TABLE OF CONTENTS




|                                                |                                                                                               |                                            |  |  |  |  |  | 
|----------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I.  FINANCIAL INFORMATION                
|                                                | Item 1. Financial Statements                                                                 
|                                                |                                                                                               | CONSOLIDATED BALANCE SHEETS               
|                                                |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS     
|                                                |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                                |                                                                                               | Notes to Consolidated Financial Statements
|                                                | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                | Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|SIGNATURE                                      
|Exhibit 10.1--Amd & Rstd Nonqualified Stock Opt



---



##### Table of Contents



---

---

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

Commission file number 1-12814

COLE NATIONAL CORPORATION(Exact name of registrant as specified in its charter)

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

(440) 449-4100
(Registrants telephone number, including area code)

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

As of November 30, 2001, 15,886,137 shares of the registrants
common stock were outstanding.



---

---





---



##### Table of Contents



---

COLE NATIONAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED NOVEMBER 3, 2001
INDEX

|                               |  |                                                                                                           |  |         
|------------------------------ |  | --------------------------------------------------------------------------------------------------------- |  | --------
|                               |  |                                                                                                           |  | Page No.
|                               |  |                                                                                                           |  |         
|PART I.  FINANCIAL INFORMATION
|                               |  |                                                                                                           |  |         
|Item 1.                        |  | Financial Statements                                                                                      |  |         
|                               |  |                                                                                                           |  |         
|                               |  | Consolidated Balance Sheets as of November 3, 2001 and
February 3, 2001                                   |  | 1       
|                               |  |                                                                                                           |  |         
|                               |  | Consolidated Statements of Operations for the 13 and 39 weeks
ended November 3, 2001 and October 28, 2000 |  | 2       
|                               |  |                                                                                                           |  |         
|                               |  | Consolidated Statements of Cash Flows for the 39 weeks ended
November 3, 2001 and October 28, 2000        |  | 3       
|                               |  |                                                                                                           |  |         
|                               |  | Notes to Consolidated Financial Statements                                                                |  | 4       
|                               |  |                                                                                                           |  |         
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations                     |  | 6       
|                               |  |                                                                                                           |  |         
|Item 3.                        |  | Quantitative and Qualitative Disclosures about Market Risk                                                |  | 10      
|                               |  |                                                                                                           |  |         
|PART II.                       |  | OTHER INFORMATION                                                                                         |  |         
|                               |  |                                                                                                           |  |         
|Item 6.                        |  | Exhibits and Reports on Form 8-K                                                                          |  | 10      



---





---



##### Table of Contents






PART I.  FINANCIAL INFORMATION




Item 1. Financial Statements

COLE NATIONAL CORPORATION AND SUBSIDIARIES




|                                                                                                                        |                                                                                              |                                            |         |             |         |             |         |          |         | 
|----------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ----------- | ------- | ----------- | ------- | -------- | ------- | 
|                                                                                                                        |                                                                                              |                                            |         | November 3, |         | February 3,
|                                                                                                                        |                                                                                              |                                            |         | 2001        |         | 2001       
|                                                                                                                        |                                                                                              |                                            |         |             |         |            
|Assets                                                                                                                  |                                                                                              |                                            |         |             |         |             |         |         
|Current assets:                                                                                                         |                                                                                              |                                            |         |             |         |             |         |         
|                                                                                                                        | Cash and cash equivalents                                                                    |                                            | $       | 21,612      |         |             | $       | 36,725   |        
|                                                                                                                        | Accounts receivable, less allowance for doubtful accounts
of $5,685 and $7,348, respectively |                                            |         | 37,673      |         |             |         | 40,505   |        
|                                                                                                                        | Current portion of notes receivable                                                          |                                            |         | 4,368       |         |             |         | 5,097    |        
|                                                                                                                        | Inventories                                                                                  |                                            |         | 135,806     |         |             |         | 122,238  |        
|                                                                                                                        | Refundable income taxes                                                                      |                                            |         | 519         |         |             |         | 1,237    |        
|                                                                                                                        | Prepaid expenses and other                                                                   |                                            |         | 15,406      |         |             |         | 15,188   |        
|                                                                                                                        | Deferred income tax benefits                                                                 |                                            |         | 2,207       |         |             |         | 2,177    |        
|                                                                                                                        |                                                                                              |                                            |         |             |         |             |         |         
|                                                                                                                        |                                                                                              | Total current assets                       |         |             | 217,591 |             |         |          | 223,167 | 
|                                                                                                                       
|Property and equipment, at cost                                                                                         |                                                                                              |                                            | 288,647 |             |         |             | 275,241 |         
|                                                                                                                        | Less  accumulated depreciation and amortization                                             |                                            |         | (157,911    | )       |             |         | (149,543 | )      
|                                                                                                                        |                                                                                              |                                            |         |             |         |             |         |         
|                                                                                                                        |                                                                                              | Total property and equipment, net          |         |             | 130,736 |             |         |          | 125,698 | 
|                                                                                                                       
|Notes receivable, excluding current portion, less reserves for
uncollectible amounts of $4,071 and $4,537, respectively |                                                                                              |                                            | 19,318  |             |         |             | 18,000  |         
|Deferred income taxes and other assets                                                                                  |                                                                                              |                                            | 78,468  |             |         |             | 75,460  |         
|Intangible assets, net                                                                                                  |                                                                                              |                                            | 147,231 |             |         |             | 151,588 |         
|                                                                                                                        |                                                                                              |                                            |         |             |         |             |         |         
|                                                                                                                        |                                                                                              | Total assets                               |         | $           | 593,344 |             |         | $        | 593,913 | 
|                                                                                                                        |                                                                                              |                                            |         |             |         |             |         |         
|Liabilities and Stockholders Equity                                                                                    |                                                                                              |                                            |         |             |         |             |         |         
|Current liabilities:                                                                                                    |                                                                                              |                                            |         |             |         |             |         |         
|                                                                                                                        | Current portion of long-term debt                                                            |                                            | $       | 144         |         |             | $       | 452      |        
|                                                                                                                        | Accounts payable                                                                             |                                            |         | 61,076      |         |             |         | 56,505   |        
|                                                                                                                        | Accrued interest                                                                             |                                            |         | 7,505       |         |             |         | 6,736    |        
|                                                                                                                        | Accrued liabilities                                                                          |                                            |         | 72,328      |         |             |         | 76,646   |        
|                                                                                                                        | Accrued income taxes                                                                         |                                            |         | 2,216       |         |             |         | 3,458    |        
|                                                                                                                        |                                                                                              |                                            |         |             |         |             |         |         
|                                                                                                                        |                                                                                              | Total current liabilities                  |         |             | 143,269 |             |         |          | 143,797 | 
|                                                                                                                       
|Long-term debt, net of discount and current portion                                                                     |                                                                                              |                                            | 284,292 |             |         |             | 284,286 |         
|                                                                                                                       
|Other long-term liabilities                                                                                             |                                                                                              |                                            | 15,914  |             |         |             | 16,280  |         
|                                                                                                                       
|Stockholders equity                                                                                                    |                                                                                              |                                            | 149,869 |             |         |             | 149,550 |         
|                                                                                                                        |                                                                                              |                                            |         |             |         |             |         |         
|                                                                                                                        |                                                                                              | Total liabilities and stockholders equity |         | $           | 593,344 |             |         | $        | 593,913 | 
|                                                                                                                        |                                                                                              |                                            |         |             |         |             |         |         

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

1



---



##### Table of Contents



COLE NATIONAL CORPORATION AND SUBSIDIARIES




|                                     |                               |                                                |                          |         |                      |         |                         |         |             |         |             |         |        |         |         |         |        |         | 
|------------------------------------ | ----------------------------- | ---------------------------------------------- | ------------------------ | ------- | -------------------- | ------- | ----------------------- | ------- | ----------- | ------- | ----------- | ------- | ------ | ------- | ------- | ------- | ------ | ------- | 
|                                     |                               |                                                |                          |         | Thirteen Weeks Ended |         | Thirty-Nine Weeks Ended
|                                     |                               |                                                |                          |         |                      |         |                        
|                                     |                               |                                                |                          |         | November 3,          |         | October 28,             |         | November 3, |         | October 28,
|                                     |                               |                                                |                          |         | 2001                 |         | 2000                    |         | 2001        |         | 2000       
|                                     |                               |                                                |                          |         |                      |         |                         |         |             |         |            
|Net revenue                          |                               | $                                              | 261,488                  |         |                      | $       | 255,950                 |         |             | $       | 805,127     |         |        | $       | 778,384 |        
|Costs and expenses:                  |                               |                                                |                          |         |                      |         |                         |         |             |         |             |         |        |         |         |        
|                                     | Cost of goods sold            |                                                |                          | 86,906  |                      |         |                         | 83,450  |             |         |             | 264,706 |        |         |         | 257,759 |       
|                                     | Operating expenses            |                                                |                          | 163,330 |                      |         |                         | 158,245 |             |         |             | 492,782 |        |         |         | 476,212 |       
|                                     | Depreciation and amortization |                                                |                          | 10,300  |                      |         |                         | 9,992   |             |         |             | 30,252  |        |         |         | 29,954  |       
|                                     |                               |                                                |                          |         |                      |         |                         |         |             |         |             |         |        |         |         |        
|                                     |                               |                                                | Total costs and expenses |         |                      | 260,536 |                         |         |             | 251,687 |             |         |        | 787,740 |         |         |        | 763,925 | 
|                                     |                               |                                                |                          |         |                      |         |                         |         |             |         |             |         |        |         |         |        
|Operating income                     |                               |                                                | 952                      |         |                      |         | 4,263                   |         |             |         | 17,387      |         |        |         | 14,459  |        
|Interest and other (income) expense: |                               |                                                |                          |         |                      |         |                         |         |             |         |             |         |        |         |         |        
|                                     | Interest expense              |                                                |                          | 7,082   |                      |         |                         | 7,196   |             |         |             | 21,150  |        |         |         | 21,284  |       
|                                     | Interest and other income     |                                                |                          | (1,113  | )                    |         |                         | (368    | )           |         |             | (3,424  | )      |         |         | (2,252  | )     
|                                     |                               |                                                |                          |         |                      |         |                         |         |             |         |             |         |        |         |         |        
|                                     |                               | Total interest and other (income) expense, net |                          |         | 5,969                |         |                         |         | 6,828       |         |             |         | 17,726 |         |         |         | 19,032 |        
|                                     |                               |                                                |                          |         |                      |         |                         |         |             |         |             |         |        |         |         |        
|Loss before income taxes             |                               |                                                | (5,017                   | )       |                      |         | (2,565                  | )       |             |         | (339        | )       |        |         | (4,573  | )      
|Income tax benefit                   |                               |                                                | (2,761                   | )       |                      |         | (1,960                  | )       |             |         | (187        | )       |        |         | (3,064  | )      
|                                     |                               |                                                |                          |         |                      |         |                         |         |             |         |             |         |        |         |         |        
|Net loss                             |                               | $                                              | (2,256                   | )       |                      | $       | (605                    | )       |             | $       | (152        | )       |        | $       | (1,509  | )      
|                                     |                               |                                                |                          |         |                      |         |                         |         |             |         |             |         |        |         |         |        
|Earnings (loss) per share:           |                               |                                                |                          |         |                      |         |                         |         |             |         |             |         |        |         |         |        
|                                     |                               | Basic                                          |                          | $       | (0.14                | )       |                         | $       | (0.04       | )       |             | $       | (0.01  | )       |         | $       | (0.10  | )      
|                                     |                               | Diluted                                        |                          | $       | (0.14                | )       |                         | $       | (0.04       | )       |             | $       | (0.01  | )       |         | $       | (0.10  | )      

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

2



---



##### Table of Contents



COLE NATIONAL CORPORATION AND SUBSIDIARIES




|                                      |                                                                                 |                                                                                           |                                           |                                                                  |        |                         |         |             |        |         |         |  
|------------------------------------- | ------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ----------------------------------------- | ---------------------------------------------------------------- | ------ | ----------------------- | ------- | ----------- | ------ | ------- | ------- | -
|                                      |                                                                                 |                                                                                           |                                           |                                                                  |        | Thirty-Nine Weeks Ended
|                                      |                                                                                 |                                                                                           |                                           |                                                                  |        |                        
|                                      |                                                                                 |                                                                                           |                                           |                                                                  |        | November 3,             |         | October 28,
|                                      |                                                                                 |                                                                                           |                                           |                                                                  |        | 2001                    |         | 2000       
|                                      |                                                                                 |                                                                                           |                                           |                                                                  |        |                         |         |            
|Cash flows from operating activities: |                                                                                 |                                                                                           |                                           |                                                                  |        |                         |         |            
|                                      | Net loss                                                                        |                                                                                           | $                                         | (152                                                             | )      |                         | $       | (1,509      | )     
|                                      | Adjustments to reconcile net loss to net cash
provided by operating activities: |                                                                                           |                                           |                                                                  |        |                         |         |             |       
|                                      |                                                                                 | Depreciation and amortization                                                             |                                           |                                                                  | 30,252 |                         |         |             | 29,954 |        
|                                      |                                                                                 | Non-cash interest, net                                                                    |                                           |                                                                  | (817   | )                       |         |             | (738   | )      
|                                      |                                                                                 | Gain on sale of fixed assets                                                              |                                           |                                                                  | (683   | )                       |         |             |       |        
|                                      |                                                                                 | Increases (decreases) in cash resulting from changes in operating
assets and liabilities: |                                           |                                                                  |        |                         |         |             |        |        
|                                      |                                                                                 |                                                                                           |                                           | Accounts and notes receivable, prepaid expenses and other assets |        |                         | 4,633   |             |        |         | 5,002   |  
|                                      |                                                                                 |                                                                                           |                                           | Inventories                                                      |        |                         | (13,568 | )           |        |         | (30,545 | )
|                                      |                                                                                 |                                                                                           |                                           | Accounts payable, accrued liabilities and other liabilities      |        |                         | 77      |             |        |         | 4,274   |  
|                                      |                                                                                 |                                                                                           |                                           | Accrued interest                                                 |        |                         | 769     |             |        |         | 876     |  
|                                      |                                                                                 |                                                                                           |                                           | Accrued, refundable and deferred income taxes                    |        |                         | (915    | )           |        |         | (1,463  | )
|                                      |                                                                                 |                                                                                           |                                           |                                                                  |        |                         |         |            
|                                      |                                                                                 |                                                                                           | Net cash provided by operating activities |                                                                  |        | 19,596                  |         |             |        | 5,851   |        
|                                      |                                                                                 |                                                                                           |                                           |                                                                  |        |                         |         |            
|Cash flows from investing activities: |                                                                                 |                                                                                           |                                           |                                                                  |        |                         |         |            
|                                      | Purchases of property and equipment, net                                        |                                                                                           |                                           | (27,861                                                          | )      |                         |         | (25,528     | )     
|                                      | Proceeds from sale of fixed assets, net                                         |                                                                                           |                                           | 4,712                                                            |        |                         |         |            |       
|                                      | Systems development costs                                                       |                                                                                           |                                           | (5,826                                                           | )      |                         |         | (5,567      | )     
|                                      | Investment in Pearle Europe, net                                                |                                                                                           |                                           | (5,610                                                           | )      |                         |         | (914        | )     
|                                      | Other, net                                                                      |                                                                                           |                                           | (382                                                             | )      |                         |         | 55          |       
|                                      |                                                                                 |                                                                                           |                                           |                                                                  |        |                         |         |            
|                                      |                                                                                 |                                                                                           | Net cash used for investing activities    |                                                                  |        | (34,967                 | )       |             |        | (31,954 | )      
|                                      |                                                                                 |                                                                                           |                                           |                                                                  |        |                         |         |            
|Cash flows from financing activities: |                                                                                 |                                                                                           |                                           |                                                                  |        |                         |         |            
|                                      | Proceeds from working capital borrowings                                        |                                                                                           |                                           |                                                                 |        |                         |         | 8,500       |       
|                                      | Repayment of long-term debt                                                     |                                                                                           |                                           | (378                                                             | )      |                         |         | (1,002      | )     
|                                      | Net proceeds from exercise of stock options                                     |                                                                                           |                                           | 1,373                                                            |        |                         |         | 916         |       
|                                      | Net issuance of notes receivable  stock options and awards                     |                                                                                           |                                           | (340                                                             | )      |                         |         | (1,128      | )     
|                                      | Payment of deferred financing fees                                              |                                                                                           |                                           |                                                                 |        |                         |         | (377        | )     
|                                      | Other, net                                                                      |                                                                                           |                                           | (397                                                             | )      |                         |         | (435        | )     
|                                      |                                                                                 |                                                                                           |                                           |                                                                  |        |                         |         |            
|                                      |                                                                                 |                                                                                           | Net cash provided by financing activities |                                                                  |        | 258                     |         |             |        | 6,474   |        
|                                      |                                                                                 |                                                                                           |                                           |                                                                  |        |                         |         |            
|Cash and cash equivalents:            |                                                                                 |                                                                                           |                                           |                                                                  |        |                         |         |            
|                                      | Net decrease during the period                                                  |                                                                                           |                                           | (15,113                                                          | )      |                         |         | (19,629     | )     
|                                      | Balance, beginning of the period                                                |                                                                                           |                                           | 36,725                                                           |        |                         |         | 28,953      |       
|                                      |                                                                                 |                                                                                           |                                           |                                                                  |        |                         |         |            
|                                      | Balance, end of the period                                                      |                                                                                           | $                                         | 21,612                                                           |        |                         | $       | 9,324       |       
|                                      |                                                                                 |                                                                                           |                                           |                                                                  |        |                         |         |            

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

3



---



##### Table of Contents



COLE NATIONAL CORPORATION AND SUBSIDIARIES




(1) Summary of Significant Accounting Policies

Basis of Presentation

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

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

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

Inventories

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

Cash Flows

Net cash flows from operating activities reflect cash payments for income
taxes and interest of $316,000 and $19,479,000 respectively, for the 39 weeks
ended November 3, 2001, and $576,000 and $19,571,000, respectively, for the 39
weeks ended October 28, 2000.

Earnings Per Share

Earnings per share for the 13 and 39 weeks ended November 3, 2001 and
October 28, 2000 have been calculated based on the following weighted average
number of common shares and equivalents outstanding:

|        |  |                |            |                   |  |      |            |      |  |  |            |  |  |  |            | 
|------- |  | -------------- | ---------- | ----------------- |  | ---- | ---------- | ---- |  |  | ---------- |  |  |  | ---------- | 
|        |  | Thirteen Weeks |            | Thirty-Nine Weeks
|        |  |                |            |                  
|        |  | 2001           |            | 2000              |  | 2001 |            | 2000
|        |  |                |            |                   |  |      |            |     
|Basic   |  |                | 15,885,622 |                   |  |      | 15,621,426 |      |  |  | 15,794,232 |  |  |  | 15,564,265 | 
|Diluted |  |                | 15,885,622 |                   |  |      | 15,621,426 |      |  |  | 15,794,232 |  |  |  | 15,564,265 | 

4



---



##### Table of Contents



COLE NATIONAL CORPORATION AND SUBSIDIARIESNotes to Consolidated Financial Statements(Unaudited)

(1) Summary of Significant Accounting Policies (continued)

Total Other Comprehensive Loss

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

|                                     |  |                |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|------------------------------------ |  | -------------- | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                     |  | Thirteen Weeks |        | Thirty-Nine Weeks
|                                     |  |                |        |                  
|                                     |  | 2001           |        | 2000              |  | 2001 |        | 2000
|                                     |  |                |        |                   |  |      |        |     
|Net loss                             |  | $              | (2,256 | )                 |  | $    | (605   | )    |  | $ | (152   | ) |  | $ | (1,509 | )
|Cumulative translation income (loss) |  |                | 64     |                   |  |      | (2,669 | )    |  |   | (895   | ) |  |   | (3,341 | )
|                                     |  |                |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|Total comprehensive loss             |  | $              | (2,192 | )                 |  | $    | (3,274 | )    |  | $ | (1,047 | ) |  | $ | (4,850 | )
|                                     |  |                |        |                   |  |      |        |      |  |   |        |   |  |   |        |  

(2) Segment Information

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

|                         |                                |                          |                                |                    |         |                |        |                   |         |       |        |         |         |        |        |         |         |        |         |  
|------------------------ | ------------------------------ | ------------------------ | ------------------------------ | ------------------ | ------- | -------------- | ------ | ----------------- | ------- | ----- | ------ | ------- | ------- | ------ | ------ | ------- | ------- | ------ | ------- | -
|                         |                                |                          |                                |                    |         | Thirteen Weeks |        | Thirty-Nine Weeks
|                         |                                |                          |                                |                    |         |                |        |                  
|                         |                                |                          |                                |                    |         | 2001           |        | 2000              |         | 2001  |        | 2000   
|                         |                                |                          |                                |                    |         |                |        |                   |         |       |        |        
|Net revenue:             |                                |                          |                                |                    |         |                |        |                   |         |       |        |         |         |        |        |        
|                         | Cole Vision                    |                          | $                              | 208,049            |         |                | $      | 200,387           |         |       | $      | 625,144 |         |        | $      | 598,050 |        
|                         | Things Remembered              |                          |                                | 53,439             |         |                |        | 55,563            |         |       |        | 179,983 |         |        |        | 180,334 |        
|                         |                                |                          |                                |                    |         |                |        |                   |         |       |        |         |         |        |        |        
|                         |                                | Consolidated net revenue |                                | $                  | 261,488 |                |        | $                 | 255,950 |       |        | $       | 805,127 |        |        | $       | 778,384 |       
|                         |                                |                          |                                |                    |         |                |        |                   |         |       |        |         |         |        |        |        
|Operating income (loss): |                                |                          |                                |                    |         |                |        |                   |         |       |        |         |         |        |        |        
|                         | Cole Vision                    |                          | $                              | 5,269              |         |                | $      | 6,891             |         |       | $      | 18,051  |         |        | $      | 15,365  |        
|                         | Things Remembered              |                          |                                | (1,571             | )       |                |        | 307               |         |       |        | 7,795   |         |        |        | 9,816   |        
|                         |                                |                          |                                |                    |         |                |        |                   |         |       |        |         |         |        |        |        
|                         |                                |                          | Total segment operating income |                    |         | 3,698          |        |                   |         | 7,198 |        |         |         | 25,846 |        |         |         | 25,181 |        
|                         | Unallocated amounts:           |                          |                                |                    |         |                |        |                   |         |       |        |         |         |        |        |         |        
|                         |                                |                          |                                | Corporate expenses |         |                | (2,746 | )                 |         |       | (2,935 | )       |         |        | (8,459 | )       |         |        | (10,722 | )
|                         |                                |                          |                                |                    |         |                |        |                   |         |       |        |         |         |        |        |        
|                         | Consolidated operating income  |                          |                                | 952                |         |                |        | 4,263             |         |       |        | 17,387  |         |        |        | 14,459  |        
|                         | Interest and other income, net |                          |                                | (5,969             | )       |                |        | (6,828            | )       |       |        | (17,726 | )       |        |        | (19,032 | )      
|                         |                                |                          |                                |                    |         |                |        |                   |         |       |        |         |         |        |        |        
|                         | Loss before income taxes       |                          | $                              | (5,017             | )       |                | $      | (2,565            | )       |       | $      | (339    | )       |        | $      | (4,573  | )      
|                         |                                |                          |                                |                    |         |                |        |                   |         |       |        |         |         |        |        |        

5



---



##### Table of Contents






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

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

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

Results of Operations

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

|                                                     |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |      |      |  
|---------------------------------------------------- | ----------------------------- | ------------------- | ----- | ------------- | ----- | ----------------- | ----- | ------ | ----- | ---- | --- | ---- | ----- | ------ | ----- | ----- | ----- | - | ----- | ----- | ----- | - | --- | ---- | ---- | -
|                                                     |                               |                     |       | Third Quarter |       | First Nine Months
|                                                     |                               |                     |       |               |       |                  
|                                                     |                               |                     |       | 2001          |       | 2000              |       | Change |       | 2001 |     | 2000 |       | Change
|                                                     |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |       
|Net Revenue:                                         |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     
|                                                     | Cole Vision                   |                     | $     | 208.1         |       |                   | $     | 200.4  |       |      |     | 3.8  | %     |        | $     | 625.1 |       |   | $     | 598.1 |       |   |     | 4.5  | %   
|                                                     | Things Remembered             |                     |       | 53.4          |       |                   |       | 55.6   |       |      |     | (3.8 | )     |        |       | 180.0 |       |   |       | 180.3 |       |   |     | (0.2 | )   
|                                                     |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     
|                                                     |                               | Total net revenue   |       | $             | 261.5 |                   |       | $      | 256.0 |      |     |      | 2.2   | %      |       | $     | 805.1 |   |       | $     | 778.4 |   |     |      | 3.4  | %
|Gross margin                                         |                               | $                   | 174.6 |               |       | $                 | 172.5 |        |       |      | 1.2 | %    |       | $      | 540.4 |       |       | $ | 520.6 |       |       |   | 3.8 |     
|Operating expenses                                   |                               |                     | 163.3 |               |       |                   | 158.2 |        |       |      | 3.2 |      |       |        | 492.7 |       |       |   | 476.1 |       |       |   | 3.5 |     
|Depreciation and amortization                        |                               |                     | 10.3  |               |       |                   | 10.0  |        |       |      | 3.1 |      |       |        | 30.3  |       |       |   | 30.0  |       |       |   | 1.0 |     
|                                                     |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     
|                                                     |                               | Operating income    |       | $             | 1.0   |                   |       | $      | 4.3   |      |     |      | (77.7 | )%     |       | $     | 17.4  |   |       | $     | 14.5  |   |     |      | 20.3 | %
|                                                     |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     
|Percentage of net revenue:                           |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     
|                                                     | Gross margin                  |                     |       | 66.8          | %     |                   |       | 67.4   | %     |      |     | (0.6 | )     |        |       | 67.1  | %     |   |       | 66.9  | %     |   |     | 0.2  |     
|                                                     | Operating expenses            |                     |       | 62.5          |       |                   |       | 61.8   |       |      |     | 0.7  |       |        |       | 61.1  |       |   |       | 61.2  |       |   |     | (0.1 | )   
|                                                     | Depreciation and amortization |                     |       | 3.9           |       |                   |       | 3.9    |       |      |     |     |       |        |       | 3.8   |       |   |       | 3.8   |       |   |     |     |     
|                                                     |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     
|                                                     |                               | Operating income    |       |               | 0.4   | %                 |       |        | 1.7   | %    |     |      | (1.3  | )      |       |       | 2.2   | % |       |       | 1.9   | % |     |      | 0.3  |  
|                                                     |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     
|Number of retail locations
at the end of the period: |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     
|                                                     | Cole Licensed Brands          |                     |       | 1,279         |       |                   |       | 1,161  |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |      |     
|                                                     | Pearle company-owned          |                     |       | 430           |       |                   |       | 444    |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |      |     
|                                                     | Pearle franchised             |                     |       | 423           |       |                   |       | 423    |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |      |     
|                                                     |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     
|                                                     |                               | Total Cole Vision   |       |               | 2,132 |                   |       |        | 2,028 |      |     |      |       |        |       |       |       |   |       |       |       |   |     |      |      |  
|                                                     | Things Remembered             |                     |       | 790           |       |                   |       | 794    |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |      |     
|                                                     |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     
|                                                     |                               | Total Cole National |       |               | 2,922 |                   |       |        | 2,822 |      |     |      |       |        |       |       |       |   |       |       |       |   |     |      |      |  
|                                                     |                               |                     |       |               |       |                   |       |        |       |      |     |      |       |        |       |       |       |   |       |       |       |   |     |     

6



---



##### Table of Contents



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

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

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

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

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

7



---



##### Table of Contents



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

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

The decrease in nine month interest and other (income) expense, net, was
primarily the result of a $0.7 million first quarter gain from the sale of a
Dallas facility no longer needed for Pearles operations. An income tax
benefit was recorded in the first nine months of fiscal 2001 and fiscal 2000
using the Companys estimated annual effective tax rates of 55% and 67%,
respectively.

Liquidity and Capital Resources

The Companys primary source of liquidity is funds provided from the
operations of its operating subsidiaries. In addition, its wholly owned
subsidiary, Cole National Group, Inc., and its operating subsidiaries have a
working capital commitment ranging from $50.0 million to $75.0 million based
on Cole National Groups current debt leverage ratio as described in the
credit facility. As of November 3, 2001, the total commitment was $75.0
million and availability under the credit facility totaled $63.9 million,
after reduction for commitments under outstanding letters of credit. There
were no working capital borrowings outstanding at any time during the first
nine months of fiscal 2001 or the first six months of fiscal 2000. The
maximum working capital borrowings outstanding during the third quarter of
fiscal 2000 was $16.5 million. Cole National Group and its principal
operating subsidiaries were in compliance with all credit facility covenants
at November 3, 2001.

Operations for the first nine months provided $19.6 million of cash in
fiscal 2001 compared to $5.9 million in fiscal 2000. The primary reasons for
the $13.7 million increase in cash provided by operations were the changes in
operating assets and liabilities during the first nine months of fiscal 2001
as compared to fiscal 2000. The improvement in cash provided by operations
this year compared to fiscal 2000 was primarily attributable to the decrease
in use of funds for inventories, partially offset by less funds provided by
accounts payable and accrued liabilities.

Cash used for investing activities included capital additions of $27.9
million and $25.5 million for the first nine months of fiscal 2001 and fiscal
2000, respectively. The majority of capital expenditures were for store
fixtures, equipment and leasehold improvements for new stores including the
Target Optical expansion and the remodeling of existing stores. Net proceeds
from the sale of the Dallas facility in the first quarter provided $4.7
million of cash flow in fiscal 2001. Investments in systems development costs
totaled $5.8 million and $5.6 million in the first nine months of fiscal 2001
and fiscal 2000, respectively. The Companys net investment in Pearle Europe
used $5.6 million and $0.9 million of cash in the first nine months of fiscal
2001 and fiscal 2000, respectively. The investment in fiscal 2001 was made in
connection with Pearle Europes acquisition of a leading optical retail chain
in Portugal during the second quarter of fiscal 2001.

8



---



##### Table of Contents



The Company believes that funds provided from operations, 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.

Recent Accounting Pronouncements

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

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

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

Forward-Looking Information

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

9



---



##### Table of Contents






Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

Item 6. Exhibits and Reports on Form 8-K

|     |  |                                                                                                                              
|---- |  | -----------------------------------------------------------------------------------------------------------------------------
|(a)  |  | Exhibits. The following Exhibits are filed herewith and made a
part hereof:                                                  
|     |  |                                                                                                                              
|10.1 |  | Amendment No. 1 to the Amended and Restated Nonqualified Stock
Option Plan for Nonemployee
Directors dated November 28, 2001.
|     |  |                                                                                                                              
|(b)  |  | Reports on Form 8-K                                                                                                          
|     |  |                                                                                                                              
|     |  | None.                                                                                                                        

10



---



##### Table of Contents






SIGNATURE

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

COLE NATIONAL CORPORATION



|                                         |  | 
|---------------------------------------- |  | 
|By: /s/Tracy L. Burmeister              
|                                        
|Tracy L. Burmeister                     
|Vice President, Accounting and Reporting
|(Duly Authorized Officer and Principal  
|Accounting Officer)                     
|                                        
|Date: December 10, 2001                 

11



---



##### Table of Contents



COLE NATIONAL CORPORATION
FORM 10-Q
QUARTER ENDED NOVEMBER 3, 2001

EXHIBIT INDEX

|                  |  |                                                                                                                              
|----------------- |  | -----------------------------------------------------------------------------------------------------------------------------
|Exhibit           |  |                                                                                                                              
|Number            |  | Description                                                                                                                  
|                  |  |                                                                                                                              
|10.1*             |  | Amendment No. 1 to the Amended and Restated Nonqualified Stock
Option Plan for Nonemployee Directors dated November 28, 2001.
|                 
|* Filed herewith.

12