##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

|     |  |                                                                                                                                     
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------
|xbox |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934                                             
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|     |  | For the Quarterly Period Ended March 31, 2002                                                                                       
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|     |  |                                                                                                                                     
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|     |  | OR                                                                                                                                  
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|     |  |                                                                                                                                     
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|box  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ____ to ____

Commission File No. 0-22623

OCULAR SCIENCES, INC.

(Exact name of registrant as specified in its charter)


|                                |  |                    
|------------------------------- |  | -------------------
|Delaware                        |  | 94-2985696         
|                               
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|(State or other jurisdiction of |  | (I.R.S. Employer   
|                               
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|incorporation or organization)  |  | 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
(CHECKBOX        NO box.

As of April 29, 2002, there were outstanding 23,548,656 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 1. Legal Proceedings                                                                    
|                               | Item 2. Changes in Securities and Use of Proceeds                                            
|                               | Item 3. Defaults Upon Senior Securities                                                      
|                               | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                               | Item 5. Other Information                                                                    
|SIGNATURES                    
|Exhibit 10.1                  
|Exhibit 10.2                  
|Exhibit 10.3                  



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##### Table of Contents



OCULAR SCIENCES, INC.

INDEX

|                               |  |                                                                                       |  |                                                                                              |    |      |    | 
|------------------------------ |  | ------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                               |  |                                                                                       |  |                                                                                              |    | Page
|                               |  |                                                                                       |  |                                                                                              |    |     
|PART I  FINANCIAL INFORMATION |  |                                                                                       |  |                                                                                             
|                              
|                              
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|                              
|                               |  |                                                                                      
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|                              
|Item 1.                        |  | Financial Statements (Unaudited)                                                      |  |                                                                                              | 3  |     
|                              
|                              
|                              
|                              
|                               |  |                                                                                      
|                              
|                              
|                              
|                              
|                               |  |                                                                                       |  | Condensed Consolidated Balance Sheets 
March 31, 2002 and December 31, 2001                 |    |      | 3  | 
|                              
|                              
|                              
|                              
|                               |  |                                                                                      
|                              
|                              
|                              
|                              
|                               |  |                                                                                       |  | Condensed Consolidated Statements of Income 
Three Months Ended March 31, 2002 and 2001     |    |      | 4  | 
|                              
|                              
|                              
|                              
|                               |  |                                                                                      
|                              
|                              
|                              
|                              
|                               |  |                                                                                       |  | Condensed Consolidated Statements of Cash Flows 
Three Months Ended March 31, 2002 and 2001 |    |      | 5  | 
|                              
|                              
|                              
|                              
|                               |  |                                                                                      
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|                              
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|                               |  |                                                                                       |  | Notes to Condensed Consolidated Financial Statements                                         |    |      | 6  | 
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|                              
|                              
|                              
|                               |  |                                                                                      
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|                              
|Item 2.                        |  | Managements Discussion and Analysis of
Financial Condition and Results of Operations |  |                                                                                              | 11 |     
|                              
|                              
|                              
|                              
|                               |  |                                                                                      
|                              
|                              
|                              
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|Item 3.                        |  | Quantitative and Qualitative Disclosures about Market Risk                            |  |                                                                                              | 21 |     
|                              
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|                               |  |                                                                                      
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|PART II  OTHER INFORMATION    |  |                                                                                       |  |                                                                                             
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|Item 1.                        |  | Legal Proceedings                                                                     |  |                                                                                              | 22 |     
|                              
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|                              
|                               |  |                                                                                      
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|                              
|Item 2.                        |  | Changes in Securities and Use of
Proceeds                                             |  |                                                                                              | 22 |     
|                              
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|                               |  |                                                                                      
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|Item 3.                        |  | Defaults Upon Senior Securities                                                       |  |                                                                                              | 22 |     
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|                               |  |                                                                                      
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|Item 4.                        |  | Submission of Matters to a Vote of Security Holders                                   |  |                                                                                              | 22 |     
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|                              
|                               |  |                                                                                      
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|Item 5.                        |  | Other Information                                                                     |  |                                                                                              | 22 |     
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|                               |  |                                                                                      
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|                              
|Item 6.                        |  | Exhibits and Reports on Form 8-K                                                      |  |                                                                                              | 23 |     
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|                               |  |                                                                                      
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|                               |  |                                                                                       |  | Signatures                                                                                   |    |      | 24 | 

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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)

|                                     |                                                                                                                                                       |                                            |         |           |         |              |         |         |         | 
|------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | --------- | ------- | ------------ | ------- | ------- | ------- | 
|                                     |                                                                                                                                                       |                                            |         | March 31, |         | December 31,
|                                     |                                                                                                                                                       |                                            |         | 2002      |         | 2001        
|                                     |                                                                                                                                                       |                                            |         |           |         |             
|ASSETS                               |                                                                                                                                                       |                                            |         |           |         |              |         |        
|                                    
|                                    
|                                    
|                                    
|Current Assets:                      |                                                                                                                                                       |                                            |         |           |         |              |         |        
|                                    
|                                    
|                                    
|                                    
|                                     | Cash and cash equivalents                                                                                                                             |                                            | $       | 4,285     |         |              | $       | 7,789   |        
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts receivable, less allowance for sales returns and doubtful
accounts of $2,019 and $2,389 for 2002 and 2001, respectively                      |                                            |         | 54,045    |         |              |         | 46,696  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Inventories                                                                                                                                           |                                            |         | 47,767    |         |              |         | 46,772  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Prepaid expenses and other current assets                                                                                                             |                                            |         | 16,292    |         |              |         | 24,721  |        
|                                     |                                                                                                                                                       |                                            |         |           |         |              |         |        
|                                     |                                                                                                                                                       | Total Current Assets                       |         |           | 122,389 |              |         |         | 125,978 | 
|                                    
|                                    
|                                    
|                                    
|Property and equipment, net          |                                                                                                                                                       |                                            | 134,124 |           |         |              | 128,157 |        
|                                    
|                                    
|                                    
|                                    
|Intangible assets, net               |                                                                                                                                                       |                                            | 44,416  |           |         |              | 45,765  |        
|                                    
|                                    
|                                    
|                                    
|Loans to officers and employees      |                                                                                                                                                       |                                            | 1,404   |           |         |              | 1,505   |        
|                                    
|                                    
|                                    
|                                    
|Long-term investments                |                                                                                                                                                       |                                            | 269     |           |         |              | 280     |        
|                                    
|                                    
|                                    
|                                    
|Other assets                         |                                                                                                                                                       |                                            | 2,035   |           |         |              | 2,652   |        
|                                     |                                                                                                                                                       |                                            |         |           |         |              |         |        
|                                     |                                                                                                                                                       | Total Assets                               |         | $         | 304,637 |              |         | $       | 304,337 | 
|                                     |                                                                                                                                                       |                                            |         |           |         |              |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY |                                                                                                                                                       |                                            |         |           |         |              |         |        
|                                    
|                                    
|                                    
|                                    
|Current Liabilities:                 |                                                                                                                                                       |                                            |         |           |         |              |         |        
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts payable                                                                                                                                      |                                            | $       | 9,551     |         |              | $       | 14,474  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Accrued liabilities                                                                                                                                   |                                            |         | 33,770    |         |              |         | 34,155  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Current portion of long-term debt                                                                                                                     |                                            |         | 11,730    |         |              |         | 12,660  |        
|                                     |                                                                                                                                                       |                                            |         |           |         |              |         |        
|                                     |                                                                                                                                                       | Total Current Liabilities                  |         |           | 55,051  |              |         |         | 61,289  | 
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred income taxes                                                                                                                                 |                                            |         | 3,964     |         |              |         | 4,394   |        
|                                    
|                                    
|                                    
|                                    
|                                     | Other liabilities                                                                                                                                     |                                            |         | 2,148     |         |              |         | 5,375   |        
|                                    
|                                    
|                                    
|                                    
|                                     | Long-term debt, less current portion                                                                                                                  |                                            |         | 3,288     |         |              |         | 3,388   |        
|                                     |                                                                                                                                                       |                                            |         |           |         |              |         |        
|                                     |                                                                                                                                                       | Total Liabilities                          |         |           | 64,451  |              |         |         | 74,446  | 
|                                     |                                                                                                                                                       |                                            |         |           |         |              |         |        
|Commitments and contingencies        |                                                                                                                                                       |                                            |         |           |         |              |         |        
|                                    
|                                    
|                                    
|                                    
|Stockholders Equity:                |                                                                                                                                                       |                                            |         |           |         |              |         |        
|                                    
|                                    
|                                    
|                                    
|                                     | Preferred stock, $0.001 par value; 4,000,000 shares authorized;
none issued                                                                           |                                            |         |          |         |              |         |        |        
|                                    
|                                    
|                                    
|                                    
|                                     | Common stock, $0.001 par value; 80,000,000 shares authorized;
23,551,746 and 23,457,185 shares issued and outstanding
for 2002 and 2001, respectively |                                            |         | 24        |         |              |         | 24      |        
|                                    
|                                    
|                                    
|                                    
|                                     | Additional paid-in capital                                                                                                                            |                                            |         | 86,820    |         |              |         | 85,025  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Retained earnings                                                                                                                                     |                                            |         | 158,717   |         |              |         | 148,624 |        
|                                    
|                                    
|                                    
|                                    
|                                     | Accumulated other comprehensive income (loss)                                                                                                         |                                            |         | (5,375    | )       |              |         | (3,782  | )      
|                                     |                                                                                                                                                       |                                            |         |           |         |              |         |        
|                                     |                                                                                                                                                       | Total Stockholders Equity                 |         |           | 240,186 |              |         |         | 229,891 | 
|                                     |                                                                                                                                                       |                                            |         |           |         |              |         |        
|                                     |                                                                                                                                                       | Total Liabilities and Stockholders Equity |         | $         | 304,637 |              |         | $       | 304,337 | 
|                                     |                                                                                                                                                       |                                            |         |           |         |              |         |        

See accompanying notes to condensed consolidated financial statements.

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##### Table of Contents






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

|                                                      |                                                                                  |                        |        |                    |        |      |        |            |        | 
|----------------------------------------------------- | -------------------------------------------------------------------------------- | ---------------------- | ------ | ------------------ | ------ | ---- | ------ | ---------- | ------ | 
|                                                      |                                                                                  |                        |        | Three months ended
|                                                      |                                                                                  |                        |        | March 31,         
|                                                      |                                                                                  |                        |        |                   
|                                                      |                                                                                  |                        |        | 2002               |        | 2001
|                                                      |                                                                                  |                        |        |                    |        |     
|Net sales                                             |                                                                                  | $                      | 60,811 |                    |        | $    | 50,051 |           
|                                                     
|                                                     
|                                                     
|                                                     
|Cost of sales                                         |                                                                                  |                        | 27,330 |                    |        |      | 21,653 |           
|                                                      |                                                                                  |                        |        |                    |        |      |        |           
|                                                      |                                                                                  | Gross profit           |        |                    | 33,481 |      |        |            | 28,398 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Selling and marketing expenses                        |                                                                                  |                        | 10,137 |                    |        |      | 8,643  |           
|                                                     
|                                                     
|                                                     
|                                                     
|General and administrative expenses                   |                                                                                  |                        | 10,032 |                    |        |      | 7,997  |           
|                                                     
|                                                     
|                                                     
|                                                     
|Research and development expenses                     |                                                                                  |                        | 1,018  |                    |        |      | 1,541  |           
|                                                     
|                                                     
|                                                     
|                                                     
|Acquired in-process research and development expenses |                                                                                  |                        |       |                    |        |      | 4,150  |           
|                                                      |                                                                                  |                        |        |                    |        |      |        |           
|                                                      |                                                                                  | Income from operations |        |                    | 12,294 |      |        |            | 6,067  | 
|                                                     
|                                                     
|                                                     
|                                                     
|Interest expense                                      |                                                                                  |                        | (341   | )                  |        |      | (117   | )         
|                                                     
|                                                     
|                                                     
|                                                     
|Interest income                                       |                                                                                  |                        | 26     |                    |        |      | 598    |           
|                                                     
|                                                     
|                                                     
|                                                     
|Other income (expense)                                |                                                                                  |                        | 330    |                    |        |      | (29    | )         
|                                                      |                                                                                  |                        |        |                    |        |      |        |           
|                                                      |                                                                                  | Income before taxes    |        |                    | 12,309 |      |        |            | 6,519  | 
|                                                     
|                                                     
|                                                     
|                                                     
|Income taxes                                          |                                                                                  |                        | (2,216 | )                  |        |      | (1,702 | )         
|                                                      |                                                                                  |                        |        |                    |        |      |        |           
|                                                      |                                                                                  | Net income             |        | $                  | 10,093 |      |        | $          | 4,817  | 
|                                                      |                                                                                  |                        |        |                    |        |      |        |           
|Net income per share data:                            |                                                                                  |                        |        |                    |        |      |        |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Net income per share (basic)                                                     |                        | $      | 0.43               |        |      | $      | 0.21       |       
|                                                      |                                                                                  |                        |        |                    |        |      |        |           
|                                                      | Net income per share (diluted)                                                   |                        | $      | 0.41               |        |      | $      | 0.20       |       
|                                                      |                                                                                  |                        |        |                    |        |      |        |           
|                                                      | Weighted average common
shares outstanding                                       |                        |        | 23,498,971         |        |      |        | 23,310,572 |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Weighted average diluted potential common
shares under the treasury stock method |                        |        | 950,115            |        |      |        | 317,921    |       
|                                                      |                                                                                  |                        |        |                    |        |      |        |           
|                                                      | Total weighted average common
and dilutive potential common
shares outstanding   |                        |        | 24,449,086         |        |      |        | 23,628,493 |       
|                                                      |                                                                                  |                        |        |                    |        |      |        |           

See accompanying notes to condensed consolidated financial statements.

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##### Table of Contents






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

|                                                                         |                                                                                   |                                                         |                                                                |                                                     |         |                              |         |       |         |        |         |  
|------------------------------------------------------------------------ | --------------------------------------------------------------------------------- | ------------------------------------------------------- | -------------------------------------------------------------- | --------------------------------------------------- | ------- | ---------------------------- | ------- | ----- | ------- | ------ | ------- | -
|                                                                         |                                                                                   |                                                         |                                                                |                                                     |         | Three months ended March 31,
|                                                                         |                                                                                   |                                                         |                                                                |                                                     |         |                             
|                                                                         |                                                                                   |                                                         |                                                                |                                                     |         | 2002                         |         | 2001 
|                                                                         |                                                                                   |                                                         |                                                                |                                                     |         |                              |         |      
|Cash flows from operating activities:                                    |                                                                                   |                                                         |                                                                |                                                     |         |                              |         |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Net income                                                                        |                                                         | $                                                              | 10,093                                              |         |                              | $       | 4,817 |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Adjustments to reconcile net income to net cash provided
by operating activities: |                                                         |                                                                |                                                     |         |                              |         |       |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   |                                                         | Depreciation and amortization                                  |                                                     |         | 4,754                        |         |       |         | 4,221  |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   |                                                         | Amortization of loans to officers and employees                |                                                     |         | 101                          |         |       |         |       |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   |                                                         | Income tax benefits from stock options exercised               |                                                     |         | 249                          |         |       |         | 23     |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   |                                                         | Provision
for (charges to) sales returns and doubtful accounts |                                                     |         | (110                         | )       |       |         | 34     |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   |                                                         | Provision for excess and obsolete inventory                    |                                                     |         | 280                          |         |       |         | 367    |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   |                                                         | Loss
on sale/disposal of property and equipment                |                                                     |         | 119                          |         |       |         |       |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   |                                                         | Exchange (gain) loss                                           |                                                     |         | (447                         | )       |       |         | 68     |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   |                                                         | Acquired in-process research and development                   |                                                     |         |                             |         |       |         | 4,150  |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   |                                                         | Deferred income taxes                                          |                                                     |         | (430                         | )       |       |         | (644   | )      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Changes in operating assets and liabilities:                                      |                                                         |                                                                |                                                     |         |                              |         |       |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   |                                                         | Accounts receivable                                            |                                                     |         | (7,239                       | )       |       |         | (3,353 | )      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   |                                                         | Inventories                                                    |                                                     |         | (1,275                       | )       |       |         | (7,564 | )      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   |                                                         | Prepaid expenses, other current and non-current assets         |                                                     |         | 9,046                        |         |       |         | (759   | )      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   |                                                         | Accounts payable                                               |                                                     |         | (4,922                       | )       |       |         | 6,537  |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   |                                                         | Accrued and other liabilities                                  |                                                     |         | (3,948                       | )       |       |         | 2,341  |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   |                                                         | Income and other taxes payable                                 |                                                     |         | 1,310                        |         |       |         | (1,168 | )      
|                                                                         |                                                                                   |                                                         |                                                                |                                                     |         |                              |         |      
|                                                                         |                                                                                   |                                                         |                                                                | Net cash provided by operating activities           |         |                              | 7,581   |       |         |        | 9,070   |  
|                                                                         |                                                                                   |                                                         |                                                                |                                                     |         |                              |         |      
|Cash flows from investing activities:                                    |                                                                                   |                                                         |                                                                |                                                     |         |                              |         |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   | Purchase of property and equipment                      |                                                                |                                                     | (10,465 | )                            |         |       | (6,368  | )     
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   | Sales and maturities of short and long-term investments |                                                                |                                                     | 9       |                              |         |       | 5,530   |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   | Payment for acquisition, net of cash acquired           |                                                                |                                                     |        |                              |         |       | (48,272 | )     
|                                                                         |                                                                                   |                                                         |                                                                |                                                     |         |                              |         |      
|                                                                         |                                                                                   |                                                         |                                                                | Net cash used in investing activities               |         |                              | (10,456 | )     |         |        | (49,110 | )
|                                                                         |                                                                                   |                                                         |                                                                |                                                     |         |                              |         |      
|Cash flows from financing activities:                                    |                                                                                   |                                                         |                                                                |                                                     |         |                              |         |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   | Proceeds from issuance of short-term debt               |                                                                |                                                     | 15,000  |                              |         |       |        |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   | Repayment of short and long-term debt                   |                                                                |                                                     | (15,000 | )                            |         |       | (300    | )     
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   | Repayment of capital lease obligation                   |                                                                |                                                     | (1,030  | )                            |         |       | (234    | )     
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   | Proceeds from issuance of common stock                  |                                                                |                                                     | 1,546   |                              |         |       | 41      |       
|                                                                         |                                                                                   |                                                         |                                                                |                                                     |         |                              |         |      
|                                                                         |                                                                                   |                                                         |                                                                | Net cash provided by (used in) financing activities |         |                              | 516     |       |         |        | (493    | )
|                                                                         |                                                                                   |                                                         |                                                                |                                                     |         |                              |         |      
|Effect of exchange rate changes on cash and cash equivalents             |                                                                                   |                                                         | (1,145                                                         | )                                                   |         |                              | (882    | )    
|                                                                         |                                                                                   |                                                         |                                                                |                                                     |         |                              |         |      
|                                                                         |                                                                                   |                                                         |                                                                | Net decrease in cash and cash equivalents           |         |                              | (3,504  | )     |         |        | (41,415 | )
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Cash and cash equivalents at beginning of period                         |                                                                                   |                                                         | 7,789                                                          |                                                     |         |                              | 55,109  |      
|                                                                         |                                                                                   |                                                         |                                                                |                                                     |         |                              |         |      
|Cash and cash equivalents at end of period                               |                                                                                   | $                                                       | 4,285                                                          |                                                     |         | $                            | 13,694  |      
|                                                                         |                                                                                   |                                                         |                                                                |                                                     |         |                              |         |      
|Supplementary
cash flow information:                                     |                                                                                   |                                                         |                                                                |                                                     |         |                              |         |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Cash
paid during the year for:                                                    |                                                         |                                                                |                                                     |         |                              |         |       |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   | Interest                                                |                                                                | $                                                   | 272     |                              |         | $     | 47      |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                   | Taxes                                                   |                                                                | $                                                   | 906     |                              |         | $     | 2,870   |       
|Supplementary
disclosure of non-cash investing and financing activities: |                                                                                   |                                                         |                                                                |                                                     |         |                              |         |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Adjustment
to liabilities assumed in connection with the Essilor acquisition      |                                                         | $                                                              | 974                                                 |         |                              | $       |      |        

See accompanying notes to condensed consolidated financial statements.

5



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##### Table of Contents






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

Note 1  Basis of Preparation

The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not contain all of the
information and footnotes required by accounting principles generally accepted
in the United States of America, for complete financial statements. In the
opinion of management, the accompanying unaudited condensed consolidated
financial statements have been prepared on the same basis as the audited
consolidated financial statements and include all adjustments, consisting only
of normal recurring adjustments, necessary for the fair presentation of our
financial condition as of March 31, 2002 and the results of our operations and
comprehensive income and our cash flows for the three-month periods ended March 31, 2002 and 2001.
These unaudited condensed consolidated financial statements should be read in
conjunction with our audited consolidated financial statements as of December
31, 2001 and 2000 and for each of the years in the three-year period ended
December 31, 2001, including notes thereto, included in our Annual Report on
Form 10-K for the year ended December 31, 2001. Operating results for the
three-month period ended March 31, 2002 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2002.

Note 2  New Accounting Standards

The Financial Accounting Standards Boards Emerging Issues Task Force
(EITF) issued EITF 00-14, Accounting for Certain Sales Incentives, effective
January 1, 2002. This Issue requires that costs related to consumer coupons to
be classified as a reduction of revenue. Comparable amounts in prior years are
required to be reclassified in accordance with this Issue. We reclassified as
deductions in net sales approximately $173,000 of marketing expenses which were
previously classified as selling and marketing expenses in the first quarter of
2001.

EITF also issued EITF 00-25, Vendor Income Statement Characterization of
Consideration to a Purchaser of the Vendors Products or Services, effective
January 1, 2002. This Issue requires that certain of our customer promotional
incentive payments, primarily cooperative merchandising allowances, to be
classified as a reduction of revenue. Comparable amounts in prior years are
required to be reclassified in accordance with this Issue. We reclassified as
deductions in net sales approximately $6.6 million of cooperative merchandising
allowances which were previously classified as selling and marketing expenses
in the first quarter of 2001.

In July 2001, the Financial Accounting Standards Board approved the
issuance of Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets. SFAS No. 142 provides guidance on how
to account for goodwill and certain intangible assets after an acquisition is
completed. The most substantive change is that goodwill and other indefinite
life intangible assets can no longer be amortized but instead should be
periodically tested for impairment. This statement applies to existing
goodwill and intangible assets beginning with fiscal years starting after
December 15, 2001. The Company reevaluated
its intangible asset lives and no adjustment to the useful life was
determined to be necessary. In accordance with Statement No. 142, the
Company intends to complete a transitional goodwill impairment test
by June 30, 2002 and does not anticipate recognizing an
impairment loss. Going forward, the annual impairment test required
by SFAS No. 142 will be performed in the fourth quarter. No
reclassification of intangible assets apart from goodwill was
necessary as a result of the adoption of Statement No. 142. We have also stopped
the amortization of approximately $34.6 million of goodwill

6



---



##### Table of Contents



and other intangible assets beginning January 1, 2002. This reduction in
amortization effective January 1, 2002 may affect the comparability of current
period results of operations with prior periods. The following table discloses
what reported net income and basic and diluted earnings per share would have
been in all periods presented exclusive of amortization expense (including tax
related effects, reported in U.S. dollars in thousands, except for per share
amounts):

|                     |                                                                     |   |                              |   |      |   |       |     | 
|-------------------- | ------------------------------------------------------------------- | - | ---------------------------- | - | ---- | - | ----- | --- | 
|                     |                                                                     |   | Three months ended March 31,
|                     |                                                                     |   |                             
|                     |                                                                     |   | 2002                         |   | 2001
|                     |                                                                     |   |                              |   |     
|Net income:          |                                                                     |   |                              |   |      |   |       |    
|                    
|                    
|                    
|                    
|Reported net income: |                                                                     | $ | 10,093                       |   |      | $ | 4,817 |    
|                    
|                    
|                    
|                    
|                     | Add
back: Goodwill and assembled workforce amortization, net of tax |   |                              |  |      |   |       | 310 | 
|                    
|                    
|                    
|                    
|Adjusted net income: |                                                                     | $ | 10,093                       |   |      | $ | 5,127 |    

|                          |                                                           |   |                              |   |      |   |      |     | 
|------------------------- | --------------------------------------------------------- | - | ---------------------------- | - | ---- | - | ---- | --- | 
|                          |                                                           |   | Three months ended March 31,
|                          |                                                           |   |                             
|                          |                                                           |   | 2002                         |   | 2001
|                          |                                                           |   |                              |   |     
|Basic earnings per share: |                                                           |   |                              |   |      |   |      |    
|                         
|                         
|                         
|                         
|Reported net income:      |                                                           | $ | 0.43                         |   |      | $ | 0.21 |    
|                         
|                         
|                         
|                         
|                          | Goodwill
and assembled workforce amortization, net of tax |   |                              |  |      |   |      | .01 | 
|                         
|                         
|                         
|                         
|Adjusted net income:      |                                                           | $ | 0.43                         |   |      | $ | 0.22 |    

|                            |                                                           |   |                              |   |      |   |      |     | 
|--------------------------- | --------------------------------------------------------- | - | ---------------------------- | - | ---- | - | ---- | --- | 
|                            |                                                           |   | Three months ended March 31,
|                            |                                                           |   |                             
|                            |                                                           |   | 2002                         |   | 2001
|                            |                                                           |   |                              |   |     
|Diluted earnings per share: |                                                           |   |                              |   |      |   |      |    
|                           
|                           
|                           
|                           
|Reported net income:        |                                                           | $ | 0.41                         |   |      | $ | 0.20 |    
|                           
|                           
|                           
|                           
|                            | Goodwill
and assembled workforce amortization, net of tax |   |                              |  |      |   |      | .02 | 
|                           
|                           
|                           
|                           
|Adjusted net income:        |                                                           | $ | 0.41                         |   |      | $ | 0.22 |    

The
following table details the change in goodwill (U.S. dollars in
thousands):

|                                                                             |  |   |         |  
|---------------------------------------------------------------------------- |  | - | ------- | -
|Balance
as of December 31, 2001                                              |  | $ | 31,965 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Adjustment
to liabilities assumed in connection with the Essilor acquisition |  |   | (974    | )
|                                                                             |  |   |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Balance
as of March 31, 2002                                                 |  |   | $30,991
|                                                                             |  |   |        

In June 2001, the Financial
Accounting Standards Board (FASB) issued SFAS No. 143, Accounting
for Asset Retirement Obligations. SFAS No. 143 addresses
financial accounting and reporting for obligations associated with
the retirement of tangible long-lived assets and the associated asset
retirement costs. This Statement applies to legal obligations
associated with retirement of long-lived assets that result from the
acquisition, construction, development or normal use of the asset.
SFAS No. 143 is effective for fiscal years beginning after
June 15, 2002. The Company is currently evaluating the impact
of SFAS No. 143 on its financial statements and related
disclosures.

In October 2001, the
FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, which addresses financial accounting and reporting
for the impairment or disposal of long-lived assets. While SFAS
No. 144 supersedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of, it retains many of the fundamental provisions of that
Statement. The Company adopted the provisions of SFAS No. 144
commencing January 1, 2002. The effects of adopting SFAS
No. 144 did not have a significant impact on the Company's
financial position or results of operations.

Note 3  Inventories

Inventories consisted of the following (U.S. dollars in thousands):

|                |  |           |        |              |  |   |        | 
|--------------- |  | --------- | ------ | ------------ |  | - | ------ | 
|                |  | March 31, |        | December 31,
|                |  | 2002      |        | 2001        
|                |  |           |        |             
|Raw materials   |  | $         | 6,824  |              |  | $ | 6,313  | 
|               
|               
|               
|               
|Work in process |  |           | 4,054  |              |  |   | 3,866  | 
|               
|               
|               
|               
|Finished goods  |  |           | 36,889 |              |  |   | 36,593 | 
|                |  |           |        |              |  |   |        | 
|                |  | $         | 47,767 |              |  | $ | 46,772 | 
|                |  |           |        |              |  |   |        | 

7



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##### Table of Contents



Note 4  Prepaid Expenses and Other Current Assets and Accrued Liabilities

Prepaid expenses and other current assets consisted of the following (U.S.
dollars in thousands):

|                             |  |           |        |              |  |   |        | 
|---------------------------- |  | --------- | ------ | ------------ |  | - | ------ | 
|                             |  | March 31, |        | December 31,
|                             |  | 2002      |        | 2001        
|                             |  |           |        |             
|Refundable taxes             |  | $         |       |              |  | $ | 7,426  | 
|                            
|                            
|                            
|                            
|Deferred income taxes        |  |           | 7,982  |              |  |   | 8,269  | 
|                            
|                            
|                            
|                            
|Value added taxes receivable |  |           |       |              |  |   | 2,803  | 
|                            
|                            
|                            
|                            
|Prepaid insurance            |  |           | 2,085  |              |  |   | 2,472  | 
|                            
|                            
|                            
|                            
|Prepaid expenses             |  |           | 3,629  |              |  |   | 1,329  | 
|                            
|                            
|                            
|                            
|Other current assets         |  |           | 2,596  |              |  |   | 2,422  | 
|                             |  |           |        |              |  |   |        | 
|                             |  | $         | 16,292 |              |  | $ | 24,721 | 
|                             |  |           |        |              |  |   |        | 

Accrued liabilities consisted of the following (U.S. dollars in
thousands):

|                                             |  |           |        |              |  |   |        | 
|-------------------------------------------- |  | --------- | ------ | ------------ |  | - | ------ | 
|                                             |  | March 31, |        | December 31,
|                                             |  | 2002      |        | 2001        
|                                             |  |           |        |             
|Accrued expenses                             |  | $         | 23,898 |              |  | $ | 28,337 | 
|                                            
|                                            
|                                            
|                                            
|Accrued cooperative merchandising allowances |  |           | 7,122  |              |  |   | 5,318  | 
|                                            
|                                            
|                                            
|                                            
|Accrued value added taxes                    |  |           | 866    |              |  |   |       | 
|                                            
|                                            
|                                            
|                                            
|Deferred income taxes                        |  |           | 74     |              |  |   |       | 
|                                            
|                                            
|                                            
|                                            
|Income taxes payable                         |  |           | 1,810  |              |  |   | 500    | 
|                                             |  |           |        |              |  |   |        | 
|                                             |  | $         | 33,770 |              |  | $ | 34,155 | 
|                                             |  |           |        |              |  |   |        | 

Note 5   Comprehensive Income

|                                             |  |                              |        |      |  |   |       |  
|-------------------------------------------- |  | ---------------------------- | ------ | ---- |  | - | ----- | -
|                                             |  | Three
months ended
March 31,
|                                             |  |                             
|                                             |  | 2002                         |        | 2001
|                                             |  |                              |        |     
|Net
income                                   |  | $                            | 10,093 |      |  | $ | 4,817 |  
|                                            
|                                            
|                                            
|                                            
|                                             |  |                              |        |      |  |   |       |  
|Foreign
Currency Translation Adjustment      |  |                              | (1,591 | )    |  |   | (836  | )
|                                            
|                                            
|                                            
|                                            
|Net
Unrealized Gains/(Losses) on Investments |  |                              | (2     | )    |  |   | 21    |  
|                                            
|                                            
|                                            
|                                            
|                                             |  |                              |        |      |  |   |       |  
|Other
Comprehensive Loss                     |  |                              | (1,593 | )    |  |   | (815  | )
|                                            
|                                            
|                                            
|                                            
|                                             |  |                              |        |      |  |   |       |  
|Comprehensive
Income                         |  | $                            | 8,500  |      |  | $ | 4,002 |  
|                                             |  |                              |        |      |  |   |       |  

Note 6   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 801,450 and 2,317,999 shares of our common stock 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 $26.10 and $15.52 per share for the three months ended March 31, 2002 and
March 31, 2001, respectively.

Note 7   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
Essilors 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s contact lens business form part
of our operating results from February 1, 2001.

The $48,590,000 purchase price for the assets acquired and liabilities
assumed was comprised of $44,476,000 in cash and $4,114,000 in acquisition
costs. There were no contingent payments, pre-acquisition contingencies or
other commitments specified in the acquisition agreement.

8



---



##### Table of Contents



The
purchase price was allocated as follows (U.S. dollars in
thousands):

|                                    |  |   |         |  
|----------------------------------- |  | - | ------- | -
|Goodwill                            |  | $ | 29,647  |  
|                                   
|                                   
|                                   
|                                   
|Inventory, net                      |  |   | 6,532   |  
|                                   
|                                   
|                                   
|                                   
|Accounts receivable, net            |  |   | 6,127   |  
|                                   
|                                   
|                                   
|                                   
|Property and equipment              |  |   | 5,627   |  
|                                   
|                                   
|                                   
|                                   
|In-process research and development |  |   | 4,150   |  
|                                   
|                                   
|                                   
|                                   
|Assembled workforce                 |  |   | 3,630   |  
|                                   
|                                   
|                                   
|                                   
|Core technology                     |  |   | 3,490   |  
|                                   
|                                   
|                                   
|                                   
|Customer list                       |  |   | 2,700   |  
|                                   
|                                   
|                                   
|                                   
|Trade names                         |  |   | 1,650   |  
|                                   
|                                   
|                                   
|                                   
|Other assets                        |  |   | 649     |  
|                                   
|                                   
|                                   
|                                   
|Liabilities                         |  |   | (15,612 | )
|                                    |  |   |         |  
|                                    |  | $ | 48,590  |  
|                                    |  |   |         |  

Included in the liabilities assumed are accruals for costs associated with
exiting certain activities and facilities of the acquired Essilor operations
that were considered duplicative. This includes accruals for severance costs
related to workforce reductions across all functions and exit costs associated
with exiting certain facilities, dismantling equipment and other miscellaneous
exit costs. Details of the exit costs and severance costs paid and charged
against the accrual are presented in the following table (U.S. dollars in
thousands):

|                            |       |   |          |       |          |   |      |        |              |   |               |       |             |   |               |        |   |   |       |       | 
|--------------------------- | ----- | - | -------- | ----- | -------- | - | ---- | ------ | ------------ | - | ------------- | ----- | ----------- | - | ------------- | ------ | - | - | ----- | ----- | 
|                            |       |   |          |       |          |   |      |        |              |   |               |       | Payments    |   |              
|                            |       |   |          |       |          |   |      |        |              |   | Accrual as of |       | made in the |   | Accrual as of
|                            |       |   |          |       |          |   | 2001 |        | December 31, |   | first quarter |       | March 31,  
|                            |       |   | Accruals |       | Payments |   | 2001 |        | of FY 2002   |   | 2002         
|                            |       |   |          |       |          |   |      |        |              |   |              
|Severance costs             |       | $ | 7,145    |       |          | $ | (442 | )      |              | $ | 6,703         |       |             | $ | (902          | )      |   | $ | 5,801 |      
|                           
|                           
|                           
|                           
|Facility costs              |       |   | 1,566    |       |          |   | (755 | )      |              |   | 811           |       |             |   | (77           | )      |   |   | 734   |      
|                           
|                           
|                           
|                           
|Equipment dismantling costs |       |   | 250      |       |          |   |     |        |              |   | 250           |       |             |   | (19           | )      |   |   | 231   |      
|                           
|                           
|                           
|                           
|Miscellaneous costs         |       |   | 107      |       |          |   |     |        |              |   | 107           |       |             |   | (7            | )      |   |   | 100   |      
|                            |       |   |          |       |          |   |      |        |              |   |               |       |             |   |               |        |   |   |       |      
|                            | Total |   | $        | 9,068 |          |   | $    | (1,197 | )            |   | $             | 7,871 |             |   | $             | (1,005 | ) |   | $     | 6,866 | 
|                            |       |   |          |       |          |   |      |        |              |   |               |       |             |   |               |        |   |   |       |      

Management began formulating the plans to exit certain activities and
facilities of the acquired Essilor operations at the time of the consummation
of the acquisition and expects to complete all actions under such plans by the
end of 2002.

The purchase price was more than the fair value of the net assets acquired
of approximately $18,943,000, resulting in goodwill of approximately
$29,647,000. Customer lists, existing technology and trade
names are included as components of intangible assets and are being amortized
on a straight-line basis over their useful lives as listed in the table below:

|                  |  |          |  | 
|----------------- |  | -------- |  | 
|                  |  | Useful  
|Intangible Assets |  | Life    
|                  |  |         
|Core technology   |  | 10 years
|                 
|                 
|                 
|                 
|Trade names       |  | 12 years
|                 
|                 
|                 
|                 
|Customer lists    |  | 15 years

The
goodwill and the assembled workforce had been amortized using lives
of 15 and 7 years, respectively. Such amortization ceased and the
assembled workforce was subsumed into goodwill on January 1,
2002, the date upon which the Company adopted SFAS No. 142
(see Note 7).

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

9



---



##### Table of Contents



complete the development efforts and the operating cash flows which the
applications are projected to generate, less a return on the assets necessary
to generate the operating cash flows.

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

The following table reflects unaudited proforma combined results of
operations of the Company and Essilor on the basis that the acquisition had
taken place on January 1, 2001 (U.S. dollars in thousands):

|                      |         |   |                              |      |      |   |        |      | 
|--------------------- | ------- | - | ---------------------------- | ---- | ---- | - | ------ | ---- | 
|                      |         |   | Three months ended March 31,
|                      |         |   |                             
|                      |         |   | 2002                         |      | 2001
|                      |         |   |                              |      |     
|Net Revenues          |         | $ | 60,811                       |      |      | $ | 54,250 |     
|                     
|                     
|                     
|                     
|Net Income            |         | $ | 10,093                       |      |      | $ | 5,251  |     
|                     
|                     
|                     
|                     
|Net Income per share: |         |   |                              |      |      |   |        |     
|                     
|                     
|                     
|                     
|                      | Basic   |   | $                            | 0.43 |      |   | $      | 0.23 | 
|                     
|                     
|                     
|                     
|                      | Diluted |   | $                            | 0.41 |      |   | $      | 0.22 | 

Note 8  Intangible Assets Subject to
Amortization, net

Intangible assets subject to amortization, net, consisted of
the following (U.S. dollars in thousands):

|                              |  |             |          |           |  |              |        |   |  |   |        |  
|----------------------------- |  | ----------- | -------- | --------- |  | ------------ | ------ | - |  | - | ------ | -
|                              |  |             |          | March 31, |  | December 31,
|                              |  | Useful Life |          | 2002      |  | 2001        
|                              |  |             |          |           |  |             
|Core technology               |  |             | 10 years |           |  | $            | 8,926  |   |  | $ | 8,926  |  
|Patents                       |  |             | 17 years |           |  |              | 1,150  |   |  |   | 1,150  |  
|                              |  |             |          |           |  |              |        |   |  |   |        |  
|                              |  |             |          |           |  |              | 10,076 |   |  |   | 10,076 |  
|Less accumulated amortization |  |             |          |           |  |              | (4,599 | ) |  |   | (4,391 | )
|                              |  |             |          |           |  |              |        |   |  |   |        |  
|                              |  |             |          |           |  | $            | 5,477  |   |  | $ | 5,685  |  
|                              |  |             |          |           |  |              |        |   |  |   |        |  

Note 9  Long-term Debt

As of March 31, 2002, the Company had borrowings under a
credit agreement with Comerica Bank. The Comerica credit agreement
contains covenants, which, among other things, requires the Company
to maintain certain financial ratios. As of March 31, 2002, the
Company was not in compliance
with one of the financial ratios. Comerica waived their default
rights with respect to such non-compliance for the period ending
March 31,
2002.

Note 10  Subsequent Events

Acquisition of Assets of Seiko Contactlens, Inc.

On March 11, 2002, we entered into an agreement to acquire certain assets
of Seiko Contactlens, Inc. (Seiko Contact Lens) for approximately $21 million.
The purchase was completed on April 1, 2002. As part of the acquisition, we
intend to hire approximately 65-70 Seiko Contactlens sales and administrative
personnel. Seiko Contactlens is our current and long-time distributor in
Japan.

We will account for the acquisition under the purchase method of
accounting and accordingly the operating results of Seiko Contactlens will be
included in our consolidated financial statements effective April 1, 2002.
The excess of the aggregate purchase price over the fair market value of net
assets acquired will be allocated to goodwill and intangible assets based upon
estimates of fair value. Certain intangible assets (not including goodwill)
have been acquired. The valuation and estimated lives of these intangible
assets have not yet been determined.

New Credit Facility

On April 16, 2002, we completed a new $50 million credit facility, $40
million of which is provided by Comerica Bank and $10 million provided by The
Northern Trust Company. These revolving loans mature on April 16, 2009, and
bear interest at 0.50% below Comericas base rate or 1.00% to 1.50% above the
banks eurodollar rate depending on our ratio of total funded debt to earnings
before interest and taxes plus noncash charges. This credit agreement contains
covenants, which, among other things, require us to maintain certain financial
ratios. Borrowings under this agreement are secured by a pledge of 100% of the
outstanding common stock of Ocular Sciences Puerto Rico and Sunsoft, Inc. and
65% of the outstanding common stock of our Barbados and Canadian subsidiaries.

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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 for the year ended December 31, 2001.

This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as amended. Such
statements relate to our future performance and plans, results of operations,
capital expenditures, acquisitions and operating improvements and costs. You
can identify forward-looking statements by the use of forward-looking
terminology such as believes, expects, may, will, should, seeks,
approximately, intends, plans, pro forma, estimates or anticipates
or the negative of these words and phrases or similar words or phrases. You can
also identify forward-looking statements by discussions of strategy, plans or
intentions. Forward-looking statements involve numerous risks and uncertainties
and you should not rely upon them as predictions of future events. There is no
assurance that the events or circumstances reflected in forward-looking
statements will be achieved or will occur. Forward-looking statements are
necessarily dependent on assumptions, data, or methods that may be incorrect or
imprecise and we may not be able to realize them. Factors that could cause
actual results and future events to differ materially from those set forth or
contemplated in the forward-looking statements include risks associated with
the overall economic environment, the integration of the Essilor and Seiko
Contactlens businesses, the impact of competitive products and pricing, product
demand both domestically and overseas, market receptiveness to various product
launches, higher than expected employee turnover, extended manufacturing
difficulties, customer bad debts, currency fluctuations, other risks of doing
business internationally and the other risks detailed in the sections entitled
Item 1, Business  Risk Factors, and Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations and elsewhere in our
Annual Report on Form 10-K for the year ended December 31, 2001, and from time
to time 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. Unless the context otherwise requires, the
terms we, us, and our refer to Ocular Sciences, Inc. and its
subsidiaries.

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. (Essilor). We
acquired, among other things, the sales and distribution assets of the contact
lens business in Europe and the United States and a number of manufacturing
facilities in France, the 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 $48,590,000 purchase price for the acquired assets was comprised of
$44,476,000 in cash and $4,114,000 in acquisition costs. Acquired in-process
research and development costs of $4,150,000 were expensed in the year ended
December 31, 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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Critical Accounting Policies

The Companys critical accounting policies are as follows:



| |  |  | revenue recognition for its various business units;            
| | - |  | ---------------------------------------------------------------
|
| |  |  | estimating valuation allowances and accrued liabilities;       
|
| |  |  | excess and obsolete inventory;                                 
|
| |  |  | cooperative merchandising allowances;                          
|
| |  |  | accounting for income taxes;                                   
|
| |  |  | valuation of long-lived and intangible assets and goodwill; and
|
| |  |  | estimates inherent in purchase accounting.                     

Revenue Recognition

Revenues are recognized based on the terms of sale with the customer,
generally upon product shipment. We have established programs that, under
specified conditions, enable our customers to return product. We establish
liabilities for estimated returns and allowances at the time revenues are
recognized. In addition, accruals for customer discounts and rebates are
recorded when revenues are recognized. Amounts billed to customers in sale
transactions related to shipping and handling are classified as revenue. In
December 1999, the Securities and Exchange Commission (the SEC) issued Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements,
which summarizes certain of the SECs views in applying generally accepted
accounting principles for revenue recognition in financial statements. Our
revenue recognition policies complied with the guidance contained in SAB No.
101 and, therefore, our results of operations were not materially affected.

Estimating Valuation Allowances and Accrued Liabilities

The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amount of assets and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reported period.

Management specifically analyzes the aging of accounts receivable and also
analyzes historical bad debts, customer concentrations, customer
credit-worthiness, current economic trends and changes in customer payment
terms, and sales returns when evaluating the adequacy of the allowance for
doubtful accounts and sales returns in any accounting period. Material
differences may result in the amount and timing of revenue and or expenses for
any period if management made different judgments or utilized different
estimates.

Excess and Obsolete Inventory

We assess the need for reserves on inventory based on monthly forward
projections of sales of products that are updated monthly. Inventories are
recorded at the lower of cost (first-in, first-out method) or market. Cost
includes material, labor and applicable factory overhead. Provision for

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potentially obsolete or slow moving inventory is made based upon
managements analysis of inventory levels and forecasted sales. Once inventory
is reserved, the reserve can only be relieved by the subsequent sale or
scrapping of the inventory.

Cooperative Merchandise Allowance

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 requires certain
of our customer promotional incentive payments, primarily cooperative
merchandising allowances, currently classified as marketing costs to be
classified as a reduction of revenue.

A majority of our promotional expenses are required to be classified as a
reduction of revenue with a corresponding reduction in marketing expenses. We
reclassified as deductions in net sales approximately $6.6 million of
cooperative merchandising allowances which were previously classified as
selling and marketing expenses in the first quarter of 2001.

Accounting for Income Taxes

We account for income taxes in accordance with SFAS No. 109, Accounting
for Income Taxes. Under SFAS No. 109, deferred income taxes are recognized for
tax consequences in future years of differences between the tax bases of assets
and liabilities and their financial reporting amounts at each balance sheet
date based on enacted tax laws and statutory tax rates expected to apply in the
periods in which the differences are expected to affect taxable income.

In preparing our consolidated financial statements, we are required to
estimate our income taxes in each of the jurisdictions in which we operate.
This process involves estimating actual current tax liability together with
assessing temporary differences resulting from differing treatment of items,
such as deferred revenue, for tax and accounting purposes. These differences
result in deferred tax assets and liabilities, which are included within the
consolidated balance sheet. Significant management judgment is required in
determining the provision for income taxes, deferred tax assets and liabilities
against net deferred tax assets. In the event that actual results differ from
these estimates or we adjust these estimates in future periods, which could
materially impact financial position and results of operations.

Valuation of Intangible Assets and Goodwill

We periodically review long-lived assets, certain identifiable intangibles
and goodwill related to these assets for impairment in accordance with SFAS No.
121, Accounting for the Impairment of Long-lived Assets and For Long-lived
Assets to be Disposed Of.

For assets to be held and used, including acquired intangibles, we
initiate our review whenever events or changes in circumstances indicate that
the carrying amount of goodwill and intangible assets may not be recoverable.
Recoverability of an asset is measured by comparison of its carrying amount to
the expected future undiscounted cash flows (without interest charges) that the
asset is expected to generate. Any impairment to be recognized is measured by
the amount by which the carrying amount of the asset exceeds its fair market
value. Significant management judgment is required in the forecasting of future
operating results which are used in the preparation of projected discounted
cash flows and should different conditions prevail, material write downs of net
intangible assets and/or goodwill could occur. It is reasonably possible that
the estimates of anticipated future gross revenue, the remaining estimated
economic life of the products and technologies, or both, could differ from

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those used to assess the recoverability of these costs and result in a
write-down of the carrying amount or a shortened life of acquired intangibles
in the future.

In January 2002, Statement of Financial Accounting Standards (SFAS) No.
142, Goodwill and Other Intangible Assets became effective and as a result,
we have ceased to amortize approximately $34.4 million of goodwill and other
intangible assets beginning January 1, 2002. In lieu of amortization, we are
required to perform an initial impairment review of goodwill in 2002 and an
annual impairment review thereafter. We have completed our review during the
first quarter of 2002, and have not identified any impairments of goodwill and
other intangible assets. However, there can be no assurance that a material
impairment charge will not be recorded in the future.

Estimates Inherent in Purchase Accounting

Purchase accounting requires extensive use of accounting estimates and
judgments to allocate the purchase price to the fair market value of the assets
purchased and liabilities assumed. In our recording of the acquisition of the
assets of Essilor on February 12, 2001, values were assigned to in process
research and development (IPRD) and intangible assets for acquired technology
and goodwill based on managements forecasts and projections that include
assumptions related to future revenues and cash flows generated from the
acquired assets.

The allocation of purchase price to IPRD of $4.2 million represented the
estimated fair value based on risk-adjusted cash flows related to the
incomplete research and development projects. At the Acquisition Date, the
development of these projects had not reached technological feasibility and the
research and development in progress had no alternative uses. Accordingly,
these costs were expensed in the statement of operations for the year ended
December 31, 2001.

IPRD was identified and valued through extensive interviews, analysis of
data concerning developmental products, their stage of development, the time
and resources needed to complete them, and, if applicable, their expected
income generating ability, target markets and associated risks. The Income
Approach, which includes an analysis of the markets, cash flows and risks
associated with achieving such cash flows, was the primary technique utilized
in valuing the IPRD. The projected incremental cash flows were discounted back
to their present value using a various discount rates determined after
consideration of various factors including the Companys cost of capital and
the risk associated with the various product types.

The acquired existing intangible assets are amortized on a straight-line
basis over an specific estimated remaining useful lives of each intangible
asset. Useful lives are based on managements estimates of the period that the
asset will generate revenue.

Intangible assets are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.

New Accounting Pronouncements Adopted

The Financial Accounting Standards Boards Emerging Issues Task Force
(EITF) issued EITF 00-14, Accounting for Certain Sales Incentives, effective
January 1, 2002. This Issue requires that costs related to consumer coupons to
be classified as a reduction of revenue. Comparable amounts in prior years are
required to be reclassified in accordance with this Issue. We reclassified as
deductions in net sales approximately $173,000 of marketing expenses which were
previously classified as selling and marketing expenses in the first quarter of
2001.

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EITF also issued EITF 00-25, Vendor Income Statement Characterization of
Consideration to a Purchaser of the Vendors Products or Services, effective
January 1, 2002. This Issue requires that certain of our customer promotional
incentive payments, primarily cooperative merchandising allowances, to be
classified as a reduction of revenue. Comparable amounts in prior years are
required to be reclassified in accordance with this Issue. We reclassified as
deductions in net sales approximately $6.6 million of cooperative merchandising
allowances which were previously classified as selling and marketing expenses
in the first quarter of 2001.

The Financial Accounting Standards Board issued SFAS No. 142, Goodwill
and Other Intangible Assets, effective January 1, 2002. Under SFAS No. 142,
we will no longer amortize goodwill and assembled workforce intangible assets.
Adoption of the non-amortization provisions of SFAS No. 142 as of January 1,
2001 would have reduced amortization expense by approximately $310,000 for the
quarter ending March 31, 2001. We also completed our initial impairment tests
under SFAS No. 142 which supported the carrying values of these assets and,
accordingly, no impairment charge resulted from the adoption of SFAS No. 142.

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Results of Operations

Net Sales

|                             |  |                              |            |      |  |          |            |   |  |  |      |  
|---------------------------- |  | ---------------------------- | ---------- | ---- |  | -------- | ---------- | - |  |  | ---- | -
|                             |  | Three Months Ended March 31, |            |      |  |         
|                             |  |                              |            |      |  |         
|                             |  | 2002                         |            | 2001 |  | % Change
|                             |  |                              |            |      |  |         
|U.S                          |  | $                            | 33,211,000 |      |  | $        | 29,797,000 |   |  |  | 11.5 | %
|                            
|                            
|                            
|                            
|As a percentage of net sales |  |                              | 54.6       | %    |  |          | 59.5       | % |  |  |      |  
|                            
|                            
|                            
|                            
|International                |  | $                            | 27,600,000 |      |  | $        | 20,254,000 |   |  |  | 36.3 | %
|                            
|                            
|                            
|                            
|As a percentage of net sales |  |                              | 45.4       | %    |  |          | 40.5       | % |  |  |      |  
|                             |  |                              |            |      |  |          |            |   |  |  |      |  
|Net sales                    |  | $                            | 60,811,000 |      |  | $        | 50,051,000 |   |  |  | 21.5 | %
|                             |  |                              |            |      |  |          |            |   |  |  |      |  

Net sales represent gross sales less allowances for returns, cooperative
merchandising allowances, 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. Cooperative
merchandising allowances are reimbursements to encourage the fitting and
wearing of our lenses marketed for disposable replacement regimens. Such
activities may include, but are not limited to advertising, in-office
promotion, displays and mailings. These allowances are limited to a percentage
of purchases of lenses marketed for disposable replacement regimens from us.
Increases in net sales for the quarter ended March 31, 2002 compared to the
quarter ended March 31, 2001 were mainly attributable to the
following factors: the additional month of revenues in 2002 from products acquired as
part of the Essilor acquisition, growing sales of our new toric disposable
lens, and growth in sales of disposable lenses marketed for daily, weekly and
monthly replacement regimens. Including the revenues generated from the
acquired Essilor products, U.S. sales grew by 11.5%, or $3.4 million, for the
quarter ended March 31, 2002, compared to the quarter ended March 31, 2001. In
addition, international sales growth was very strong, growing by 36.3%, or $7.3
million, for the quarter ended March 31, 2002, as compared to the quarter ended
March 31, 2001. The growth in our international sales reflects the
strengthening of our position in the international marketplace, the increased
breath of our product offerings, better inventory availability, additional
distribution channels in Europe, and our increased distribution network in the
Japanese marketplace. For the quarter ended March 31, 2002 as compared to the
quarter ended March 31, 2001, the effect of lower exchange rates negatively
impacted our revenues by approximately $600,000.

Unit sales growth of our lenses marketed for disposable replacement
regimens increased 32.8% for the quarter ended March 31, 2002 as compared to
the quarter ended March 31, 2001. A significant portion of this unit sales
growth came from international sales, which grew faster than domestic sales,
the additional product offerings from the Essilor-acquired entities and
increased sales of our lenses marketed for daily and weekly disposable regimens
in Europe and Asia.

Our
overall average selling price decreased during the quarter ended March
31, 2002, as compared to the quarter ended March 31, 2001. The decrease of our
selling price is attributable to the increase in unit sales of lenses marketed
for daily disposal, additional direct distribution channels in Europe and
increasing proportion of sales to international distributors at lower prices.
These factors resulted in an 8.3% decline in the overall average selling prices
of our lenses in the quarter ended March 31, 2002 as compared to the quarter
ended March 31, 2001. We expect that the overall average selling price that we
realize across our products will continue to decline over time because of
shifts in our product mix from lenses marketed for annual replacement regimens
to lenses marketed for disposable replacement regimens, particularly lenses
marketed for daily disposal.

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Gross Profit

|                             |  |                              |            |      |  |          |            |   |  |  |      |  
|---------------------------- |  | ---------------------------- | ---------- | ---- |  | -------- | ---------- | - |  |  | ---- | -
|                             |  | Three Months Ended March 31, |            |      |  |         
|                             |  |                              |            |      |  |         
|                             |  | 2002                         |            | 2001 |  | % Change
|                             |  |                              |            |      |  |         
|Gross profit                 |  | $                            | 33,481,000 |      |  | $        | 28,398,000 |   |  |  | 17.9 | %
|                            
|                            
|                            
|                            
|As a percentage of net sales |  |                              | 55.1       | %    |  |          | 56.7       | % |  |  |      |  

Gross profit increased 17.9% in the first quarter and gross margin percent
declined to 55.1% in the quarter ended March 31, 2002 as compared to 56.7% in
the quarter ended March 31, 2001. The reduction in gross margin percent was
largely due to unfavorable product mix. This is mostly a result of above
average growth in sales of daily disposable products at margins lower than
other products. We expect this trend to continue in the near-term and be
offset by lower manufacturing costs later in the year.

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 gross margin percentage for the
quarter ended March 31, 2002 was comparable to the gross margin
percentage for the quarter ended March 31,
2001. We expect cost reductions resulting from improvements in our current
production processes to continue in the future. Specifically, we are in the
process of adding new automated production lines at our United Kingdom and
Puerto Rico facilities, which are designed to further reduce our per unit cost
of production over time, although such cost reductions may not be seen until
future periods. We expect that our overall average selling price will continue
to decline over time due to product and geographic mix shift, as discussed in
Net Sales. We will need to continue to reduce our per unit production costs
through increased automation, increased volume and reduced packaging costs in
order to improve, or even to maintain, our gross margin percentage. We believe
that the decline in average selling price, as sales of lower average selling
price lenses marketed for daily replacement regimens increase, may exceed the
rate of decline in production cost in the near term and accordingly, we would
expect continued pressure on our gross profit margins in the near-term for our
products.

Selling and Marketing Expenses

|                               |  |                              |            |      |  |          |           |   |  |  |      |  
|------------------------------ |  | ---------------------------- | ---------- | ---- |  | -------- | --------- | - |  |  | ---- | -
|                               |  | Three Months Ended March 31, |            |      |  |         
|                               |  |                              |            |      |  |         
|                               |  | 2002                         |            | 2001 |  | % Change
|                               |  |                              |            |      |  |         
|Selling and marketing expenses |  | $                            | 10,137,000 |      |  | $        | 8,643,000 |   |  |  | 17.3 | %
|                              
|                              
|                              
|                              
|As a percentage of net sales   |  |                              | 16.7       | %    |  |          | 17.3      | % |  |  |      |  

Selling and marketing expenses are comprised primarily of sample
diagnostic products provided to eyecare practitioners without charge, salaries,
commissions and benefits for selling and marketing personnel and postage and
freight charges. The increase in sales and marketing expenses in the quarter
ended March 31, 2002, as compared to the quarter ended March 31, 2001, resulted
primarily from increases in expenditures related to new product launches in the
United States and Canada, promotional programs and additional sales and
marketing expenses related to the new entities acquired from Essilor.

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General and Administrative Expenses

|                                    |  |                              |            |      |  |          |           |   |  |  |      |  
|----------------------------------- |  | ---------------------------- | ---------- | ---- |  | -------- | --------- | - |  |  | ---- | -
|                                    |  | Three Months Ended March 31, |            |      |  |         
|                                    |  |                              |            |      |  |         
|                                    |  | 2002                         |            | 2001 |  | % Change
|                                    |  |                              |            |      |  |         
|General and administrative expenses |  | $                            | 10,032,000 |      |  | $        | 7,997,000 |   |  |  | 25.4 | %
|                                   
|                                   
|                                   
|                                   
|As a percentage of net sales        |  |                              | 16.5       | %    |  |          | 16.0      | % |  |  |      |  

General and administrative expenses consist primarily of salaries and
benefits for distribution, general and administrative personnel, professional
services, consultants fees, depreciation and facilities costs. The increase in
dollar and percentage terms for the quarter ended March 31, 2002 as compared to
the quarter ended March 31, 2001 was due primarily to increased costs
associated with the new entities acquired in the Essilor acquisition. We
believe that when net sales grow, our general and administrative expenses will
increase in absolute dollars, but will decrease as a percentage of net sales on
an annualized basis.

Research and Development Expenses

|                                  |  |                              |           |      |  |          |           |   |  |  |       |   
|--------------------------------- |  | ---------------------------- | --------- | ---- |  | -------- | --------- | - |  |  | ----- | --
|                                  |  | Three Months Ended March 31, |           |      |  |         
|                                  |  |                              |           |      |  |         
|                                  |  | 2002                         |           | 2001 |  | % Change
|                                  |  |                              |           |      |  |         
|Research and development expenses |  | $                            | 1,018,000 |      |  | $        | 1,541,000 |   |  |  | (33.9 | %)
|                                 
|                                 
|                                 
|                                 
|As a percentage of net sales      |  |                              | 1.7       | %    |  |          | 3.1       | % |  |  |       |   

Research and development expenses consist primarily of consulting costs
for research and development personnel, in-house labor related to manufacturing
process and new product development. In the quarter ended March 31, 2002, as
compared to the quarter ended March 31, 2001, research and development expenses
decreased in dollars and as a percentage of revenue primarily due to the timing
of new product development projects and the capitalization of costs in each
period.

Acquired In-Process Research and Development

|                                  |  |                              |     |      |  |          |           |   |  |  |        |   
|--------------------------------- |  | ---------------------------- | --- | ---- |  | -------- | --------- | - |  |  | ------ | --
|                                  |  | Three Months Ended March 31, |     |      |  |         
|                                  |  |                              |     |      |  |         
|                                  |  | 2002                         |     | 2001 |  | % Change
|                                  |  |                              |     |      |  |         
|Research
and development expenses |  | $                            |    |      |  | $        | 4,150,000 |   |  |  | (100.0 | %)
|                                 
|                                 
|                                 
|                                 
|As a percentage of net sales      |  |                              | 0.0 | %    |  |          | 8.3       | % |  |  |        |   

On February 12, 2001, we acquired the contact lens business of Essilor
(see Note 7 to Notes to the Condensed Consolidated Financial Statements). We acquired
the sales and distribution assets of Essilors contact lens business in Europe
and the United States and manufacturing facilities in France, the United
Kingdom and the United States. We accounted for the acquisition using the
purchase method. As a result of the acquisition, we recorded acquired
in-process research and development costs totaling $4,150,000 covering the
incomplete development of two new lens type in the quarter ended March 31,
2001.

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Interest and Other Income, Net

|                               |  |                              |        |      |  |          |         |   |  |  |       |   
|------------------------------ |  | ---------------------------- | ------ | ---- |  | -------- | ------- | - |  |  | ----- | --
|                               |  | Three Months Ended March 31, |        |      |  |         
|                               |  |                              |        |      |  |         
|                               |  | 2002                         |        | 2001 |  | % Change
|                               |  |                              |        |      |  |         
|Interest and other income, net |  | $                            | 15,000 |      |  | $        | 452,000 |   |  |  | (96.7 | %)
|                              
|                              
|                              
|                              
|As a percentage of net sales   |  |                              | 0.0    | %    |  |          | 0.9     | % |  |  |       |   

The decrease in interest and other income in dollar and percentage terms
in the quarter ended March 31, 2002, as compared to the quarter ended March 31,
2001, resulted primarily from the decrease in available cash balances used for
the acquisition of the Essilor contact lens business and the increase in
interest expense incurred on larger amounts of outstanding debt.

Income Taxes

|                   |  |                              |           |      |          |   |           |   |  |  |      |  
|------------------ |  | ---------------------------- | --------- | ---- | -------- | - | --------- | - |  |  | ---- | -
|                   |  | Three Months Ended March 31, |           |      |          |  
|                   |  |                              |           |      |          |  
|                   |  | 2002                         |           | 2001 | % Change
|                   |  |                              |           |      |         
|Income taxes       |  | $                            | 2,216,000 |      |          | $ | 1,702,000 |   |  |  | 30.2 | %
|                  
|                  
|                  
|                  
|Effective tax rate |  |                              | 18.0      | %    |          |   | 26.1      | % |  |  |      |  

Our effective tax rate for the quarter ended March 31, 2002 decreased, as
compared to the quarter ended March 31, 2001, to 18.0% from 26.1% primarily due
to increase in sales and income from our offshore subsidiary which has a lower
effective tax rate. We continue to receive an industrial tax exemption from
United States taxation with respect to the earnings of our Puerto Rican
operations. We anticipate we will continue to benefit from the favorable effect
of the Puerto Rican industrial tax exemption through 2002, with limited
exemption during the transition period from 2002 through 2005, when the benefit
will expire under the current provisions of the United States Internal Revenue
Code.

Liquidity and Capital Resources

At March 31, 2002, we had cash and cash equivalents of $4.3 million
compared to cash and cash equivalents of $7.8 million at December 31, 2001. The
decrease in cash and cash equivalents was primarily attributable to the
purchase of property and equipment totaling $10.5 million, which exceeded the
cash provided by operating activities of $8.5 million. Working capital
increased from $64.7 million at December 31, 2001 to $67.3 million at March 31,
2002 primarily due to the increase in accounts receivable and the decrease in
accounts payable, offset by a decrease in prepaid and other current and
non-current assets. In the first quarter of 2002, net cash provided by
operating activities of $7.6 million was derived principally from net income of
$10.1 million plus depreciation and amortization of $4.9 million and a net
decrease in operating accounts of $7.1 million as a result of increases in
accounts receivable, inventory, income and other taxes payable offset by
decreases in prepaid and other current and non-current assets and accounts
payable.

Net cash used in investing activities in the first quarter of 2002 was
$10.5 million, consisting primarily of expenditures of property and equipment.
We anticipate that capital expenditures will be approximately $40 million in
2002 (including the $10.5 million expended in the first quarter of 2002) as we
continue to invest in increases in capacity and the implementation of our new
Generation Two automated production line at our new United Kingdom
manufacturing facility. However, the amount of capital expenditures may
increase or decrease, as we may accelerate or delay the implementation of the
automated production equipment based on market conditions and demand for our
products.

Net cash used in financing activities in the first quarter of 2002 was $1
million, consisting primarily

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of proceeds received from short-term debt and issuances of common stock
offset against repayments of debt and lease obligations.

In addition to cash, cash equivalents and short and long-term investments,
we have a credit facility with Comerica Bank  California. The Comerica credit
agreement provides for up to $20.0 million of revolving loans to us, which
mature on June 30, 2002. The loans bear interest at Comerica Banks base rate
or at a margin of 1.00% to 1.25% above the banks eurodollar rate depending on
our ratio of total liabilities to tangible net worth. At March 31, 2002, we had
$11 million in revolving loans outstanding under the Comerica credit agreement.
In addition, the Comerica credit agreement originally provided up to $10
million of term loans to Ocular Sciences Puerto Rico, Inc. (Ocular Sciences
Puerto Rico) which bear 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 March 31, 2002,
there were no term loans outstanding under the Comerica credit agreement.
Principal installments of $300,000 are due quarterly and all outstanding
principal and unpaid interest is due and payable on July 31, 2002. The Comerica
credit agreement contains covenants, which, among other things, require us to
maintain certain financial ratios. As of March 31, 2002, we were not in
compliance with one of the financial ratios. Comerica Bank waived their
default rights with respect to such non-compliance for the period
ending March 31, 2002.
Borrowings under the Comerica credit agreement are secured by a pledge of 100%
of the outstanding common stock of Ocular Sciences Puerto Rico and 65% of the
outstanding stock of our Barbados and Canadian subsidiaries. In addition,
Ocular Sciences, Inc. and Ocular Sciences Puerto Rico have each guaranteed the
others borrowings under the Comerica credit agreement. All
outstanding amounts were repaid with borrowings under a new Comerica
Credit Agreement, discussed in the following paragraph.

On April 16, 2002, we completed a new $50 million credit facility, $40
million of which is provided by Comerica Bank and $10 million provided by The
Northern Trust Company. These revolving loans mature on April 16, 2009, and
bear interest at 0.50% below Comericas base rate or 1.00% to 1.50% above the
banks eurodollar rate depending on our ratio of total funded debt to earnings
before interest and taxes plus noncash charges. This credit agreement contains
covenants, which, among other things, require us to maintain certain financial
ratios. Borrowings under this agreement are secured by a pledge of 100% of the
outstanding common stock of Ocular Sciences Puerto Rico and Sunsoft, Inc. and
65% of the outstanding common stock of our Barbados and Canadian subsidiaries.

We believe that our current cash and cash equivalents, borrowings
available under our credit facilities and 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.

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Item 3. Quantitative And Qualitative Disclosures About Market Risk

We have debt outstanding, which is carried at cost, with an interest rate
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 March 31, 2002, we had $11 million in revolving loans
outstanding under the Comerica Bank credit agreement, which were payable in
quarterly installments of $300,000, with any remaining balance to be paid on
July 31, 2002. All outstanding amounts were repaid with
borrowings under a new Comerica Credit Agreement.

We operate multiple foreign subsidiaries that manufacture and/or sell
our products worldwide. As a result, our earnings, cash flows and financial
position are exposed to foreign currency risk from foreign-currency-denominated
receivables and payables, forecasted sales transactions, and net investments in
certain foreign operations. We have not normally engaged in foreign currency
hedging activities, except for a recent hedging contract covering the Yen
payments made in April 2002 for the acquisition of the Seiko Contact lens
business. We continue to evaluate the potential use of such activities on a
more regular basis.

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 its Annual Report on Form 10-K for the fiscal year ended December 31, 2001.

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PART II  OTHER INFORMATION




Item 1. Legal Proceedings

None.




Item 2. Changes in Securities and Use of Proceeds

None.




Item 3. Defaults Upon Senior Securities

None.




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

None.




Item 5. Other Information

None.

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Item 6. Exhibits and Reports on Form 8-K



| | (a) |  | Exhibits
| | --- |  | --------

|            |  |                                                                                                                                                                                                                     
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                     
|10.1        |  | Credit Agreement among Ocular Sciences, Inc. and Comerica
Bank  California dated April 16, 2002.                                                                                                                   
|10.2        |  | Asset Purchase Agreement by and between Ocular Sciences, Inc. and
Essilor International (Compagnie Generale d'Optique) S.A. dated as of
December 21, 2000.                                                          
|10.3        |  | Master Agreement by and between Ocular Sciences K.K., Ocular
Sciences, Inc., Seiko Contactlens Inc., Seiko Epson Corporation,
Seiko Epson Contact Lens Corporation and Seiko Corporation dated as
of March 11, 2002.



| | (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.

|                   |  |                                                                                                                                                                    
|------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   |  | OCULAR SCIENCES, INC.
(Registrant)                                                                                                                                 
|                  
|                  
|                  
|                  
|                   |  |                                                                                                                                                                    
|                  
|                  
|                  
|                  
|Date: May 15, 2002 |  | /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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