TABLE OF CONTENTS




|                                                  |                                                                                               |                                            |  |  |  |  |  | 
|------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|FORM 10-Q                                        
|PART I  FINANCIAL INFORMATION                   
|                                                  | Item 1. Financial Statements                                                                 
|                                                  |                                                                                               | 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                           
|PART II  OTHER INFORMATION                      
|                                                  | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                                        
|EXHIBIT INDEX                                    
|Exhibit 10.1 -- Secured Promissory Note          
|Exhibit 10.2 -- Stock Pledge & Security Agreement
|Exhibit 27 -- Financial Data Schedule            



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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 October 28, 2000, or                        
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|  |  | 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
(State or other jurisdiction of
incorporation or organization) |  | 34-1453189
(I.R.S. employer
identification no.)

|                                                                                       |  |                 
|-------------------------------------------------------------------------------------- |  | ----------------
|5915 Landerbrook Drive
Mayfield Heights, Ohio
(Address of principal executive offices) |  | 44124
(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 20, 2000, 15,621,426 shares of the registrants common stock
were outstanding.





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##### Table of Contents



COLE NATIONAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED OCTOBER 28, 2000
INDEX

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|------- |  | --------------------------------------------------------------------------------------------------------- |  |  |  |  |  | -------- | -- | 
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|PART I  |  | FINANCIAL INFORMATION                                                                                    
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|Item 1. |  | Financial Statements                                                                                     
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|        |  | Consolidated Balance Sheets as of
October 28, 2000 and January 29, 2000                                   |  |  |  |  |  |          | 1  | 
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|        |  | Consolidated Statements of Operations for the 13 and 39 weeks
ended October 28, 2000 and October 30, 1999 |  |  |  |  |  |          | 2  | 
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|        |  | Consolidated Statements of Cash Flows for the 39 weeks ended
October 28, 2000 and October 30, 1999        |  |  |  |  |  |          | 3  | 
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|        |  | Notes to Consolidated Financial Statements                                                                |  |  |  |  |  |          | 4  | 
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|Item 2. |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations                     |  |  |  |  |  |          | 7  | 
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|Item 3. |  | Quantitative and Qualitative Disclosures about Market Risk                                                |  |  |  |  |  |          | 11 | 
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|PART II |  | OTHER INFORMATION                                                                                        
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|Item 4. |  | Submission of Matters to a Vote of Security Holders                                                       |  |  |  |  |  |          | 12 | 
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|Item 6. |  | Exhibits and Reports on Form 8-K                                                                          |  |  |  |  |  |          | 13 | 



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##### Table of Contents









PART I  FINANCIAL INFORMATION







Item 1. Financial Statements

COLE NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)

|                                                                                                                           |                                                                                              |                                            |         |             |         |             |         |          |         | 
|-------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ----------- | ------- | ----------- | ------- | -------- | ------- | 
|                                                                                                                           |                                                                                              |                                            |         | October 28, |         | January 29,
|                                                                                                                           |                                                                                              |                                            |         | 2000        |         | 2000       
|                                                                                                                           |                                                                                              |                                            |         |             |         |            
|ASSETS                                                                                                                    
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Current assets:                                                                                                           
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Cash and temporary cash investments                                                          |                                            | $       | 9,324       |         |             | $       | 28,953   |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Accounts receivable, less allowance for doubtful accounts
of $5,473 and $7,557, respectively |                                            |         | 39,894      |         |             |         | 41,682   |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Current portion of notes receivable                                                          |                                            |         | 4,965       |         |             |         | 4,917    |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Inventories                                                                                  |                                            |         | 147,059     |         |             |         | 116,514  |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Refundable income taxes                                                                      |                                            |         | 1,546       |         |             |         | 1,546    |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Prepaid expenses and other                                                                   |                                            |         | 7,273       |         |             |         | 6,947    |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Deferred income tax benefits                                                                 |                                            |         | 5,186       |         |             |         | 3,901    |        
|                                                                                                                           |                                                                                              |                                            |         |             |         |             |         |         
|                                                                                                                           |                                                                                              | Total current assets                       |         |             | 215,247 |             |         |          | 204,460 | 
|                                                                                                                          
|                                                                                                                          
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|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Property and equipment, at cost                                                                                            |                                                                                              |                                            | 281,546 |             |         |             | 267,633 |         
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Less  accumulated depreciation and amortization                                             |                                            |         | (151,550    | )       |             |         | (144,249 | )      
|                                                                                                                           |                                                                                              |                                            |         |             |         |             |         |         
|                                                                                                                           |                                                                                              | Total property and equipment, net          |         |             | 129,996 |             |         |          | 123,384 | 
|                                                                                                                          
|                                                                                                                          
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|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Notes receivable, excluding current portion and less reserves for
uncollectible amounts of $4,822 and $4,196, respectively |                                                                                              |                                            | 21,964  |             |         |             | 25,948  |         
|                                                                                                                          
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|Deferred income taxes and other assets                                                                                     |                                                                                              |                                            | 74,454  |             |         |             | 77,080  |         
|                                                                                                                          
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|Intangible assets, net                                                                                                     |                                                                                              |                                            | 153,118 |             |         |             | 157,399 |         
|                                                                                                                           |                                                                                              |                                            |         |             |         |             |         |         
|                                                                                                                           |                                                                                              | Total assets                               |         | $           | 594,779 |             |         | $        | 588,271 | 
|                                                                                                                           |                                                                                              |                                            |         |             |         |             |         |         
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                      
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Current Liabilities:                                                                                                      
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Working capital borrowing                                                                    |                                            | $       | 8,500       |         |             | $       |         |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Current portion of long-term debt                                                            |                                            |         | 881         |         |             |         | 1,515    |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Accounts payable                                                                             |                                            |         | 59,971      |         |             |         | 60,388   |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Accrued interest                                                                             |                                            |         | 7,358       |         |             |         | 6,482    |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Accrued liabilities                                                                          |                                            |         | 78,114      |         |             |         | 71,998   |        
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Accrued income taxes                                                                         |                                            |         |            |         |             |         | 178      |        
|                                                                                                                           |                                                                                              |                                            |         |             |         |             |         |         
|                                                                                                                           |                                                                                              | Total current liabilities                  |         |             | 154,824 |             |         |          | 140,561 | 
|                                                                                                                          
|                                                                                                                          
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|                                                                                                                          
|Long-term debt, net of discount and current portion                                                                        |                                                                                              |                                            | 284,281 |             |         |             | 284,584 |         
|                                                                                                                          
|                                                                                                                          
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|Other long-term liabilities                                                                                                |                                                                                              |                                            | 13,166  |             |         |             | 16,610  |         
|                                                                                                                          
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|                                                                                                                          
|Stockholders equity                                                                                                       |                                                                                              |                                            | 142,508 |             |         |             | 146,516 |         
|                                                                                                                           |                                                                                              |                                            |         |             |         |             |         |         
|                                                                                                                           |                                                                                              | Total liabilities and stockholders equity |         | $           | 594,779 |             |         | $        | 588,271 | 
|                                                                                                                           |                                                                                              |                                            |         |             |         |             |         |         

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

1



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##### Table of Contents



COLE NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)

|                                     |                               |                                       |         |                      |         |                         |         |             |         |             |         |         |         |   |         |         |         | 
|------------------------------------ | ----------------------------- | ------------------------------------- | ------- | -------------------- | ------- | ----------------------- | ------- | ----------- | ------- | ----------- | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                     |                               |                                       |         | Thirteen Weeks Ended |         | Thirty-Nine Weeks Ended
|                                     |                               |                                       |         |                      |         |                        
|                                     |                               |                                       |         | October 28,          |         | October 30,             |         | October 28, |         | October 30,
|                                     |                               |                                       |         | 2000                 |         | 1999                    |         | 2000        |         | 1999       
|                                     |                               |                                       |         |                      |         |                         |         |             |         |            
|Net revenue                          |                               | $                                     | 255,950 |                      |         | $                       | 251,165 |             |         | $           | 778,384 |         |         | $ | 772,566 |        
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|Costs and expenses:                 
|                                    
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|                                     | Cost of goods sold            |                                       |         | 83,450               |         |                         |         | 87,012      |         |             |         | 257,759 |         |   |         | 266,012 |        
|                                    
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|                                     | Operating expenses            |                                       |         | 158,245              |         |                         |         | 152,475     |         |             |         | 476,212 |         |   |         | 452,762 |        
|                                    
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|                                    
|                                    
|                                     | Depreciation and amortization |                                       |         | 9,992                |         |                         |         | 10,514      |         |             |         | 29,954  |         |   |         | 28,716  |        
|                                     |                               |                                       |         |                      |         |                         |         |             |         |             |         |         |         |   |         |        
|                                     |                               | Total costs and expenses              |         |                      | 251,687 |                         |         |             | 250,001 |             |         |         | 763,925 |   |         |         | 747,490 | 
|                                     |                               |                                       |         |                      |         |                         |         |             |         |             |         |         |         |   |         |        
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|Operating income                     |                               |                                       | 4,263   |                      |         |                         | 1,164   |             |         |             | 14,459  |         |         |   | 25,076  |        
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|Interest and other (income) expense:
|                                    
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|                                     | Interest expense              |                                       |         | 7,196                |         |                         |         | 7,038       |         |             |         | 21,284  |         |   |         | 20,841  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Interest and other income     |                                       |         | (368                 | )       |                         |         | (1,117      | )       |             |         | (2,252  | )       |   |         | (2,936  | )      
|                                     |                               |                                       |         |                      |         |                         |         |             |         |             |         |         |         |   |         |        
|                                     |                               | Total interest and other
expense, net |         |                      | 6,828   |                         |         |             | 5,921   |             |         |         | 19,032  |   |         |         | 17,905  | 
|                                     |                               |                                       |         |                      |         |                         |         |             |         |             |         |         |         |   |         |        
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|Income (loss) before income taxes    |                               |                                       | (2,565  | )                    |         |                         | (4,757  | )           |         |             | (4,573  | )       |         |   | 7,171   |        
|                                    
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|Income tax provision (benefit)       |                               |                                       | (1,960  | )                    |         |                         | (1,951  | )           |         |             | (3,064  | )       |         |   | 2,940   |        
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|                                     |                               |                                       |         |                      |         |                         |         |             |         |             |         |         |         |   |         |        
|Net income (loss)                    |                               | $                                     | (605    | )                    |         | $                       | (2,806  | )           |         | $           | (1,509  | )       |         | $ | 4,231   |        
|                                     |                               |                                       |         |                      |         |                         |         |             |         |             |         |         |         |   |         |        
|Earnings (loss) per common share:   
|                                    
|                                    
|                                    
|                                    
|                                     | Basic                         |                                       | $       | (.04                 | )       |                         | $       | (0.19       | )       |             | $       | (.10    | )       |   | $       | .28     |        
|                                    
|                                    
|                                    
|                                    
|                                     | Diluted                       |                                       | $       | (.04                 | )       |                         | $       | (0.19       | )       |             | $       | (.10    | )       |   | $       | .28     |        



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

2



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##### Table of Contents



COLE NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)

|                                      |                                                                                          |                                                                                 |                                                                  |         |                         |         |             |         |        |         |  
|------------------------------------- | ---------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ------- | ----------------------- | ------- | ----------- | ------- | ------ | ------- | -
|                                      |                                                                                          |                                                                                 |                                                                  |         | Thirty-Nine Weeks Ended
|                                      |                                                                                          |                                                                                 |                                                                  |         |                        
|                                      |                                                                                          |                                                                                 |                                                                  |         | October 28,             |         | October 30,
|                                      |                                                                                          |                                                                                 |                                                                  |         | 2000                    |         | 1999       
|                                      |                                                                                          |                                                                                 |                                                                  |         |                         |         |            
|Cash flows from operating activities:
|                                     
|                                     
|                                     
|                                     
|                                      | Net income (loss)                                                                        |                                                                                 | $                                                                | (1,509  | )                       |         | $           | 4,231   |       
|                                     
|                                     
|                                     
|                                     
|                                      | Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                          | Depreciation and amortization                                                   |                                                                  |         | 29,954                  |         |             |         | 28,716 |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                          | Non-cash interest and other expense, net                                        |                                                                  |         | (738                    | )       |             |         | (1,563 | )      
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                          | Increases (decreases) in cash resulting from changes in
assets and liabilities:
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                          |                                                                                 | Accounts and notes receivable, prepaid expenses and
other assets |         |                         | 5,002   |             |         |        | 983     |  
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                          |                                                                                 | Inventories                                                      |         |                         | (30,545 | )           |         |        | (13,968 | )
|                                     
|                                     
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|                                     
|                                      |                                                                                          |                                                                                 | Accounts payable, accrued liabilities and other liabilities      |         |                         | 4,274   |             |         |        | (18,809 | )
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                          |                                                                                 | Accrued interest                                                 |         |                         | 876     |             |         |        | 1,140   |  
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                          |                                                                                 | Accrued, refundable and deferred income taxes                    |         |                         | (1,463  | )           |         |        | 8,789   |  
|                                      |                                                                                          |                                                                                 |                                                                  |         |                         |         |             |        
|                                      |                                                                                          |                                                                                 | Net cash provided by operating activities                        |         |                         | 5,851   |             |         |        | 9,519   |  
|                                      |                                                                                          |                                                                                 |                                                                  |         |                         |         |             |        
|Cash flows from investing activities:
|                                     
|                                     
|                                     
|                                     
|                                      | Purchases of property and equipment, net                                                 |                                                                                 |                                                                  | (25,528 | )                       |         |             | (21,025 | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Systems development costs                                                                |                                                                                 |                                                                  | (5,567  | )                       |         |             | (10,930 | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Investment in Pearle Europe, net                                                         |                                                                                 |                                                                  | (914    | )                       |         |             | (1,360  | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Acquisitions of businesses, net                                                          |                                                                                 |                                                                  |        |                         |         |             | (2,281  | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Other, net                                                                               |                                                                                 |                                                                  | 55      |                         |         |             | (549    | )     
|                                      |                                                                                          |                                                                                 |                                                                  |         |                         |         |             |        
|                                      |                                                                                          |                                                                                 | Net cash used by investing activities                            |         |                         | (31,954 | )           |         |        | (36,145 | )
|                                      |                                                                                          |                                                                                 |                                                                  |         |                         |         |             |        
|Cash flows from financing activities:
|                                     
|                                     
|                                     
|                                     
|                                      | Proceeds from working capital borrowings                                                 |                                                                                 |                                                                  | 8,500   |                         |         |             |        |       
|                                     
|                                     
|                                     
|                                     
|                                      | Repayment of long-term debt                                                              |                                                                                 |                                                                  | (1,002  | )                       |         |             | (1,104  | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Proceeds from exercise of stock options                                                  |                                                                                 |                                                                  | 916     |                         |         |             | 163     |       
|                                     
|                                     
|                                     
|                                     
|                                      | Common stock repurchased                                                                 |                                                                                 |                                                                  |        |                         |         |             | (564    | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Note receivable in connection with common stock award                                    |                                                                                 |                                                                  | (1,128  | )                       |         |             |        |       
|                                     
|                                     
|                                     
|                                     
|                                      | Payment of deferred financing fees                                                       |                                                                                 |                                                                  | (377    | )                       |         |             | (280    | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Other, net                                                                               |                                                                                 |                                                                  | (435    | )                       |         |             | 147     |       
|                                      |                                                                                          |                                                                                 |                                                                  |         |                         |         |             |        
|                                      |                                                                                          |                                                                                 | Net cash provided (used) by financing activities                 |         |                         | 6,474   |             |         |        | (1,638  | )
|                                      |                                                                                          |                                                                                 |                                                                  |         |                         |         |             |        
|Cash and temporary cash investments: 
|                                     
|                                     
|                                     
|                                     
|                                      | Net decrease during the period                                                           |                                                                                 |                                                                  | (19,629 | )                       |         |             | (28,264 | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Balance, beginning of the period                                                         |                                                                                 |                                                                  | 28,953  |                         |         |             | 51,057  |       
|                                      |                                                                                          |                                                                                 |                                                                  |         |                         |         |             |        
|                                      | Balance, end of the period                                                               |                                                                                 | $                                                                | 9,324   |                         |         | $           | 22,793  |       
|                                      |                                                                                          |                                                                                 |                                                                  |         |                         |         |             |        

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

3



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##### Table of Contents



COLE NATIONAL CORPORATION AND
SUBSIDIARIES




Notes to Consolidated Financial Statements  (Unaudited)


(1) Basis of Presentation and Accounting
Policies

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 Cole National
Corporations consolidated financial statements for the fiscal year ended
January 29, 2000.

In the opinion
of management, the accompanying financial statements contain all adjustments
(consisting only of normal recurring accruals) necessary to present fairly its
financial position as of October 28, 2000 and the results of operations and cash
flows for the 39 weeks ended October 28, 2000 and October 30, 1999.

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
$576,000 and $19,571,000 respectively, for the 39 weeks ended October 28, 2000,
and $299,000 and $18,902,000 respectively, for the 39 weeks ended October 30,
1999.

Earnings Per Share

Earnings per
share for the 13 and 39 weeks ended October 28, 2000 and October 30, 1999 have
been calculated based on the following weighted average number of common shares
and equivalents outstanding:

|        |  |                |            |                   |  |      |            |      |  |  |            |  |  |  |            | 
|------- |  | -------------- | ---------- | ----------------- |  | ---- | ---------- | ---- |  |  | ---------- |  |  |  | ---------- | 
|        |  | Thirteen Weeks |            | Thirty-nine Weeks
|        |  |                |            |                  
|        |  | 2000           |            | 1999              |  | 2000 |            | 1999
|        |  |                |            |                   |  |      |            |     
|Basic   |  |                | 15,621,426 |                   |  |      | 14,857,634 |      |  |  | 15,564,265 |  |  |  | 14,861,096 | 
|       
|       
|       
|       
|Diluted |  |                | 15,621,426 |                   |  |      | 14,857,634 |      |  |  | 15,564,265 |  |  |  | 14,933,562 | 

4



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##### Table of Contents



COLE NATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

(1) Basis of Presentation and Accounting
Policies (continued)

Total Other Comprehensive Income (Loss)

Total other comprehensive income (loss) for the 13 and 39 weeks ended
October 28, 2000 and October 30, 1999 is as follows (000s omitted):

|                                  |  |                |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|--------------------------------- |  | -------------- | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                  |  | Thirteen Weeks |        | Thirty-Nine Weeks
|                                  |  |                |        |                  
|                                  |  | 2000           |        | 1999              |  | 2000 |        | 1999
|                                  |  |                |        |                   |  |      |        |     
|Net income (loss)                 |  | $              | (605   | )                 |  | $    | (2,806 | )    |  | $ | (1,509 | ) |  | $ | 4,231  |  
|                                 
|                                 
|                                 
|                                 
|Cumulative translation loss       |  |                | (2,669 | )                 |  |      | (395   | )    |  |   | (3,341 | ) |  |   | (1,281 | )
|Total comprehensive income (loss) |  |                |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|Total comprehensive income (loss) |  | $              | (3,274 | )                 |  | $    | (3,201 | )    |  | $ | (4,850 | ) |  | $ | 2,950  |  

(2) Credit Facility

In June 2000,
the credit facility was amended to provide availability under the working
capital commitment ranging from $50.0 million to $75.0 million based on Cole
National Groups current debt leverage ratio described in the credit
facility. As of October 28, 2000, total availability under the credit facility
was $50.0 million. The amendment also modified certain covenants, as well as the
permitted levels on indebtedness, dividends, investments, and capital
expenditures.

5



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##### Table of Contents



COLE NATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

(3) Segment Information

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

|                     |                    |                                   |   |                |         |                   |   |         |         |      |   |         |         |   |   |         |         | 
|-------------------- | ------------------ | --------------------------------- | - | -------------- | ------- | ----------------- | - | ------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------- | 
|                     |                    |                                   |   | Thirteen Weeks |         | Thirty-Nine Weeks
|                     |                    |                                   |   |                |         |                  
|                     |                    |                                   |   | 2000           |         | 1999              |   | 2000    |         | 1999
|                     |                    |                                   |   |                |         |                   |   |         |         |     
|Net revenue:        
|                    
|                    
|                    
|                    
|                     | Cole Vision        |                                   | $ | 200,387        |         |                   | $ | 197,976 |         |      | $ | 598,050 |         |   | $ | 602,108 |        
|                    
|                    
|                    
|                    
|                     | Things Remembered  |                                   |   | 55,563         |         |                   |   | 53,189  |         |      |   | 180,334 |         |   |   | 170,458 |        
|                     |                    |                                   |   |                |         |                   |   |         |         |      |   |         |         |   |   |         |        
|                    
|                    
|                    
|                    
|                     |                    | Consolidated net revenue          |   | $              | 255,950 |                   |   | $       | 251,165 |      |   | $       | 778,384 |   |   | $       | 772,566 | 
|                     |                    |                                   |   |                |         |                   |   |         |         |      |   |         |         |   |   |         |        
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|Income:             
|                    
|                    
|                    
|                    
|                     | Cole Vision        |                                   | $ | 6,891          |         |                   | $ | 6,528   |         |      | $ | 15,365  |         |   | $ | 24,932  |        
|                    
|                    
|                    
|                    
|                     | Things Remembered  |                                   |   | 307            |         |                   |   | 270     |         |      |   | 9,816   |         |   |   | 9,408   |        
|                     |                    |                                   |   |                |         |                   |   |         |         |      |   |         |         |   |   |         |        
|                    
|                    
|                    
|                    
|                     |                    | Total segment profit              |   |                | 7,198   |                   |   |         | 6,798   |      |   |         | 25,181  |   |   |         | 34,340  | 
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|Unallocated amounts:
|                    
|                    
|                    
|                    
|                     | Corporate expenses |                                   |   | 2,935          |         |                   |   | 5,634   |         |      |   | 10,722  |         |   |   | 9,264   |        
|                     |                    |                                   |   |                |         |                   |   |         |         |      |   |         |         |   |   |         |        
|                     |                    | Consolidated operating income     |   |                | 4,263   |                   |   |         | 1,164   |      |   |         | 14,459  |   |   |         | 25,076  | 
|                    
|                    
|                    
|                    
|                     |                    | Interest and other expense, net   |   |                | 6,828   |                   |   |         | 5,921   |      |   |         | 19,032  |   |   |         | 17,905  | 
|                     |                    |                                   |   |                |         |                   |   |         |         |      |   |         |         |   |   |         |        
|                    
|                    
|                    
|                    
|                     |                    | Income (loss) before income taxes |   | $              | (2,565  | )                 |   | $       | (4,757  | )    |   | $       | (4,573  | ) |   | $       | 7,171   | 
|                     |                    |                                   |   |                |         |                   |   |         |         |      |   |         |         |   |   |         |        

(4) Reclassifications

Certain fiscal 1999 amounts have been reclassified to conform with the fiscal 2000
presentation.

6



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##### 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 Cole National Corporations
results of operations for the 13 and 39 week periods ended October 28, 2000 and
October 30, 1999 (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 January 29, 2000 included in the 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 January
29, 2000 is referred to as fiscal 1999. The current fiscal year,
which will end February 3, 2001, is referred to as fiscal 2000.

Results of Operations

The following table sets forth certain operating information for the third
quarter and first nine months of fiscal 2000 and fiscal 1999 (dollars in
millions):

|                                                     |                   |                               |                     |     |               |       |                   |     |        |       |      |   |      |       |        |  |       |       |       |  |       |       |     |   |       |        |  
|---------------------------------------------------- | ----------------- | ----------------------------- | ------------------- | --- | ------------- | ----- | ----------------- | --- | ------ | ----- | ---- | - | ---- | ----- | ------ |  | ----- | ----- | ----- |  | ----- | ----- | --- | - | ----- | ------ | -
|                                                     |                   |                               |                     |     | Third Quarter |       | First Nine Months
|                                                     |                   |                               |                     |     |               |       |                  
|                                                     |                   |                               |                     |     | 2000          |       | 1999              |     | Change |       | 2000 |   | 1999 |       | Change
|                                                     |                   |                               |                     |     |               |       |                   |     |        |       |      |   |      |       |       
|Net revenue:                                        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                   | Cole Vision                   |                     |     | 200.4         |       |                   |     | 198.0  |       |      |   | 1.2  | %     |        |  | 598.1 |       |       |  | 602.1 |       |     |   | (0.7) | %     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                   | Things Remembered             |                     |     | 55.6          |       |                   |     | 53.2   |       |      |   | 4.5  |       |        |  | 180.3 |       |       |  | 170.5 |       |     |   | 5.8   |       
|                                                     |                   |                               |                     |     |               |       |                   |     |        |       |      |   |      |       |        |  |       |       |       |  |       |       |     |  
|                                                     |                   |                               | Total net revenue   |     |               | 256.0 |                   |     |        | 251.2 |      |   |      | 1.9   | %      |  |       | 778.4 |       |  |       | 772.6 |     |   |       | 0.8    | %
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|Gross margin                                         |                   |                               | 172.5               |     |               |       | 164.2             |     |        |       | 5.1  | % |      |       | 520.6  |  |       |       | 506.6 |  |       |       | 2.8 | %
|                                                    
|                                                    
|                                                    
|                                                    
|Operating expenses                                   |                   |                               | 158.2               |     |               |       | 152.5             |     |        |       | 3.8  |   |      |       | 476.1  |  |       |       | 452.8 |  |       |       | 5.2 |  
|                                                    
|                                                    
|                                                    
|                                                    
|Depreciation and amortization                        |                   |                               | 10.0                |     |               |       | 10.5              |     |        |       | (5.0 | ) |      |       | 30.0   |  |       |       | 28.7  |  |       |       | 4.3 |  
|                                                     |                   |                               |                     |     |               |       |                   |     |        |       |      |   |      |       |        |  |       |       |       |  |       |       |     |  
|                                                     |                   |                               | Operating income    |     |               | 4.3   |                   |     |        | 1.2   |      |   |      | 266.2 | %      |  |       | 14.5  |       |  |       | 25.1  |     |   |       | (42.3) | %
|                                                     |                   |                               |                     |     |               |       |                   |     |        |       |      |   |      |       |        |  |       |       |       |  |       |       |     |  
|Percentage of net revenue:                          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                   | Gross margin                  |                     |     | 67.4          | %     |                   |     | 65.4   | %     |      |   | 2.0  |       |        |  | 66.9  | %     |       |  | 65.6  | %     |     |   | 1.3   |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                   | Operating expenses            |                     |     | 61.8          |       |                   |     | 60.7   |       |      |   | 1.1  |       |        |  | 61.2  |       |       |  | 58.7  |       |     |   | 2.5   |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                   | Depreciation and amortization |                     |     | 3.9           |       |                   |     | 4.2    |       |      |   | (0.3 | )     |        |  | 3.8   |       |       |  | 3.7   |       |     |   | 0.1   |       
|                                                     |                   |                               |                     |     |               |       |                   |     |        |       |      |   |      |       |        |  |       |       |       |  |       |       |     |  
|                                                     |                   |                               | Operating income    |     |               | 1.7   | %                 |     |        | 0.5   | %    |   |      | 1.2   |        |  |       | 1.9   | %     |  |       | 3.2   | %   |   |       | (1.3   | )
|                                                     |                   |                               |                     |     |               |       |                   |     |        |       |      |   |      |       |        |  |       |       |       |  |       |       |     |  
|Number of retail locations
at the end of the period:
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                   | Cole Licensed Brands          |                     |     | 1,161         |       |                   |     | 1,199  |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                   | Pearle company-owned          |                     |     | 444           |       |                   |     | 455    |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                   | Pearle franchised             |                     |     | 423           |       |                   |     | 412    |      
|                                                     |                   |                               |                     |     |               |       |                   |    
|                                                     |                   |                               | Total Cole Vision   |     |               | 2,028 |                   |     |        | 2,066 |     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Things Remembered |                               |                     | 794 |               |       |                   | 811 |       
|                                                     |                   |                               |                     |     |               |       |                   |    
|                                                     |                   |                               | Total Cole National |     |               | 2,822 |                   |     |        | 2,877 |     
|                                                     |                   |                               |                     |     |               |       |                   |    

7



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##### Table of Contents



The increase in net revenue for the third quarter and first nine months of
fiscal 2000 was primarily attributable to increases in consolidated
comparable store sales and revenue associated with the MetLife vision care
business acquired in October 1999. These increases were partially offset by a
reduction in the number of locations, including the closing of all optical
departments at Montgomery Ward in December 1999, and by $1.4 million of
revenue in fiscal 1999 from the sale of rights under various franchise and
other agreements for 13 franchise stores. Changes in comparable store sales
by business were:

|                             |                     |  |               |     |                   |  |     |     |  
|---------------------------- | ------------------- |  | ------------- | --- | ----------------- |  | --- | --- | -
|                             |                     |  | Third Quarter |     | First Nine Months
|                             |                     |  |               |     |                  
|Cole Licensed Brands         |                     |  | 2.2           | %   |                   |  | 4.2 | %  
|                            
|                            
|                            
|                            
|Pearle U.S. company-owned    |                     |  | 6.4           | %   |                   |  | 0.7 | %  
|                            
|                            
|                            
|                            
|                             | Total Cole Vision   |  |               | 3.4 | %                 |  |     | 2.8 | %
|                            
|                            
|                            
|                            
|Things Remembered            |                     |  | 4.0           | %   |                   |  | 6.3 | %  
|                            
|                            
|                            
|                            
|                             | Total Cole National |  |               | 3.5 | %                 |  |     | 3.6 | %
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|Pearle U.S. franchise stores |                     |  | 5.0           | %   |                   |  | 3.2 | %  
|                            
|                            
|                            
|                            
|Pearle U.S. chain-wide       |                     |  | 5.6           | %   |                   |  | 2.0 | %  

At Cole Licensed Brands, an increase in the average selling price for
the third quarter and first nine months was nearly offset by a decrease in
number of units sold, primarily from closing the Montgomery Ward departments.
At Pearle company-owned stores, third quarter sales benefited from an
increase in both average transaction amount and number of
transactions compared to the same period last year. Both
measures reflected improvement from first half results. For the first nine
months, the average transaction increase at Pearle was offset by a decrease
in the number of transactions. At Things Remembered, the comparable store
sales increases for the third quarter and first nine months reflected an
increase in sales of new merchandise at higher average unit retails,
partially offset by a third quarter decrease in the number of transactions.

The gross margin dollar increase for the third quarter was attributable
to the revenue increase at Pearle and Things Remembered, the additional
revenue associated with the MetLife vision care business and an improvement
in gross margin as a percentage of net revenue. The improvement in the gross
margin rate was a result of higher average selling prices in the optical
businesses, the additional MetLife vision care revenue and warehouse
productivity gains at Things Remembered. At Cole Vision, gross margin rate
improved 2.5 and 1.7 percentage points in fiscal 2000 compared to the third
quarter and first nine months of last year, respectively. At Things
Remembered, gross margin rate increased 0.4 percentage points to last year in
the third quarter. Gross margin rate at Things Remembered decreased 0.5
percentage points to last year in the first nine months reflecting the impact
of an aggressive merchandise clearance promotion in the first quarter of this
year.

The operating expense increases for the third quarter and first nine
months were due primarily to increases in staffing for improved service
levels in the optical businesses, increases in expenses associated
with the rapid expansion of
Target Optical and increases in managed vision care costs
(primarily associated with the MetLife vision care business). Third
quarter last year included severance costs for the Company's former
president and several other executives that totaled
$4.7 million of which $0.7 million was charged to depreciation and
amortization. A decline in comparable store sales at Pearle company-owned
stores during the first six months this year and a $1.8 million first quarter
2000 charge for severance costs recorded in connection with a personnel
reduction at Cole Vision also impacted the nine-month comparison. Payroll
costs as a percentage of net revenue increased 1.4 percentage points in the
third quarter and 1.7 percentage points for the first nine months compared to
the same periods a year ago. The Company opened 45 Target Optical
stores in the third quarter, bringing the total number of Target
Optical stores opened this year to 87. Managed vision care costs increased 0.3 and 0.4
percentage points for the third quarter and first nine months, respectively,
compared to those same periods last year.

The increase in depreciation and amortization for the first nine months
of fiscal 2000 compared to the same period last year was primarily
attributable to amortization of systems development costs related to the
Pearle manufacturing and merchandise/inventory management system implemented
in the third quarter last year and amortization of restricted stock awarded
in January 2000. Depreciation and amortization expense for last
year included the $0.7 million third quarter severance charge.

8



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##### Table of Contents



The increase in operating income for the third quarter of fiscal 2000
compared to the same period last year was primarily due to last years
severance costs, partially offset by the income from the sale of certain
franchise rights last year. Operating income excluding these items was
essentially flat to last year, an improvement from first and second quarter
results, attributable in large part to the sales improvement at Pearle. The
decrease in operating income for the first nine months compared to the same
period last year was primarily the result of the increases in operating
expenses and depreciation and amortization as noted above.

The increase in interest and other (income) expense for the third
quarter and first nine months compared to the same periods a year ago
reflected increased interest expense from seasonal borrowing and less income,
due to reduced short-term investments and lower equity income for Pearle Europe. Income tax provisions were recorded in
the first nine months of fiscal 2000 and fiscal 1999 using the Companys
estimated annual effective tax rates of 67% and 41%, respectively. At the end
of third quarter, the Company reassessed its estimate of the annual effective
tax rate for fiscal 2000 increasing the rate from the previous estimate of
55%.

The net loss for the third quarter decreased to $0.6 million from $2.8
million for the same period last year. For the first nine months of fiscal
2000, net income decreased to a loss of $1.5 million from a
profit of $4.2 million for the first nine months of fiscal 1999.

Liquidity and Capital Resources

The Companys primary source of liquidity is funds provided from
operations of its operating subsidiaries. In addition, its wholly-owned
subsidiary, Cole National Group, Inc., and its operating subsidiaries have a
working capital line of credit of $75.0 million. By amendment, availability
under the working capital commitment ranges from $50.0 million to $75.0
million based on Cole National Groups current debt leverage ratio described
in the credit facility. As of October 28, 2000, total availability under the
credit facility was $50.0 million and availability after reduction for
commitments under outstanding letters of credit and outstanding borrowings
totaled $31.9 million. The maximum working capital borrowings outstanding
during the third quarter of fiscal 2000 was $16.5 million. There were no
working capital borrowings outstanding at any time during the first six
months of fiscal 2000 and during fiscal 1999.

Operations for the first nine months provided $5.9 million of cash in
fiscal 2000 compared to $9.5 million for the same period in fiscal 1999. The
primary reason for the $3.6 million reduction in cash provided by operations
was the decrease in net income compared to last year. There were also
significant, but offsetting, changes in the assets and liabilities for the
first nine months of this year compared to the same period last year.
Re-merchandising the Pearle stores and opening the Target departments
required a larger increase in inventories and a corresponding increase in
accounts payable this year. There was a significant decrease in accounts
payable and accrued liabilities for the same period last year.

Cash used by investing activities included capital additions of $25.5
million and $21.0 million for the first nine months of fiscal 2000 and fiscal
1999, respectively. The majority of capital expenditures were for store
fixtures, equipment and leasehold improvements for new stores including the
Target openings and for the remodeling of existing stores. Investments in
systems development costs totaled $5.6 million and $10.9 million in the first
nine months of fiscal 2000 and fiscal 1999, respectively. The Companys net
investment in Pearle Europe was increased by $0.9 million and $1.4 million in
the first nine months of fiscal 2000 and fiscal 1999, respectively. In
fiscal 1999, the Company acquired the managed vision care business of
Metlife.

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.

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Outlook and Forward-Looking Information

The Company expects significant improvement in fourth quarter earnings
at Cole Vision, compared to the same period a year ago, due to improved sales
and gross margin performance this year and elimination of extra advertising
expenditures at Pearle that were not productive last year. As a result, the
Company currently expects that earnings per share for the fourth quarter of
fiscal 2000 could be approximately $0.20 to $0.25 compared to a loss of $0.15 per share for
the fourth quarter of fiscal 1999. Achieving such results is, of course
subject to the usual holiday season sales risk at Things Remembered and other
factors outlined in the next paragraph.

Certain sections of this Form 10-Q, 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 the continuing restructuring and improvements in the
operations of the optical business, the Companys ability to select, stock
and price merchandise attractive to customers, success of systems
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 relationships 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 the Company. All forward-looking
statements involve risk and uncertainty.

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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.

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PART II  OTHER INFORMATION




Item 6. Exhibits and Reports on Form 8-K

|    |  |                     |  |                                                                                                                         
|--- |  | ------------------- |  | ------------------------------------------------------------------------------------------------------------------------
|(a) |  | Exhibits.           |  | The following Exhibits are filed herewith and made a part hereof:                                                       
|   
|   
|   
|   
|   
|   
|   
|   
|   
|   
|   
|   
|    |  | 10.1                |  | Secured Promissory Note between Cole National Corporation and
Jeffrey A. Cole dated as of November 17, 2000.            
|   
|   
|   
|   
|   
|   
|   
|   
|   
|   
|   
|   
|    |  | 10.2                |  | Stock Pledge and Security Agreement between Cole National
Corporation and Jeffrey A. Cole dated as of November 17, 2000.
|   
|   
|   
|   
|   
|   
|   
|   
|   
|   
|   
|   
|    |  | 27                  |  | Financial Data Schedule                                                                                                 
|   
|   
|   
|   
|   
|   
|   
|   
|   
|   
|   
|   
|(b) |  | Reports on Form 8-K
|   
|   
|   
|   
|    |  |                     |  | None.                                                                                                                   

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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/William P. Lahiff, Jr.                                                                                  
| |  |                                                                                                                
| |  | William P. Lahiff, Jr.
Vice President and Controller
(Duly Authorized Officer and Principal
Accounting Officer)

Date: December 7, 2000

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COLE NATIONAL CORPORATION
FORM 10-Q
QUARTER ENDED OCTOBER 28, 2000




EXHIBIT INDEX

|        |  |                                                                                                                          |  |  |  | 
|------- |  | ------------------------------------------------------------------------------------------------------------------------ |  |  |  | 
|Exhibit
|Number  |  | Description                                                                                                             
|       
|       
|       
|       
|       
|       
|       
|       
|       
|       
|       
|       
|10.1    |  | Secured Promissory Note between Cole National Corporation and
Jeffrey A. Cole dated as of November 17, 2000.            
|       
|       
|       
|       
|       
|       
|       
|       
|       
|       
|       
|       
|10.2    |  | Stock Pledge and Security Agreement between Cole National
Corporation and Jeffrey A. Cole dated as of November 17, 2000.
|       
|       
|       
|       
|       
|       
|       
|       
|       
|       
|       
|       
|27      |  | Financial Data Schedule                                                                                                 

14