Third Quarter 1997
================================================================================
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q
Mark one

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

     For the quarterly period ended July 31, 1997

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

       For the transition period from ____________to____________



                                [GRAPHIC OMITTED]
                        Optical Coating Laboratory, Inc.
             (Exact name of registrant as specified in its charter)

                          Commission File Number 0-2537

Delaware                                                              68-0164244
--------                                                              ----------
(State or other jurisdiction of                         (IRS Identification No.)
incorporation or organization)

2789 Northpoint Parkway, Santa Rosa California                        95407-7397
----------------------------------------------                        ----------
(Address of principal executive offices)                              (Zip code)


       Registrant's telephone number, including area code: (707) 545-6440
                                                           --------------

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 [ ]


                      APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.


                            Classes of Common Stock:
                          COMMON STOCK, $.01 PAR VALUE

                Outstanding at August 31, 1997: 10,511,605 shares


This document contains 20 pages.

The Exhibit listing appears on Page 19.

================================================================================



<PAGE>

<TABLE>

                                         PART I. FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

                               OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES
                                     CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>

                                                                                     July 31,      October 31,
ASSETS                                                                                   1997             1996
--------------------------------------------------------------------------------------------------------------
(Dollars in thousands except share amounts)                                       (Unaudited)
<S>                                                                                 <C>              <C>      
Current           Cash and short-term investments...........................        $   8,821        $  16,027
Assets            Accounts receivable, net of allowance for
                   doubtful accounts of $2,014 and $1,775...................           38,112           27,700
                  Inventories...............................................           22,752           18,701
                  Income taxes receivable...................................              600            1,248
                  Deferred income tax assets................................            7,307            5,165
                  Other current assets......................................            1,919            1,230
                                                                                    ---------        ---------
                             Total Current Assets...........................           79,511           70,071

Other             Deferred income tax assets................................            1,290            4,451
Assets            Other assets..............................................            8,288           10,680

Property,         Land and improvements.....................................            9,277            9,200
Plant and         Buildings and improvements................................           41,222           40,953
Equipment         Machinery and equipment ..................................          119,580          112,326
                  Construction-in-progress..................................            7,486            6,190
                                                                                    ---------        ---------
                                                                                      177,565          168,669
                  Less accumulated depreciation.............................          (88,518)         (81,100)
                                                                                    ---------        ---------
                    Property, plant and equipment-net  .....................           89,047           87,569
                                                                                    ---------        ---------
                             Total Assets...................................        $ 178,136        $ 172,771
                                                                                    =========        =========

LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------------------------------------

Current           Accounts payable.........................................         $   9,923        $   7,199
Liabilities       Accrued expenses.........................................             7,941            6,566
                  Accrued compensation expenses............................             6,910            7,057
                  Current maturities on long-term debt.....................             6,203            4,981
                  Notes payable............................................               911            3,112
                  Income taxes payable.....................................             3,320            1,823
                  Deferred revenue.........................................               699            1,246
                                                                                    ---------        ---------
                             Total Current Liabilities ....................            35,907           31,984

Noncurrent        Accrued postretirement health benefits
Liabilities        and pension liabilities.................................             2,271            2,308
                  Deferred income tax liabilities..........................               735            1,804
                  Long-term debt ..........................................            42,414           45,788
                  Minority interest........................................            14,426           11,328
                  Convertible redeemable preferred stock...................             5,559           11,309
                          (liquidation preference $6,295 and $12,080)
Common            Common stock, $.01 par value; authorized
Stockholders'      30,000,000 shares; issued and outstanding
Equity             10,512,000 and 9,761,000 shares.........................               105               98
                  Paid-in capital..........................................            54,837           47,219
                  Retained earnings........................................            23,631           20,984
                  Cumulative foreign currency translation adjustment ......            (1,749)             (51)
                                                                                    ---------        ---------
                    Common Stockholders' Equity............................            76,824           68,250
                                                                                    ---------        ---------
                             Total Liabilities and Stockholders' Equity....         $ 178,136        $ 172,771
                                                                                    =========        =========

<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
                                                       2

<PAGE>

<TABLE>

                                  OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES

                                     CONDENSED CONSOLIDATED STATEMENTS OF INCOME

                                                     (Unaudited)

<CAPTION>
For the three and nine months ended July 31, 1997 and 1996                   Three Months            Nine Months
                                                                             ------------            -----------
(Amounts in thousands, except per share amounts)                            1997      1996       1997          1996
-------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>        <C>         <C>         <C>      
Revenues          Revenues............................................ $  59,997  $  48,772   $  159,233  $ 141,134
                  Cost of sales.......................................    40,207     33,353      105,248     93,500
                                                                       ---------  ---------   ----------  ---------
                      Gross Profit....................................    19,790     15,419       53,985     47,634

Costs and         Operating Expenses:
Expenses           Research and development ..........................     3,943      2,934       10,456      7,944
                   Selling and administrative.........................    10,774      8,109       31,822     27,310
                   Amortization of intangibles........................       232        284          712        849
                                                                       ---------  ---------   ----------  ---------
                    Total Operating Expenses..........................    14,949     11,327       42,990     36,103
                                                                       ---------  ---------   ----------  ---------

                      Income from Operations..........................     4,841      4,092       10,995     11,531

                  Nonoperating Income (Expense):
                   Interest income ...................................        78         52          335        191
                   Interest expense...................................    (1,007)      (829)      (3,086)    (2,552)
                                                                       ---------  ---------   ----------  ---------

Earnings              Income Before Provision for Income Taxes
                         and Minority Interest........................     3,912      3,315        8,244      9,170

                  Provision for income taxes..........................     1,568      1,117        3,301      3,576
                  Minority interest...................................       350        165          529        750
                                                                       ---------  ---------   ----------  ---------
                      Net Income......................................     1,994      2,033        4,414      4,844

                  Dividend on convertible redeemable
                   preferred stock....................................       141        240          568        720
                                                                       ---------  ---------   ----------  ---------

                      Net Income Applicable to Common Stock........... $   1,853  $   1,793    $   3,846  $   4,124
                                                                       =========  =========   ==========  =========

                  Net Income Per Common and Common
                   Equivalent Share................................... $     .17  $     .17   $      .37  $     .40
                                                                       =========  =========   ==========  =========

                  Weighted average number of common shares used
                   to compute earnings per share......................    10,965     10,550       10,517     10,279
                                                                       =========  =========   ==========  =========

<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
                                                          3

<PAGE>

<TABLE>

                                  OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES

                                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                     (Unaudited)
<CAPTION>

For the three and nine months ended July 31, 1997 and 1996                    Three Months             Nine Months
                                                                              ------------             -----------
 (Amounts in thousands)                                                     1997      1996          1997       1996
-------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>       <C>          <C>        <C>      
Operations        Cash Flows From Operations:
                   Cash received from customers.......................  $ 49,548  $  47,238    $ 138,100  $ 136,806
                   Interest received..................................       111         32          346        139
                   Cash paid to suppliers and employees...............   (46,697)   (46,339)    (127,744)  (123,319)
                   Cash paid to ESOP+.................................      (125)                   (272)
                   Interest paid......................................    (1,425)    (1,514)      (3,875)    (3,642)
                   Income taxes paid, net of refunds.................       (391)     3,606       (1,298)    (1,383)
                                                                       ---------  ---------    ---------  ---------
                         Net Cash Provided By Operations..............     1,021      3,023        5,257      8,601
                                                                       ---------  ---------    ---------  ---------

Investments       Cash Flows From Investments:
                   Purchase of plant and equipment....................    (5,237)    (7,163)     (11,862)   (23,957)
                   Proceeds from sale-leaseback of new equipment......               12,304                  18,980
                                                                       ---------  ---------    ---------  ---------
                      Net Cash (Used For) Provided by Investments.....    (5,237)     5,141      (11,862)    (4,977)

Financing         Cash Flows From Financing:
                   Proceeds from long-term debt.......................     1,998                   1,998      5,957
                   Proceeds from notes payable........................       101       269           108        423
                   Proceeds from exercise of stock options............     1,343     1,032         1,510      1,485
                   Proceeds from note to minority stockholder.........       640                   1,124
                   Investment by minority stockholder.................       426                   1,443
                   Repayment of long-term debt........................      (998)    (1,002)      (2,916)    (3,902)
                   Repayment of notes payable.........................      (298)                 (1,949)      (924)
                   Repayment of note to minority stockholder..........               (2,090)                 (1,137)
                   Payment of dividend on preferred stock.............      (141)      (240)        (568)      (720)
                   Payment of dividend on common stock................      (613)      (582)      (1,199)    (1,153)
                                                                       ---------  ---------    ---------  ---------
                      Net Cash Provided By (Used For) Financing.......     2,458     (2,613)        (449)        29
                                                                       ---------  ---------    ---------  ---------

                  Effect of exchange rate changes on cash.............       117         97         (152)      (108)
                                                                       ---------  ---------    ---------  ---------

                  (Decrease) increase in cash and
                     short-term investments..........................     (1,641)     5,648       (7,206)     3,545
                  Cash and short-term investments
                     at beginning of period..........................     10,462      4,499       16,027      6,602
                                                                       ---------  ---------    ---------  ---------
                 Cash and short-term investments at end of period...   $   8,821   $ 10,147    $   8,821  $  10,147
                                                                       =========   ========    =========  =========
</TABLE>

                                                          4


<PAGE>

<TABLE>

                                  OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES

                             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

                                                     (Unaudited)

<CAPTION>
For the three and nine months ended July 31, 1997 and 1996                    Three Months             Nine Months
                                                                              ------------             -----------
(Amounts in thousands)                                                      1997      1996          1997       1996
-------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>         <C>          <C>       <C>     
Adjustments Reconciliation of Net Income To Cash Flows From Operations:

                  Net income..........................................  $  1,994    $ 2,033      $  4,414  $  4,844

                  Adjustments  to reconcile  net income to net cash
                    provided by operations:
                      Depreciation and amortization ..................     3,113      3,544         9,425    10,040
                      Minority interest in earnings of subsidiaries...       350        165           529       750
                      Net book value of coating machine sold..........                  880                     880
                      Loss on disposal or abandonment of equipment ...       (17)       334           193       389
                      Accrued postretirement health benefits..........       (61)        10            25        65
                      Deferred income tax liabilities.................        (2)    (1,076)      (1,054)     (967)
                      Other non-cash adjustments to net income........       (37)      (292)           4      (512)

                      Change in:
                         Accounts receivable..........................    (6,473)    (1,000)     (11,562)   (3,748)
                         Inventories..................................      (612)      (458)      (4,676)   (3,217)
                         Income tax receivable .......................       429        147          539       (31)
                         Deferred income tax assets and liabilities...       (24)     2,334          924     2,742
                         Other current assets and other assets........       268     (1,551)        (237)   (1,610)
                         Accounts payable, accrued expenses and
                           accrued compensation expenses..............     1,272     (1,201)       5,275      (626)
                         Deferred revenue.............................       (16)       289         (547)      484
                         Income taxes payable.........................       837     (1,135)       2,005      (882)
                                                                        --------   --------     --------  --------
                           Total adjustments..........................      (973)       990          843     3,757
                                                                        --------   --------     --------  --------

                         Net Cash Provided By Operations..............  $  1,021    $ 3,023     $  5,257  $  8,601
                                                                        ========   ========     ========  ========

<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
                                                          5

<PAGE>

<TABLE>

                                  OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES

                          CONDENSED CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY

                                                     (Unaudited)

<CAPTION>
For the nine months ended July 31, 1997                  Common Stock                                   Foreign
                                                       -------------------    Pain-in       Retained    Currency 
(Amounts in thousands)                                 Shares     Amount      Capital       Earnings    Translation
-------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>         <C>      <C>           <C>           <C>      
Balance at November 1, 1996                               9,761      $ 98     $ 47,219      $20,984       $    (51)

Shares issued to Employee Stock
Ownership Plan                                               15                   159
Exercise of stock options,
     including tax benefit and
     shares issued to directors                             181         2       1,638
Conversion of Preferred Stock
     to common stock555                                                 5       5,821
Foreign currency translation
     adjustment                                                                                             (1,698)
Net income                                                                                    4,414
Dividend on preferred stock                                                                    (568)
Dividend on common stock                                                                     (1,199)
-------------------------------------------------------------------------------------------------------------------
                    Balance at July 31, 1997             10,512      $105     $ 54,837      $23,631       $ (1,749)
-------------------------------------------------------------------------------------------------------------------

<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
                                                          6

<PAGE>


                OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

               Three and Nine Months Ended July 31, 1997 and 1996
                                   (Unaudited)
1.       GENERAL

Optical Coating  Laboratory,  Inc. (OCLI) designs,  develops,  manufactures  and
sells thin film coated products. Thin film coatings control and enhance light by
altering the transmission,  reflection and absorption of the various wavelengths
of light energy to achieve a desired effect such as anti-reflection,  shielding,
conductivity  or  abrasion  resistance.  OCLI  markets  and sells  its  products
worldwide  to original  equipment  manufacturers  (OEMs) who  utilize  thin film
coated  components  or devices  for  optical  and  electro-optical  systems  for
computers,  photocopiers,  LCD desktop  projectors,  scanners,  instruments  and
satellites.  OCLI sells its  Glare/Guard(R)  ergonomic computer display products
through  distributors  and office supply  retailers.  Flex Products,  Inc. (Flex
Products),  OCLI's 60% owned  subsidiary,  develops and  manufactures  thin film
coatings on plastic film with a proprietary high speed process.

The  Condensed  Consolidated  Balance  Sheet as of July 31, 1997,  the Condensed
Consolidated  Statements  of Income for the three and nine month  periods  ended
July  31,  1997  and  1996,  the  Condensed  Consolidated  Statement  of  Common
Stockholders'  Equity for the nine  month  period  ended  July 31,  1997 and the
Condensed  Consolidated  Statements  of Cash  Flows for the three and nine month
periods ended July 31, 1997 and 1996 have been  prepared by the Company  without
audit. In the opinion of management, all adjustments necessary to present fairly
the financial  position,  results of operations and cash flows at July 31, 1997,
and for all periods presented, have been made.

Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have  been  condensed  or  omitted.   It  is  suggested  that  these   condensed
consolidated  financial  statements  be read in  conjunction  with the financial
statements  and notes  included in the Company's  Annual Report on Form 10-K for
the year ended October 31, 1996.

The results of operations for the period ended July 31, 1997 are not necessarily
indicative of the operating results anticipated for the full year.

At the beginning of fiscal 1997, the Company  implemented SFAS 121,  "Accounting
for the Impairment of Long-Lived Assets," which requires that long-lived assets,
certain  identifiable  intangibles  and  goodwill  related  to those  assets  be
reviewed for impairment,  measured by comparing the carrying amount of the asset
to its fair value, whenever events or changes in circumstances indicate that the
carrying  amount  of a  long-lived  asset may not be  recoverable.  There was no
financial  impact  resulting  from the Company's  adoption of this  statement in
1997.

In February 1997, the Financial  Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share," which requires the Company to replace its  presentation of
primary  earnings per share with a presentation  of basic earnings per share and
requires dual  presentation of basic and diluted  earnings per share on the face
of the income statement.  The principal  difference between primary earnings per
share under current accounting  standards and basic earnings per share under the
new  statement is that basic  earnings per share does not consider  common stock
equivalents such as stock options and warrants. Diluted earnings per share under
the new statement will include  potential  dilution of  convertible  securities,
stock options and warrants.  The statement is effective for the Company's  first
quarter of fiscal 1998 and requires  restatement of all prior periods  presented
under the new statement,  basic earnings per share would have been $.18 and $.19
for the three months ended July 31, 1997 and 1996 and $.38 and $.43 for the nine
months ended July 31, 1997 and 1996.  Under the new statement,  diluted earnings
per share for those  periods  would  have been the same as net income per common
and common equivalent share presented on the income statement.

In June 1997,  the  Financial  Accounting  Standards  Board issued SFAS No. 130,
"Reporting Comprehensive Income," which requires enterprises to report, by major
component and in total,  all changes in equity from nonowner  sources;  and SFAS
No. 131,  "Disclosures about Segments of an Enterprise and Related Information,"
which establishes annual and interim reporting  standards for a public companys'
operating  segments  and  related  disclosures  about  its  products,  services,
geographic  areas and major  customers.  Both  standards  are  effective for the
Company's  fiscal year 1999 with earlier  application  permitted.  The effect of
adoption  of these  statements  will be limited  to the form and  content of the
Company's  disclosures and will not impact the Company's  results of operations,
cash flow or financial position.

                                       7

<PAGE>
<TABLE>

2.       INVENTORIES

Inventories consisted of the following:
<CAPTION>
                                                                                  July 31,         October 31,
(Amounts in thousands)                                                                1997                1996
--------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>                <C>      
Raw materials and supplies                                                        $  8,538           $   7,483
Work-in-process                                                                     11,646               8,797
Finished goods                                                                       2,568               2,421
                                                                                  --------           ---------
         Total inventories                                                        $ 22,752           $  18,701
                                                                                  ========           =========
</TABLE>

                                                       8

<PAGE>


<TABLE>
3.       ACCRUED EXPENSES

Accrued  expenses  at July 31,  1997  and  October  31,  1996  consisted  of the
following:
<CAPTION>
                                                                                  July 31,         October 31,
(Amounts in thousands)                                                                1997                1996
--------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>                <C>      
Workers' compensation reserve                                                     $    516           $     659
Ground water remediation reserve                                                       759                 659
Other accrued liabilities                                                            6,666               5,248
                                                                                  --------           ---------
                                                                                  $  7,941           $   6,566
                                                                                  ========           =========
</TABLE>
<TABLE>
4.       LONG-TERM DEBT

Long-term debt,  including current maturities,  at July 31, 1997 and October 31,
1996 consisted of the following:
<CAPTION>
                                                                                       July 31,    October 31,
(Amounts in thousands)                                                                     1997           1996
--------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>            <C>    
Unsecured senior notes. Interest at 8.71% payable semiannually.
     Principal payable in annual installments of $3.6 million from
     1998 through 2002..........................................................        $18,000        $18,000

Unsecured bank term loan.  Variable  interest  rate  averaging  7.0% at July 31,
     1997, payable quarterly, with semiannual principal
     payments of $2 million.....................................................         12,000         13,000

Unsecured borrowings under bank line of credit. Variable interest rate averaging
     6.7% at July 31, 1997, payable quarterly or specified
     duration period. Principal due upon expiration on April 28, 2000...........         2,000

Mortgage payable.  Interest at 8%. Collateralized by a
     72,000 sq. ft. newly constructed building and related
     land.  Principal and interest payments of $25,000 per
     month through 2011.........................................................         2,448           2,523

Mortgage payable.  Interest at 7.5%. Collateralized by a
     65,000 sq. ft. newly constructed building and related
     land leased to Flex Products.  Principal and interest
     payments of $28,000 per month through 2011.................................         2,858           2,945

Land improvement assessment. Interest at an average rate of 6.75%.
     Principal and interest payable in semiannual installments of
     $77,000 through 1998.......................................................           150             276

Scottish  Development  Agency (SDA) building loan,  with a conditional  interest
     moratorium  from February 1, 1995 through January 31, 1998 with interest at
     9.5% thereafter.  Semiannual  principal payments of approximately  $100,000
     are payable  through  January  1998 with  subsequent  payments of $331,000,
     comprising principal and interest, through 2006. Collateralized by the land
     and building of
     the Company's Scottish subsidiary..........................................         3,877           3,996

Note payable to private parties in connection with the purchase of the Company's
     wholly-owned  subsidiary  in Germany  (MMG).  Principal  and interest at 8%
     payable over ten years in quarterly
     installments. Refinanced in May 1997.......................................                         6,188

                                       9

<PAGE>


Unsecured bank note. Interest at 5.6%. Quarterly
     principal and interest payments of approximately $300,000
     through December 2002......................................................         4,455

Bank loans of MMG with  interest  rates  ranging  from 4.5% to 8.0%.  Payable in
     semiannual and annual installments  through 2013. Partly  collateralized by
     mortgages on MMG land and buildings
     and liens on equipment.....................................................         2,795           3,760

Present value of obligations under capital leases at an imputed interest
     rate of 8.0%  payable in monthly installments through 2004.................            34              81
                                                                                       -------         -------
                                                                                        48,617          50,769
Less current maturities ........................................................        (6,203)         (4,981)
                                                                                       -------         -------
         Total long-term debt, net of current maturities........................       $42,414         $45,788
                                                                                       =======         =======
</TABLE>

The Company has a $32  million  unsecured  credit  facility  comprised  of a $12
million term loan and a $20 million revolving line of credit. The revolving line
of credit  carries a commitment  fee of .375% per year on the unused  portion of
the facility  and expires on April 28, 2000.  The Company has a letter of credit
for  approximately  $903,000  to satisfy  the  Company's  workers'  compensation
self-insurance  requirements.  The  letter of credit  facility  carries a fee of
1.25% per year.

During the third quarter of 1997,  the Company  replaced its 8%, $5 million note
payable to private  parties  with a 5.6% bank note.  Payments of  principal  and
interest   under  the  new  note  are   denominated  in  German  marks  and  are
approximately $300,000 per quarter through December 2002. In connection with the
note  payable to private  parties,  the Company  carried an  incremental  credit
facility  to cover a surety  letter for  approximately  $2.5  million  issued to
secure 50% of the Company's  obligation arising from the purchase of MMG. As the
new note does not require a surety  letter,  the $2.5 million  surety letter was
cancelled.  During the third quarter of 1997,  the Company's $15 million line of
credit was increased to $20 million.

The  Company's  subsidiary  in  Scotland  has  a  credit  arrangement  of  up to
approximately  $490,000 at market interest rates and has outstanding  letters of
credit of  approximately  $330,000 to  guarantee  import  duties.  There were no
borrowings under the credit arrangement in fiscal years 1997 or 1996.

The Company's  subsidiary in Germany has various  credit  facilities  with local
banks  totaling  approximately  $3.1 million which are used for working  capital
requirements.  These  credit  facilities  are  utilized as part of normal  local
payment practices.

During 1996, the Company entered into three  sale/lease-back  arrangements for a
newly  acquired  continuous  coating  machine and related  equipment and for two
newly acquired  coating machines to be used in the  manufacturing  operations of
Flex Products. Cash proceeds from the sale/lease-back  arrangements exceeded the
Company's cost by approximately  $750,000 which was recorded as deferred revenue
and is being  amortized  against  lease  expense  at the  rate of  approximately
$125,000 per year. The lease terms are six years with monthly payments  totaling
approximately $290,000 and buyout provisions at the end of each lease.

The Company has certain  financial  covenants  and  restrictions  under its bank
credit arrangements and the unsecured senior notes.

5.       STOCK OPTIONS

During the third quarter of 1997,  232,500  option shares were granted under the
Company's  incentive  compensation  and employee  stock option plans,  including
162,000 shares that were regranted for the purpose of repricing the options.  At
July 31, 1997,  2,062,800 shares were subject to outstanding  options,  of which
1,202,337 options were exercisable. Options to purchase 317,289 shares of common
stock were available for future grants under the plans.

                                       10
<PAGE>

6.       CONVERTIBLE REDEEMABLE PREFERRED STOCK

In June 1997,  1,750 shares of the Company's 8% Series C Convertible  Redeemable
Preferred Stock were converted into approximately 169,000 shares of common stock
at the conversion  price of $10.50 per share. In February 1997,  4,000 shares of
the Company's 8% Series C Convertible  Redeemable Preferred Stock were converted
into  approximately  386,000 shares of common stock at the  conversion  price of
$10.50 per share.

7.       LITIGATION

During the past several years, the Company has been engaged in litigation in the
United  Kingdom  (U.K.)  involving  infringement  of a Company  patent by a U.K.
company.  The Company won its action at the Patents County Courts level but lost
on appeal to the U.K.  House of Lords.  During the injunction  period,  the U.K.
company  submitted a claim for damages totaling  approximately  $1.6 million for
lost profits.  The Company and legal counsel are in the process of reviewing the
claim.  Management  believes  that the  amount  of the  claim  is  substantially
overstated  and that the ultimate  settlement  will not have a material  adverse
effect on the financial statements.

In July 1996,  SICPA Holdings S.A.  (SICPA),  the 40% minority  stockholder  and
largest customer of Flex, filed a lawsuit in Delaware Chancery Court in order to
block an attempted initial public offering by Flex Products arguing that such an
offering was prohibited by Flex Products' articles of incorporation,  as well as
by  certain  contractual  provisions  between  OCLI and  SICPA  without  SICPA's
consent. In January 1997, the Delaware Chancery Court rendered a decision on one
of the issues in dispute,  holding the position of OCLI and Flex Products that a
simple  majority of the Flex  Products  Board of Directors  has the authority to
authorize a public offering of Flex Products'  securities  prior to May 8, 1998,
independent of the rights of either SICPA or OCLI to cause Flex Products to have
an initial  public  offering of its common stock created under the Put and Call,
Right of First  Refusal and Co-Sale  Agreement.  In May 1997,  the Company filed
with the Delaware Courts, for their review and approval, a public ofering in the
form of Flex debt securities with detachable OCLI warrants.  The lawsuit did not
have, nor is it expected to have, an impact on Flex  Products'  operations or on
the sale of product to SICPA given the  proprietary  nature of the product and a
15 year exclusive supply contract between Flex Products and SICPA which requires
SICPA to make annual  minimum  purchases from Flex Products or to pay liquidated
damages in the event that such minimum purchases are not satisfied.

                                       11

<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
              AND CHANGES IN FINANCIAL CONDITION

THE INFORMATION CONTAINED IN MANAGEMENT'S  DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION INCLUDES FORWARD LOOKING STATEMENTS WHICH ARE
TYPICALLY  IDENTIFIED  BY  THE  WORDS  "ANTICIPATES,"   "BELIEVES,"   "EXPECTS,"
"INTENDS,"  "FORECASTS,"  "PLANS,"  "FUTURE,"  "STRATEGY,"  OR WORDS OF  SIMILAR
IMPORT.  VARIOUS  IMPORTANT  FACTORS THAT COULD CAUSE  ACTUAL  RESULTS TO DIFFER
MATERIALLY FROM THOSE EXPRESSED IN THE FORWARD LOOKING STATEMENTS ARE IDENTIFIED
BELOW.  ACTUAL  RESULTS  MAY VARY  SIGNIFICANTLY  BASED ON A NUMBER  OF  FACTORS
INCLUDING,  BUT NOT  LIMITED  TO,  PRODUCT  DEVELOPMENT,  COMMERCIALIZATION  AND
TECHNOLOGICAL DIFFICULTIES; MANUFACTURING COSTS AND YIELD ISSUES ASSOCIATED WITH
INITIATING PRODUCTION AT NEW FACILITIES;  THE IMPACT OF COMPETITIVE PRODUCTS AND
PRICING;  CHANGING CUSTOMER REQUIREMENTS;  AND THE CHANGE IN ECONOMIC CONDITIONS
OF THE VARIOUS MARKETS THE COMPANY SERVES.

RESULTS OF OPERATIONS

Revenue.  Revenue  for the third  quarter of fiscal 1997 was $60.0  million,  an
increase of $11.2  million,  or 23%,  over revenue of $48.8 million in the third
quarter of fiscal  1996.  Revenues  for the first nine months of fiscal 1997 was
$159.2  million,  an increase of $18.1  million,  or 13%, over revenue of $141.1
million  for the first nine months of 1996.  The third  quarter and year to date
1997  increase  is  partly  due to sales  of  Wavelength  Division  Multiplexing
products (WDM) for telecommunications  applications.  In addition, 1997 revenues
were higher in the  security  products  business  for  products  produced by the
Company's  60% owned  subsidiary,  Flex Products Inc.  (Flex  Products),  in the
defense and aerospace  business for  telecommunications  satellites,  and in the
display products business for products used in projection display  applications.
Revenues for the office  automation  business  decreased in the third quarter of
1997 compared to the prior year.

Gross  Profit.  Gross  profit  for the third  quarter  of fiscal  1997 was $19.8
million,  or 33.0% of revenue,  compared to $15.4 million,  or 31.6% of revenue,
for the third quarter of fiscal 1996.  Gross profit for the first nine months of
1997 was $54.0 million,  or 33.9%,  compared to $47.6 million, or 33.8%, for the
first  nine  months of 1996.  The gross  profit  improvement  in the 1997  third
quarter and year to date periods is due to yield and throughput  improvements of
the Company's two new continuous  coating  platforms.  These  improvements  were
partially offset by higher than Company average material cost percentages in the
manufacture of WDM products and lower margins in the Company's office automation
markets.

Research and  Development.  Research and  development  expenditures in the third
quarter of 1997 were $3.9 million compared to $2.9 million in the second quarter
of 1996 and were $10.5  million  for the first nine  months of 1997  compared to
$7.9  million  for the first nine  months of 1996.  The quarter and year to date
increases  were  due to  increased  spending  in  the  Company's  Flex  Products
operation  for the  qualification  of new  products  and for product and process
development for telecommunications and display markets.

Selling and  Administrative.  Selling and  administrative  expenses in the third
quarter of fiscal 1997 were $10.8 million compared to $8.1 million for the third
quarter  of 1996 and were  $31.8  million  for the  first  nine  months  of 1997
compared to $27.3  million for the first nine months of 1996.  The 1997 increase
was  primarily  due to legal  expenses  associated  with the lawsuit  with SICPA
holdings S.A,  additional  expenses  associated with the  establishment of a new
joint venture in Japan (OCLI Asia) and marketing initiatives at Flex Products.

Income From Operations.  As a result of the foregoing changes in revenue,  gross
profit and operating  expenses,  the Company's  income from  operations was $4.8
million for the third  quarter of fiscal 1997  compared to $4.1  million for the
third  quarter of fiscal  1996 and $11.0  million  for the first nine  months of
fiscal 1997 compared to $11.5 million for the first nine months of fiscal 1996.

Interest  Income and Expense.  Interest  income for the third  quarter of fiscal
1997 was $78,000 compared to interest income of $52,000 for the third quarter of
fiscal  1996 and was  $335,000  for the first nine  months of 1997  compared  to
$191,000 for the first nine months of 1996.  1997  increases  were due to higher
average cash balances.  Interest expense, net of capitalized  interest,  for the
third  quarter  of 1997 was $1.0  million  compared  to  $829,000  for the third
quarter of fiscal  1996 and was $3.1  million  for the first nine months of 1997
compared to $2.6 million for the first nine months of 1996. Interest expense was
lower in 1996 primarily due to higher capitalized interest.

                                       12

<PAGE>

Income Taxes and Minority  Interest.  The effective  income tax rate was 40% for
the third  quarter and first nine months of 1997,  34% for the third  quarter of
1996 and 39% for the  first  nine  months  of 1996.  The lower tax rates for the
prior year periods were due to the recognition of new tax credit  provisions and
the utilization of net operating loss  carryforwards  by foreign  operations for
which tax benefits  had not been  provided in prior  years.  Minority  interest,
primarily  representing  the 40% share of Flex Products' net income  accruing to
the minority stockholder and the minority interest in OCLI Asia, was $350,000 in
the third  quarter of 1997 compared to $165,000 in the third quarter of 1996 and
was $529,000 in the first nine months of 1997  compared to $750,000 in the first
nine months of 1996.

Net  Income.  The  Company  had net income  applicable  to common  stock of $1.9
million,  or $.17 per share,  for the third  quarter of fiscal 1997  compared to
$1.8  million,  or $.17 per share,  for the third  quarter of fiscal  1996.  The
Company had net income  applicable to common stock of $3.8 million,  or $.37 per
share,  for the first nine months of 1997 compared to $4.1 million,  or $.40 per
share for the first nine months of 1996.

JOINT VENTURES AND STRATEGIC ALLIANCES

During 1997, the Company announced that it had entered into an alliance with JDS
FITEL,  Inc.  (JDS) in order to  capitalize  on the rapidly  growing  market for
Wavelength  Division  Multiplexing  (WDM)  products  used in  telecommunications
applications.  The alliance is structured as a contractual joint venture through
a series of exclusive  supply and  distribution  contracts under which OCLI will
contribute  its  expertise  to provide  optical  filters  for WDM's and JDS will
contribute  its  expertise  in the  design,  manufacture  and  marketing  of WDM
products.  The first sales under these  agreements were recognized in the second
quarter of 1997.

Also in 1997, the Company  announced the  establishment of a 50/50 joint venture
with Hakuto Co., Ltd. in Japan. The new company, Hakuto-OCLI Co., Ltd., which is
doing  business as "OCLI  Asia",  is  headquartered  in  Shinjuku,  Tokyo,  with
manufacturing facilities in Isehara, Kanagawa Prefecture.  The joint venture was
established to address the rapidly  changing market for OCLI's  multi-layer thin
film coatings that require an expanded  presence and to provide more  integrated
support within Asia.  Hakuto has been a long-term  distributor and fabricator of
OCLI's  products in Japan and  several  other  Asian  countries.  OCLI Asia will
assume sales  support,  fabrication  and  applications  engineering  support for
several of the Company's products that are being sold into the Asian market. The
joint  venture began  operations  in Japan in the second  quarter of 1997 and is
consolidated into the Company's results of operations and financial  position as
the Company has operating control over the joint venture.

FINANCIAL CONDITION

During the third quarter and first nine months of 1997,  the Company's  cash and
short-term  investments  decreased  by $1.6 million and $7.2  million.  Net cash
provided by  operations  for the third  quarter and nine month  periods was $1.0
million and $5.3 million,  offset by  investments in plant and equipment of $5.2
million and $11.9 million and payment of dividends of $754,000 and $1.8 million.
Long-term debt and notes payable borrowings  exceeded  repayments by $803,000 in
the third  quarter  and were $2.8  million  below  repayments  in the first nine
months of 1997.  $1.1 million and $2.6 million were  contributed  in the quarter
and year to date  periods  by  minority  stockholders,  constituting  additional
investments in Flex Products and the minority interest  investment in OCLI Asia,
and the Company  received  $1.3  million and $1.5  million  from the exercise of
employee stock options.

During the first nine months of 1997, the Company's  working capital,  excluding
cash and  short-term  investments,  increased  $12.7  million,  primarily due to
increased accounts receivable  (resulting  primarily from customer late payments
that were resolved after the balance sheet date and the impact of  consolidation
of OCLI Asia) and increased  inventory (to satisfy  anticipated  customer demand
for the remainder of the year),  offset by increased accounts payable (primarily
resulting from the impact of consolidation of OCLI Asia).

During  the first  nine  months of 1997,  as part of an  innovative  program  to
modernize  its  business  processes,  the Company  purchased a  state-of-the-art
Enterprise  Resource  Planning  System.  Total  cost  of the  system,  including
hardware,  software,  training and consulting,  is approximately $4.3 million of
which $2.0 million for hardware,  software and  consulting  was financed under a
five year lease with monthly payments of approximately $50,000 commencing in the
fourth quarter of 1997.

During the third quarter of 1997,  the Company  replaced its 8%, $5 million note
payable to private  parties  with a 5.6% bank note.  Payments of  principal  and
interest   under  the  new  note  are   denominated  in  German  marks  and  are
approximately  $300,000 at the end of each  calendar  quarter  through  December
2002. Also during the third quarter of 1997, the Company's $15 million unsecured
revolving credit facility was increased to $20 million.

                                       13

<PAGE>

Management  believes that the cash on hand at July 31, 1997, cash anticipated to
be generated  from future  operations  and the  available  funds from  revolving
credit  arrangements  will be sufficient to meet the Company's  working capital,
capital  expenditure,  debt service and dividend  payment  requirements  for the
foreseeable future.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1996

Except for historical information contained in this report, matters discussed in
this report are forward-looking statements that involve risks and uncertainties.
Actual results may vary  significantly  based on a number of factors  including,
but not limited to, product  development,  commercialization  and  technological
difficulties,  manufacturing  costs and yield issues  associated with initiating
production at new  facilities,  the impact of competitive  products and pricing,
changing  customer  requirements  and the change in economic  conditions  of the
various markets the Company serves.

                                       14

<PAGE>

                         INDEPENDENT ACCOUNTANTS' REVIEW

The July 31, 1997 condensed  consolidated  financial statements included in this
filing on Form 10-Q have been  reviewed  by  Deloitte & Touche  LLP  independent
accountants,   in  accordance  with  established   professional   standards  and
procedures for such a review.

The report of Deloitte & Touche LLP  commenting  on their  review  (which  makes
reference to the report of other accountants), follows.

                                       15
<PAGE>

INDEPENDENT ACCOUNTANTS' REPORT

To the Board of Directors
and Stockholders of
Optical Coating Laboratory, Inc.
Santa Rosa, California

We have  reviewed  the  accompanying  condensed  consolidated  balance  sheet of
Optical Coating  Laboratory,  Inc. and subsidiaries as of July 31, 1997, and the
related  condensed  consolidated  statements  of income  and cash  flows for the
three-month and nine-month periods ended July 31, 1997 and July 31, 1996 and the
related  condensed  consolidated  statement  of  stockholders'  equity  for  the
nine-month  period  ended July 31,  1997.  These  financial  statements  are the
responsibility of the Company's management. We were furnished with the report of
other accountants on their review of the interim  financial  information of Flex
Products, Inc. (a consolidated  subsidiary),  whose total assets constituted 12%
of  consolidated  total  assets  at July  31,  1997  and  whose  total  revenues
constituted 18% of consolidated  total revenues for the nine-month  period ended
July 31, 1997.

We conducted our review in accordance with standards established by the American
Institute  of  Certified  Public  Accountants.  A review  of  interim  financial
information  consists of applying analytical review procedures to financial data
and making  inquiries  of  persons  responsible  for  financial  and  accounting
matters.  It is  substantially  less in scope than an audit in  accordance  with
generally accepted auditing standards,  the objective of which is the expression
of an opinion regarding the financial statements taken as a whole.  Accordingly,
we do not express such an opinion.

Based on our review and the report of other accountants, we are not aware of any
material  modifications  that  should  be made to  such  condensed  consolidated
financial  statements  for  them to be in  conformity  with  generally  accepted
accounting principles.

We have  previously  audited,  in accordance  with generally  accepted  auditing
standards,  the consolidated  balance sheet of Optical Coating Laboratory,  Inc.
and subsidiaries as of October 31, 1996, and the related consolidated statements
of  income,  stockholders'  equity,  and cash flows for the year then ended (not
presented  herein);  and in our report dated  December 18, 1996, we expressed an
unqualified  opinion on those  consolidated  financial  statements  based on our
audit and the report of other auditors on their audit of Flex Products,  Inc. (a
consolidated subsidiary).  In our opinion, based on our audit, and the report of
other  auditors,  the  information  set  forth  in  the  accompanying  condensed
consolidated  balance  sheet as of October  31,  1996 is fairly  stated,  in all
material respects,  in relation to the consolidated  balance sheet from which it
has been derived.

Deloitte & Touche LLP

San Jose, California
August 20, 1997

                                       16
<PAGE>

                         INDEPENDENT ACCOUNTANTS' REVIEW

The August 2, 1997 financial  statements of Flex  Products,  Inc., the Company's
60% owned subsidiary which are included in the Company's July 31, 1997 condensed
consolidated financial statements included in this filing on Form 10-Q have been
reviewed by KPMG Peat Marwick LLP,  independent  accountants  for Flex Products,
Inc., in accordance with established  professional  standards and procedures for
such a review.

The Flex Products,  Inc. financial statements have been prepared on a historical
basis of  accounting  and do not reflect  any  purchase  accounting  adjustments
recorded by Optical Coating Laboratory, Inc. as a result of their acquisition of
a majority interest in Flex Products. Inc. as of May 8, 1995.

                                       17
<PAGE>

INDEPENDENT ACCOUNTANTS' REPORT

To the Board of Directors
and Stockholders of
Flex Products, Inc.
Santa Rosa, California

We have reviewed the balance sheet of Flex  Products,  Inc. as of August 2, 1997
and the related  statements of operations  for the  three-month  and  nine-month
periods ended August 2, 1997 and July 28, 1996 and  statements of cash flows for
the nine-month  periods ended August 2, 1997 and July 28, 1996.  Those financial
statements are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute  of  Certified  Public  Accountants.  A review  of  interim  financial
information consists principally of applying analytical  procedures to financial
data and making  inquiries of persons  responsible  for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with  generally  accepted  auditing  standards,  the  objective  of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.

These  financial  statements  have  been  prepared  on  a  historical  basis  of
accounting and do not reflect any purchase  accounting  adjustments  recorded by
Optical Coating Laboratory,  Inc. as a result of their acquisition of a majority
interest in the Company as of May 8, 1995.

Based on our review, we are not aware of any material  modifications that should
be  made  to the  financial  statements  referred  to  above  for  them to be in
conformity with generally accepted accounting principals.

The balance  sheet of November  3, 1996 was  audited by us and we  expressed  an
unqualified opinion on it in our report dated December 18, 1996, but we have not
performed any auditing procedures since that date.

KPMG Peat Marwick LLP

August 15, 1997

                                       18
<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS

              Incorporated  by  reference  to Note 7. of the Notes to  Condensed
              Consolidated Financial Statements.

ITEM 2.       CHANGES IN SECURITIES

              None

ITEM 3.       DEFAULTS UPON SENIOR SECURITIES

              None

ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

              None

ITEM 5.       OTHER INFORMATION

              None

ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K

              (a)    The  following  are  filed as  Exhibits  to this  Quarterly
                     Report.  The numbers refer to the Exhibit Table of Item 601
                     of Regulation S-K.

                     (2)       None

                     (3)       None

                     (4)       None

                     (10)      None

                     (11)*     Computation  of earnings  per share for the three
                               and nine month  periods  ended July 31,  1997 and
                               1996.

                     (15)*     Letter  of   Deloitte  &  Touche  LLP   regarding
                               unaudited interim financial information.

                     (18)      None
                     (19)      None
                     (22)      None
                     (23)      None
                     (24)      None

                     (27)*     Financial   Data  Schedule  for the three  months
                               ended July 31, 1997.

              * Items not previously filed are designated by an asterisk.

              (b) Reports on Form 8-K filed for the three  months ended July 31,
                  1997.

                  None

                                       19
<PAGE>



                                   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 and in the capacity indicated.

                                              OPTICAL COATING LABORATORY, INC.
                                                      (Registrant)


September 15, 1997                            /s/ JOSEPH C. ZILS
------------------                            ----------------------------------
Date                                          Joseph C. Zils
                                              Vice President, General Counsel
                                              and Acting Chief Financial Officer
                                              (Principal Financial Officer)

                                       20