to net cash provided
by operating activities: |                                                         |                                                                         |                                                      |         |                                 |         |        |        
|                                                             |                                                                                   |                                                         | Depreciation and amortization                                           |                                                      |         | 13,067                          |         |        |         | 8,860  |        
|                                                             |                                                                                   |                                                         | Amortization of Loans to Officers                                       |                                                      |         | 20                              |         |        |         |       |        
|                                                             |                                                                                   |                                                         | Provision for sales returns and doubtful accounts                       |                                                      |         | (656                            | )       |        |         | 793    |        
|                                                             |                                                                                   |                                                         | Provision for excess and obsolete inventory,
damaged and scrap products |                                                      |         | 639                             |         |        |         | 1,204  |        
|                                                             |                                                                                   |                                                         | Loss on sale of property and equipment                                  |                                                      |         | 38                              |         |        |         |       |        
|                                                             |                                                                                   |                                                         | Exchange loss (gain)                                                    |                                                      |         | 80                              |         |        |         | 106    |        
|                                                             |                                                                                   |                                                         | Acquired in-process research and development                            |                                                      |         | 4,150                           |         |        |         |       |        
|                                                             |                                                                                   |                                                         | Deferred income taxes                                                   |                                                      |         | (843                            | )       |        |         |       |        
|                                                             | Changes in operating assets and liabilities,
net of effects of acquisition:       |                                                         |                                                                         |                                                      |         |                                 |         |        |        
|                                                             |                                                                                   |                                                         | Accounts receivable                                                     |                                                      |         | (12,345                         | )       |        |         | 4,666  |        
|                                                             |                                                                                   |                                                         | Inventories                                                             |                                                      |         | (10,853                         | )       |        |         | (7,440 | )      
|                                                             |                                                                                   |                                                         | Prepaid expenses, other current and non-current assets                  |                                                      |         | 110                             |         |        |         | 1,138  |        
|                                                             |                                                                                   |                                                         | Accounts payable                                                        |                                                      |         | 5,092                           |         |        |         | (1,462 | )      
|                                                             |                                                                                   |                                                         | Accrued liabilities                                                     |                                                      |         | 470                             |         |        |         | 5,755  |        
|                                                             |                                                                                   |                                                         | Income taxes (refundable) payable                                       |                                                      |         | 70                              |         |        |         | 943    |        
|                                                             |                                                                                   |                                                         |                                                                         |                                                      |         |                                 |         |        |        
|                                                             |                                                                                   |                                                         |                                                                         | Net cash provided by operating activities            |         |                                 | 20,479  |        |         |        | 46,663  |  
|                                                             |                                                                                   |                                                         |                                                                         |                                                      |         |                                 |         |       
|Cash flows from investing activities:                        |                                                                                   |                                                         |                                                                         |                                                      |         |                                 |         |       
|                                                             |                                                                                   | Purchase of property and equipment                      |                                                                         |                                                      | (30,101 | )                               |         |        | (22,263 | )     
|                                                             |                                                                                   | Purchase of short and long-term investments             |                                                                         |                                                      |        |                                 |         |        | (21,607 | )     
|                                                             |                                                                                   | Sales and maturities of short and long-term investments |                                                                         |                                                      | 11,613  |                                 |         |        | 33,501  |       
|                                                             |                                                                                   | Loans to officers and employees                         |                                                                         |                                                      | (500    | )                               |         |        |        |       
|                                                             |                                                                                   | Payment for Essilor Acquisition, net of cash acquired   |                                                                         |                                                      | (48,277 | )                               |         |        |        |       
|                                                             |                                                                                   | Deposits to restricted cash                             |                                                                         |                                                      |        |                                 |         |        | (6      | )     
|                                                             |                                                                                   |                                                         |                                                                         |                                                      |         |                                 |         |        |        
|                                                             |                                                                                   |                                                         |                                                                         | Net cash used in investing activities                |         |                                 | (67,265 | )      |         |        | (10,375 | )
|                                                             |                                                                                   |                                                         |                                                                         |                                                      |         |                                 |         |        |        
|Cash flows from financing activities:                        |                                                                                   |                                                         |                                                                         |                                                      |         |                                 |         |       
|                                                             |                                                                                   | Proceeds from issuance of short- and long-term debt     |                                                                         |                                                      | 6,000   |                                 |         |        |        |       
|                                                             |                                                                                   | Repayment of short- and long-term debt                  |                                                                         |                                                      | (6,880  | )                               |         |        | (700    | )     
|                                                             |                                                                                   | Repurchase of common stock under stock repurchase plan  |                                                                         |                                                      |        |                                 |         |        | (227    | )     
|                                                             |                                                                                   | Proceeds from issuance of common stock                  |                                                                         |                                                      | 2,097   |                                 |         |        | 757     |       
|                                                             |                                                                                   |                                                         |                                                                         |                                                      |         |                                 |         |       
|                                                             |                                                                                   |                                                         |                                                                         | Net cash provided by (used in) financing activities  |         |                                 | 1,217   |        |         |        | (170    | )
|                                                             |                                                                                   |                                                         |                                                                         |                                                      |         |                                 |         |       
|Effect of exchange rate changes on cash and cash equivalents |                                                                                   |                                                         | (872                                                                    | )                                                    |         |                                 | (940    | )     
|                                                             |                                                                                   |                                                         |                                                                         |                                                      |         |                                 |         |       
|                                                             |                                                                                   |                                                         |                                                                         | Net increase (decrease) in cash and cash equivalents |         |                                 | (46,441 | )      |         |        | 35,178  |  
|Cash and cash equivalents at beginning of period             |                                                                                   |                                                         | 55,109                                                                  |                                                      |         |                                 | 10,053  |       
|                                                             |                                                                                   |                                                         |                                                                         |                                                      |         |                                 |         |       
|Cash and cash equivalents at end of period                   |                                                                                   | $                                                       | 8,668                                                                   |                                                      |         | $                               | 45,231  |       
|                                                             |                                                                                   |                                                         |                                                                         |                                                      |         |                                 |         |       

See accompanying notes to condensed consolidated financial statements.



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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 September 30, 2001 and the results of our operations
and comprehensive income for the three- and nine-month periods ended September
30, 2001 and 2000, and our cash flows for the nine-month periods ended
September 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 nine-month
periods ended September 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):

|                |  |          |        |          |  |           |        |              |  |   |        |  |  |   |        | 
|--------------- |  | -------- | ------ | -------- |  | --------- | ------ | ------------ |  | - | ------ |  |  | - | ------ | 
|                |  | Sept 30, |        | June 30, |  | March 31, |        | December 31,
|                |  | 2001     |        | 2001     |  | 2001      |        | 2000        
|                |  |          |        |          |  |           |        |             
|Raw materials   |  | $        | 6,276  |          |  | $         | 4,627  |              |  | $ | 4,815  |  |  | $ | 4,396  | 
|Work in process |  |          | 3,841  |          |  |           | 4,107  |              |  |   | 4,360  |  |  |   | 3,339  | 
|Finished goods  |  |          | 34,377 |          |  |           | 36,210 |              |  |   | 33,357 |  |  |   | 20,013 | 
|                |  |          |        |          |  |           |        |              |  |   |        |  |  |   |        | 
|                |  | $        | 44,494 |          |  | $         | 44,944 |              |  | $ | 42,532 |  |  | $ | 27,748 | 
|                |  |          |        |          |  |           |        |              |  |   |        |  |  |   |        | 

Certain prior-period amounts have been reclassified to conform to the current
period presentation.

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

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

|                      |  |               |        |              |  |   |        | 
|--------------------- |  | ------------- | ------ | ------------ |  | - | ------ | 
|                      |  | September 30, |        | December 31,
|                      |  | 2001          |        | 2000        
|                      |  |               |        |             
|Refundable taxes      |  | $             | 674    |              |  | $ | 621    | 
|Deferred income taxes |  |               | 8,870  |              |  |   | 8,289  | 
|Prepaid expenses      |  |               | 3,936  |              |  |   | 2,462  | 
|Other current assets  |  |               | 3,420  |              |  |   | 3,628  | 
|                      |  |               |        |              |  |   |        | 
|                      |  | $             | 16,900 |              |  | $ | 15,000 | 
|                      |  |               |        |              |  |   |        | 



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Accrued liabilities consisted of the following (in thousands):

|                                             |  |          |        |              |  |   |        | 
|-------------------------------------------- |  | -------- | ------ | ------------ |  | - | ------ | 
|                                             |  | Sept 30, |        | December 31,
|                                             |  | 2001     |        | 2000        
|                                             |  |          |        |             
|Accrued expenses                             |  | $        | 20,366 |              |  | $ | 15,781 | 
|Accrued cooperative merchandising allowances |  |          | 5,729  |              |  |   | 6,314  | 
|Income taxes payable                         |  |          | 3,321  |              |  |   | 3,251  | 
|                                             |  |          |        |              |  |   |        | 
|                                             |  | $        | 29,416 |              |  | $ | 25,346 | 
|                                             |  |          |        |              |  |   |        | 

Note 4   Comprehensive Income

|                         |                                              |   |                    |     |                   |   |       |      |      |   |         |      |   |   |         |        |  
|------------------------ | -------------------------------------------- | - | ------------------ | --- | ----------------- | - | ----- | ---- | ---- | - | ------- | ---- | - | - | ------- | ------ | -
|                         |                                              |   | Three months ended |     | Nine months ended
|                         |                                              |   | September 30,      |     | September 30,    
|                         |                                              |   |                    |     |                  
|                         |                                              |   | 2001               |     | 2000              |   | 2001  |      | 2000
|                         |                                              |   |                    |     |                   |   |       |      |     
|Net Income               |                                              | $ | 9,570              |     |                   | $ | 7,490 |      |      | $ | 21,440  |      |   | $ | 32,100  |       
|                         |                                              |   |                    |     |                   |   |       |      |      |   |         |      |   |   |         |       
|                         | Foreign
Currency                             |   |                    |     |                   |   |       |      |      |   |         |      |   |   |         |        |  
|                         | Translation Adjustment                       |   |                    | 104 |                   |   |       | (407 | )    |   |         | (793 | ) |   |         | (1,427 | )
|                         | Net Unrealized
gains/(losses) on
Investments |   |                    |    |                   |   |       | 26   |      |   |         | (18  | ) |   |         | 144    |  
|                         |                                              |   |                    |     |                   |   |       |      |      |   |         |      |   |   |         |       
|Other Comprehensive Loss |                                              |   | 104                |     |                   |   | (381  | )    |      |   | (811    | )    |   |   | (1,283  | )     
|                         |                                              |   |                    |     |                   |   |       |      |      |   |         |      |   |   |         |       
|Comprehensive Income     |                                              | $ | 9,674              |     |                   | $ | 7,109 |      |      |   | $20,629 |      |   |   | $30,817 |       
|                         |                                              |   |                    |     |                   |   |       |      |      |   |         |      |   |   |         |       

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 913,070 and 1,284,390 shares of our common stock were
not included in the computation of diluted earnings per share for the three and
nine months ended September 30, 2001 because their exercise prices were greater
than the average market price of our common stock of $21.51 and $19.27 per
share, respectively. Options to purchase 2,688,939 and 2,503,489 shares of our
common stock for the three and nine months ended September 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 $11.70 and $14.64 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 preliminarily 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  |  
|                                    |  |   |         |  



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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 salaries and
benefits owing upon involuntary termination to employees associated with those
discontinued activities. The current liability is preliminary and will be
adjusted as additional expenditures are estimated or incurred.

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.

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   Management Employment Agreements

On August 8, 2001, we entered into an employment agreement with Stephen
J. Fanning, our newly appointed President, Chief Executive Officer and member
of the Board of Directors. Under this



8



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##### Table of Contents



employment agreement, we agreed to
extend a $400,000 loan to Mr. Fanning in connection with his purchase of a new
residence. The loan will be interest free, secured by a purchase money second
deed of trust on a new residence. Fifty-percent (50%), or $200,000, of the
loan will be forgiven when Mr. Fanning completes three (3) consecutive years of
employment with us. Should Mr. Fanning sell, convey, transfer, dispose of, or
further encumber his new residence, this loan will be due a payable in full
within ninety days of such sale, conveyance, disposition or encumbrance. In
addition, we agreed to extend a $725,000 personal loan to Mr. Fanning. The
loan will be interest free and will be forgiven when Mr. Fanning completes
three (3) consecutive years of employment with us. If Mr. Fanning voluntary
resigns or is terminated by us for Cause (as defined in Mr. Fannings
employment agreement), both loans will become due and payable in full within
ninety days of such resignation or termination. We have also agreed to
reimburse Mr. Fanning for all costs incurred to relocate his residence.

Note 9    Puerto Rico Aqueducts and Sewer Authority Assessment of Discharge
Penalty

On June 28, 2001, the Puerto Rico Aqueducts and Sewers Authority (PRASA)
notified us that PRASA believed that we had exceeded the discharge limits
specified in its Pre-Treatment Permit and proposed a civil penalty. On August
30, 2001, we responded to PRASAs notice and, among other things, denied a
significant number of the alleged violations on the grounds that they were
without merit. We believe any settlement with PRASA will not have a material
impact on our financial condition.




|        |                                                                                      
|------- | -------------------------------------------------------------------------------------
|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 are risks associated
with the overall economic environment, the integration of the Ocular and
Essilor contact lens business, the impact of competitive products and pricing,
product demand both domestically and overseas, market receptiveness to the
Toric product launch, extended manufacturing difficulties, customer bad debts,
currency fluctuations, changes in our anticipated earnings and acquired contact
lens operations during 2001 and other factors 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, 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.



9



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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 nine month period ended September 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.



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Results of Operations

Net Sales

|                             |  |                             |            |      |  |          |            |   |  |  |      |  
|---------------------------- |  | --------------------------- | ---------- | ---- |  | -------- | ---------- | - |  |  | ---- | -
|                             |  | Three Months Ended Sept 30, |            |      |  |         
|                             |  |                             |            |      |  |         
|                             |  | 2001                        |            | 2000 |  | % Change
|                             |  |                             |            |      |  |         
|U.S.                         |  | $                           | 39,599,000 |      |  | $        | 32,905,000 |   |  |  | 20.3 | %
|As a percentage of net sales |  |                             | 57.5       | %    |  |          | 68.9       | % |  |  |      |  
|International                |  | $                           | 29,258,000 |      |  | $        | 14,885,000 |   |  |  | 96.6 | %
|As a percentage of net sales |  |                             | 42.5       | %    |  |          | 31.1       | % |  |  |      |  
|                             |  |                             |            |      |  |          |            |   |  |  |      |  
|Net sales                    |  | $                           | 68,857,000 |      |  | $        | 47,790,000 |   |  |  | 44.1 | %
|                             |  |                             |            |      |  |          |            |   |  |  |      |  

|                             |  |                            |             |   |  |  |  |      |  |          |             |   |  |  |      |  
|---------------------------- |  | -------------------------- | ----------- | - |  |  |  | ---- |  | -------- | ----------- | - |  |  | ---- | -
|                             |  | Nine Months Ended Sept 30, |             |   |  | 
|                             |  |                            |             |   |  | 
|                             |  | 2001                       |             |   |  |  |  | 2000 |  | % Change
|                             |  |                            |             |   |  |  |  |      |  |         
|U.S.                         |  | $                          | 112,793,000 |   |  |  |  |      |  | $        | 93,698,000  |   |  |  | 20.4 | %
|As a percentage of net sales |  |                            | 60.4        | % |  |  |  |      |  |          | 69.8        | % |  |  |      |  
|International                |  | $                          | 73,995,000  |   |  |  |  |      |  | $        | 40,488,000  |   |  |  | 82.8 | %
|As a percentage of net sales |  |                            | 39.6        | % |  |  |  |      |  |          | 30.2        | % |  |  |      |  
|                             |  |                            |             |   |  |  |  |      |  |          |             |   |  |  |      |  
|Net sales                    |  | $                          | 186,788,000 |   |  |  |  |      |  | $        | 134,186,000 |   |  |  | 39.2 | %
|                             |  |                            |             |   |  |  |  |      |  |          |             |   |  |  |      |  

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
nine-month periods ended September 30, 2001, compared to the three- and
nine-month periods ended September 30, 2000, was attributable to the continued
growth in revenues for our existing product lines both domestically and
internationally, the added revenues generated by the new entities acquired in
the Essilor acquisition and the continued strength generated by our product
lines in Asia.

Including the revenues generated by acquired Essilor entities, our U.S.
sales grew by 20.3% and 20.4% for the three- and nine-month periods ending
September 30, 2001, respectively, from the same period in 2000. The growth was
primarily attributable to demand of our product lines as a result of the
increased effectiveness of our direct sales force and U.S. market share gains.
Excluding the revenues generated by the acquired Essilor entities and despite
an overall slowdown in the U.S. economy, our organic growth in U.S. sales grew
by 3.9% and 5.8% for the three- and nine-month periods ending September 30,
2001, respectively, from the same period in 2000.

Our international sales continued to remain strong, growing by 96.6% and
82.8% for the three- and nine-month periods ended September 30, 2001,
respectively, from the same period in 2000, reflecting the continued strength
in the international marketplace of our broader product offerings, our expanded
distribution channels in Europe as a result of the Essilor acquisition, and the
strength of the Japanese marketplace for our products. Excluding the revenues
generated by the acquired Essilor entities, our organic growth in international
markets grew by 39.3% and 31.1% for the three- and nine-month periods ending
September 30, 2001, respectively, from the same period in 2000. For the three-
and nine-month periods ended September 30, 2001, as compared to the same
periods in 2000, the effect of lower exchange rates negatively impacted our
revenues by $0.4 million and $2.5 million, respectively.

Unit sales growth of our lenses including units sales generated by the new
entities acquired in the Essilor acquisition increased 34.3% and 27.5% for the
three- and nine-month periods ended September 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.



11



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Our overall average selling price per lens remained flat in the United
States during each of the three- and nine-month periods ended September 30, 2001,
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 worldwide average selling prices of our
lenses for the three- and nine-month periods ended September 30, 2001,
from the same period in 2000.

Gross Profit

|                             |  |                             |            |      |  |          |            |   |  |  |      |  
|---------------------------- |  | --------------------------- | ---------- | ---- |  | -------- | ---------- | - |  |  | ---- | -
|                             |  | Three Months Ended Sept 30, |            |      |  |         
|                             |  |                             |            |      |  |         
|                             |  | 2001                        |            | 2000 |  | % Change
|                             |  |                             |            |      |  |         
|Gross profit                 |  | $                           | 41,135,000 |      |  | $        | 28,130,000 |   |  |  | 46.2 | %
|As a percentage of net sales |  |                             | 59.7       | %    |  |          | 58.9       | % |  |  |      |  

|                             |  |                            |             |      |  |          |            |   |  |  |      |  
|---------------------------- |  | -------------------------- | ----------- | ---- |  | -------- | ---------- | - |  |  | ---- | -
|                             |  | Nine Months Ended Sept 30, |             |      |  |         
|                             |  |                            |             |      |  |         
|                             |  | 2001                       |             | 2000 |  | % Change
|                             |  |                            |             |      |  |         
|Gross profit                 |  | $                          | 114,408,000 |      |  | $        | 79,237,000 |   |  |  | 44.4 | %
|As a percentage of net sales |  |                            | 61.3        | %    |  |          | 59.1       | % |  |  |      |  

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 nine-month periods ended September 30, 2001,
from the three- and nine-month periods ended September 30, 2000, was due to the
continued improvement in manufacturing performance, the realization of higher
gross profit margins on products from the acquired Essilor entities and offset
by lower gross margins realized on products sold in Japan.

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 Sept 30, |            |      |  |         
|                               |  |                             |            |      |  |         
|                               |  | 2001                        |            | 2000 |  | % Change
|                               |  |                             |            |      |  |         
|Selling and marketing expenses |  | $                           | 18,058,000 |      |  | $        | 12,659,000 |   |  |  | 42.6 | %
|As a percentage of net sales   |  |                             | 26.2       | %    |  |          | 26.5       | % |  |  |      |  

|                               |  |                            |            |      |  |          |            |   |  |  |      |  
|------------------------------ |  | -------------------------- | ---------- | ---- |  | -------- | ---------- | - |  |  | ---- | -
|                               |  | Nine Months Ended Sept 30, |            |      |  |         
|                               |  |                            |            |      |  |         
|                               |  | 2001                       |            | 2000 |  | % Change
|                               |  |                            |            |      |  |         
|Selling and marketing expenses |  | $                          | 51,055,000 |      |  | $        | 35,175,000 |   |  |  | 45.1 | %
|As a percentage of net sales   |  |                            | 27.3       | %    |  |          | 26.2       | % |  |  |      |  

Selling and marketing expenses primarily consist 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 paid to
eyecare practitioners 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
nine-month periods ended September 30, 2001, as compared to the three- and
nine-month periods ended September 30, 2000, primarily resulted from a
proportionate increase in cooperative merchandising allowances associated with
increased sales during the quarter and from additional sales and marketing
expenses related to the entities we acquired in the Essilor acquisition.



12



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General and Administrative Expenses

|                                    |  |                             |           |      |  |          |           |   |  |  |      |  
|----------------------------------- |  | --------------------------- | --------- | ---- |  | -------- | --------- | - |  |  | ---- | -
|                                    |  | Three Months Ended Sept 30, |           |      |  |         
|                                    |  |                             |           |      |  |         
|                                    |  | 2001                        |           | 2000 |  | % Change
|                                    |  |                             |           |      |  |         
|General and administrative expenses |  | $                           | 9,418,000 |      |  | $        | 5,226,000 |   |  |  | 80.2 | %
|As a percentage of net sales        |  |                             | 13.7      | %    |  |          | 10.9      | % |  |  |      |  

|                                    |  |                            |            |      |  |          |            |   |  |  |      |  
|----------------------------------- |  | -------------------------- | ---------- | ---- |  | -------- | ---------- | - |  |  | ---- | -
|                                    |  | Nine Months Ended Sept 30, |            |      |  |         
|                                    |  |                            |            |      |  |         
|                                    |  | 2001                       |            | 2000 |  | % Change
|                                    |  |                            |            |      |  |         
|General and administrative expenses |  | $                          | 26,741,000 |      |  | $        | 16,057,000 |   |  |  | 66.5 | %
|As a percentage of net sales        |  |                            | 14.3       | %    |  |          | 12.0       | % |  |  |      |  

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 nine-month
periods ended September 30, 2001, general and administrative expenses in
dollars and as a percentage of sales increased, as compared to the three- and
nine-month periods ended September 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. Although our general and administrative
expenses will likely increase in absolute dollars, it is our objective to decrease
general and administrative expenses as a percentage of net sales on annualized
basis.

Research and Development Expenses

|                                  |  |                             |           |      |  |          |           |   |  |  |      |   
|--------------------------------- |  | --------------------------- | --------- | ---- |  | -------- | --------- | - |  |  | ---- | --
|                                  |  | Three Months Ended Sept 30, |           |      |  |         
|                                  |  |                             |           |      |  |         
|                                  |  | 2001                        |           | 2000 |  | % Change
|                                  |  |                             |           |      |  |         
|Research and development expenses |  | $                           | 1,290,000 |      |  | $        | 1,297,000 |   |  |  | (0.5 | %)
|As a percentage of net sales      |  |                             | 1.9       | %    |  |          | 2.7       | % |  |  |      |   

|                                  |  |                            |           |      |  |          |           |   |  |  |      |  
|--------------------------------- |  | -------------------------- | --------- | ---- |  | -------- | --------- | - |  |  | ---- | -
|                                  |  | Nine Months Ended Sept 30, |           |      |  |         
|                                  |  |                            |           |      |  |         
|                                  |  | 2001                       |           | 2000 |  | % Change
|                                  |  |                            |           |      |  |         
|Research and development expenses |  | $                          | 4,509,000 |      |  | $        | 3,288,000 |   |  |  | 37.1 | %
|As a percentage of net sales      |  |                            | 2.4       | %    |  |          | 2.5       | % |  |  |      |  

Research and development expenses, excluding acquired in-process research
and development expenses, are comprised primarily of consulting fees for
research and development projects contracted for external personnel, in-house
labor related to process and new product development. For the three-month
period ended September 30, 2001, as compared to the three-month period ended
September 30, 2000, research and development expenses declined slightly in
dollars and as a percentage of revenue primarily as a result of the timing of
our activities related to a number of new manufacturing process and product
development programs. For the nine-month period ended September 30, 2001, as
compared to the nine-month period ended September 30, 2000, research and
development expenses increased in dollars and as a percentage of revenue
primarily as a result of increased expenditures during the first half of the
year related to these same new manufacturing process and product development
programs. Research and development expenses will fluctuate based on the timing
of new product development projects and our use of outside resources.

Interest and Other Income (Expense), Net

|                                         |  |                             |          |      |  |          |         |   |  |  |        |   
|---------------------------------------- |  | --------------------------- | -------- | ---- |  | -------- | ------- | - |  |  | ------ | --
|                                         |  | Three Months Ended Sept 30, |          |      |  |         
|                                         |  |                             |          |      |  |         
|                                         |  | 2001                        |          | 2000 |  | % Change
|                                         |  |                             |          |      |  |         
|Interest and other income (expense), net |  | $                           | (554,000 | )    |  | $        | 780,000 |   |  |  | (171.0 | %)
|As a percentage of net sales             |  |                             | (0.8     | %)   |  |          | 1.6     | % |  |  |        |   

|                                         |  |                            |         |      |  |          |            |   |  |  |        |   
|---------------------------------------- |  | -------------------------- | ------- | ---- |  | -------- | ---------- | - |  |  | ------ | --
|                                         |  | Nine Months Ended Sept 30, |         |      |  |         
|                                         |  |                            |         |      |  |         
|                                         |  | 2001                       |         | 2000 |  | % Change
|                                         |  |                            |         |      |  |         
|Interest and other income (expense), net |  | $                          | (98,000 | )    |  | $        | 22,492,000 |   |  |  | (100.4 | %)
|As a percentage of net sales             |  |                            | (0.1    | %)   |  |          | 16.8       | % |  |  |        |   



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The decrease in interest and other income in dollar and percentage terms
in the three-month period ended September 30, 2001, as compared to the
three-month period ended September 30, 2000, resulted primarily from decreased
interest income and increased interest costs associated with our advances under
our short-term line of credit during the quarter. The decrease in interest and
other income in dollar and percentage terms in the nine-month period ended
September 30, 2001, as compared to the nine-month period ended September 30,
2000, resulted primarily from the $25 million merger termination fee from
Wesley Jessen, less merger-related expenses of $4.2 million, decreased interest
income and increased interest costs associated with our advances under our
short-term line of credit during the quarter.

Income Taxes

|                   |  |                             |           |      |  |          |           |   |  |  |     |  
|------------------ |  | --------------------------- | --------- | ---- |  | -------- | --------- | - |  |  | --- | -
|                   |  | Three Months Ended Sept 30, |           |      |  |         
|                   |  |                             |           |      |  |         
|                   |  | 2001                        |           | 2000 |  | % Change
|                   |  |                             |           |      |  |         
|Income taxes       |  | $                           | 2,245,000 |      |  | $        | 2,238,000 |   |  |  | 0.3 | %
|Effective tax rate |  |                             | 19.0      | %    |  |          | 23.0      | % |  |  |     |  

|                   |  |                            |           |      |  |          |            |   |  |  |       |   
|------------------ |  | -------------------------- | --------- | ---- |  | -------- | ---------- | - |  |  | ----- | --
|                   |  | Nine Months Ended Sept 30, |           |      |  |         
|                   |  |                            |           |      |  |         
|                   |  | 2001                       |           | 2000 |  | % Change
|                   |  |                            |           |      |  |         
|Income taxes       |  | $                          | 6,415,000 |      |  | $        | 15,109,000 |   |  |  | (57.5 | %)
|Effective tax rate |  |                            | 23.0      | %    |  |          | 32.0       | % |  |  |       |   

In reviewing the overall effects of the Essilor acquisition on our tax
structure, we anticipate our annual effective tax rate will be approximately
22% for 2001. As a result, the effective tax rate for the three-month period
ended September 30, 2001 decreased, as compared to the three-month period ended
September 30, 2000, due to this change. For the nine-month period ended
September 30, 2001 as compared to the nine-month period ended September 30,
2000, our effective tax rate declined due to the change in our annual effective
tax rate as well as the change in our U.S. tax rate applicable to the $25.0
million merger termination fee we received from Wesley Jessen last year.

Liquidity and Capital Resources

At September 30, 2001, we had cash and cash equivalents of $8.7 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
$72.3 million at September 30, 2001. This decrease was primarily due to cash
paid to complete the Essilor acquisition and for associated acquisition
expenses. In the first nine months of 2001, net cash provided by operating
activities of $20.5 million was derived principally from net income of $21.4
million, acquired in-process research and development charges of $4.2 million,
depreciation and amortization charges of $13.1 million, an increase in
provisions for product returns, doubtful accounts, excess and obsolete
inventory, damaged and scrap products, and exchange loss of $0.1 million in the
aggregate, and offset by a net decrease in operating assets and liabilities of
$17.5 million, and deferred income tax payments of $0.8 million.

Net cash used in investing activities in the first nine months of 2001 was
$67.3 million, consisting primarily of the $48.3 million paid in the Essilor
acquisition, $30.1 million expended to purchase property and equipment, $0.5
million for loans to officers and employees and offset by $11.6 million of net
maturities of short and long-term investments. We anticipate that capital
expenditures will be approximately $35-40 million in 2001 (including the $30.1
million in the first nine 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



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or delay implementation based on market conditions and demand for
our products.

Net cash provided by financing activities in the first nine months of 2001
was $1.4 million, consisting primarily of the $6.0 million proceeds from
issuance of short term debt, $2.2 million from the issuance of common stock
under our employee stock option plans and offset by $6.8 million in repayments
of bank debt and repayments under capital lease obligations. In comparison, in
the first nine months of 2000 net cash used in financing activities was $0.2
million, consisting primarily of $0.7 million in repayments of long-term debt,
$0.2 million in repurchases of common stock, offset by $0.7 million in proceeds
from the issuance of common stock under our employee stock option plans.

In addition to cash, cash equivalents and short and long-term investments,
we have a credit facility with Comerica Bank  California. Our credit agreement
with Comerica Bank provides up to $20.0 million of revolving loans, which
mature on September 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 September
30, 2001, we had no revolving loans outstanding under the credit agreement with
Comerica Bank. In addition, the credit agreement provided up to $10.0 million
of term loans to Ocular Sciences Puerto Rico, Inc. 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
September 30, 2001, Ocular Sciences Puerto Rico, Inc. had $900,000 in term
loans outstanding under the credit agreement with Comerica Bank. Principal
installments of $300,000 are due quarterly and all outstanding principal and
unpaid interest is due and payable on July 31, 2002. The credit agreement with
Comerica Bank contains covenants, which, among other things, require us to
maintain certain financial ratios. We are currently out of compliance with one
financial covenant and are in the process of obtaining a waiver from Comerica.
Borrowings under the credit agreement are secured by a pledge of 100% of the
outstanding common stock of Ocular Sciences Puerto Rico, Inc. and 65% of the
outstanding stock of our Barbados and Canadian subsidiaries. In addition, we
and Ocular Sciences Puerto Rico, Inc. have each guaranteed the others
borrowings under the credit agreement with Comerica Bank.

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, our Board of Directors approved 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 September 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 in the nine-months ended September 30, 2001. This change 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,



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Business Combinations, and SFAS No. 142, Goodwill
and Other Intangible Assets. SFAS No. 141 provides 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 provides guidance on how to account for goodwill and intangible
assets after an acquisition is completed. The most substantive change is that
goodwill and other indefinite life assets 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. We are currently evaluating the impact of
this statement as we expect to adopt the statement at the beginning of fiscal
2002.

In July 2001, the FASB issued SFAS No. 143,  Accounting for Asset
Retirement Obligations. SFAS No. 143 requires liability recognition for
obligations associated with the retirement of tangible long-lived asset and the
associated asset retirement costs. We are required to adopt the provisions of
SFAS No. 143 effective January 1, 2003, with earlier application encouraged. We
are currently evaluating the impact of this statement as we expect to adopt the
statement at the beginning of fiscal 2002.

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, in that it removes goodwill from its impairment
scope and allows for different approaches in cash flow estimation. However,
SFAS No. 144 retains the fundamental provisions of SFAS No. 121 for (a)
recognition and measurement of long-live assets to be held and used and (b)
measurement of ling-lived assets to be disposed of. SFAS No. 144 also
supersedes the business segment concept in APB Opinion No. 30, Reporting the
Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions, in that it permits presentation of a component of an entity,
whether classified as held for sale or disposed of, as a discontinued
operation. However, SFAS No.144 retains the requirement of APB Opinion No. 30
to report discontinued operations separately from continuing operations. We
are required to adopt the provision of SFAS No. 144 effective January 1, 2002,
with earlier application encouraged. We are currently evaluating the impact of
this statement as we expect to adopt the statement at the beginning of fiscal
2002.




Item 3. Quantitative And Qualitative Disclosures About Market Risk

Interest Rate 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 September 30, 2001, the
outstanding balance under our term loan with Comerica Bank was $900,000 and is
payable in quarterly installments of $300,000, with any remaining balance to be
paid on July 31, 2002.

Foreign Currency Translation Risk

We have various foreign operations that exposes it to foreign currency
translation risk when the local currency financial statements are translated to
U.S. dollars. Management monitors this exposure on an on-going basis. The
fluctuations in foreign currency translation adjustments are reported as a
component of comprehensive income.

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 6. Exhibits and Reports on Form 8-K



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(a)  The following exhibits are filed herewith:

|        |  |                                                                                               
|------- |  | ----------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                               
|Number  |  | Description                                                                                   
|        |  |                                                                                               
|10.1    |  | Employment Agreement between Stephen J. Fanning and Ocular
Sciences, Inc. dated August 8, 2001

(b)  Reports on Form 8-K:

None



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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.



|Date: November 13, 2001 | OCULAR SCIENCES, INC.
(Registrant)
 
 
/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)
|----------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Exhibit Index

|        |  |                                                                                                       
|------- |  | ------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                       
|Number  |  | Exhibit Index                                                                                         
|        |  |                                                                                                       
|10.1    |  | Employment Agreement between Stephen J. Fanning and Ocular
Sciences, Inc., dated as of August 8, 2001.



19