##### Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)


(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 1, 2003,                                        
|      
|      
|      
|      
|       |  | 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 33-66342

COLE NATIONAL GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)

|                                                                                  |  |                                                
|--------------------------------------------------------------------------------- |  | -----------------------------------------------
|DELAWARE
(State or other jurisdiction of
incorporation or organization)           |  | 34-1744334
(I.R.S. Employer Identification No.)
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|1925
 ENTERPRISE PARKWAY
TWINSBURG, OHIO
(Address of principal executive offices) |  | 44087
(Zip Code)                               

(330) 486-3100
(Registrants telephone number, including area code)

The Registrant meets the conditions set forth in General Instruction
H(1)(a) and (b) of Form 10-Q and is therefore filing this form in the reduced
disclosure format.

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x]  No [    ]

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

All of the outstanding capital stock of the registrant is held by Cole
National Corporation.

As of November 30, 2003, 1,100 shares of the registrants common stock,
$.01 par value were outstanding.





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TABLE OF CONTENTS



|                               |                                                                                               |                                                      |  |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                               |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                               |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     
|                               |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                               |                                                                                               | 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                           
|                               | Item 4. Controls and Procedures                                                              
|PART II  OTHER INFORMATION   
|                               | Item 1. Legal Proceedings                                                                    
|                               | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                    
|EXHIBIT INDEX                 
|EX-31.1 Certification         
|EX-31.2 Certification         
|EX-32 Certification           



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##### Table of Contents



EXPLANATORY NOTE

This Amendment No. 1 on Form 10-Q/A
amends and restates Items 1 and 2 of Part I contained in the
Companys report on Form 10-Q for the quarterly period ended November
1, 2003 to give effect to the restatement of the Companys
condensed consolidated financial statements for the quarterly period ended
November 1, 2003, as discussed in Note 9 to the Notes to Condensed
Consolidated Financial Statements.
Except as set forth in Items 1 and 2 of Part I below, the Company has not
made any changes to, nor updated any disclosures contained in, its
Form 10-Q filed December 15, 2003.

COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
FORM 10-Q/A
QUARTER ENDED NOVEMBER 1, 2003
INDEX

|                              |                                                                                               |                                                                                                                                          |  |          |   | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | - | 
|                              |                                                                                               |                                                                                                                                          |  | Page No.
|                              |                                                                                               |                                                                                                                                          |  |         
|PART I. FINANCIAL INFORMATION |                                                                                               |                                                                                                                                          |  |         
|                             
|                             
|                             
|                             
|                              | Item 1. Financial Statements (unaudited)                                                      |                                                                                                                                          |  |          |  
|                             
|                             
|                             
|                             
|                              |                                                                                               | Condensed
Consolidated Balance Sheets as of November 1, 2003 (as restated), November 2, 2002
and February 1, 2003                        |  |          | 1 | 
|                             
|                             
|                             
|                             
|                              |                                                                                               | Condensed Consolidated Statements of Operations for the 13 and 39 week periods
ended November 1, 2003 (as restated) and November 2, 2002 |  |          | 2 | 
|                             
|                             
|                             
|                             
|                              |                                                                                               | Condensed Consolidated Statements of Cash Flows for the 39 week periods
ended November 1, 2003 (as restated) and November 2, 2002        |  |          | 3 | 
|                             
|                             
|                             
|                             
|                              |                                                                                               | Notes to Condensed Consolidated Financial Statements                                                                                     |  |          | 4 | 
|                             
|                             
|                             
|                             
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                                                          |  | 12       |  
|                             
|                             
|                             
|                             
|                              | Item 3. Quantitative and Qualitative Disclosures about Market Risk                            |                                                                                                                                          |  | 22       |  
|                             
|                             
|                             
|                             
|                              | Item 4. Controls and Procedures                                                               |                                                                                                                                          |  | 22       |  
|                             
|                             
|                             
|                             
|PART II. OTHER INFORMATION    |                                                                                               |                                                                                                                                          |  |         
|                             
|                             
|                             
|                             
|                              | Item 1. Legal Proceedings                                                                     |                                                                                                                                          |  | 23       |  
|                             
|                             
|                             
|                             
|                              | Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                                                          |  | 23       |  
|                             
|                             
|                             
|                             
|                              | Signatures                                                                                    |                                                                                                                                          |  | 25       |  
|                             
|                             
|                             
|                             
|                              | Exhibit Index                                                                                 |                                                                                                                                          |  | 26       |  





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##### Table of Contents






PART I  FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)

|                                                                                                        |                                                                                 |                                            |                                   |                           |         |              |         |             |         |             |         |          |         |         |         | 
|------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------------ | --------------------------------- | ------------------------- | ------- | ------------ | ------- | ----------- | ------- | ----------- | ------- | -------- | ------- | ------- | ------- | 
|                                                                                                        |                                                                                 |                                            |                                   |                           |         | November 1,  |         |             |         |            
|                                                                                                        |                                                                                 |                                            |                                   |                           |         | 2003         |         |             |         |            
|                                                                                                        |                                                                                 |                                            |                                   |                           |         | (As
Restated |         | November 7, |         | February 1,
|                                                                                                        |                                                                                 |                                            |                                   |                           |         | See Note
9)  |         | 2002        |         | 2003       
|                                                                                                        |                                                                                 |                                            |                                   |                           |         |              |         |             |         |            
|Assets                                                                                                  |                                                                                 |                                            |                                   |                           |         |              |         |             |         |             |         |         
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Current assets:                                                                                         |                                                                                 |                                            |                                   |                           |         |              |         |             |         |             |         |         
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                        | Cash and cash equivalents                                                       |                                            | $                                 | 25,677                    |         |              | $       | 21,370      |         |             | $       | 42,001   |        
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                        | Accounts receivable, less allowances of
$3,831, $2,488 and $3,063, respectively |                                            |                                   | 51,908                    |         |              |         | 48,589      |         |             |         | 50,954   |        
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                        | Current portion of notes receivable                                             |                                            |                                   | 2,367                     |         |              |         | 2,756       |         |             |         | 4,517    |        
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                        | Inventories                                                                     |                                            |                                   | 140,324                   |         |              |         | 137,875     |         |             |         | 120,642  |        
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                        | Prepaid expenses and other                                                      |                                            |                                   | 21,625                    |         |              |         | 25,854      |         |             |         | 24,210   |        
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                        | Deferred income taxes                                                           |                                            |                                   | 33,238                    |         |              |         | 28,298      |         |             |         | 32,116   |        
|                                                                                                        |                                                                                 |                                            |                                   |                           |         |              |         |             |         |             |         |         
|                                                                                                        |                                                                                 |                                            | Total current assets              |                           |         | 275,139      |         |             |         | 264,742     |         |          |         | 274,440 |        
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Property and equipment, at cost                                                                         |                                                                                 |                                            | 320,720                           |                           |         |              | 314,862 |             |         |             | 312,413 |         
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                        | Less  accumulated depreciation and amortization                                |                                            |                                   | (200,098                  | )       |              |         | (193,569    | )       |             |         | (192,805 | )      
|                                                                                                        |                                                                                 |                                            |                                   |                           |         |              |         |             |         |             |         |         
|                                                                                                        |                                                                                 |                                            | Total property and equipment, net |                           |         | 120,622      |         |             |         | 121,293     |         |          |         | 119,608 |        
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Notes receivable, excluding current portion, less allowances
of $2,787, $3,806 and $3,010, respectively |                                                                                 |                                            | 5,402                             |                           |         |              | 3,320   |             |         |             | 2,180   |         
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Deferred income taxes                                                                                   |                                                                                 |                                            | 31,942                            |                           |         |              | 26,233  |             |         |             | 26,026  |         
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Other assets                                                                                            |                                                                                 |                                            | 41,227                            |                           |         |              | 45,659  |             |         |             | 45,449  |         
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Other intangibles, net                                                                                  |                                                                                 |                                            | 50,099                            |                           |         |              | 46,646  |             |         |             | 50,903  |         
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Goodwill, net                                                                                           |                                                                                 |                                            | 85,737                            |                           |         |              | 85,550  |             |         |             | 85,557  |         
|                                                                                                        |                                                                                 |                                            |                                   |                           |         |              |         |             |         |             |         |         
|                                                                                                        |                                                                                 |                                            | Total assets                      |                           | $       | 610,168      |         |             | $       | 593,443     |         |          | $       | 604,163 |        
|                                                                                                        |                                                                                 |                                            |                                   |                           |         |              |         |             |         |             |         |         
|Liabilities and Stockholders Equity                                                                    |                                                                                 |                                            |                                   |                           |         |              |         |             |         |             |         |         
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Current liabilities:                                                                                    |                                                                                 |                                            |                                   |                           |         |              |         |             |         |             |         |         
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                        | Current portion of long-term debt                                               |                                            | $                                 | 446                       |         |              | $       | 227         |         |             | $       | 232      |        
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                        | Accounts payable                                                                |                                            |                                   | 81,764                    |         |              |         | 66,319      |         |             |         | 67,581   |        
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                        | Payable to affiliates, net                                                      |                                            |                                   | 84,468                    |         |              |         | 80,013      |         |             |         | 78,557   |        
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                        | Accrued interest                                                                |                                            |                                   | 8,442                     |         |              |         | 8,164       |         |             |         | 7,805    |        
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                        | Accrued liabilities                                                             |                                            |                                   | 89,088                    |         |              |         | 85,859      |         |             |         | 92,289   |        
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                        | Accrued income taxes                                                            |                                            |                                   |                          |         |              |         |            |         |             |         | 516      |        
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                        | Deferred revenue                                                                |                                            |                                   | 41,055                    |         |              |         | 37,754      |         |             |         | 38,014   |        
|                                                                                                        |                                                                                 |                                            |                                   |                           |         |              |         |             |         |             |         |         
|                                                                                                        |                                                                                 |                                            |                                   | Total current liabilities |         |              | 305,263 |             |         |             | 278,336 |          |         |         | 284,994 | 
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Long-term debt, net of current portion                                                                  |                                                                                 |                                            | 276,475                           |                           |         |              | 276,254 |             |         |             | 276,553 |         
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Other long-term liabilities                                                                             |                                                                                 |                                            | 30,976                            |                           |         |              | 19,225  |             |         |             | 36,498  |         
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Deferred revenue, long-term                                                                             |                                                                                 |                                            | 12,855                            |                           |         |              | 11,927  |             |         |             | 11,559  |         
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Stockholders (deficit) equity                                                                          |                                                                                 |                                            | (15,401                           | )                         |         |              | 7,701   |             |         |             | (5,441  | )       
|                                                                                                        |                                                                                 |                                            |                                   |                           |         |              |         |             |         |             |         |         
|                                                                                                        |                                                                                 | Total liabilities and stockholders equity |                                   | $                         | 610,168 |              |         | $           | 593,443 |             |         | $        | 604,163 |        
|                                                                                                        |                                                                                 |                                            |                                   |                           |         |              |         |             |         |             |         |         

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

1



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##### Table of Contents






COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands)

|                                          |                                                  |                                                         |         |                             |         |                                |         |               |         |             |         |         |         |   |         |         |         | 
|----------------------------------------- | ------------------------------------------------ | ------------------------------------------------------- | ------- | --------------------------- | ------- | ------------------------------ | ------- | ------------- | ------- | ----------- | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                          |                                                  |                                                         |         | Thirteen Week Periods Ended |         | Thirty-Nine Week Periods Ended
|                                          |                                                  |                                                         |         |                             |         |                               
|                                          |                                                  |                                                         |         | November 1,                 |         |                                |         | November 1,   |         |            
|                                          |                                                  |                                                         |         | 2003                        |         |                                |         | 2003          |         |            
|                                          |                                                  |                                                         |         | (As
Restated,               |         | November 2,                    |         | (As
Restated, |         | November 2,
|                                          |                                                  |                                                         |         | See Note
9)                 |         | 2002                           |         | See Note
9)   |         | 2002       
|                                          |                                                  |                                                         |         |                             |         |                                |         |               |         |            
|Net revenue                               |                                                  | $                                                       | 296,507 |                             |         | $                              | 275,501 |               |         | $           | 892,415 |         |         | $ | 853,332 |        
|                                         
|                                         
|                                         
|                                         
|Costs and expenses:                       |                                                  |                                                         |         |                             |         |                                |         |               |         |             |         |         |         |   |         |        
|                                         
|                                         
|                                         
|                                         
|                                          | Cost of revenues                                 |                                                         |         | 109,229                     |         |                                |         | 98,294        |         |             |         | 331,336 |         |   |         | 302,783 |        
|                                         
|                                         
|                                         
|                                         
|                                          | Operating expenses                               |                                                         |         | 187,671                     |         |                                |         | 177,356       |         |             |         | 564,236 |         |   |         | 531,545 |        
|                                          |                                                  |                                                         |         |                             |         |                                |         |               |         |             |         |         |         |   |         |        
|                                          |                                                  | Total costs and expenses                                |         |                             | 296,900 |                                |         |               | 275,650 |             |         |         | 895,572 |   |         |         | 834,328 | 
|                                          |                                                  |                                                         |         |                             |         |                                |         |               |         |             |         |         |         |   |         |        
|Operating income (loss)                   |                                                  |                                                         | (393    | )                           |         |                                | (149    | )             |         |             | (3,157  | )       |         |   | 19,004  |        
|                                         
|                                         
|                                         
|                                         
|Interest and other (income) expense, net: |                                                  |                                                         |         |                             |         |                                |         |               |         |             |         |         |         |   |         |        
|                                         
|                                         
|                                         
|                                         
|                                          | Interest expense                                 |                                                         |         | 6,307                       |         |                                |         | 6,370         |         |             |         | 18,768  |         |   |         | 19,985  |        
|                                         
|                                         
|                                         
|                                         
|                                          | Interest and other (income), net                 |                                                         |         | (413                        | )       |                                |         | 56            |         |             |         | (1,102  | )       |   |         | (711    | )      
|                                         
|                                         
|                                         
|                                         
|                                          | (Gain) loss on early
     extinguishment of debt |                                                         |         | (15                         | )       |                                |         |              |         |             |         | (15     | )       |   |         | 11,141  |        
|                                          |                                                  |                                                         |         |                             |         |                                |         |               |         |             |         |         |         |   |         |        
|                                          |                                                  | Total
interest and other          (income) expense, net |         |                             | 5,879   |                                |         |               | 6,426   |             |         |         | 17,651  |   |         |         | 30,415  | 
|                                          |                                                  |                                                         |         |                             |         |                                |         |               |         |             |         |         |         |   |         |        
|Income (loss) before income taxes         |                                                  |                                                         | (6,272  | )                           |         |                                | (6,575  | )             |         |             | (20,808 | )       |         |   | (11,411 | )      
|                                         
|                                         
|                                         
|                                         
|Income tax provision (benefit)            |                                                  |                                                         | (3,252  | )                           |         |                                | (6,777  | )             |         |             | (6,450  | )       |         |   | (4,176  | )      
|                                          |                                                  |                                                         |         |                             |         |                                |         |               |         |             |         |         |         |   |         |        
|Net income (loss)                         |                                                  | $                                                       | (3,020  | )                           |         | $                              | 202     |               |         | $           | (14,358 | )       |         | $ | (7,235  | )      
|                                          |                                                  |                                                         |         |                             |         |                                |         |               |         |             |         |         |         |   |         |        

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

2



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##### Table of Contents






COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)

|                                      |                                                                                                     |                                                                                           |                                                                  |                                                      |        |                                |         |             |        |         |         |  
|------------------------------------- | --------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ---------------------------------------------------- | ------ | ------------------------------ | ------- | ----------- | ------ | ------- | ------- | -
|                                      |                                                                                                     |                                                                                           |                                                                  |                                                      |        | Thirty-Nine Week Periods Ended
|                                      |                                                                                                     |                                                                                           |                                                                  |                                                      |        |                               
|                                      |                                                                                                     |                                                                                           |                                                                  |                                                      |        | November 1,                    |         |            
|                                      |                                                                                                     |                                                                                           |                                                                  |                                                      |        | 2003                           |         |            
|                                      |                                                                                                     |                                                                                           |                                                                  |                                                      |        | (As Restated,                  |         | November 2,
|                                      |                                                                                                     |                                                                                           |                                                                  |                                                      |        | See Note 9)                    |         | 2002       
|                                      |                                                                                                     |                                                                                           |                                                                  |                                                      |        |                                |         |            
|Cash flows from operating activities: |                                                                                                     |                                                                                           |                                                                  |                                                      |        |                                |         |            
|                                     
|                                     
|                                     
|                                     
|                                      | Net income (loss)                                                                                   |                                                                                           | $                                                                | (14,358                                              | )      |                                | $       | (7,235      | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Adjustments to reconcile net income (loss) to net cash (used for)
provided by operating activities: |                                                                                           |                                                                  |                                                      |        |                                |         |             |       
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                     | Depreciation and amortization                                                             |                                                                  |                                                      | 29,823 |                                |         |             | 26,837 |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                     | (Gain) loss on early extinguishment of debt                                               |                                                                  |                                                      | (15    | )                              |         |             | 11,141 |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                     | Deferred income tax benefit                                                               |                                                                  |                                                      | (5,921 | )                              |         |             | (4,025 | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                     | Noncash compensation                                                                      |                                                                  |                                                      | 3,442  |                                |         |             | (519   | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                     | Noncash interest, foreign currency exchange (gains) losses
and other, net                 |                                                                  |                                                      | (270   | )                              |         |             | 1,030  |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                     | Increases (decreases) in cash resulting from changes in operating
assets and liabilities: |                                                                  |                                                      |        |                                |         |             |        |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                     |                                                                                           | Accounts and notes receivable, prepaid expenses and other
assets |                                                      |        | 2,953                          |         |             |        | (5,724  | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                     |                                                                                           | Inventories                                                      |                                                      |        | (19,295                        | )       |             |        | (16,333 | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                     |                                                                                           | Accounts payable, accrued liabilities and other liabilities      |                                                      |        | 1,720                          |         |             |        | 16,003  |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                     |                                                                                           | Accrued interest                                                 |                                                      |        | 637                            |         |             |        | 1,824   |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                                     |                                                                                           | Accrued and refundable income taxes                              |                                                      |        | (1,499                         | )       |             |        | (1,553  | )      
|                                      |                                                                                                     |                                                                                           |                                                                  |                                                      |        |                                |         |            
|                                      |                                                                                                     |                                                                                           |                                                                  | Net cash (used for) provided by operating
activities |        |                                | (2,783  | )           |        |         | 21,446  |  
|                                      |                                                                                                     |                                                                                           |                                                                  |                                                      |        |                                |         |            
|Cash flows from investing activities: |                                                                                                     |                                                                                           |                                                                  |                                                      |        |                                |         |            
|                                     
|                                     
|                                     
|                                     
|                                      | Purchases of property and equipment                                                                 |                                                                                           |                                                                  | (22,366                                              | )      |                                |         | (33,274     | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Systems development costs                                                                           |                                                                                           |                                                                  | (4,912                                               | )      |                                |         | (3,671      | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Contingent payments for and acquisition of business                                                 |                                                                                           |                                                                  | (4,048                                               | )      |                                |         | (978        | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Other, net                                                                                          |                                                                                           |                                                                  | (9                                                   | )      |                                |         |            |       
|                                      |                                                                                                     |                                                                                           |                                                                  |                                                      |        |                                |         |            
|                                      |                                                                                                     |                                                                                           |                                                                  | Net cash used for investing activities               |        |                                | (31,335 | )           |        |         | (37,923 | )
|                                      |                                                                                                     |                                                                                           |                                                                  |                                                      |        |                                |         |            
|Cash flows from financing activities: |                                                                                                     |                                                                                           |                                                                  |                                                      |        |                                |         |            
|                                     
|                                     
|                                     
|                                     
|                                      | Repayment of long-term debt                                                                         |                                                                                           |                                                                  | (201                                                 | )      |                                |         | (158,233    | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Proceeds from issuance of long-term debt                                                            |                                                                                           |                                                                  |                                                     |        |                                |         | 150,000     |       
|                                     
|                                     
|                                     
|                                     
|                                      | Increase (decrease) in overdraft balances                                                           |                                                                                           |                                                                  | 12,138                                               |        |                                |         | (6,224      | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Advances from (to) parent, net                                                                      |                                                                                           |                                                                  | 5,801                                                |        |                                |         | (5,117      | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Payment of deferred financing fees                                                                  |                                                                                           |                                                                  | (239                                                 | )      |                                |         | (5,982      | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Other, net                                                                                          |                                                                                           |                                                                  | 295                                                  |        |                                |         | 104         |       
|                                      |                                                                                                     |                                                                                           |                                                                  |                                                      |        |                                |         |            
|                                      |                                                                                                     |                                                                                           |                                                                  | Net cash provided by (used for) financing
activities |        |                                | 17,794  |             |        |         | (25,452 | )
|                                      |                                                                                                     |                                                                                           |                                                                  |                                                      |        |                                |         |            
|Cash and cash equivalents:            |                                                                                                     |                                                                                           |                                                                  |                                                      |        |                                |         |            
|                                     
|                                     
|                                     
|                                     
|                                      | Net decrease during the period                                                                      |                                                                                           |                                                                  | (16,324                                              | )      |                                |         | (41,929     | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Balance, beginning of period                                                                        |                                                                                           |                                                                  | 42,001                                               |        |                                |         | 63,299      |       
|                                      |                                                                                                     |                                                                                           |                                                                  |                                                      |        |                                |         |            
|                                      | Balance, end of period                                                                              |                                                                                           | $                                                                | 25,677                                               |        |                                | $       | 21,370      |       
|                                      |                                                                                                     |                                                                                           |                                                                  |                                                      |        |                                |         |            

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

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##### Table of Contents






COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1) Summary of Significant Accounting Policies

Basis of Presentation

Cole National Group, Inc. is a wholly owned subsidiary of Cole National
Corporation. The condensed 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.

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 1, 2003 is referred to as fiscal 2002. The current fiscal
year, which ends January 31, 2004, is referred to as fiscal 2003. Fiscal 2003
and fiscal 2002 each consists of 52 weeks.

The accompanying condensed consolidated financial statements have been
prepared without audit and certain information and footnote disclosures
normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States have been
condensed or omitted, although management believes that the disclosures herein
are adequate to make the information not misleading. The condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Companys 2002 Annual
Report on Form 10-K. Results for interim periods are not necessarily indicative
of the results to be expected for the full year.

Nature of Operations

The Company is a specialty service retailer operating in both host and
nonhost environments, whose primary lines of business are optical products and
services and personalized gifts. The Company sells its products through 2,482
company-owned retail locations and 466 franchised locations in 50 states,
Canada, and the Caribbean. In connection with its optical business, the Company
is a managed vision care benefits provider and claims payment administrator
whose programs provide comprehensive eyecare benefits primarily marketed
directly to large employers, health maintenance organizations (HMO) and other
organizations. The Company has two reportable segments: Cole Vision and Things
Remembered (see Note 5).

Use of Estimates

The preparation of financial statements, in conformity with accounting
principles generally accepted in the United States, requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Significant estimates are required in determining the allowance for
uncollectible accounts, inventory reserves, depreciation, amortization and
recoverability of long-lived assets, deferred income taxes, remakes and returns
allowances, managed vision underwriting results, self-insurance reserves and
retirement and post-employment benefits.

Reclassifications

Certain reclassifications have been made to prior year financial
statements and the notes to conform to the current year presentation.

Managed care claims expense, certain store lab leased equipment and
manufacturing workers compensation and property insurance expense have been
reclassified to cost of revenues from operating expenses to provide improved
transparency to gross margin.

Deferred Revenue

The Company sells separately priced extended warranty contracts with terms
of coverage of 12 and 24 months. Revenues from the sale of these contracts are
deferred and amortized over the lives of the contracts, while the costs to
service the warranty claims are

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##### Table of Contents



expensed as incurred. Incremental costs
directly related to the sale of such contracts, such as sales commissions and
percentage rent, are deferred in prepaid expenses and charged to expense in
proportion to the revenue recognized.

A reconciliation of the changes in deferred revenue from the sale of
warranty contracts and other deferred items follows (dollars in thousands):

|                   |  |                                  |  |                                |         |             |  |             |         |   |  |   |         |  
|------------------ |  | -------------------------------- |  | ------------------------------ | ------- | ----------- |  | ----------- | ------- | - |  | - | ------- | -
|                   |  |                                  |  | Thirty-Nine Week Periods Ended |         | Year Ended 
|                   |  |                                  |  |                                |         |            
|                   |  |                                  |  | November 1,                    |         | November 2, |  | February 1,
|                   |  |                                  |  | 2003                           |         | 2002        |  | 2003       
|                   |  |                                  |  |                                |         |             |  |            
|Deferred revenues: |  |                                  |  |                                |         |             |  |             |         |   |  |  
|                  
|                  
|                  
|                  
|                   |  | Beginning balance                |  | $                              | 49,573  |             |  | $           | 46,511  |   |  | $ | 46,511  |  
|                  
|                  
|                  
|                  
|                   |  | Warranty contracts sold          |  |                                | 43,035  |             |  |             | 40,044  |   |  |   | 53,023  |  
|                  
|                  
|                  
|                  
|                   |  | Other deferred revenue           |  |                                | 2,234   |             |  |             | 630     |   |  |   | 1,080   |  
|                  
|                  
|                  
|                  
|                   |  | Amortization of deferred revenue |  |                                | (40,932 | )           |  |             | (37,504 | ) |  |   | (51,041 | )
|                   |  |                                  |  |                                |         |             |  |             |         |   |  |  
|                   |  | Ending balance                   |  | $                              | 53,910  |             |  | $           | 49,681  |   |  | $ | 49,573  |  
|                   |  |                                  |  |                                |         |             |  |             |         |   |  |  

Cash Flows

Net cash flows from operating activities reflect net cash payments for
income taxes and payments for interest of $971,000 and $17,245,000,
respectively, for the 39 week period ended November 1, 2003, and $1,057,000 and
$17,730,000, respectively, for the 39 week period ended November 2, 2002.

Overdrafts resulting from outstanding checks at the end of each reporting
period are reclassified as current liabilities in either accounts payable or
accrued expenses from cash and cash equivalents. This reclassification to
accounts payable amounted to $36.6 million, $11.9 million and $28.4 million at
November 1, 2003, November 2, 2002 and February 1, 2003, respectively and to
accrued expenses amounted to $7.0 million, $7.1 million and $3.2 million at
November 1, 2003, November 2, 2002 and February 1, 2003, respectively.

Total Other Comprehensive Income (Loss)

Total other comprehensive income (loss) for the 13 and 39 week periods
ended November 1, 2003 and November 2, 2002 is as follows (dollars in
thousands):

|                                        |  |                             |        |                                |  |             |     |             |  |   |         |   |  |   |        |  
|--------------------------------------- |  | --------------------------- | ------ | ------------------------------ |  | ----------- | --- | ----------- |  | - | ------- | - |  | - | ------ | -
|                                        |  | Thirteen Week Periods Ended |        | Thirty-Nine Week Periods Ended
|                                        |  |                             |        |                               
|                                        |  | November 1,                 |        | November 2,                    |  | November 1, |     | November 2,
|                                        |  | 2003                        |        | 2002                           |  | 2003        |     | 2002       
|                                        |  |                             |        |                                |  |             |     |            
|Net income (loss)                       |  | $                           | (3,020 | )                              |  | $           | 202 |             |  | $ | (14,358 | ) |  | $ | (7,235 | )
|                                       
|                                       
|                                       
|                                       
|Cumulative translation income           |  |                             | 240    |                                |  |             | 276 |             |  |   | 741     |   |  |   | 266    |  
|                                        |  |                             |        |                                |  |             |     |             |  |   |         |   |  |   |        |  
|Total other comprehensive income (loss) |  | $                           | (2,780 | )                              |  | $           | 478 |             |  | $ | (13,617 | ) |  | $ | (6,969 | )
|                                        |  |                             |        |                                |  |             |     |             |  |   |         |   |  |   |        |  

Stock-Based Compensation

At November 1, 2003, the Company has various stock-based employee
compensation plans which are described more fully in Note 1 of the Notes to
Consolidated Financial Statements in the Companys 2002 Annual Report on Form
10-K. In accordance with APB Opinion No. 25 Accounting for Stock
Issued to Employees, the Company measures compensation expense
for employee stock options as the aggregate difference between the
market value of Cole National Corporations common stock and the
exercise price of the options on the date that both the number of
shares the grantee is entitled to receive and the exercise price are
known. In fiscal 2003, certain stock options were exercised by using
a feature permitting a cashless exercise of options through the use of
vested options in payment of the exercise price. This feature creates
an arrangement that requires variable accounting, beginning with the
third quarter of fiscal 2003. Previous to the fiscal 2003
transactions, such options had been accounted for as fixed grants
based on the presumption that this feature would not be utilized as
evidenced by Cole National Corporations historical experience of
this feature not being used. For the stock option agreements that
have this cashless exercise feature, compensation expense is measured
as the amount by which the quoted market value of the shares exceeds
the option price at the end of each period. All stock options
requiring variable accounting are fully vested. Compensation expense
associated with stock options requiring variable accounting was $3.2
million in the third quarter of fiscal 2003.

The following table illustrates the pro forma effect on net income of the
Company had the Company applied the fair value recognition provisions of
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation.

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##### Table of Contents



|                                                                                                                                             |  |                             |        |                                |  |             |      |             |  |   |         |   |  |   |        |  
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | ------------------------------ |  | ----------- | ---- | ----------- |  | - | ------- | - |  | - | ------ | -
|                                                                                                                                             |  | Thirteen Week Periods Ended |        | Thirty-Nine Week Periods Ended
|                                                                                                                                             |  |                             |        |                               
|                                                                                                                                             |  | November 1,                 |        | November 2,                    |  | November 1, |      | November 2,
|(Dollars in thousands)                                                                                                                       |  | 2003                        |        | 2002                           |  | 2003        |      | 2002       
|                                                                                                                                             |  |                             |        |                                |  |             |      |            
|Net income (loss), as reported                                                                                                               |  | $                           | (3,020 | )                              |  | $           | 202  |             |  | $ | (14,358 | ) |  | $ | (7,235 | )
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|Additions
for stock-based employee compensation expense included in reported
net income (loss), net of related taxes                         |  |                             | 2,067  |                                |  |             |     |             |  |   | 2,067   |   |  |   |       |  
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|Deductions for total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related taxes |  |                             | (150   | )                              |  |             | (619 | )           |  |   | (832    | ) |  |   | (1,668 | )
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                             |  |                             |        |                                |  |             |      |             |  |   |         |   |  |   |        |  
|Net income (loss), pro forma                                                                                                                 |  | $                           | (1,103 | )                              |  | $           | (417 | )           |  | $ | (13,123 | ) |  | $ | (8,903 | )
|                                                                                                                                             |  |                             |        |                                |  |             |      |             |  |   |         |   |  |   |        |  

Recently Issued Accounting Standards

The Financial Accounting Standards Board (FASB) has issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64, Amendment of SFAS Statement
No. 13, and Technical Corrections (SFAS 145). SFAS 145 states that the
rescission of SFAS No. 4 shall be applied in fiscal years beginning after May
15, 2002. Any gain or loss on extinguishment of debt that was classified as an
extraordinary item in prior periods presented that does not meet the criteria
in Accounting Principles Board (APB) Opinion 30, Reporting the Results of
Operations  Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for
classification as an extraordinary item shall be reclassified as operating
expenses. The Company adopted SFAS 145 as of the beginning of fiscal 2003. As a
result, the loss on early extinguishment of debt reported as an extraordinary
item in the second quarter of the year ended February 1, 2003 has been
reclassified. The pretax loss from the early extinguishment of debt has been
presented as a separate line within interest and other (income) expenses and
the related income tax benefit reduced the reported income tax provision. Other
portions of the statement are not applicable to the Company.

The FASB has also issued SFAS No. 143, Accounting for Asset Retirement
Obligations (SFAS 143). SFAS 143 provides guidance for legal obligations
arising from the retirement of long-lived assets. SFAS 143 was adopted in
fiscal 2003 and did not have a material effect on the Companys financial
position or operations.

In January 2003, the FASB issued FASB Interpretation No. 46,
Consolidation of Variable Interest Entities (FIN 46). FIN 46 requires certain
variable interest entities, including certain special purpose entities, to be
consolidated by the primary beneficiary if the equity investors in the entity
do not have all the essential characteristics of a controlling financial
interest or do not have sufficient equity at risk. FIN 46 immediately applies
to entities created after January 31, 2003. On October 9, 2003, the FASB
deferred the effective date for applying the provision of FIN 46 for existing
variable interest entities until the end of the Companys 2003 fourth quarter.
Management is still assessing the impacts of FIN 46 on its condensed
consolidated financial statements. However, it is reasonably possible that the
synthetic operating lease for the Highland Heights, Ohio facility will require
consolidation under FIN 46. The consolidation will result in an additional $2.3
million in assets and liabilities on the consolidated balance sheet.

In November 2002, the Emerging Issues Task Force of the FASB (EITF)
reached a consensus on Issue 02-16, Accounting by a Reseller for Cash
Consideration Received from a Vendor (Issue 02-16). Certain aspects of Issue
02-16 were effective in fiscal 2002, which were adopted and did not have a
significant impact on operations. The remaining portion of Issue 02-16 has been
adopted in fiscal 2003 and does not have a material effect on the Companys
financial position or operations.

(2) Goodwill and Other Intangible Assets

Goodwill and tradenames are tested at least annually for impairment and
are not amortized. All other intangible assets with finite lives are amortized
over their estimated useful economic lives based on managements estimates of
the period that the assets will generate revenue. Other intangible assets
consist of (dollars in thousands):

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##### Table of Contents



|                         |  |             |        |             |  |             |        |   |  |   |        |  
|------------------------ |  | ----------- | ------ | ----------- |  | ----------- | ------ | - |  | - | ------ | -
|                         |  | November 1, |        | November 2, |  | February 1,
|                         |  | 2003        |        | 2002        |  | 2003       
|                         |  |             |        |             |  |            
|Tradename                |  | $           | 49,460 |             |  | $           | 49,460 |   |  | $ | 49,460 |  
|                        
|                        
|                        
|                        
|Noncompete agreements    |  |             | 320    |             |  |             | 240    |   |  |   | 240    |  
|                        
|                        
|                        
|                        
|Contracts                |  |             | 8,947  |             |  |             | 4,438  |   |  |   | 8,847  |  
|                        
|                        
|                        
|                        
|Customer records         |  |             | 9      |             |  |             |       |   |  |   |       |  
|                         |  |             |        |             |  |             |        |   |  |   |        |  
|                         |  |             | 58,736 |             |  |             | 54,138 |   |  |   | 58,547 |  
|                        
|                        
|                        
|                        
|Accumulated amortization |  |             | (8,637 | )           |  |             | (7,492 | ) |  |   | (7,644 | )
|                         |  |             |        |             |  |             |        |   |  |   |        |  
|Other intangibles, net   |  | $           | 50,099 |             |  | $           | 46,646 |   |  | $ | 50,903 |  
|                         |  |             |        |             |  |             |        |   |  |   |        |  

During the first quarter of fiscal 2003, the Company purchased the
operations of three Sears Optical departments in California for a total
purchase price of $242,500. The amount allocated to the tangible fixed assets
acquired including exam equipment and inventory was $29,500. The remainder of
the purchase price was allocated to intangible assets under the provisions of
Statement of Financial Accounting Standards No. 141, Business Combinations.
Goodwill related to this transaction was $124,000 and noncompete agreements and
customer records totaled $89,000. The change in the carrying amount of
contracts for the nine months ended November 1, 2003 resulted primarily from a
contingent payment for a previously acquired provider network. The additional
change in the carrying amount of goodwill was due to foreign currency
translation at Cole Vision. The net carrying amount of goodwill at November 1,
2003, by business segment, was $64.3 million at Cole Vision and $21.4 million
at Things Remembered.

(3) Long-Term Debt

On August 15, 2003, the Company retired $385,000 of 8-5/8% Senior
Subordinated Notes due December 31, 2006. The notes were contributed to the
Company by its parent, Cole National Corporation, after receiving them as part
of the full payment for a note receivable from the Companys former Chairman. A
$15,400 gain on early extinguishment of debt and $15,400 of compensation
expense were recorded in connection with the transaction.

On May 22, 2002, the Company issued $150.0 million of 8-7/8% Senior
Subordinated Notes that mature on May 15, 2012. Interest on the notes is
payable semi-annually on each May 15 and November 15, commencing November 15,
2002. Net proceeds from the 8-7/8% note offering, together with cash on hand,
were used to retire the Companys $150.0 million of 9-7/8% Senior Subordinated
Notes due 2006 and pay premiums and other costs associated with retiring those
notes. The Companys results for fiscal 2002 included a loss on early
extinguishment of debt of $11.1 million representing the payment of premiums
and other costs of retiring the notes and the write-offs of unamortized
discount and deferred financing fees.

On August 22, 1997, the Company issued $125.0 million of 8-5/8% Senior
Subordinated Notes that mature in 2007 with no earlier scheduled redemption or
sinking fund payments. Interest on the 8-5/8% notes is payable semi-annually on
February 15 and August 15.

The 8-5/8% notes and the 8-7/8% notes are general unsecured obligations of
the Company, subordinated in right of payment to senior indebtedness of the
Company and senior in right of payment to any current or future subordinated
indebtedness of the Company. The indentures pursuant to which the 8-5/8% notes
and the 8-7/8% notes were issued restrict dividend payments to the Companys
parent, Cole National Corporation. The indentures also contain certain optional
and mandatory redemption features and other financial covenants.

The Company has no significant principal payment obligations under its
outstanding indebtedness until 2007, when the $125.0 million of 8-5/8% Senior
Subordinated Notes become due.

During the third quarter of fiscal 2002, the Company entered into interest
rate swap agreements to take advantage of favorable market interest rates.
These agreements require the Company to pay an average floating interest rate
based on six-month LIBOR plus 4.5375% to a counter party while receiving a
fixed interest rate on a portion of the Companys $125.0 million 8-5/8% Senior
Subordinated Notes due 2007. The counter party is a major commercial bank. The
agreements mature August 15, 2007 and qualify as fair value hedges. The
aggregate notional amount of the interest rate swap agreements is $50.0
million. At November 1, 2003, the floating rate of swaps was approximately 5.8%
and the fair value of the swap agreements was an unrealized gain of
approximately $0.2 million. There was no impact to earnings in the first nine
months of fiscal 2003 due to hedge ineffectiveness.

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##### Table of Contents



(4) Credit Facility

On June 27, 2003, the operating subsidiaries of the Company amended,
restated and extended their working capital credit facility with their bank
lenders. The maturity date of the credit facility was extended to February 1,
2007 from May 31, 2006. The size of the facility was adjusted to $60.0 million
from $75.0 million. In addition, certain financial covenants were amended.
Borrowings under the credit facility presently bear interest based on leverage
ratios of the Company at a rate equal to either (a) the Eurodollar Rate plus
2.50% or (b) 1.50% plus the highest of (i) the CIBC prime rate, (ii) the
three-week moving average of the secondary market rates for three-month
certificates of deposit plus 1.0% or (iii) the federal funds rate plus 0.5%.
The Company pays a commitment fee of 0.75% per annum on the total unused
portion of the facility based on the percentage of revolving credit commitments
used. Cole National Corporation and the Company guarantee this credit facility.
The credit facility is secured by the assets of the operating subsidiaries of
the Company. On October 30, 2003, the credit facility was amended to permit
indebtedness of up to $10.0 million of documentary letters of credit from
sources other than the lenders and liens on inventory pursuant to documentary
letters of credit issued under such financing.

The credit facility, which is guaranteed by Cole National Corporation and
the Company, requires the Company and its principal operating subsidiaries to
comply with various operating covenants that restrict corporate activities,
including covenants restricting the ability of the subsidiaries to incur
additional indebtedness, pay dividends, prepay subordinated indebtedness,
dispose of certain investments or make acquisitions. The credit facility also
requires the Company to comply with certain financial covenants, including
covenants regarding interest coverage and maximum leverage. The Company is in
compliance with the covenants in the credit agreement as of the date of this
report.

The credit facility restricts dividend payments to the Company from its
subsidiaries to amounts needed to pay interest on the 8-7/8% notes and the
8-5/8% notes, and certain amounts related to taxes, along with up to 0.25% of
the Companys consolidated net revenue annually for other direct expenses of
Cole National Corporation. If certain maximum leverage targets are met, the
credit facility restricts dividend payments to the Company in an aggregate
amount not to exceed $25.0 million to allow for the repurchase of Senior
Subordinated Notes.

As of November 1, 2003, the total availability under the credit facility
totaled $46.3 million after reduction for commitments outstanding of $13.7
million under letters of credit. There were no working capital borrowings under
the credit facility outstanding as of November 1, 2003 and November 2, 2002,
and the maximum amount of borrowings outstanding was $7.5 million during the
third quarter of fiscal 2003. There were no borrowings during the third quarter
of fiscal 2002.

As of November 1, 2003, the Company had additional outstanding documentary
letters of credit of $2.1 million, which were issued under an uncommitted
letter of credit facility secured by the import inventory purchased.

(5) Segment Information

Information on the Companys reportable segments is as follows (dollars in
thousands):

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|                         |                                          |                                |   |                             |         |                                |   |             |         |             |   |         |         |  |   |         |         | 
|------------------------ | ---------------------------------------- | ------------------------------ | - | --------------------------- | ------- | ------------------------------ | - | ----------- | ------- | ----------- | - | ------- | ------- |  | - | ------- | ------- | 
|                         |                                          |                                |   | Thirteen Week Periods Ended |         | Thirty-Nine Week Periods Ended
|                         |                                          |                                |   |                             |         |                               
|                         |                                          |                                |   | November 1,                 |         | November 2,                    |   | November 1, |         | November 2,
|                         |                                          |                                |   | 2003                        |         | 2002                           |   | 2003        |         | 2002       
|                         |                                          |                                |   |                             |         |                                |   |             |         |            
|Net revenue:             |                                          |                                |   |                             |         |                                |   |             |         |             |   |         |         |  |   |        
|                        
|                        
|                        
|                        
|                         |                                          | Cole Vision                    |   | $                           | 239,746 |                                |   | $           | 221,778 |             |   | $       | 702,119 |  |   | $       | 672,827 | 
|                        
|                        
|                        
|                        
|                         |                                          | Things Remembered              |   |                             | 56,761  |                                |   |             | 53,723  |             |   |         | 190,296 |  |   |         | 180,505 | 
|                         |                                          |                                |   |                             |         |                                |   |             |         |             |   |         |         |  |   |        
|                         |                                          | Total net revenue              |   | $                           | 296,507 |                                |   | $           | 275,501 |             |   | $       | 892,415 |  |   | $       | 853,332 | 
|                         |                                          |                                |   |                             |         |                                |   |             |         |             |   |         |         |  |   |        
|Operating income (loss): |                                          |                                |   |                             |         |                                |   |             |         |             |   |         |         |  |   |        
|                        
|                        
|                        
|                        
|                         |                                          | Cole Vision                    |   | $                           | 7,886   |                                |   | $           | 6,054   |             |   | $       | 20,348  |  |   | $       | 22,251  | 
|                        
|                        
|                        
|                        
|                         |                                          | Things Remembered              |   |                             | (1,128  | )                              |   |             | (2,643  | )           |   |         | 6,232   |  |   |         | 5,313   | 
|                         |                                          |                                |   |                             |         |                                |   |             |         |             |   |         |         |  |   |        
|                         |                                          | Total segment operating income |   |                             | 6,758   |                                |   |             | 3,411   |             |   |         | 26,580  |  |   |         | 27,564  | 
|                        
|                        
|                        
|                        
|                         | Unallocated amounts:                     |                                |   |                             |         |                                |   |             |         |             |   |         |         |  |   |         |        
|                        
|                        
|                        
|                        
|                         |                                          | Corporate expenses             |   |                             | 7,151   |                                |   |             | 3,560   |             |   |         | 29,737  |  |   |         | 8,560   | 
|                         |                                          |                                |   |                             |         |                                |   |             |         |             |   |         |         |  |   |        
|                         | Total operating income (loss)            |                                |   | (393                        | )       |                                |   | (149        | )       |             |   | (3,157  | )       |  |   | 19,004  |        
|                        
|                        
|                        
|                        
|                         | Interest and other (income) expense, net |                                |   | 5,879                       |         |                                |   | 6,426       |         |             |   | 17,651  |         |  |   | 30,415  |        
|                         |                                          |                                |   |                             |         |                                |   |             |         |             |   |         |         |  |   |        
|                         | Income (loss) before income taxes        |                                | $ | (6,272                      | )       |                                | $ | (6,575      | )       |             | $ | (20,808 | )       |  | $ | (11,411 | )      
|                         |                                          |                                |   |                             |         |                                |   |             |         |             |   |         |         |  |   |        

(6) Commitments and Contingencies

The Company leases a substantial portion of its computers, equipment and
facilities including laboratories, office and warehouse space, and retail store
locations. These leases generally have initial terms of up to 10 years and
often contain renewal or purchase options. Operating and capital lease
obligations are based upon contractual minimum rates and, in most leases
covering retail store locations, additional rents are payable based on store
sales. In addition, Cole Vision operates departments in various host stores
paying occupancy costs solely as a percentage of sales under agreements
containing short-term cancellation clauses. Generally, the Company is required
to pay taxes and normal expenses of operating the premises for laboratory,
office, warehouse and retail store leases; the host stores pay these expenses
for departments operated on a percentage-of-sales basis.

The Company guarantees future minimum lease payments for certain store
locations leased directly by franchisees. These guarantees totaled
approximately $13.0 million, $13.7 million and $13.8 million as of November 1,
2003, November 2, 2002 and February 1, 2003, respectively. Generally, these
guarantees also extend to payments of taxes and other normal expenses payable
under these leases, the amounts of which are not readily quantifiable.

The Companys agreement with Target Corporation, under which the Company
operates licensed optical departments in 265 Target Stores, expires on January
31, 2004 unless renewed. The
Company is in discussions with Target Corporation regarding the renewal of the
agreement on modified terms. No assurances can be given as to the outcome of
the discussions. It is estimated that exiting the Target Optical business would
result in a pretax charge of approximately $22.0 million in the fourth quarter
of fiscal year 2003, relating primarily to the write-down of fixed assets and
inventory, and the payment of severance.

(7) Legal Proceedings

The Company and its optical subsidiaries have been sued by the State of
California, which alleges claims for various statutory violations related to
the operation of 23 Pearle Vision Centers in California. The claims include
untrue or misleading advertising, illegal dilation fees, unlawful advertising
of eye exams, maintaining an optometrist on or near the premises of a
registered dispensing optician, unlawful advertising of an optometrist,
unlicensed practice of optometry, and illegal relationships between dispensing
opticians, optical retailers and optometrists. The action seeks unspecified
damages, restitution and injunctive relief. In July 2002, the State of
California obtained a preliminary injunction to enjoin certain advertising
practices and from charging dilation fees. The trial courts decision was
appealed by both the Company and the State. On November 26, 2003, the appellate
court ruled on the appeal in a manner adverse to the Company with respect to
continued advertising in California by Pearle Vision that expressly or
implicitly advertises the furnishing of optometric services, disallowing
continued advertising of the availability of optometric services with a
disclaimer that had been previously approved by the trial court. The appellate
court ruled in the Companys favor with respect to charging dilation fees. The
Company intends to continue the appellate process. Although the Company
believes that its advertising and operational practices in California complied
with California law, and there is appellate law from another district in
California that

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supports the Companys belief, the appellate ruling may, if
unmodified, compel the Company to modify or close its activities in California.
Further, the Company might be required to pay damages and or restitution in a
currently undeterminable amount, the cost of which might have a material
adverse effect on the Companys operating results and cash flow in one or more
periods.

Things Remembered, Inc. settled a class action complaint in California
alleging that the putative class (alleged to include 200 members) were
improperly denied overtime compensation in violation of California law. The
action sought unspecified damages, interest, restitution, as well as
declaratory and injunctive relief and attorneys fees. On February 3, 2003,
Things Remembered and the plaintiffs reached an agreement to resolve the
lawsuit for $562,500. Preliminary approval was received from the Court on
August 1, 2003. On December 3, 2003, the Court approved final settlement of the
lawsuit. A liability of $562,500 was recorded in the fourth quarter of fiscal
2002.

Cole National Corporation settled a class action lawsuit alleging claims
for various violations of federal securities laws related to the Companys
publicly reported revenues and earnings. The action, which pleaded claims under
Section 10(b) and 20(a) of the Securities Exchange Act of 1934, and named Cole
National Corporation and certain present and former officers and directors as
defendants, sought unspecified compensatory damages, punitive damages where
appropriate, costs, expenses and attorneys fee. On May 30, 2003, Cole
National Corporation and the plaintiffs reached an agreement to resolve the
lawsuit. On September 29, 2003, the Court approved final settlement of the
lawsuit. A charge of $2,687,500 was recorded in the first quarter of fiscal
2003 with respect to the Companys portion of the settlement.

Following the Companys announcement in November 2002 of the restatement
of the Companys financial statements, the Securities and Exchange Commission
began an investigation into the Companys previous accounting. The course of
this investigation or further litigation or investigations arising out of the
restatement of the Companys financial statements cannot be predicted. In
addition, under certain circumstances the Company would be obliged to indemnify
the individual current and former directors and officers who are named as
defendants in litigation or who are or become involved in an investigation. The
Company believes it has insurance that should be available with respect to
litigation and certain indemnification obligations. However, if the Company is
unsuccessful in defending against any such litigation, and if its insurance
coverage is not available or is insufficient to cover its expenses, indemnity
obligations and liability, if any, the litigation and/or investigation may have
a material adverse effect on the Companys financial condition, cash flow and
results of operations.

The Company has been named as a defendant along with numerous other
retailers, in patent infringement litigation challenging the defendants use of
bar code technology. The Company believes it has available defenses and does
not expect any liability. However, if the Company were to be found liable for
an infringement, it might have a material adverse effect on the Companys
operating results and cash flow in the period incurred.

In the ordinary course of business, the Company is involved in various
other legal proceedings. The Company is of the opinion that the ultimate
resolution of these matters will not have a material adverse effect on the
results of operations, liquidity or financial position of the Company.

(8) Subsequent Events

On November 3, 2003, the Company entered into an agreement with Key Bank
National Association to provide documentary letters of credit for import
inventory purchases not to exceed $7.0 million. The letters of credit are
secured by the inventory purchased.

See Note 7 regarding recent events in the litigation in which the Company
and its optical subsidiaries have been sued by the State of California alleging
various statutory violations related to the operation of 23 Pearle Vision
Centers in California.

As discussed in Note 7, on December 3, 2003, Things Remembered, Inc.
received Court approval on the final settlement of the putative class action
complaint regarding overtime compensation in California.

(9) Restatement

Subsequent to the issuance of the Companys condensed consolidated financial
statements for the quarterly period ended November 1, 2003,
the Company determined it needed to change the accounting for certain stock options. In
accordance with APB Opinion No. 25 Accounting for
Stock Issued to Employees, the Company measures
compensation expense for employee stock options as the aggregate
difference between the market value of Cole National
Corporations common stock and the exercise price of the
options on the date that both the number of shares the grantee
is entitled to receive and the exercise price are known. In
fiscal 2003, certain stock options were exercised by using a
feature permitting a cashless exercise of options through the
use of vested

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options in payment of the exercise price. This
feature creates an arrangement that requires variable accounting
beginning with the third quarter of fiscal 2003. Previous to the
fiscal 2003 transactions, such options had been accounted for as
fixed grants based on the presumption that this feature would
not be utilized as evidenced by Cole National Corporations
historical experience of this feature not being used. For the
stock option agreements that have this cashless exercise
feature, compensation expense is measured as the amount by which
the quoted market value of the shares exceeds the option price at
the end of each period. All variable stock options requiring
variable accounting are fully vested. Compensation expense
associated with stock options requiring variable accounting was
$3.2 million in the third quarter of fiscal 2003.

As a result, the accompanying condensed consolidated financial statements
for the quarterly period ended November 1, 2003 have been
restated from the amounts previously reported to appropriately
account for this treatment. The following is a summary of the
significant effects of the restatement:

|                                                                                                             |  |                  |         |                  |  |               |         |             |  |   |         |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------ |  | ---------------- | ------- | ---------------- |  | ------------- | ------- | ----------- |  | - | ------- | - |  | - | ------- | -
|                                                                                                             |  |                  |         |                 
|                                                                                                             |  | Thirteen Week    |         | Thirty-Nine Week
|                                                                                                             |  | Periods Ended    |         | Periods Ended   
|                                                                                                             |  | November 1, 2003 |         | November 1, 2003
|                                                                                                             |  |                  |         |                 
|                                                                                                             |  | As Previously    |         |                  |  | As Previously |         |            
|(in thousands)                                                                                               |  | Reported         |         | As Restated      |  | Reported      |         | As Restated
|                                                                                                             |  |                  |         |                  |  |               |         |            
|Condensed Consolidated Statement of Operations
    for the 13 and 39 week periods ended
    November 1, 2003 |  |                  |         |                  |  |               |         |             |  |   |         |   |  |   |         |  
|                                                                                                            
|Operating expenses                                                                                           |  | $                | 184,492 |                  |  | $             | 187,671 |             |  | $ | 561,057 |   |  | $ | 564,236 |  
|Total costs and expenses                                                                                     |  |                  | 293,721 |                  |  |               | 296,900 |             |  |   | 892,393 |   |  |   | 895,572 |  
|Operating income (loss)                                                                                      |  |                  | 2,786   |                  |  |               | (393    | )           |  |   | 22      |   |  |   | (3,157  | )
|Income (loss) before income taxes                                                                            |  |                  | (3,093  | )                |  |               | (6,272  | )           |  |   | (17,629 | ) |  |   | (20,808 | )
|Income tax provision (benefit)                                                                               |  |                  | (1,915  | )                |  |               | (3,252  | )           |  |   | (5,113  | ) |  |   | (6,450  | )
|Net income (loss)                                                                                            |  |                  | (1,178  | )                |  |               | (3,020  | )           |  |   | (12,516 | ) |  |   | (14,358 | )
|                                                                                                            
|Condensed Consolidated Balance Sheet as of
    November 1, 2003                                              |  |                  |         |                  |  |               |         |             |  |   |         |   |  |   |         |  
|                                                                                                            
|Long-term deferred income taxes                                                                              |  |                  |         |                  |  |               |         |             |  | $ | 30,605  |   |  | $ | 31,942  |  
|Total assets                                                                                                 |  |                  |         |                  |  |               |         |             |  |   | 608,831 |   |  |   | 610,168 |  
|Stockholders equity                                                                                         |  |                  |         |                  |  |               |         |             |  |   | (16,738 | ) |  |   | (15,401 | )
|Total liabilities and
    stockholders equity                                                               |  |                  |         |                  |  |               |         |             |  |   | 608,831 |   |  |   | 610,168 |  

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

Overview

Subsequent to the issuance of the Companys
condensed consolidated financial statements for the quarterly period ended
November 1, 2003, the Company determined it needed to change the accounting for certain
stock options. As a result, the accompanying condensed consolidated
financial statements for the quarterly period ended November 1, 2003
have been restated from the amounts previously reported to
appropriately account for
this change. See Note 9 of the Condensed Consolidated Financial
Statements for a summary of the significant effects of
the restatement.

Cole National Group, Inc., a wholly owned subsidiary of Cole National
Corporation, is a leading provider of optical products and services and
personalized gifts. The Company sells its products and services through 2,482
company-owned retail locations and 466 franchised locations in 50 states,
Canada and the Caribbean.

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 1, 2003 is referred to as fiscal 2002. The current fiscal
year, which ends January 31, 2004, is referred to as fiscal 2003. Fiscal 2003
and fiscal 2002 each consists of 52 weeks.

The Company has two reportable segments, Cole Vision and Things
Remembered. Most of Cole Visions revenue represents sales of prescription
eyewear, accessories, optical warranties and other services through its Cole
Licensed Brands and Pearle Vision retail locations. Cole Vision revenue also
includes sales of merchandise to franchisees, royalties based on franchise
sales, initial franchise fees for Pearle Vision and capitation revenue,
administrative service fee revenue and discount program service fees from its
Cole Managed Vision business.

Things Remembereds revenue represents sales of engraveable gift
merchandise, personalization and other services primarily through retail
in-line stores and kiosks. Things Remembered revenue also includes direct sales
through its e-commerce site, www.ThingsRemembered.com, revenues through Things
Remembered catalogs and through affiliate programs direct to businesses.

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Results of Operations

The following schedule sets forth certain operating information for the
third quarters and the first nine months of fiscal 2003 and fiscal 2002. This
schedule and subsequent discussions should be read in conjunction with the
condensed consolidated financial statements included in this
Form 10-Q/A.

|                                                    |                         |                                |                               |                     |      |                       |       |       |      |        |       |                       |       |       |   |        |       |       |   |       |      |       |  |      |       |        |    | 
|--------------------------------------------------- | ----------------------- | ------------------------------ | ----------------------------- | ------------------- | ---- | --------------------- | ----- | ----- | ---- | ------ | ----- | --------------------- | ----- | ----- | - | ------ | ----- | ----- | - | ----- | ---- | ----- |  | ---- | ----- | ------ | -- | 
|                                                    |                         |                                |                               |                     |      | Third Quarter         |       |       |      |        |       | First Nine Months     |       |       |   |       
|                                                    |                         |                                |                               |                     |      |                       |       |       |      |        |       |                       |       |       |   |       
|                                                    |                         |                                |                               |                     |      | 2003                  |       | 2002  |      | Change |       | 2003                  |       | 2002  |   | Change
|                                                    |                         |                                |                               |                     |      |                       |       |       |      |        |       |                       |       |       |   |       
|                                                    |                         |                                |                               |                     |      | (Dollars in millions) |       |       |      |        |       | (Dollars in millions) |       |       |   |       
|                                                    |                         |                                |                               |                     |      |                       |       |       |      |        |       |                       |       |       |   |       
|Net revenue:                                        |                         |                                |                               |                     |      |                       |       |       |      |        |       |                       |       |       |   |        |       |       |   |       |      |       |  |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Cole Vision             |                                | $                             | 239.7               |      |                       | $     | 221.8 |      |        |       | 8.1                   | %     |       | $ | 702.1  |       |       | $ | 672.8 |      |       |  | 4.4  | %    
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Things Remembered       |                                |                               | 56.8                |      |                       |       | 53.7  |      |        |       | 5.7                   |       |       |   | 190.3  |       |       |   | 180.5 |      |       |  | 5.4  |      
|                                                    |                         |                                |                               |                     |      |                       |       |       |      |        |       |                       |       |       |   |        |       |       |   |       |      |       |  |     
|                                                    |                         |                                | Total net revenue             |                     | $    | 296.5                 |       |       | $    | 275.5  |       |                       |       | 7.6   | % |        | $     | 892.4 |   |       | $    | 853.3 |  |      |       | 4.6    | % 
|                                                   
|                                                   
|                                                   
|                                                   
|Gross margin:                                       |                         |                                |                               |                     |      |                       |       |       |      |        |       |                       |       |       |   |        |       |       |   |       |      |       |  |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Cole Vision             |                                | $                             | 145.7               |      |                       | $     | 137.6 |      |        |       | 5.9                   | %     |       | $ | 423.7  |       |       | $ | 418.7 |      |       |  | 1.2  | %    
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Things Remembered       |                                |                               | 41.6                |      |                       |       | 39.7  |      |        |       | 4.9                   |       |       |   | 137.4  |       |       |   | 131.9 |      |       |  | 4.2  |      
|                                                    |                         |                                |                               |                     |      |                       |       |       |      |        |       |                       |       |       |   |        |       |       |   |       |      |       |  |     
|                                                    |                         |                                | Total gross margin            |                     | $    | 187.3                 |       |       | $    | 177.2  |       |                       |       | 5.7   | % |        | $     | 561.1 |   |       | $    | 550.5 |  |      |       | 1.9    | % 
|                                                   
|                                                   
|                                                   
|                                                   
|Operating expenses:                                 |                         |                                |                               |                     |      |                       |       |       |      |        |       |                       |       |       |   |        |       |       |   |       |      |       |  |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Cole Vision             |                                | $                             | 137.8               |      |                       | $     | 131.5 |      |        |       | 4.8                   | %     |       | $ | 403.3  |       |       | $ | 396.4 |      |       |  | 1.7  | %    
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Things Remembered       |                                |                               | 42.7                |      |                       |       | 42.3  |      |        |       | 1.0                   |       |       |   | 131.2  |       |       |   | 126.6 |      |       |  | 3.6  |      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                         | Unallocated corporate expenses |                               |                     | 7.2  |                       |       |       | 3.6  |        |       |                       | 101.0 |       |   |        | 29.8  |       |   |       | 8.6  |       |  |      | 247.5 |       
|                                                    |                         |                                |                               |                     |      |                       |       |       |      |        |       |                       |       |       |   |        |       |       |   |       |      |       |  |     
|                                                    |                         |                                | Total operating expenses      |                     | $    | 187.7                 |       |       | $    | 177.3  |       |                       |       | 5.8   | % |        | $     | 564.3 |   |       | $    | 531.5 |  |      |       | 6.2    | % 
|                                                   
|                                                   
|                                                   
|                                                   
|Operating income (loss):                            |                         |                                |                               |                     |      |                       |       |       |      |        |       |                       |       |       |   |        |       |       |   |       |      |       |  |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Cole Vision             |                                | $                             | 7.9                 |      |                       | $     | 6.0   |      |        |       | 30.3                  | %     |       | $ | 20.4   |       |       | $ | 22.3  |      |       |  | (8.5 | )%   
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Things Remembered       |                                |                               | (1.1                | )    |                       |       | (2.6  | )    |        |       | 57.3                  |       |       |   | 6.2    |       |       |   | 5.3   |      |       |  | 17.3 |      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                         | Unallocated corporate expenses |                               |                     | (7.2 | )                     |       |       | (3.6 | )      |       |                       | 101.0 |       |   |        | (29.8 | )     |   |       | (8.6 | )     |  |      | 247.5 |       
|                                                    |                         |                                |                               |                     |      |                       |       |       |      |        |       |                       |       |       |   |        |       |       |   |       |      |       |  |     
|                                                    |                         |                                | Total operating income (loss) |                     | $    | (0.4                  | )     |       | $    | (0.2   | )     |                       |       | 165.5 | % |        | $     | (3.2  | ) |       | $    | 19.0  |  |      |       | (116.6 | )%
|                                                    |                         |                                |                               |                     |      |                       |       |       |      |        |       |                       |       |       |   |        |       |       |   |       |      |       |  |     
|Percentage of net revenue:                          |                         |                                |                               |                     |      |                       |       |       |      |        |       |                       |       |       |   |        |       |       |   |       |      |       |  |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Gross margin            |                                |                               | 63.2                | %    |                       |       | 64.3  | %    |        |       | (1.1                  | )     |       |   | 62.9   | %     |       |   | 64.5  | %    |       |  | (1.6 | )    
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Operating expenses      |                                |                               | 63.3                |      |                       |       | 64.4  |      |        |       | (1.1                  | )     |       |   | 63.2   |       |       |   | 62.3  |      |       |  | (0.9 | )    
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Operating income (loss) |                                |                               | (0.1                | )%   |                       |       | (0.1  | )%   |        |       | 0.0                   |       |       |   | (0.4   | )%    |       |   | 2.2   | %    |       |  | (2.6 | )    
|                                                   
|                                                   
|                                                   
|                                                   
|Number of retail locations at the end of
the period |                         |                                |                               |                     |      |                       |       |       |      |        |       |                       |       |       |   |        |       |       |   |       |      |       |  |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Cole Licensed Brands    |                                |                               | 1,338               |      |                       |       | 1,313 |      |        |       |                       |       |       |   |        |       |       |   |       |      |       |  |      |      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Pearle company-owned    |                                |                               | 393                 |      |                       |       | 415   |      |        |       |                       |       |       |   |        |       |       |   |       |      |       |  |      |      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Pearle franchised       |                                |                               | 466                 |      |                       |       | 447   |      |        |       |                       |       |       |   |        |       |       |   |       |      |       |  |      |      
|                                                    |                         |                                |                               |                     |      |                       |       |       |      |        |       |                       |       |       |   |        |       |       |   |       |      |       |  |     
|                                                    |                         |                                |                               | Total Cole Vision   |      |                       | 2,197 |       |      |        | 2,175 |                       |       |       |   |        |       |       |   |       |      |       |  |      |       |        |    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Things Remembered       |                                |                               | 751                 |      |                       |       | 781   |      |        |       |                       |       |       |   |        |       |       |   |       |      |       |  |      |      
|                                                    |                         |                                |                               |                     |      |                       |       |       |      |        |       |                       |       |       |   |        |       |       |   |       |      |       |  |     
|                                                    |                         |                                |                               | Total Cole National |      |                       | 2,948 |       |      |        | 2,956 |                       |       |       |   |        |       |       |   |       |      |       |  |      |       |        |    | 
|                                                    |                         |                                |                               |                     |      |                       |       |       |      |        |       |                       |       |       |   |        |       |       |   |       |      |       |  |     

As used in
Item 2 of this Form 10-Q/A, same-store sales growth is a non-GAAP
financial measure, which includes deferred warranty sales on a cash basis and
undelivered customer orders, and does not reflect provisions for returns,
remakes and certain other items. The Companys current systems do not gather
data on these items on an individual store basis. Adjustments to the cash basis
sales information accumulated at the store level are made on an aggregate
basis. As a retailer, the Company believes that a measure of same-store sales
performance is important for understanding its operations. The Company
calculates same-store sales for stores opened for at least twelve months. A
reconciliation of same-store sales to revenue is presented in the section
Reconciliation of Same-Store Sales Growth. Same-store sales growth follows:

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|                               |                     |  |               |     |                   |  |      |     |  
|------------------------------ | ------------------- |  | ------------- | --- | ----------------- |  | ---- | --- | -
|                               |                     |  | 2003         
|                               |                     |  |              
|                               |                     |  | Third Quarter |     | First Nine Months
|                               |                     |  |               |     |                  
|Cole Licensed Brands (U.S.)    |                     |  | 6.7           | %   |                   |  | 5.2  | %  
|                              
|                              
|                              
|                              
|Pearle company-owned (U.S.)    |                     |  | 3.9           | %   |                   |  | 1.5  | %  
|                              
|                              
|                              
|                              
|                               | Total Cole Vision   |  |               | 5.4 | %                 |  |      | 3.6 | %
|                              
|                              
|                              
|                              
|Things Remembered              |                     |  | 4.4           | %   |                   |  | 4.7  | %  
|                              
|                              
|                              
|                              
|                               | Total Cole National |  |               | 5.2 | %                 |  |      | 3.8 | %
|                              
|                              
|                              
|                              
|Pearle franchise stores (U.S.) |                     |  | 2.6           | %   |                   |  | (0.1 | )% 

Same-store sales for Pearle U.S. franchise stores is a non-GAAP financial
measure that is provided for comparative purposes only. The Company believes
that its franchisees method of reporting sales is consistent on a year-to-year
basis.

Third Quarter Fiscal 2003 Compared to Third Quarter Fiscal 2002

Consolidated Operations

Total revenues were $296.5 million in the third quarter of fiscal 2003,
compared with $275.5 million in the same period of fiscal 2002. Total revenues
increased 7.6% in the third quarter of fiscal 2003, primarily attributable to a
5.2% increase in same-store sales and increases in revenues from managed vision
care programs. Same-store sales increased 6.7% at Cole Licensed Brands, 3.9%
at Pearle Vision Company-owned U.S. stores and 4.4% at Things Remembered in the
third quarter of fiscal 2003.

Gross margin was $187.3 million in the third quarter of fiscal 2003,
compared with $177.2 million in the same period of fiscal 2002, an increase of
5.7%. The gross margin dollar increase was attributable to higher revenues at
both Cole Vision and Things Remembered. The gross margin rate for the third
quarter of fiscal 2003 was 63.2%, compared to 64.3% for the third quarter of
fiscal 2002. The gross margin rate at Cole Vision decreased by 1.3% from the
same period last year (further discussion is included in the Cole Vision
segment). The gross margin rate at Things Remembered decreased by 0.5%,
primarily due to reduced revenues from gift personalization. At Cole Vision,
certain central and store lab costs, including equipment lease costs, workers
compensation for lab employees and property insurance, have been reclassified
from operating expenses to cost of revenues in both years.

Operating expenses
were $187.7 million in the third quarter of fiscal 2003, compared
with $177.3 million in the same period of fiscal 2002, an increase of
5.8%. Included in operating expense was an increase of $3.6 million
in unallocated corporate expenses. Unallocated corporate expenses
included compensation expense of $3.2 million for variable stock
options having a feature permitting the use of vested options in
payment of the exercise price. In fiscal 2003, certain stock options
were exercised by using this feature. Previous to fiscal 2003
such options had been accounted for as fixed grants based on the
presumption that this feature would not be utilized as evidenced by
the Cole National Corporations historical experience of this feature
not being used, therefore no compensation expense was recorded. The
utilization of this feature in fiscal year 2003 created an
arrangement that requires variable accounting, beginning with the
third quarter of fiscal 2003. The Company incurred incremental legal
and professional fees of $0.8 million related to the reaudit and
restatement of its financial statements and the resulting SEC
investigation. The Company incurred incremental audit and
professional fees of $0.5 million in the third quarter of fiscal
2003, compared to the same period last year. The increase was due to
higher audit costs of $0.3 million and higher expenses of $0.2
million required to comply with Section 404 of the Sarbanes-Oxley Act
of 2002. The Company incurred in the third quarter of fiscal 2002
executive severance costs of $0.7 million and expenses totaling $0.3
million associated with the closing of the corporate office and
relocating it to the Companys facility in Twinsburg, Ohio, which
were not repeated in the third quarter of fiscal 2003.

Operating expenses at the Cole Vision and Things Remembered segments
increased 3.9% primarily due to higher store payroll including fringe benefits,
advertising and from rent and occupancy costs. These costs increased primarily
in support of higher revenues. The Company incurred incremental systems
amortization expense of $0.8 million related primarily to its Patriot Claims
Management system. The Company and its optical subsidiaries have been sued by
the State of California (see Note 7 of the Notes to Condensed Consolidated
Financial Statements). Legal costs associated with the defense of this matter
totaled $1.4 million in the third quarter of fiscal 2003, compared with $1.0
million in the same period last year. Partially offsetting these expense
increases were savings from work force reductions and lower bonus expenses.

Operating loss was
$0.4 million in the third quarter of fiscal 2003, compared to an operating loss of $0.2 million in the same period of fiscal 2002. The
change was attributable to higher unallocated corporate expenses
related to variable stock options and expenses related to legal and
professional costs for the restatement and reaudit and higher
professional fees. These costs were partially offset by improvements in
net revenues and savings from lower bonus expenses and workforce
reductions taken in fiscal 2002.

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Interest and other (income) expense, net, was $5.9 million for the third
quarter of fiscal 2003, compared to $6.4 million for the same period of fiscal
2002. The Company recorded higher interest income from investments in the third
quarter of fiscal 2003 compared to the same period last year.

The Company recorded a tax benefit based on its estimated annual effective
rate of 31%. The quarterly rate reflects the cumulative impact of changing the
estimated annual effective rate from 22% in the second quarter of fiscal 2003
to 31%. Additionally, the estimated lower effective tax rate in fiscal 2003
compared to fiscal 2002 is based on the expected full year results and the
impact of certain nondeductible expenses.

Cole Vision Segment

Cole Vision revenues were $239.7 million in the third quarter of fiscal
2003, compared with $221.8 million in the same period of fiscal 2002, an
increase of 8.1%. The revenue increase was primarily due to increased revenues
at Cole Licensed Brands and increased revenues from managed vision care
programs. The increase in Cole Licensed Brands revenues was primarily
attributable to a 4.3% increase in same-store sales at Sears Optical.
Same-store sales improved 22.4% at Target Optical and 16.2% at BJs Optical
during the third quarter of fiscal 2003. Same-store sales results at Cole
Licensed Brands were driven by increases in the average transaction size and an
increase in the number of transactions. Revenues from managed vision care
programs were higher primarily due to an increase in the number of capitated
plans sold to employers, health plans and associations and increased laser
procedure volume and program changes in laser vision correction resulting in
higher revenues per procedure. Same-store sales for the third quarter of fiscal
2003 increased 3.9% at Pearle Vision Company-owned U.S. stores. Same-store
sales at Pearle Vision reflected an increase in the average transaction size,
partially offset by a decrease in the number of transactions. Same-store sales
increases at Pearle Vision were partially offset by a lower number of company
owned stores. Pearle Vision operated 22 fewer company owned stores than the
same time period last year, due to the net sale of 11 Company stores to
franchisees, the closure of 16 stores and the opening of 5 new stores.

Gross margin was $145.7 million in the third quarter of fiscal 2003,
compared to $137.6 million in the same period last year, an increase of 5.9%
due to increased revenues, partially offset by a decrease in gross margin rate.
Gross margin, as a percentage of net revenues, decreased by 1.3 percentage
points at Cole Vision. Cole Managed Vision gross margin rate decreased by 3.4
percentage points due to a shift in revenue mix toward more funded programs and
higher utilization within funded programs. Cole Licensed Brands gross margin
rate decreased by 2.8 percentage points due primarily to higher obsolescence
costs in the third quarter of fiscal 2003, higher costs associated with a shift
toward premium product, and lower contact lens gross margin. Pearle Vision
gross margin, as a percent of net revenues, increased by 2.6 percentage points
due primarily to lower inventory shrink and lower manufacturing costs,
including workers compensation costs.

Operating expenses were $137.8 million in the third quarter of fiscal
2003, compared to $131.5 million for the same period last year, an increase of
4.8%. Operating expenses as a percent of net revenues decreased at Cole Vision
by 1.8% in the third quarter of fiscal 2003, compared to the same period of
fiscal 2002. Store payroll and rent and occupancy costs at Cole Vision were
$2.0 million and $1.3 million higher, respectively, in the third quarter of
fiscal 2003 compared to the same period last year, primarily to support the
increase in revenues. Store payroll, as a percent of net revenues, was lower in
the third quarter of fiscal 2003 compared to the same period last year at both
Cole Licensed Brands and Pearle Vision. Advertising costs were $1.7 million
higher in the third quarter of fiscal 2003 compared to the same period last
year, primarily at Cole Licensed Brands due to the timing of such expenditures.

Claims processing costs at Cole Managed Vision were $1.6 million higher in
the third quarter of fiscal 2003, compared to the same period last year due
primarily to $0.9 million of incremental system maintenance costs related to
Health Insurance Portability and Accountability Act (HIPAA) compliance and $0.8
million of incremental systems amortization for the Companys Patriot Claims
Management system, of which a portion is prior period amortization. Additional
portions of the Patriot Claims Management system were placed in service during
the third quarter, and the system is now processing enrollment and eligibility
for capitated plans. The Company believes that the system will require
additional development throughout 2004 to meet the needs of its fee-for-service
plans. The Company anticipates that a portion of these additional development
expenditures will be capitalized and a portion will be expensed. In the
meantime, the fee-for-service plans will continue to operate on the existing
system.

Operating expenses from the Companys Canadian operations were $0.9
million higher in the third quarter of fiscal 2003, compared to the same period
last year. This expense was due primarily to unfavorable exchange rates and
higher advertising costs. The Company and its optical subsidiaries have been
sued by the State of California (see Note 7 of the Notes to Condensed
Consolidated Financial Statements). Legal costs associated with the defense of
this matter totaled $1.4 million in the third quarter of fiscal 2003, compared
with $1.0 million in the same period last year. Partially offsetting expense
increases were savings from reduced bonus expense, lower paid time off (PTO)
expense and work force reductions.

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Operating income at Cole Vision increased to $7.9 million in the third
quarter of fiscal 2003, compared to $6.0 million in the same period of fiscal
2002. The improvement was attributable to increases in net revenue and lower
bonus expense, partially offset by decreases in the gross margin rate, higher
costs to support revenue increases and higher systems maintenance and
amortization costs.

Things Remembered Segment

Things Remembered revenues were $56.8 million in the third quarter of
fiscal 2003, compared with $53.7 million in the same period of fiscal 2002, a
5.7% increase. The same-store sales increase of 4.4% and a 37% increase in
direct channel revenues were the primary reasons for the increase. Direct
channel revenues include revenues from its e-commerce site,
www.ThingsRemembered.com, revenues from Things Remembered catalogs and through
affiliate programs direct to businesses. Improvements in the average
transaction size were offset by a lower number of transactions and a reduction
in the number of stores operating at the end of the third quarter. Store count
at the end of the third quarter of fiscal 2003 was 751 compared to 781 at the
end of the third quarter of fiscal 2002 due to store closings.

Gross margin was $41.6 million in the third quarter of fiscal 2003,
compared to $39.7 million for the same period last year, an increase of 4.9%.
Gross margin as a percent of revenues decreased 0.5% in the third quarter of
fiscal 2003 compared to the same period of fiscal 2002, primarily from reduced
revenues from gift personalization.

Operating expenses were $42.7 million in the third quarter of fiscal 2003,
compared to $42.3 million for the same period last year, an increase of 1.0%.
Operating expenses as a percent of revenues decreased 3.5% in the third quarter
of fiscal 2003 compared to the same period of fiscal 2002. Store rent and
occupancy charges increased $0.6 million primarily due to a higher mix of
inline mall locations than kiosks. Inline mall locations generally incur higher
rent and occupancy costs than kiosks due to greater square footage
requirements. Store rent and occupancy costs, as a percent of net revenues, was
lower in the third quarter of fiscal 2003, than the same period last year.
Things Remembered accrued higher management bonuses of $0.6 million in the
third quarter of fiscal 2003 compared to the same period last year. Partially
offsetting these expense increases were lower store payroll costs in the third
quarter of fiscal 2003, compared to the same period last year and savings from
lower legal fees, lower travel and meeting expense and work force reductions
taken in fiscal 2002.

Operating loss for the third quarter of fiscal 2003 was $1.1 million
compared to $2.6 million in the same period of fiscal 2002. Increases in net
revenue and savings from lower store payroll costs, travel, meetings and
workforce reductions, which were taken in fiscal 2002 were partially offset by
the lower gross margin rate, higher bonus expense and increased store rent and
occupancy costs.

First Nine Months of Fiscal 2003 Compared to First Nine Months of Fiscal 2002

Consolidated Operations

Total revenues were $892.4 million in the first nine months of fiscal
2003, compared with $853.3 million in the same period of fiscal 2002. Total
revenues increased 4.6% in the first nine months of fiscal 2003, primarily
attributable to a 3.8% increase in same-store sales and increases in revenues
from managed vision care programs. Same-store sales increased 5.2% at Cole
Licensed Brands, 1.5% at Pearle Vision Company-owned U.S. stores and 4.7% at
Things Remembered in the first nine months of fiscal 2003.

Gross margin was $561.1 million in the first nine months of fiscal 2003,
compared with $550.5 million in the same period of fiscal 2002. The gross
margin dollar increase was attributable to higher revenues at both Cole Vision
and Things Remembered. The gross margin rate for the first nine months of
fiscal 2003 was 62.9%, compared to 64.5% for the same period of fiscal 2002.
The gross margin rate at Cole Vision decreased by 1.9% from the same period
last year (further discussion is included in the Cole Vision segment). The
gross margin rate at Things Remembered decreased by 0.9%, primarily due to
reduced revenues from gift personalization. Certain central and store lab
costs, including equipment lease costs, workers compensation for lab employees
and property insurance, have been reclassified from operating expenses to cost
of revenues in both years.

Operating expenses
were $564.3 million in the first nine months of fiscal
2003, compared with $531.5 million in the same period of fiscal 2002, an
increase of 6.2%. Included in operating expense was an increase of
$21.2 million in unallocated corporate expenses. The Companys former Chairman and
Chief Executive Officer retired at the annual meeting of shareholders on June
25, 2003 and the Company fulfilled its obligation, including certain contingent
obligations, under his employment agreement and for retirement and life
insurance benefits. These obligations required a one-time cash payment of $11.9
million with a charge to operating expenses in the second quarter of fiscal
2003 of $9.2 million. The Company incurred incremental charges of $5.1 million
for legal and professional fees primarily related to the reaudit and
restatement of its financial statements and the resulting SEC
investigation. Unallocated corporate expenses included compensation
expense of $3.2 million for variable stock options having a feature
permitting the use of vested options in payment of the exercise
price. In fiscal 2003, certain stock options were exercised by using
this feature. Previous to fiscal 2003, such options had been
accounted for as fixed grants based on the presumption that this
feature would not be utilized as evidenced by the Cole National
Corporations historical experience of this feature not being
used, therefore no compensation expense was recorded. The utilization
of this feature in fiscal year 2003 created an arrangement that
requires variable accounting, beginning with the third quarter of
fiscal 2003. Settlement costs related to the class action lawsuit, alleging claims of
various violations of federal securities laws related to the Companys publicly

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reported revenues and earnings totaled $2.7 million. The Company incurred
incremental professional and legal fees of $1.1 million related to recent
management changes and management initiatives. The Company incurred incremental
audit and professional fees of $0.5 million in the first nine months of fiscal
2003, compared to the same period last year. The increase was due to higher
audit costs of $0.3 million and higher expenses of $0.2 million required to
comply with Section 404 of the Sarbanes-Oxley Act of 2002. The Company incurred
in the third quarter of fiscal 2002 executive severance costs of $0.7 million
and expenses totaling $0.3 million associated with the closing of the corporate
office and relocating it to the Companys facility in Twinsburg, Ohio, which
were not repeated in the first nine months of fiscal 2003.

Operating expenses at the Cole Vision and Things Remembered segments
increased 2.2% primarily due to higher store payroll including fringe benefits
and workers compensation and rent and occupancy costs. These costs increased
primarily in support of higher revenues. Store payroll, rent and occupancy
costs as a percent of net revenue, were lower in the first nine months of
fiscal 2003, compared to the same period last year. Operating expenses from the
Companys Canadian operations were $2.2 million higher in the first nine months
of fiscal 2003, compared to the same period last year. The increase in
operating expense was due primarily to unfavorable exchange rates and costs
associated with the closure of its manufacturing and distribution facility in
Toronto, Canada. The Company and its optical subsidiaries have been sued by the
State of California (see Note 7 of the Notes to Condensed Consolidated
Financial Statements). Legal costs associated with the defense of this matter
totaled $3.3 million in the first nine months of fiscal 2003, compared $2.6
million in the same period last year. Partially offsetting these expense
increases were savings from lower bonus expense in the first nine months of
fiscal 2003 compared to the same period last year and from workforce reductions
taken in fiscal 2002. In addition, the first nine months of fiscal 2002
included charges of $1.0 million for the closure of 12 Target Optical stores.

Operating loss was
$3.2 million in the first nine months of fiscal 2003,
compared to an operating income of $19.0 million in the same period of fiscal
2002. Increases in unallocated corporate expenses totaling $21.2 million and
higher operating expenses from the Companys Canadian operations were the
primary reason for the decrease in operating results.

Interest and other (income) expense, net, was $17.7 million for the first
nine months of fiscal 2003, compared to $30.4 million for the same period of
fiscal 2002. Nine month fiscal 2002 results include a loss of $11.1 million on
early extinguishment of debt. The charge represents the payment of premiums and
other costs of retiring Cole National Groups 9-7/8% Senior Subordinated Notes
due 2006 and the write-offs of unamortized discount and deferred financing
fees. The Company recorded lower interest expense in the first nine months of
fiscal 2003 compared to the same period last year, primarily due to replacement
of the $150.0 million 9-7/8% Senior Subordinated Notes with the issuance of
8-7/8% Senior Subordinated Notes in May 2002 and the impact of the interest
rate swap agreements. See Note 3 of the Notes to Condensed Consolidated
Financial Statements.

The Company recorded a tax benefit based on its estimated annual effective
rate of 31%. The estimated lower effective tax rate in fiscal 2003 compared to
fiscal 2002 is based on the expected full year results and the impact of
certain nondeductible expenses.

Cole Vision Segment

Cole Vision revenues were $702.1 million in the first nine months of
fiscal 2003, compared with $672.8 million in the same period of fiscal 2002, an
increase of 4.4%. The revenue increase was primarily due to increased revenues
at Cole Licensed Brands and increased revenues from managed vision care
programs, partially offset by sales decreases at Pearle Vision. The increase in
Cole Licensed Brands revenues was attributable to a 3.3% same-store sales
increase at Sears Optical, an 18.9% increase in same-store sales at Target
Optical and an increase in the number of store locations, primarily at Target.
Same-store sales improved 10.6% at BJs Optical during the first nine months of
fiscal 2003. Same-store sales results at Cole Licensed Brands were driven by
increases in both the average transaction size and the number of transactions.
Revenues from managed vision care programs were higher primarily due to an
increase in the number of capitated plans sold to employers, health plans and
associations, and increased laser procedure volume and program changes in laser
vision correction resulting in higher revenues per procedure. Same-store sales
for the first nine months of fiscal 2003 increased 1.5% at Pearle Vision
Company-owned U.S. stores. Same-store sales at Pearle Vision reflected a
decrease in the number of transactions, offset by an increase in the average
transaction size. Same-store sales increases at Pearle Vision were offset by a
lower number of Company-owned stores. Pearle Vision operated 22 fewer
Company-owned stores than the same time period last year, due to the net sale
of 11 Company stores to franchisees, the closure of 16 stores and the opening
of 5 new stores.

Gross margin was $423.7 million in the first nine months of fiscal 2003,
compared to $418.7 million in the same period last year, an increase of 1.2%
due to increased revenues, partially offset by a decrease in gross margin rate.
Gross margin, as a percentage of net revenues, decreased by 1.9 percentage
points at Cole Vision. Cole Managed Vision gross margin rate decreased by 7.7
percentage points due to a shift in revenue mix toward more funded programs and
higher utilization within funded programs. The Company closed its
manufacturing and distribution facility in Toronto, Canada in the second
quarter of fiscal 2003. The operations of this

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facility have been absorbed by
the Companys facility in Knoxville, TN. As part of the integration of the
Canadian operations into the Knoxville lab, the Company changed the Canadian
product assortment. As a result, the Company recorded a $0.3 million charge to
gross margin for obsolescence of inventory. The obsolescence charge, in
addition to unfavorable exchange rates and lower net revenues in the first nine
months resulted in $1.3 million lower gross margin from the Companys Canadian
operations. Cole Licensed Brands gross margin rate decreased by 1.5 percentage
points and was impacted by higher obsolescence costs, higher costs associated
with a shift toward premium product and lower contact lens gross margin. Pearle
Vision gross margin, as a percent of net revenues, decreased by 0.4 percentage
points, due to higher cost premium product driven by promotions and higher
manufacturing costs. Partially offsetting these factors was the increase in
average spectacle selling price and lower inventory shrink.

Operating expenses were $403.3 million in the first nine months of fiscal
2003, compared to $396.4 million for the same period last year, an increase of
1.7%. Operating expenses as a percent of net revenues decreased at Cole Vision
by 1.5% in the first nine months of fiscal 2003, compared to the same period of
fiscal 2002. Store payroll and rent and occupancy costs at Cole Vision were
$3.5 million and $2.5 million higher respectively, in the first nine months of
fiscal 2003 compared to the same period last year to support increases in net
revenues. Store payroll, rent and occupancy costs, as a percent of net
revenues, were lower in the first nine months of fiscal 2003 compared to the
same period last year. Pearle Vision recorded a $0.6 million charge for assets
disposed in a prior period. The Companys Canadian operations closed its
manufacturing and distribution facility located in Toronto, Canada in second
quarter of fiscal 2003. One time costs associated with the closure of the
facility totaled $0.4 million. The Company and its optical subsidiaries have
been sued by the State of California (see Note 7 to the Notes to Condensed
Consolidated Financial Statements). Legal costs associated with the defense of
this matter totaled $3.3 million in the first nine months of fiscal 2003,
compared with $2.6 million in the same period last year. Fringe benefits costs
increased $0.4 million in the first nine months of fiscal 2003, compared to the
same period last year. Claims processing costs were the same as the prior year.
Included in claims processing costs in the current year were $1.0 million of
incremental maintenance cost related to HIPAA compliance and $1.1 million of
incremental systems amortization offset by lower processing fees and bonus
expense compared to the same period last year. There were no processing fees
paid to MetLife in the first nine months of fiscal 2003 compared to $1.3
million in the same period last year.

Partially offsetting these expense increases in fiscal 2003 were savings
from lower bonus expense, a reduction of $0.6 million in advertising costs and
work force reductions. The first nine months of fiscal 2002 included charges of
$1.0 million for the closure of 12 Target Optical stores. Pearle Vision
recorded a gain of $1.2 million on the sale of six Company-owned stores during
the first nine months of fiscal 2003 compared to a gain of $0.2 million on the
sale of three Company-owned stores during the first nine months of fiscal 2002.

Operating income at Cole Vision was $20.4 million in the first nine months
of fiscal 2003, compared to $22.3 million in the same period of fiscal 2002.
The decrease in revenues at Pearle Vision, a lower gross margin rate
at Pearle Vision,
the Companys Canadian operations, Cole Licensed Brands and Cole Managed Vision
and the costs associated with the closure of the Companys Canadian lab and
manufacturing facility were partially offset by improved revenues at Cole
Licensed Brands and Cole Managed Vision.

Things Remembered Segment

Things Remembered revenues were $190.3 million in the first nine months of
fiscal 2003, compared with $180.5 million in the same period of fiscal 2002, a
5.4% increase. A same-store sales increase of 4.7% and a 35% increase in direct
channel revenues were the primary reasons for the increase. Direct channel
revenues include revenues from its e-commerce site, www.ThingsRemembered.com,
revenues from Things Remembered catalogs and through affiliate programs direct
to businesses. Improvements in the average transaction size were offset by a
lower number of transactions and from a reduction in the number of stores
operating at the end of the third quarter. Store count at the end of the third
quarter of fiscal 2003 was 751 compared to 781 at the end of the third quarter
of fiscal 2002, due to store closings.

Gross margin was $137.4 million in the first nine months of fiscal 2003,
compared to $131.9 million for the same period last year, an increase of 4.2%.
Gross margin as a percent of revenues decreased 0.9% in the first nine months
of fiscal 2003 compared to the same period of fiscal 2002, primarily from
reduced revenues from gift personalization.

Operating expenses were $131.2 million in the first nine months of fiscal
2003, compared to $126.6 million for the same period last year, an increase of
3.6%. Operating expenses as a percent of revenues decreased 1.2% in the first
nine months of fiscal 2003 compared to the same period of fiscal 2002. Store
rent and occupancy charges increased $1.5 million primarily due to a higher mix
of inline mall locations than kiosks. Inline mall locations generally incur
higher rent and occupancy costs than kiosks due to greater square footage
requirements. Store rent and occupancy costs, as a percent of net revenues, was
lower for the first nine months of fiscal 2003 than the same period last year.
Things Remembered accrued higher management bonuses totaling $1.5 million and
incurred

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incremental advertising costs of $1.2 million for the first nine
months of fiscal 2003, compared to the same period last year. Things
Remembered recorded higher payroll costs in the first nine months of fiscal
2003, compared to the same period last year to support higher revenues and also
due to increased payroll hours to comply with state statutory requirements.
Store payroll costs as a percent of net revenue, were lower in the first nine
months of fiscal 2003, compared to the same period last year. Workers
compensation expense increased $0.9 million in the first nine months of fiscal
2003, compared to the same period last year. The increase was due to higher
estimated workers compensation obligations utilizing loss development factors
prepared by independent third party actuaries. Partially offsetting the expense
increases were savings from travel, meetings, store depreciation and work force
reductions taken in fiscal 2002.

Operating income for the first nine months of fiscal 2003 was $6.2 million
compared to $5.3 million in the same period of fiscal 2002. Increases in
revenue and savings from travel, meetings, store depreciation and workforce
reductions taken in fiscal 2002 were partially offset by the lower gross margin
rate, and higher advertising, management bonus, workers compensation and store
rent and occupancy costs.

Reconciliation of Same-Store Sales Growth

Same-store sales growth is a non-GAAP financial measure, which includes
deferred warranty sales on a cash basis and does not reflect provisions for
returns and remakes and certain other items. The Companys current systems do
not gather data on these items on an individual store basis. Adjustments to the
cash basis sales information accumulated at the store level are made for these
items on an aggregate basis. As a retailer, the Company believes that a measure
of same-store sales performance is important for understanding its operations.
The Company calculates same-store sales for stores opened for at least twelve
months. A reconciliation of same-store sales to revenue reported on a GAAP
basis follows:

|                              |                                |             |         |                |         |                   |         |        |         | 
|----------------------------- | ------------------------------ | ----------- | ------- | -------------- | ------- | ----------------- | ------- | ------ | ------- | 
|                              |                                |             |         | 2003          
|                              |                                |             |         |               
|                              |                                |             |         | Third Quarter  |         | First Nine Months
|                              |                                |             |         |                |         |                  
|                              |                                |             |         | (In thousands)
|Current year same-store sales |                                | $           | 252,412 |                |         | $                 | 774,470 |       
|                             
|                             
|                             
|                             
|Prior year same-store sales   |                                |             | 239,967 |                |         |                   | 745,939 |       
|                             
|                             
|                             
|                             
|Percent change                |                                |             | 5.2     | %              |         |                   | 3.8     | %     
|                             
|                             
|                             
|                             
|Current year same-store sales |                                | $           | 252,412 |                |         | $                 | 774,470 |       
|                             
|                             
|                             
|                             
|Adjustment for:               |                                |             |         |                |         |                   |         |       
|                             
|                             
|                             
|                             
|                              | Sales at new and closed stores |             |         | 3,281          |         |                   |         | 12,388 |        
|                             
|                             
|                             
|                             
|                              | Deferred revenue               |             |         | (1,488         | )       |                   |         | (4,337 | )      
|                             
|                             
|                             
|                             
|                              | Order vs. customer receipt     |             |         | 6,200          |         |                   |         | 717    |        
|                             
|                             
|                             
|                             
|                              | Returns, remakes and refunds   |             |         | (140           | )       |                   |         | (522   | )      
|                             
|                             
|                             
|                             
|                              | Other                          |             |         | 235            |         |                   |         | 534    |        
|                              |                                |             |         |                |         |                   |         |       
|                              |                                | Store sales |         |                | 260,500 |                   |         |        | 783,250 | 
|                             
|                             
|                             
|                             
|Nonstore revenues             |                                |             | 43,135  |                |         |                   | 131,984 |       
|                             
|                             
|                             
|                             
|Intercompany eliminations     |                                |             | (7,128  | )              |         |                   | (22,819 | )     
|                              |                                |             |         |                |         |                   |         |       
|GAAP Basis Net Revenue        |                                | $           | 296,507 |                |         | $                 | 892,415 |       
|                              |                                |             |         |                |         |                   |         |       

Liquidity and Capital Resources

The Companys primary source of liquidity is funds provided from
operations of its operating subsidiaries. On June 27, 2003, the Companys
operating subsidiaries amended, restated and extended their working capital
line of credit. The maturity date of the credit facility was extended to
February 1, 2007 from May 31, 2006. The size of the facility was adjusted to
$60.0 million from $75.0 million. In addition, certain financial covenants were
amended. As of the end of the third quarter of fiscal 2003, the total
commitment was $60.0 million and the availability under the credit facility
totaled $46.3 million after reduction for $13.7 million under letters of
credit. There were no working capital borrowings outstanding as of November 1,
2003. The maximum amount of borrowings outstanding was $7.5 million and the
daily average borrowing was approximately $1.0 million during the third quarter
of fiscal 2003.

19



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##### Table of Contents



The credit facility, which is guaranteed by Cole National Corporation and
the Company, requires the Company and its principal operating subsidiaries to
comply with various operating covenants that restrict corporate activities,
including covenants restricting the ability of the subsidiaries to incur
additional indebtedness, pay dividends, prepay subordinated indebtedness,
dispose of certain investments or make acquisitions. The credit facility also
requires the Company to comply with certain financial covenants, including
covenants regarding interest coverage and maximum leverage. The Company is in
compliance with the covenants in the credit agreement as of the date of this
report.

The indentures pursuant to which the 8-5/8% notes and the 8-7/8% notes
were issued contain certain optional and mandatory redemption features and
other financial covenants, including restrictions on the ability of the Company
to incur additional indebtedness, pay dividends or make other restricted
payments to Cole National Corporation. The indentures permit payments to Cole
National Corporation for certain tax obligations and for administrative
expenses not to exceed 0.25% of net sales. See Note 3 of the Notes to Condensed
Consolidated Financial Statements. The Company may from time to time purchase
its outstanding notes in the open market or refinance them, depending on
capital market conditions.

No significant principal payment obligations are due under the Companys
outstanding indebtedness until 2007, when $125.0 million of 8-5/8% Senior
Subordinated Notes become due. The ability of the Company and its subsidiaries
to satisfy their obligations will be primarily dependent upon future financial
and operating performance of the subsidiaries and upon Cole National
Corporations ability to renew or refinance borrowings or raise additional
capital through equity financing or sales of assets.

Operations for the first nine months of fiscal 2003 used $2.8 million of
cash compared with cash provided by operations of $21.4 million in the same
period of fiscal 2002. The change in operating cash was primarily attributable
to lower operating results as described above in the Results of Operations
section of this report and from changes in operating assets and liabilities,
which used $15.5 million in the first nine months of fiscal 2003, compared with
$5.8 million in the first nine months of fiscal 2002. Changes in accounts
payable and accrued liabilities provided $1.7 million in the first nine months
of fiscal 2003, compared with $16.0 million in the prior year. The decrease was
primarily due to the timing of purchases and payments. Changes in inventories
resulted in a use of funds of $19.3 million in the first nine months, compared
with $16.3 million in the prior year. The increase was primarily due to an
increased mix of premium products, additional inventory needed to change the
product assortment in the Canadian operations, and additional inventory needed
to support the increase in store count at Cole Licensed Brands. Changes in
accounts receivable and other assets resulted in a source of funds of $3.0
million in the first nine months of fiscal 2003, compared to a use of funds of
$5.7 million in the same period last year. The Company received $1.3 million in
the first nine months of fiscal 2003 from interest rate swap agreements. The
change compared to the prior year is due primarily to improved receivable
collection at Cole Managed Vision. Noncash compensation was $3.4
million the first nine months of fiscal 2003 compared to $0.5 million
for the same period last year. The increase was due primarily to
compensation expenses for variable stock options.

Net cash from investing activities resulted in a use of funds of $31.3
million for the first nine months of fiscal 2003 compared to a use of funds
totaling $37.9 million in the same period of fiscal 2002. Capital expenditures,
which accounted for most of the cash used for investing, were $22.4 million and
$33.3 million in the first nine months of fiscal 2003 and fiscal 2002,
respectively. The majority of capital expenditures for both periods were for
store fixtures, equipment and leasehold improvements for new stores and
remodeling of existing stores. Expenditures for systems development costs
totaled $4.9 million and $3.7 million for the first nine months of fiscal 2003
and fiscal 2002, respectively. The Company used $3.8 million in the first nine
months of fiscal 2003 for the last contingent payment in connection with the
prior acquisition of MetLifes managed vision business.

Net cash provided by financing activities totaled $17.8 million in the
first nine months of fiscal 2003, compared with a use of funds totaling $25.5
million in the prior year. In May 2002, the Company issued $150.0 million of
8-7/8% Senior Subordinated Notes due May 2012. The net proceeds of this
issuance and cash on hand were used to retire all of the Companys $150.0
million 9-7/8% Senior Subordinated Notes due 2006. Financing fees and early
repayment premium of the 9-7/8% notes resulted in a net cash usage of $14.2
million in the first nine months of fiscal 2002. Changes in overdraft balances
resulted in a source of funds totaling $12.1 million in the first nine months
of fiscal 2003, compared to a use of funds totaling $6.2 million in the prior
year. The change was due to the timing of payments. Changes in the balance to
the parent provided $5.8 million in the first nine months of fiscal 2003
compared with a use of $5.1 million for the same period last year.

The Company believes that funds provided from operations, including cash
on hand, along with funds available under the credit facility will provide
adequate sources of liquidity to allow its operating subsidiaries to continue
to expand the number of stores and to fund capital expenditures and systems
development costs.

Off Balance Sheet Arrangements and Contractual Commitments

The Company leases a substantial portion of its equipment and facilities
including laboratories, office and warehouse space, and retail locations. In
addition, Cole Licensed Brands primarily operates departments in various host
stores and pays occupancy costs

20



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##### Table of Contents



solely as a percentage of sales. A more
complete discussion of the Companys lease and license commitments is included
in Note 6 of the Notes to Condensed Consolidated Financial Statements.

The Company guarantees future minimum lease payments for certain store
locations leased directly by Pearle franchisees. The term of these guarantees
range from one to ten years of which many are limited to periods that are less
than the full term of the leases involved. A more complete discussion of the
Companys guarantees is included in Note 6 of the Notes to Condensed
Consolidated Financial Statements.

Material Changes in Contingencies

Cole National Corporation and its optical subsidiaries have been sued by
the State of California, which alleges claims for various statutory violations
related to the operation of 23 Pearle Vision Centers in California. The claims
include untrue or misleading advertising, illegal dilation fees, unlawful
advertising of eye exams, maintaining an optometrist on or near the
premises of a registered dispensing optician, unlawful advertising of an
optometrist, unlicensed practice of optometry, and illegal relationships
between dispensing opticians, optical retailers and optometrists. The action
seeks unspecified damages, restitution and injunctive relief. In July 2002, the
State of California obtained a preliminary injunction to enjoin certain
advertising practices and from charging dilation fees. The trial courts
decision was appealed by both the Company and the State. On November 26, 2003,
the appellate court ruled on the appeal in a manner adverse to the Company with
respect to continued advertising in California by Pearle Vision that expressly
or implicitly advertises the furnishing of optometric services, disallowing
continued advertising of the availability of optometric services with a
disclaimer that had been previously approved by the trial court. The appellate
court ruled in the Companys favor with respect to charging dilation fees. The
Company intends to continue the appellate process. Although the Company
believes that its advertising and operational practices in California complied
with California law, and there is appellate law from another district in
California that supports the Companys belief, the appellate ruling may, if
unmodified, compel the Company to modify or close its activities in California.
Further, the Company might be required to pay damages and or restitution in a
currently undeterminable amount. Defense costs associated with the case, as
discussed under Results of Operations, are expected to continue. The costs
associated with modification or closing of the 23 Pearle locations or the
outcome of the litigation, might have a material effect on the Companys
operating results and cash flow in the period or periods in which it occurs.

Significant Accounting Policies and Critical Estimates

The Companys significant accounting policies are discussed in the Notes
to the Consolidated Financial Statements that are included in the Companys
2002 Annual Report on Form 10-K that is filed with the Securities and Exchange
Commission. In most cases, the accounting policies utilized by the Company are
the only ones permissible under U.S. Generally Accepted Accounting Principles
for businesses in our industry. However, the application of certain of these
policies requires significant judgments or a complex estimation process that
can affect the results of operations and financial position of the Company, as
well as the related footnote disclosures. The Company bases its estimates on
historical experience and other assumptions that it believes are reasonable. If
actual amounts are ultimately different from previous estimates, the revisions
are included in the Companys results of operations for the period in which the
actual amounts become known. The accounting policies and estimates that can
have a significant impact on the operating results, financial position and
footnote disclosures of the Company are described in the Management Discussion
and Analysis in the Companys 2002 Annual Report on Form 10-K.

Forward Looking Statements

Cole National Corporation announced on October 8, 2003 that its Board of
Directors had formed a Special Committee of independent directors to evaluate
the Companys strategic alternatives. The Special Committees evaluation of
strategic alternatives, including a possible merger or sale of the Company, a
corporate restructuring or other alternatives, continues. There can be no
assurance, however, that any transaction will be approved, or if approved, the
amount or form of the consideration proposed to be payable to the Company or
its shareholders, or whether a transaction will be consummated.

The same-store sales in the Companys vision segment increased in the
third quarter of fiscal 2003 compared to the same period last year and the
Company continued to see that trend in November, with same-store sales for the
vision segment increasing in the mid-single digits. The performance within the
segment was varied, with Cole Licensed Brands posting strong results and Pearle
Visions company-owned stores experiencing low single-digit negative same-store
sales. Things Remembereds November same-store sales started off strongly and
then flattened, increasing more than 3% overall. There is no assurance that
these same-store sales trends will continue for the remainder of the year.

21



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The Company expects that certain cost of revenues and operating expense
trends experienced in the first nine months of fiscal 2003, such as higher
product costs, utilization within funded programs, and occupancy costs, are
likely to continue through the balance of the year. The Company also expects it
will continue to incur legal and professional expenses as a result of the SEC
investigation and the previously disclosed California lawsuit.

The Companys agreement with Target Corporation, under which the Company
operates licensed optical departments in 265 Target Stores, expires on January
31, 2004 unless renewed. The Company estimates that losses at Target Optical
reduced the operating income of its Cole Vision segment by $9.6 million in
fiscal 2002 and $6.9 million in the first nine months of fiscal 2003. The
Company is in discussions with Target Corporation regarding the renewal of the
agreement on modified terms. No assurances can be given as to the outcome of
the discussions. It is estimated that exiting the Target Optical business would
result in a pretax charge of approximately $22.0 million in the fourth quarter
of fiscal year 2003, relating primarily to the write-down of fixed assets and
inventory, and the payment of severance. Approximately three-quarters of this
charge would be noncash.

The Companys expectations and beliefs concerning the future contained in
this document are 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 potential adverse consequences of the restatement of the
Companys financial statements, including those resulting from litigation or
government investigations, restrictions or curtailment of the Companys credit
facility and other credit situations, costs and other effects associated with
the California litigation, the Companys evaluation of strategic alternatives,
the expiration or renewal of the Companys agreement with Target Corporation,
the timing and achievement of improvements in the operations of the optical
business, the results of Things Remembered, which is highly dependent on the
fourth quarter holiday season, the nature and extent of disruptions of the
economy from terrorist activities or major health concerns and from
governmental and consumer responses to such situations, the actual utilization
of Cole Managed Vision funded eyewear programs, 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, costs and other effects associated with
litigation, 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 relationships with host stores and
franchisees, the mix of goods sold, pricing and other competitive factors and
the seasonality of the Companys business.




Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Companys major market risk exposure is to changes in foreign currency
exchange rates in Canada, 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.

In addition, the Company is exposed to changes in the fair value of its
debt portfolio, primarily resulting from the effects of changes in interest
rates. The Company utilizes interest rate swaps to manage its exposure and to
take advantage of favorable market interest rates. Management believes that its
use of these financial instruments is in the Companys best interest. These
agreements require the Company to pay an average floating interest rate based
on six month LIBOR plus 4.5375% to a counter party while receiving a fixed rate
on $50.0 million of the Companys $125.0 million 8-5/8% Senior Subordinated
Notes due 2007. The agreements mature August 15, 2007 and qualify as fair value
hedges. The LIBOR rate is reset in arrears in February and August of each year.
The market LIBOR rate at the end of the third quarter was 1.23%, which would
result in a rate of 5.7675%. The actual rate for the third quarter will be set
on February 17, 2004. The LIBOR rate for the six month period February 18
through August 15, 2003 was 1.18%, which resulted in a rate of 5.7175% for that
same period.

A change in six-month LIBOR would affect the interest cost associated with
the $50.0 million notional value of the swap agreements. A 50% change
(approximately 62 basis points) in the market rates would increase annual
interest cost by $0.3 million.




Item 4. Controls and Procedures

(a)  Attached as Exhibits 31.1 and 31.2 to this Quarterly Report are
certifications of the Companys Chief Executive Officer and Chief Financial
Officer required in accordance with Section 302 of the Sarbanes-Oxley Act of
2002 (the Section 302 Certifications). This portion of our Quarterly Report
on Form 10-Q/A is our disclosure of the results of our control evaluation
referred to in paragraphs (4) and (5) of the Section 302 Certifications and
should be read in conjunction with the Section 302 Certifications for a more
complete understanding of the topics presented.

22



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The Company carried out an evaluation, under the supervision and with the
participation of its Chief Executive Officer and Chief Financial Officer,
pursuant to Rule 13a-15 promulgated under the Securities Exchange Act of 1934
(the Exchange Act), as amended, of the design, operation and effectiveness of
the Companys disclosure controls and procedures. The Companys Chief Executive
Officer and Chief Financial Officer concluded that based on such evaluation, as
of November 1, 2003, the Companys disclosure controls and procedures were
effective and reasonably designed to ensure that information required to be
disclosed by the Company in the reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the Securities and Exchange Commission.
(b) Based on evaluation, there have not been any changes in the Companys
internal control over financial reporting or in other factors during the
quarter ended November 1, 2003 that have materially affected, or are reasonably
likely to materially affect, the Companys internal controls over financial
reporting.




PART II  OTHER INFORMATION




Item 1. Legal Proceedings

A complaint was filed in the Superior Court of California, county of San
Diego against Cole National Corporation, its affiliates and certain of its
officers by the Attorney General of the State of California on February 14,
2002 and amended on February 22, 2002. The case, State of California v. Cole
National Corporation, et al., alleges claims for various statutory violations
related to the operation of 23 Pearle Vision Centers in California. The claims
include untrue or misleading advertising, illegal dilation fees, unlawful
advertising of eye exams, maintaining an optometrist on or near the premises of
a registered dispensing optician, unlawful advertising of an optometrist,
unlicensed practice of optometry, and illegal relationships between dispensing
opticians, optical retailers and optometrists. The action seeks unspecified
damages, restitution and injunctive relief. In July 2002, the State of
California obtained a preliminary injunction to enjoin certain advertising
practices and from charging dilation fees. The trial courts decision was
appealed by both the Company and the State to the state Court of Appeal, Fourth
Appellate District. On November 26, 2003, the appellate court ruled on the
appeal in a manner adverse to the Company with respect to continued advertising
in California by Pearle Vision that expressly or implicitly advertises the
furnishing of optometric services, disallowing continued advertising of the
availability of optometric services with a disclaimer that had been previously
approved by the trial court. The appellate court ruled in the Companys favor
with respect to charging dilation fees. Although the Company believes that its
advertising and operational practices in California complied with California
law, and there is appellate law from another district in California that
supports the Companys belief, the Company can not predict with certainty the
cases outcome or costs.

As previously reported in the Companys report on Form 10-Q for the
quarter ended August 2, 2003, a class action complaint was filed on August 14,
2002 in the Superior Court of San Francisco, California, against Things
Remembered by a purported class of approximately 200 employees of Things
Remembered alleging that the members of the putative class were improperly
denied overtime compensation in violation of California law. The action sought
unspecified damages, interest, restitution, as well as declaratory and
injunctive relief and attorneys fees. On February 3, 2003, Things Remembered
and the plaintiffs reached an agreement to resolve the lawsuit for $562,500.
Preliminary approval was received from the Court on August 11, 2003. On
December 3, 2003, the Court approved final settlement of the lawsuit. A
liability of $562,500 was recorded in the fourth quarter of fiscal 2002.

As previously reported in the Companys report on Form 10-Q for the quarter
ended August 2, 2003, a class action complaint was filed on December 6, 2002 in
the United States District Court for the Northern District of Ohio against Cole
National Corporation and certain present and former officers and directors by a
purported class of shareholders of Cole National Corporation alleging claims
for various violations of federal securities laws related to the Companys
publicly reported revenues and earnings. The action, which proposes a class
period of March 23, 1999 through November 26, 2002, seeks
unspecified compensatory damages, punitive damages where appropriate, costs,
expenses and attorneys fees. On May 30, 2003, Cole National Corporation and the
plaintiffs reached an agreement to resolve the lawsuit. On September 29, 2003
the Court approved final settlement of the lawsuit. A charge of $2,687,500 was
recorded in the first quarter of fiscal 2003 with respect to the Companys
portion of the settlement.




Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits. The following Exhibits are filed herewith and made a part
hereof:

|      |  |                                                                                                   
|----- |  | --------------------------------------------------------------------------------------------------
|10.1* |  | Employment Agreement dated September 3, 2003 between Cole National Corporation and Lawrence Hyatt.

23



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|      |  |                                                                                                                                                                                                                                                          
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.2* |  | Employment Agreement dated September 3, 2003 between Cole National Corporation and Leslie Dunn.                                                                                                                                                          
|     
|     
|     
|     
|10.3* |  | Employment Agreement dated September 3, 2003 between Cole National Corporation and Patricia Luzier.                                                                                                                                                      
|     
|     
|     
|     
|10.4* |  | Multi-Year Performance Incentive Bonus Addendum between Cole National Corporation and Larry Pollock, dated
November 26, 2003.                                                                                                                            
|     
|     
|     
|     
|10.5* |  | First Amendment to the Second Credit Agreement, dated October 30, 2003,
among Cole Vision Corporation, Things Remembered, Inc., Pearle, Inc., and Canadian Imperial Bank of Commerce.                                                                    
|     
|     
|     
|     
|10.6* |  | Letter of Credit Reimbursement and Security agreement between Cole
National Corporation and Key Bank National
Association, dated November 3, 2003.                                                                                                       
|     
|     
|     
|     
|10.7* |  | Addendum to Letter Agreement dated
May 15, 2000 between Cole National Corporation and Ann M. Holt.                                                                                                                                                       
|     
|     
|     
|     
|10.8* |  | Addendum to Letter Agreement dated
March 27, 1993 between Cole National Corporation and Joseph Gaglioti.                                                                                                                                                 
|     
|     
|     
|     
|31.1 |  | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act.                                                                                                                                                       
|     
|     
|     
|     
|31.2 |  | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act.                                                                                                                                                       
|     
|     
|     
|     
|32   |  | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                           
|     
|     
|     
|     
|(b)   |  | Reports on Form 8-K.                                                                                                                                                                                                                                     
|     
|     
|     
|     
|      |  | The Company filed a Form 8-K (Items 5 and 7) on October 8, 2003
announcing Melchert Groot had resigned from the Board and the
Cole National Corporations response to receipt of an acquisition
proposal from another party.                             
|     
|     
|     
|     
|      |  | The Company filed a Form 8-K (Item 5) on September 23, 2003 announcing
managed care claims expense was reclassified to cost of revenues from
operating expenses for all periods presented to provide improved
transparency to Cole Visions gross margin.
|     
|     
|     
|     
|      |  | The Company furnished a report on Form 8-K (Items 7 and 12) on September
16, 2003 announcing financial results for the second fiscal quarter of
2003.                                                                                                    



|  |                                                                  
|- | -----------------------------------------------------------------
|* | Filed with the original Form 10-Q filed on
    December 15, 2003.

|  |                
|- | ---------------
| | Filed herewith.

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##### Table of Contents






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.

|                     |  |                                                                                                                           
|-------------------- |  | --------------------------------------------------------------------------------------------------------------------------
|                     |  | COLE NATIONAL GROUP, INC.                                                                                                 
|                    
|                     |  | By:  /s/ Lawrence E. HyattLawrence E. Hyatt
Executive Vice President and Chief Financial Officer
(Duly Authorized Officer)
|                    
|                     |  | By:  /s/ Ann M. HoltAnn M. Holt
Senior Vice President and Corporate Controller
(Principal Accounting Officer)             
|                    
|Date: April 12, 2004 |  |                                                                                                                           

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##### Table of Contents



COLE NATIONAL GROUP, INC.
FORM 10-Q/A
QUARTER ENDED NOVEMBER 1, 2003




EXHIBIT INDEX

|        |  |                                                                                                                                                                                      
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                      
|Number  |  | Description                                                                                                                                                                          
|        |  |                                                                                                                                                                                      
|10.1*   |  | Employment Agreement dated September 3, 2003 between Cole National Corporation and Lawrence Hyatt.                                                                                   
|       
|       
|       
|       
|10.2*   |  | Employment Agreement dated September 3, 2003 between Cole National Corporation and Leslie Dunn.                                                                                      
|       
|       
|       
|       
|10.3*   |  | Employment Agreement dated September 3, 2003 between Cole National Corporation and Patricia Luzier.                                                                                  
|       
|       
|       
|       
|10.4*   |  | Multi-Year Performance Incentive Bonus Addendum between Cole National Corporation and Larry Pollock, dated
November 26, 2003.                                                        
|       
|       
|       
|       
|10.5*   |  | First Amendment to the Second Credit Agreement, dated October 30,
2003, among Cole Vision Corporation, Things Remembered, Inc., Pearle,
Inc., and Canadian Imperial Bank of Commerce.
|       
|       
|       
|       
|10.6*   |  | Letter of Credit Reimbursement and Security agreement between
Cole National Corporation and Key Bank National
Association, dated November 3, 2003.                                   
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|10.7*   |  | Addendum to Letter Agreement dated
May 15, 2000 between Cole National Corporation and Ann M. Holt.                                                                                   
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|10.8*   |  | Addendum to Letter Agreement dated
March 27, 1993 between Cole National Corporation and Joseph Gaglioti.                                                                             
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|31.1   |  | Certification of Chief Executive Officer Pursuant to Rule
13a-14(a)/15d-14(a) of the Exchange Act.                                                                                   
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|31.2   |  | Certification of Chief Financial Officer Pursuant to Rule
13a-14(a)/15d-14(a) of the Exchange Act.                                                                                   
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|32     |  | Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.       

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|- | -----------------------------------------------------------------
|* | Filed with the original Form 10-Q filed on
    December 15, 2003.

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|- | --------------
| | Filed herewith

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