TABLE OF CONTENTS




|                                |                              |                                                                                               |  |  |  |  |  | 
|------------------------------- | ---------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I.  FINANCIAL INFORMATION
|                                | Item 1. Financial Statements
|                                |                              | CONSOLIDATED BALANCE SHEETS                                                                  
|                                |                              | CONSOLIDATED STATEMENTS OF OPERATIONS                                                        
|                                |                              | CONSOLIDATED STATEMENTS OF CASH FLOWS                                                        
|                                |                              | Notes to 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                           
|SIGNATURE                      



---



##### Table of Contents



---

---



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

|  |  |                                                                                                                                            
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------
|X |  | Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended November 3, 2001, or

| |  |                                                                                                                                                                      
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____________________ to
____________________.

Commission file number 1-12814

|                                                                         
|-------------------------------------------------------------------------
|COLE NATIONAL GROUP(Exact name of registrant as specified in its charter)



|                                         |  |                    
|---------------------------------------- |  | -------------------
|Delaware                                 |  | 34-1453189         
|(State or other jurisdiction of          |  | (I.R.S. employer   
|incorporation or organization)           |  | identification no.)
|                                        
|5915 Landerbrook Drive                   |  |                    
|Mayfield Heights, Ohio                   |  | 44124              
|(Address of principal executive offices) |  | (Zip code)         

|                                                                   
|-------------------------------------------------------------------
|(440) 449-4100
(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.  X
  YES  NO

As of November 30, 2001, 1,100 shares of the registrants common stock were
outstanding.





---

---





---



##### Table of Contents



---



COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED NOVEMBER 3, 2001
INDEX

|         |  |                                                                                                           |  |         
|-------- |  | --------------------------------------------------------------------------------------------------------- |  | --------
|         |  |                                                                                                           |  | Page No.
|PART I.  |  | FINANCIAL INFORMATION                                                                                     |  |         
|         |  |                                                                                                           |  |         
|Item 1.  |  | Financial Statements                                                                                      |  |         
|         |  |                                                                                                           |  |         
|         |  | Consolidated Balance Sheets as of November 3, 2001 and
February 3, 2001                                   |  | 1       
|         |  |                                                                                                           |  |         
|         |  | Consolidated Statements of Operations for the 13 and 39 weeks
ended November 3, 2001 and October 28, 2000 |  | 2       
|         |  |                                                                                                           |  |         
|         |  | Consolidated Statements of Cash Flows for the 39 weeks ended
November 3, 2001 and October 28, 2000        |  | 3       
|         |  |                                                                                                           |  |         
|         |  | Notes to Consolidated Financial Statements                                                                |  | 4       
|         |  |                                                                                                           |  |         
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations                     |  | 6       
|         |  |                                                                                                           |  |         
|Item 3.  |  | Quantitative and Qualitative Disclosures about Market Risk                                                |  | 9       
|         |  |                                                                                                           |  |         
|PART II. |  | OTHER
INFORMATION                                                                                         |  |         
|         |  |                                                                                                           |  |         
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                                          |  | 9       





---



---



##### Table of Contents






PART I.  FINANCIAL INFORMATION




Item 1. Financial Statements

COLE NATIONAL GROUP, INC. AND SUBSIDIARIES




|                                                                                                                        |                                                                                              |                                            |         |             |         |             |         |          |         | 
|----------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ----------- | ------- | ----------- | ------- | -------- | ------- | 
|                                                                                                                        |                                                                                              |                                            |         | November 3, |         | February 3,
|                                                                                                                        |                                                                                              |                                            |         | 2001        |         | 2001       
|                                                                                                                        |                                                                                              |                                            |         |             |         |            
|Assets                                                                                                                  |                                                                                              |                                            |         |             |         |             |         |         
|Current assets:                                                                                                         |                                                                                              |                                            |         |             |         |             |         |         
|                                                                                                                        | Cash and cash equivalents                                                                    |                                            | $       | 21,612      |         |             | $       | 36,725   |        
|                                                                                                                        | Accounts receivable, less allowance for doubtful accounts
of $5,685 and $7,348, respectively |                                            |         | 37,581      |         |             |         | 40,429   |        
|                                                                                                                        | Current portion of notes receivable                                                          |                                            |         | 4,269       |         |             |         | 4,272    |        
|                                                                                                                        | Inventories                                                                                  |                                            |         | 135,806     |         |             |         | 122,238  |        
|                                                                                                                        | Refundable income taxes                                                                      |                                            |         | 519         |         |             |         | 571      |        
|                                                                                                                        | Prepaid expenses and other                                                                   |                                            |         | 15,261      |         |             |         | 15,188   |        
|                                                                                                                        | Deferred income tax benefits                                                                 |                                            |         | 2,040       |         |             |         | 2,009    |        
|                                                                                                                        |                                                                                              |                                            |         |             |         |             |         |         
|                                                                                                                        |                                                                                              | Total current assets                       |         |             | 217,088 |             |         |          | 221,432 | 
|                                                                                                                       
|Property and equipment, at cost                                                                                         |                                                                                              |                                            | 282,148 |             |         |             | 268,742 |         
|                                                                                                                        | Less  accumulated depreciation and amortization                                             |                                            |         | (153,552    | )       |             |         | (145,723 | )      
|                                                                                                                        |                                                                                              |                                            |         |             |         |             |         |         
|                                                                                                                        |                                                                                              | Total property and equipment, net          |         |             | 128,596 |             |         |          | 123,019 | 
|                                                                                                                       
|Notes receivable, excluding current portion, less reserves for
uncollectible amounts of $4,071 and $4,537, respectively |                                                                                              |                                            | 3,905   |             |         |             | 6,573   |         
|Deferred income taxes and other assets                                                                                  |                                                                                              |                                            | 56,185  |             |         |             | 57,422  |         
|Intangible assets, net                                                                                                  |                                                                                              |                                            | 147,231 |             |         |             | 151,588 |         
|                                                                                                                        |                                                                                              |                                            |         |             |         |             |         |         
|                                                                                                                        |                                                                                              | Total assets                               |         | $           | 553,005 |             |         | $        | 560,034 | 
|                                                                                                                        |                                                                                              |                                            |         |             |         |             |         |         
|Liabilities
and Stockholders Equity                                                                                    |                                                                                              |                                            |         |             |         |             |         |         
|Current liabilities:                                                                                                    |                                                                                              |                                            |         |             |         |             |         |         
|                                                                                                                        | Current portion of long-term debt                                                            |                                            | $       | 65          |         |             | $       | 49       |        
|                                                                                                                        | Accounts payable                                                                             |                                            |         | 60,559      |         |             |         | 55,644   |        
|                                                                                                                        | Payable to affiliates, net                                                                   |                                            |         | 75,572      |         |             |         | 81,789   |        
|                                                                                                                        | Accrued interest                                                                             |                                            |         | 7,233       |         |             |         | 6,337    |        
|                                                                                                                        | Accrued liabilities                                                                          |                                            |         | 71,363      |         |             |         | 75,654   |        
|                                                                                                                        | Accrued income taxes                                                                         |                                            |         | (845        | )       |             |         | 502      |        
|                                                                                                                        |                                                                                              |                                            |         |             |         |             |         |         
|                                                                                                                        |                                                                                              | Total current liabilities                  |         |             | 213,947 |             |         |          | 219,975 | 
|                                                                                                                       
|Long-term debt, net of discount and current portion                                                                     |                                                                                              |                                            | 274,292 |             |         |             | 274,262 |         
|                                                                                                                       
|Other long-term liabilities                                                                                             |                                                                                              |                                            | 11,179  |             |         |             | 11,506  |         
|                                                                                                                       
|Stockholders equity                                                                                                    |                                                                                              |                                            | 53,587  |             |         |             | 54,291  |         
|                                                                                                                        |                                                                                              |                                            |         |             |         |             |         |         
|                                                                                                                        |                                                                                              | Total liabilities and stockholders equity |         | $           | 553,005 |             |         | $        | 560,034 | 
|                                                                                                                        |                                                                                              |                                            |         |             |         |             |         |         

The accompanying notes to consolidated financial statements are an integral part
of these consolidated balance sheets.

1



---



##### Table of Contents



COLE NATIONAL GROUP, INC. AND SUBSIDIARIES




|                                     |                               |                                                |                          |         |                      |         |                         |         |             |         |             |         |        |         |         |         |        |         | 
|------------------------------------ | ----------------------------- | ---------------------------------------------- | ------------------------ | ------- | -------------------- | ------- | ----------------------- | ------- | ----------- | ------- | ----------- | ------- | ------ | ------- | ------- | ------- | ------ | ------- | 
|                                     |                               |                                                |                          |         | Thirteen Weeks Ended |         | Thirty-Nine Weeks Ended
|                                     |                               |                                                |                          |         |                      |         |                        
|                                     |                               |                                                |                          |         | November 3,          |         | October 28,             |         | November 3, |         | October 28,
|                                     |                               |                                                |                          |         | 2001                 |         | 2000                    |         | 2001        |         | 2000       
|                                     |                               |                                                |                          |         |                      |         |                         |         |             |         |            
|Net revenue                          |                               | $                                              | 261,488                  |         |                      | $       | 255,901                 |         |             | $       | 805,127     |         |        | $       | 777,656 |        
|Costs and expenses:                  |                               |                                                |                          |         |                      |         |                         |         |             |         |             |         |        |         |         |        
|                                     | Cost of goods sold            |                                                |                          | 86,906  |                      |         |                         | 83,450  |             |         |             | 264,706 |        |         |         | 257,759 |       
|                                     | Operating expenses            |                                                |                          | 163,771 |                      |         |                         | 158,519 |             |         |             | 493,170 |        |         |         | 476,345 |       
|                                     | Depreciation and amortization |                                                |                          | 9,775   |                      |         |                         | 9,278   |             |         |             | 28,597  |        |         |         | 27,874  |       
|                                     |                               |                                                |                          |         |                      |         |                         |         |             |         |             |         |        |         |         |        
|                                     |                               |                                                | Total costs and expenses |         |                      | 260,452 |                         |         |             | 251,247 |             |         |        | 786,473 |         |         |        | 761,978 | 
|                                     |                               |                                                |                          |         |                      |         |                         |         |             |         |             |         |        |         |         |        
|Operating income                     |                               |                                                | 1,036                    |         |                      |         | 4,654                   |         |             |         | 18,654      |         |        |         | 15,678  |        
|Interest and other (income) expense: |                               |                                                |                          |         |                      |         |                         |         |             |         |             |         |        |         |         |        
|                                     | Interest expense              |                                                |                          | 6,907   |                      |         |                         | 7,035   |             |         |             | 20,671  |        |         |         | 20,776  |       
|                                     | Interest and other income     |                                                |                          | (189    | )                    |         |                         | (18     | )           |         |             | (1,440  | )      |         |         | (254    | )     
|                                     |                               |                                                |                          |         |                      |         |                         |         |             |         |             |         |        |         |         |        
|                                     |                               | Total interest and other (income) expense, net |                          |         | 6,718                |         |                         |         | 7,017       |         |             |         | 19,231 |         |         |         | 20,522 |        
|                                     |                               |                                                |                          |         |                      |         |                         |         |             |         |             |         |        |         |         |        
|Loss before income taxes             |                               |                                                | (5,682                   | )       |                      |         | (2,363                  | )       |             |         | (577        | )       |        |         | (4,844  | )      
|Income tax benefit                   |                               |                                                | (3,978                   | )       |                      |         | (1,927                  | )       |             |         | (404        | )       |        |         | (3,391  | )      
|                                     |                               |                                                |                          |         |                      |         |                         |         |             |         |             |         |        |         |         |        
|Net loss                             |                               | $                                              | (1,704                   | )       |                      | $       | (436                    | )       |             | $       | (173        | )       |        | $       | (1,453  | )      
|                                     |                               |                                                |                          |         |                      |         |                         |         |             |         |             |         |        |         |         |        

The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.

2



---



##### Table of Contents



COLE NATIONAL GROUP, INC. AND SUBSIDIARIES




|                                      |                                                                                 |                                                                                           |                                                      |                                                                  |        |                         |         |             |        |         |         |  
|------------------------------------- | ------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ---------------------------------------------------- | ---------------------------------------------------------------- | ------ | ----------------------- | ------- | ----------- | ------ | ------- | ------- | -
|                                      |                                                                                 |                                                                                           |                                                      |                                                                  |        | Thirty-Nine Weeks Ended
|                                      |                                                                                 |                                                                                           |                                                      |                                                                  |        |                        
|                                      |                                                                                 |                                                                                           |                                                      |                                                                  |        | November 3,             |         | October 28,
|                                      |                                                                                 |                                                                                           |                                                      |                                                                  |        | 2001                    |         | 2000       
|                                      |                                                                                 |                                                                                           |                                                      |                                                                  |        |                         |         |            
|Cash flows from operating activities: |                                                                                 |                                                                                           |                                                      |                                                                  |        |                         |         |            
|                                      | Net loss                                                                        |                                                                                           | $                                                    | (173                                                             | )      |                         | $       | (1,453      | )     
|                                      | Adjustments to reconcile net loss to net cash
provided by operating activities: |                                                                                           |                                                      |                                                                  |        |                         |         |             |       
|                                      |                                                                                 | Depreciation and amortization                                                             |                                                      |                                                                  | 28,597 |                         |         |             | 27,874 |        
|                                      |                                                                                 | Non-cash interest, net                                                                    |                                                      |                                                                  | 901    |                         |         |             | 837    |        
|                                      |                                                                                 | Gain on sale of fixed assets                                                              |                                                      |                                                                  | (683   | )                       |         |             |       |        
|                                      |                                                                                 | Increases (decreases) in cash resulting from changes in operating
assets and liabilities: |                                                      |                                                                  |        |                         |         |             |        |        
|                                      |                                                                                 |                                                                                           |                                                      | Accounts and notes receivable, prepaid expenses and other assets |        |                         | 5,347   |             |        |         | 5,020   |  
|                                      |                                                                                 |                                                                                           |                                                      | Inventories                                                      |        |                         | (13,568 | )           |        |         | (30,545 | )
|                                      |                                                                                 |                                                                                           |                                                      | Accounts payable, accrued liabilities and other liabilities      |        |                         | 642     |             |        |         | (1,663  | )
|                                      |                                                                                 |                                                                                           |                                                      | Accrued interest                                                 |        |                         | 896     |             |        |         | 1,006   |  
|                                      |                                                                                 |                                                                                           |                                                      | Accrued, refundable and deferred income taxes                    |        |                         | (1,397  | )           |        |         | 4,112   |  
|                                      |                                                                                 |                                                                                           |                                                      |                                                                  |        |                         |         |            
|                                      |                                                                                 |                                                                                           |                                                      | Net cash provided by operating activities                        |        |                         | 20,562  |             |        |         | 5,188   |  
|                                      |                                                                                 |                                                                                           |                                                      |                                                                  |        |                         |         |            
|Cash flows from investing activities: |                                                                                 |                                                                                           |                                                      |                                                                  |        |                         |         |            
|                                      | Purchases of property and equipment, net                                        |                                                                                           |                                                      | (27,860                                                          | )      |                         |         | (23,087     | )     
|                                      | Proceeds from sale of fixed assets, net                                         |                                                                                           |                                                      | 4,712                                                            |        |                         |         |            |       
|                                      | Systems development costs                                                       |                                                                                           |                                                      | (5,826                                                           | )      |                         |         | (5,567      | )     
|                                      | Other, net                                                                      |                                                                                           |                                                      | (213                                                             | )      |                         |         | 53          |       
|                                      |                                                                                 |                                                                                           |                                                      |                                                                  |        |                         |         |            
|                                      |                                                                                 |                                                                                           | Net cash used for investing activities               |                                                                  |        | (29,187                 | )       |             |        | (28,601 | )      
|                                      |                                                                                 |                                                                                           |                                                      |                                                                  |        |                         |         |            
|Cash flows from financing activities: |                                                                                 |                                                                                           |                                                      |                                                                  |        |                         |         |            
|                                      | Proceeds from working capital borrowings                                        |                                                                                           |                                                      |                                                                 |        |                         |         | 8,500       |       
|                                      | Repayment of long-term debt                                                     |                                                                                           |                                                      | (30                                                              | )      |                         |         | (281        | )     
|                                      | Advances to affiliates, net                                                     |                                                                                           |                                                      | (5,938                                                           | )      |                         |         | (3,623      | )     
|                                      | Payment of deferred financing fees                                              |                                                                                           |                                                      |                                                                 |        |                         |         | (377        | )     
|                                      | Other, net                                                                      |                                                                                           |                                                      | (520                                                             | )      |                         |         | (435        | )     
|                                      |                                                                                 |                                                                                           |                                                      |                                                                  |        |                         |         |            
|                                      |                                                                                 |                                                                                           | Net cash provided by (used for) financing activities |                                                                  |        | (6,488                  | )       |             |        | 3,784   |        
|                                      |                                                                                 |                                                                                           |                                                      |                                                                  |        |                         |         |            
|Cash and cash equivalents:            |                                                                                 |                                                                                           |                                                      |                                                                  |        |                         |         |            
|                                      | Net decrease during the period                                                  |                                                                                           |                                                      | (15,113                                                          | )      |                         |         | (19,629     | )     
|                                      | Balance, beginning of the period                                                |                                                                                           |                                                      | 36,725                                                           |        |                         |         | 28,953      |       
|                                      |                                                                                 |                                                                                           |                                                      |                                                                  |        |                         |         |            
|                                      | Balance, end of the period                                                      |                                                                                           | $                                                    | 21,612                                                           |        |                         | $       | 9,324       |       
|                                      |                                                                                 |                                                                                           |                                                      |                                                                  |        |                         |         |            

The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.

3



---



##### Table of Contents



COLE NATIONAL GROUP, INC. AND SUBSIDIARIES




(1) Summary of Significant Accounting Policies

Basis of Presentation

Cole National Group, Inc. is a wholly owned subsidiary of Cole National
Corporation. The consolidated financial statements include the accounts of Cole
National Group and its wholly owned subsidiaries (collectively, the Company).
All significant intercompany transactions have been eliminated in consolidation.

The accompanying consolidated financial statements have been prepared
without audit and certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted, although management
believes that the disclosures herein are adequate to make the information not
misleading. Results for interim periods are not necessarily indicative of the
results to be expected for the full year. These statements should be read in
conjunction with the Companys consolidated financial statements for the fiscal
year ended February 3, 2001.

In the opinion of management, the accompanying financial statements contain
all adjustments (consisting only of normal recurring accruals) necessary to
present fairly the Companys financial position as of November 3, 2001 and the
results of operations and cash flows for the 39 weeks ended November 3, 2001 and
October 28, 2000.

Inventories

The accompanying interim consolidated financial statements have been
prepared without physical inventories.

Cash Flows

Net cash flows from operating activities reflect cash payments for income
taxes and interest of $981,000 and $18,874,000 respectively, for the 39 weeks
ended November 3, 2001, and $843,000 and $18,934,000, respectively, for the 39
weeks ended October 28, 2000.

Total Other Comprehensive Income
(Loss)

Total other comprehensive income (loss) for the 13 and 39 weeks ended
November 3, 2001 and October 28, 2000 is as follows (000s omitted):

|                            |  |                |        |                   |  |      |      |      |  |   |      |   |  |   |        |  
|--------------------------- |  | -------------- | ------ | ----------------- |  | ---- | ---- | ---- |  | - | ---- | - |  | - | ------ | -
|                            |  | Thirteen Weeks |        | Thirty-Nine Weeks
|                            |  |                |        |                  
|                            |  | 2001           |        | 2000              |  | 2001 |      | 2000
|                            |  |                |        |                   |  |      |      |     
|Net loss                    |  | $              | (1,704 | )                 |  | $    | (436 | )    |  | $ | (173 | ) |  | $ | (1,453 | )
|Cumulative translation loss |  |                | (313   | )                 |  |      | (271 | )    |  |   | (531 | ) |  |   | (455   | )
|                            |  |                |        |                   |  |      |      |      |  |   |      |   |  |   |        |  
|Total comprehensive loss    |  | $              | (2,017 | )                 |  | $    | (707 | )    |  | $ | (704 | ) |  | $ | (1,908 | )
|                            |  |                |        |                   |  |      |      |      |  |   |      |   |  |   |        |  

4



---



##### Table of Contents



COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

(2) Segment Information

Information on the Companys reportable segments is as follows (000s
omitted):

|                         |                                |                          |                                |                    |         |                |        |                   |         |       |        |         |         |        |        |         |         |        |        |  
|------------------------ | ------------------------------ | ------------------------ | ------------------------------ | ------------------ | ------- | -------------- | ------ | ----------------- | ------- | ----- | ------ | ------- | ------- | ------ | ------ | ------- | ------- | ------ | ------ | -
|                         |                                |                          |                                |                    |         | Thirteen Weeks |        | Thirty-Nine Weeks
|                         |                                |                          |                                |                    |         |                |        |                  
|                         |                                |                          |                                |                    |         | 2001           |        | 2000              |         | 2001  |        | 2000   
|                         |                                |                          |                                |                    |         |                |        |                   |         |       |        |        
|Net revenue:             |                                |                          |                                |                    |         |                |        |                   |         |       |        |         |         |        |        |        
|                         | Cole Vision                    |                          | $                              | 208,049            |         |                | $      | 200,338           |         |       | $      | 625,144 |         |        | $      | 597,322 |        
|                         | Things Remembered              |                          |                                | 53,439             |         |                |        | 55,563            |         |       |        | 179,983 |         |        |        | 180,334 |        
|                         |                                |                          |                                |                    |         |                |        |                   |         |       |        |         |         |        |        |        
|                         |                                | Consolidated net revenue |                                | $                  | 261,488 |                |        | $                 | 255,901 |       |        | $       | 805,127 |        |        | $       | 777,656 |       
|                         |                                |                          |                                |                    |         |                |        |                   |         |       |        |         |         |        |        |        
|Operating income (loss): |                                |                          |                                |                    |         |                |        |                   |         |       |        |         |         |        |        |        
|                         | Cole Vision                    |                          | $                              | 5,242              |         |                | $      | 6,913             |         |       | $      | 18,048  |         |        | $      | 15,400  |        
|                         | Things Remembered              |                          |                                | (1,571             | )       |                |        | 307               |         |       |        | 7,795   |         |        |        | 9,816   |        
|                         |                                |                          |                                |                    |         |                |        |                   |         |       |        |         |         |        |        |        
|                         |                                |                          | Total segment operating income |                    |         | 3,671          |        |                   |         | 7,220 |        |         |         | 25,843 |        |         |         | 25,216 |       
|                         | Unallocated amounts:           |                          |                                |                    |         |                |        |                   |         |       |        |         |         |        |        |         |        
|                         |                                |                          |                                | Corporate expenses |         |                | (2,635 | )                 |         |       | (2,566 | )       |         |        | (7,189 | )       |         |        | (9,538 | )
|                         |                                |                          |                                |                    |         |                |        |                   |         |       |        |         |         |        |        |        
|                         | Consolidated operating income  |                          |                                | 1,036              |         |                |        | 4,654             |         |       |        | 18,654  |         |        |        | 15,678  |        
|                         | Interest and other income, net |                          |                                | (6,718             | )       |                |        | (7,017            | )       |       |        | (19,231 | )       |        |        | (20,522 | )      
|                         |                                |                          |                                |                    |         |                |        |                   |         |       |        |         |         |        |        |        
|                         | Loss before income taxes       |                          | $                              | (5,682             | )       |                | $      | (2,363            | )       |       | $      | (577    | )       |        | $      | (4,844  | )      
|                         |                                |                          |                                |                    |         |                |        |                   |         |       |        |         |         |        |        |        

5



---



##### Table of Contents






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

Certain information required by this item has been omitted pursuant to
General Instruction H of Form 10-Q.

The following is a discussion of certain factors affecting the Companys
results of operations for the 13 and 39 week periods ended November 3, 2001 and
October 28, 2000 (the Companys third quarter and first nine months,
respectively). This discussion should be read in conjunction with the
consolidated financial statements and notes thereto included elsewhere in this
filing and the audited financial statements for the fiscal year ended February
3, 2001 included in the Companys annual report on Form 10-K.

Fiscal years end on the Saturday closest to January 31 and are identified
according to the calendar year in which they begin. For example, the fiscal year
ended February 3, 2001 is referred to as fiscal 2000. The current fiscal year,
which will end February 2, 2002, is referred to as fiscal 2001.

Results of Operations

The following table sets forth certain operating information for the third
quarter and first nine months of fiscal 2001 and fiscal 2000 (dollars in
millions):

|                                                     |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |      |      |  
|---------------------------------------------------- | ----------------------------- | ------------------- | ----- | ------------- | ----- | ----------------- | ----- | ------ | ----- | ---- | --- | ---- | ----- | ------ | ----- | ----- | ----- | - | ----- | ----- | ----- | - | --- | ---- | ---- | -
|                                                     |                               |                     |       | Third Quarter |       | First Nine Months
|                                                     |                               |                     |       |               |       |                  
|                                                     |                               |                     |       | 2001          |       | 2000              |       | Change |       | 2001 |     | 2000 |       | Change
|                                                     |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |       
|Net Revenue:                                         |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     
|                                                     | Cole Vision                   |                     | $     | 208.1         |       |                   | $     | 200.3  |       |      |     | 3.8  | %     |        | $     | 625.1 |       |   | $     | 597.4 |       |   |     | 4.7  | %   
|                                                     | Things Remembered             |                     |       | 53.4          |       |                   |       | 55.6   |       |      |     | (3.8 | )     |        |       | 180.0 |       |   |       | 180.3 |       |   |     | (0.2 | )   
|                                                     |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     
|                                                     |                               | Total net revenue   |       | $             | 261.5 |                   |       | $      | 255.9 |      |     |      | 2.2   | %      |       | $     | 805.1 |   |       | $     | 777.7 |   |     |      | 3.5  | %
|Gross margin                                         |                               | $                   | 174.6 |               |       | $                 | 172.5 |        |       |      | 1.2 | %    |       | $      | 540.4 |       |       | $ | 519.9 |       |       |   | 3.9 | %   
|Operating expenses                                   |                               |                     | 163.8 |               |       |                   | 158.5 |        |       |      | 3.3 |      |       |        | 493.1 |       |       |   | 476.3 |       |       |   | 3.5 |     
|Depreciation and amortization                        |                               |                     | 9.8   |               |       |                   | 9.3   |        |       |      | 5.4 |      |       |        | 28.6  |       |       |   | 27.9  |       |       |   | 2.6 |     
|                                                     |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     
|                                                     |                               | Operating income    |       | $             | 1.0   |                   |       | $      | 4.7   |      |     |      | (77.7 | )%     |       | $     | 18.7  |   |       | $     | 15.7  |   |     |      | 19.0 | %
|                                                     |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     
|Percentage of net revenue:                           |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     
|                                                     | Gross margin                  |                     |       | 66.8          | %     |                   |       | 67.4   | %     |      |     | (0.6 | )     |        |       | 67.1  | %     |   |       | 66.9  | %     |   |     | 0.2  |     
|                                                     | Operating expenses            |                     |       | 62.7          |       |                   |       | 62.0   |       |      |     | 0.7  |       |        |       | 61.2  |       |   |       | 61.3  |       |   |     | (0.1 | )   
|                                                     | Depreciation and amortization |                     |       | 3.7           |       |                   |       | 3.6    |       |      |     | 0.1  |       |        |       | 3.6   |       |   |       | 3.6   |       |   |     |     |     
|                                                     |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     
|                                                     |                               | Operating income    |       |               | 0.4   | %                 |       |        | 1.8   | %    |     |      | (1.4  | )      |       |       | 2.3   | % |       |       | 2.0   | % |     |      | 0.3  |  
|                                                     |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     
|Number of retail locations
at the end of the period: |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     
|                                                     | Cole Licensed Brands          |                     |       | 1,279         |       |                   |       | 1,161  |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |      |     
|                                                     | Pearle company-owned          |                     |       | 430           |       |                   |       | 444    |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |      |     
|                                                     | Pearle franchised             |                     |       | 423           |       |                   |       | 423    |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |      |     
|                                                     |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     
|                                                     |                               | Total Cole Vision   |       |               | 2,132 |                   |       |        | 2,028 |      |     |      |       |        |       |       |       |   |       |       |       |   |     |      |      |  
|                                                     | Things Remembered             |                     |       | 790           |       |                   |       | 794    |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |      |     
|                                                     |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     
|                                                     |                               | Total Cole National |       |               | 2,922 |                   |       |        | 2,822 |      |     |      |       |        |       |       |       |   |       |       |       |   |     |      |      |  
|                                                     |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     

6



---



##### Table of Contents



The increases in consolidated net revenue for the third quarter and first
nine months of fiscal 2001 were primarily attributable to increases in
comparable store sales at Cole Vision, an increase in the number of Target
Optical locations and additional managed vision care revenue, partially offset
by a sales decrease at Things Remembered caused by the general slowdown in mall
traffic. Revenue at all businesses was unfavorably impacted by consumer
responses to the terrorist activities of September 11 and the general economic
slowdown. Changes in comparable store sales by business compared to the same
periods a year ago were:

| |  |                              |  |  |      |               |  |                   |      |    |  | 
| |  | ---------------------------- |  |  | ---- | ------------- |  | ----------------- | ---- | -- |  | 
| |  |                              |  |  |      | Third Quarter |  | First Nine Months
| |  |                              |  |  |      |               |  |                  
| |  | Cole Licensed
Brands U.S.    |  |  | 2.4  | %             |  |                   | 3.0  | % 
| |  | Pearle U.S. Company-owned    |  |  | 2.2  | %             |  |                   | 2.3  | % 
| |  | Total Cole Vision            |  |  | 1.7  | %             |  |                   | 2.1  | % 
| |  | Things Remembered            |  |  | (4.8 | )%            |  |                   | (2.1 | )%
| |  | Total Cole National          |  |  | 0.2  | %             |  |                   | 1.0  | % 
| |  |                              |  |  |      |               |  |                   |      |    |  | 
| |  | Pearle U.S. franchise stores |  |  | 1.1  | %             |  |                   | (0.4 | )%
| |  | Pearle U.S. chain-wide       |  |  | 1.6  | %             |  |                   | 0.8  | % 

At Cole Licensed Brands and Pearle company-owned stores, comparable store
sales increases for the third quarter and first nine months primarily reflect
increases in the average spectacle selling prices. At Cole Licensed Brands,
third quarter comparable store sales also reflect the fact that this years
National Eye Exam Month promotion at Sears Optical ran exclusively in the third
quarter rather than beginning in the second quarter as it had last year. At
Pearle company-owned stores, the increase in average spectacle selling price for
the first nine months was due, in part, to not repeating a 50% off frame
promotion that ran during the entire first quarter of fiscal 2000. At Things
Remembered, comparable store sales for the first nine months decreased, in part,
from the general slowdown in mall traffic and from not repeating February 2000s
aggressive merchandise clearance promotion. However, the average selling price
increased as a result of sales of new merchandise at higher average unit
retails, more personalization and not repeating last years February promotion.
The increase in Things Remembered`s average selling price for the third quarter
was tempered by added promotions to stimulate business following September 11.
The general slowdown in mall traffic has continued in the fourth quarter and
Things Remembereds full year results will be heavily dependent on the Christmas
selling season.

The gross margin dollar increase for the third quarter resulted from
increased net revenue at Cole Vision partially offset by a lower gross margin
rate at Cole Vision and decreased net revenue at Things Remembered. The gross
margin dollar increase for the first nine months resulted from increased net
revenue at Cole Vision and improvements in gross margin rate at both Cole Vision
and Things Remembered. The gross margin rate at Cole Vision declined 0.7
percentage points for the third quarter compared to the same period last year
primarily because more customers selected merchandise from Cole Licensed Brands
new, higher cost frame assortment at Sears. Additional revenue from managed
vision care partially offset the third quarter decline in frame margins and
resulted in the 0.3 percentage point improvement in gross margin rate at Cole
Vision for the first nine months of fiscal 2001 compared to the same period last
year. Going forward, introduction of new Sears private label frames is expected
to address the decline in gross margin rate that affected the third quarter. The
gross margin rate at Things Remembered was even in the third quarter of fiscal
2001 compared to the same period last year despite various promotional
activities undertaken to stimulate sales after September 11. The gross margin
rate for the first nine months improved 0.3 percentage points reflecting the
improvement in average selling price due in part to not repeating last years
first quarter aggressive clearance promotion.

The increases in operating expenses for the third quarter and first nine
months of fiscal 2001 were primarily due to costs incurred to support the
increases in net revenue and the Target Optical expansion. The Company has
opened 111 new Target Optical stores since the third quarter of fiscal 2000. As
a percentage of net revenue, operating expenses increased by 0.7 percentage
points in the third quarter compared to the same

7



---



##### Table of Contents



period last year. This decrease in leverage resulted primarily from the level of
sales growth in relation to store operating expenses and the Target Optical
expansion. The Company experienced a 1.3 percentage point increase in payroll
costs and a 0.5 percentage point increase in store occupancy costs, which were
partially offset by a leverage gain from reduced advertising expenditures in all
businesses. Operating expenses as a percentage of net revenue were essentially
even for the first nine months of fiscal 2001 compared to the same period last
year as the decreased leverage for third quarter offset previous year to date
improvements from leveraging non-store overhead and improved efficiencies in the
cost per managed vision care claim processed. Last year, operating expenses also
included a $1.8 million first quarter severance charge in connection with
personnel reductions at Cole Vision.

The Companys operating results for the third quarter and first nine months
of fiscal 2001 includes the absorption of increased losses from the continued
expansion of Target Optical. During the first nine months of fiscal 2001, 106
Target Optical locations were opened, bringing the total number to 223. The
decrease in operating income for the third quarter was also attributable to the
modest growth in net revenues and the decrease in gross margin rates at Cole
Vision. The increase in operating income for the first nine months resulted from
increases in net revenue at Cole Vision, improved gross margin rates at both
Cole Vision and Things Remembered and the severance charge included in fiscal
2000 results.

The decrease in nine month interest and other (income) expense, net, was
primarily the result of a $0.7 million first quarter gain from the sale of a
Dallas facility no longer needed for Pearles operations. An income tax benefit
was recorded in the first nine months of fiscal 2001 and fiscal 2000 using the
Companys estimated annual effective tax rate of 70%.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets (SFAS 142). This standard requires that companies stop
amortizing goodwill and certain intangible assets with an indefinite useful life
created by business combinations accounted for using the purchase method of
accounting. Instead, goodwill and intangible assets deemed to have an indefinite
useful life will be subject to an annual review for impairment. The new standard
generally will be effective for the Company in the first quarter of fiscal 2002.
The Company is in the process of quantifying the impact of adopting each of the
provisions of SFAS 142.

Upon adoption of SFAS 142, the Company expects to stop amortizing goodwill
and tradenames. Based upon the current level of these assets, this would reduce
annual amortization expense by approximately $5.7 million. Because a substantial
portion of the goodwill amortization is nondeductible for tax purposes, the
impact of stopping goodwill and tradename amortization would be to reduce the
Companys annual effective tax rate and to increase its annual net income.

The FASB has also issued Statement of Financial Accounting Standards No.
141, Business Combinations (SFAS 141), No. 143 Accounting for Asset
Retirement Obligations (SFAS 143) and No. 144 Accounting for the Impairment or
Disposal of Long-Lived Assets (SFAS 144). SFAS 141 changes the accounting for
business combinations by, among other things, prohibiting the use of the pooling
of interests method. SFAS 143 provides guidance for legal obligations arising
from the retirement of long-lived assets. SFAS 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
None of these standards is expected to have a material effect on the Companys
financial position or operations.

8



---



##### Table of Contents



Forward-Looking Information

Certain sections of this Form 10-Q Report, including this Managements
Discussion and Analysis, contain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Actual results may
differ materially from those forecasted due to a variety of factors that can
adversely affect the Companys operating results, liquidity and financial
condition such as risks associated with the timing and achievement of
improvements in the operations of the optical business, the nature and extent of
disruptions of the economy from terrorists activities and from governmental and
consumer responses to such acts, the success of new store openings and the rate
at which new stores achieve profitability, the Companys ability to select,
stock and price merchandise attractive to customers, success of systems
development and integration, competition in the optical industry, integration of
acquired businesses, economic and weather factors affecting consumer spending,
operating factors affecting customer satisfaction, including manufacturing
quality of optical and engraved goods, the Companys relationship with host
stores and franchisees, the mix of goods sold, pricing and other competitive
factors, and the seasonality of the Companys business. Forward-looking
statements are made based upon managements expectations and beliefs concerning
future events impacting Cole National Group, Inc. All forward-looking statements
involve risk and uncertainty.




Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to market risk from changes in foreign currency
exchange rates, which could impact its results of operations and financial
condition. Foreign exchange risk arises from the Companys exposure to
fluctuations in foreign currency exchange rates because the Companys reporting
currency is the United States dollar. Management seeks to minimize the exposure
to foreign currency fluctuations through natural internal offsets to the fullest
extent possible.

Item 6. Exhibits and Reports on Form 8-K

| |  |     |  |                                                                            
| |  | --- |  | ---------------------------------------------------------------------------
| |  | (a) |  | Exhibits. The following Exhibits are filed herewith and made a part
hereof:
| |  |     |  |                                                                            
| |  |     |  | None.                                                                      
| |  |     |  |                                                                            
| |  | (b) |  | Reports on Form 8-K                                                        
| |  |     |  |                                                                            
| |  |     |  | None.                                                                      

9



---



##### Table of Contents






SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

|                        
|------------------------
|COLE NATIONAL GROUP, INC

|    |  |                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------
|By: |  | /s/Tracy L. Burmeister                                                                                                 
|    |  |                                                                                                                        
|    |  | Tracy L. Burmeister
Vice President, Accounting and Reporting
(Duly Authorized Officer and Principal
Accounting Officer)



Date:  December 10, 2001

10