<PAGE>   1
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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 JULY 31, 1999,
              OR

              TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
              FROM___________ TO____________.


                         COMMISSION FILE NUMBER 1-12814

                            COLE NATIONAL CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                           DELAWARE                              34-1453189
             (STATE OR OTHER JURISDICTION OF                  (I.R.S. EMPLOYER
             INCORPORATION OR ORGANIZATION)                  IDENTIFICATION NO.)


                      5915 LANDERBROOK DRIVE
                      MAYFIELD HEIGHTS, OHIO                       44124
             (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)            (ZIP CODE)

                                 (440) 449-4100
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)



         INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
         REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD
         THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS
         BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
          X  YES     NO
         ---     ---

         AS OF AUGUST 23, 1999, 14,855,843 SHARES OF THE REGISTRANT'S COMMON
         STOCK WERE OUTSTANDING.

================================================================================
<PAGE>   2

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                   COLE NATIONAL CORPORATION AND SUBSIDIARIES
                                    FORM 10-Q
                           QUARTER ENDED JULY 31, 1999
                                      INDEX
<TABLE>
<CAPTION>

                                                                                                PAGE NO.

PART I.  FINANCIAL INFORMATION

       <S>                                                                                   <C>
         ITEM 1.  FINANCIAL STATEMENTS

                  CONSOLIDATED BALANCE SHEETS AS OF JULY 31, 1999 AND JANUARY 30,
                  1999......................................................................      1

                  CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE 13 AND 26 WEEKS ENDED
                  JULY 31, 1999 AND AUGUST 1, 1998..........................................      2

                  CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE 26 WEEKS ENDED JULY 31,
                  1999 AND AUGUST 1, 1998...................................................      3

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS................................    4 - 6

         ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                  RESULTS OF OPERATIONS.....................................................   7 - 10

         ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................     11


PART II. OTHER INFORMATION

         ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......................     12

         ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K..........................................     13

</TABLE>

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<PAGE>   3


                         PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
                   COLE NATIONAL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)


                                                        July 31,    January 30,
                                                         1999          1999
                                                       ---------    ---------
Assets
------
Current assets:
    Cash and temporary cash investments                $  25,254    $  51,057
    Accounts receivable, less allowance for
       doubtful accounts of $8,935 in 1999 and
       $7,189 in 1998                                     46,573       45,561
    Current portion of notes receivable                    3,452        2,707
    Refundable income taxes                                9,556        9,556
    Inventories                                          126,852      119,881
    Prepaid expenses and other                             8,529        8,582
    Deferred income tax benefits                          13,739       14,048
                                                       ---------    ---------
          Total current assets                           233,955      251,392
Property and equipment, at cost                          268,710      261,605
    Less-accumulated depreciation and amortization      (142,721)    (135,731)
                                                       ---------    ---------
          Total property and equipment, net              125,989      125,874
Other assets:
    Notes receivable, excluding current portion           30,892       32,039
    Deferred income taxes and other assets                62,742       59,021
    Intangible assets, net                               157,160      159,698
                                                       ---------    ---------
          Total assets                                 $ 610,738    $ 628,024
                                                       =========    =========

Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
    Current portion of long-term debt                  $   1,623    $   1,497
    Accounts payable                                      56,873       73,065
    Accrued interest                                       6,280        6,216
    Accrued liabilities                                   89,986      101,791
    Accrued income taxes                                   4,482          128
                                                       ---------    ---------
          Total current liabilities                      159,244      182,697

Long-term debt, net of discount and current portion      285,222      276,013

Other long-term liabilities                               14,490       23,954

Stockholders' equity                                     151,782      145,360
                                                       ---------    ---------
          Total liabilities and stockholders' equity   $ 610,738    $ 628,024
                                                       =========    =========


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

                                      -1-

<PAGE>   4




                   COLE NATIONAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                      13 Weeks Ended         26 Weeks Ended
                                    --------------------  --------------------
                                    July 31,   August 1,  July 31,   August 1,
                                      1999       1998       1999       1998
                                    --------   --------   --------   --------

Net revenue                         $267,502   $267,611   $534,134   $539,439

Costs and expenses:
    Cost of goods sold                90,205     89,132    177,503    179,421
    Operating expenses               155,828    147,721    314,788    304,039
    Depreciation and amortization      8,797      8,091     17,931     16,489
                                    --------   --------   --------   --------
       Total costs and expenses      254,830    244,944    510,222    499,949
                                    --------   --------   --------   --------

Operating income                      12,672     22,667     23,912     39,490

Interest and other (income)
    expense, net                       5,895      6,233     11,984     12,520
                                    --------   --------   --------   --------

Income before income taxes             6,777     16,434     11,928     26,970

Income tax provision                   2,779      6,634      4,891     11,058
                                    --------   --------   --------   --------

Net income                          $  3,998   $  9,800   $  7,037   $ 15,912
                                    ========   ========   ========   ========


Earnings per common share:
    Basic-                          $    .27   $    .66   $    .47   $   1.07
    Diluted-                        $    .27   $    .64   $    .47   $   1.04

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

                                      -2-

<PAGE>   5


                   COLE NATIONAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                       26 Weeks Ended
                                                                    --------------------
                                                                    July 31,   August 1,
                                                                      1999       1998
                                                                    --------    --------
<S>                                                                <C>         <C>
Cash flows from operating activities:
    Net income                                                      $  7,037    $ 15,912
    Adjustments to reconcile net income to net cash provided
      (used) by operating activities:
          Depreciation and amortization                               17,931      16,489
          Amortization of restricted stock awards                        271          --
          Non-cash interest, net                                        (854)       (473)
          Change in assets and liabilities:
              Decrease (increase) in accounts and notes
                 receivable, prepaid expenses and other assets           319      (5,580)
              Increase in inventories                                 (6,971)     (5,950)
              Decrease in accounts payable, accrued liabilities
                 and other liabilities                               (25,697)    (23,220)
              Increase in accrued interest                                64         207
              Increase in accrued, refundable and deferred
                 income taxes                                          4,354      10,090
                                                                    --------    --------
                 Net cash provided (used) by operating activities     (3,546)      7,475
                                                                    --------    --------

Cash flows from investing activities:
    Purchases of property and equipment, net                         (12,901)    (22,563)
    Systems development costs                                         (6,500)    (10,150)
    Investment in Pearle Europe, net                                  (1,360)     (7,152)
    Acquisitions of businesses, net                                       --      (2,923)
    Other, net                                                          (582)        402
                                                                    --------    --------
                 Net cash used by investing activities               (21,343)    (42,386)
                                                                    --------    --------

Cash flows from financing activities:
    Repayment of long-term debt                                         (710)       (682)
    Net proceeds from exercise of stock options and warrants             153       1,857
    Common stock repurchased                                            (564)         --
    Other, net                                                           207        (165)
                                                                    --------    --------
                 Net cash provided (used) by financing activities       (914)      1,010
                                                                    --------    --------

Cash and temporary cash investments:
  Net decrease during the period                                     (25,803)    (33,901)
  Balance, beginning of the period                                    51,057      68,053
                                                                    --------    --------
  Balance, end of the period                                        $ 25,254    $ 34,152
                                                                    ========    ========

</TABLE>


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

                                      -3-

<PAGE>   6


                   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 30, 1999.

           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 July 31, 1999 and
    the results of operations and cash flows for the 26 weeks ended July 31,
    1999 and August 1, 1998.

           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 $283,000 and $13,331,000, respectively, for the
    26 weeks ended July 31, 1999, and $912,000 and $13,471,000, respectively,
    for the 26 weeks ended August 1, 1998.

           Earnings Per Share

           Earnings per share for the 13 and 26 weeks ended July 31, 1999 and
    August 1, 1998 have been calculated based on the following weighted average
    number of common shares and equivalents outstanding:

                              13 Weeks                       26 Weeks
                     --------------------------      -------------------------
                      July 31,        August 1,       July 31,       August 1,
                        1999            1998            1999           1998
                     ----------      ----------      ----------     ----------

           Basic     14,855,657      14,881,801      14,862,827     14,818,344
           Diluted   14,874,604      15,344,539      14,971,526     15,310,805


                                      -4-

<PAGE>   7


    (2) RESTRUCTURING CHARGE

           In the fourth quarter of fiscal 1998, the Company recorded a
    restructuring charge related to Pearle's operations. The Company's
    restructuring plan, which included the closing of certain unprofitable
    stores during fiscal 1999 and removing surfacing equipment from certain
    in-store full service labs through the second quarter of 2000, is
    proceeding. The estimated costs of the restructuring are expected to
    approximate original estimates. During the first half of fiscal 1999, the
    Company closed a total of 17 Pearle stores and no in-store labs. The
    restructuring reserves remaining at January 30, 1999 were $7.1 million, of
    which approximately $4.9 million were paid in the first six months of fiscal
    1999. The remaining reserve at July 31, 1999 of $2.2 million is expected to
    be paid through the fourth quarter of fiscal 1999.

    (3)    LONG TERM DEBT

           In the fourth quarter of fiscal 1998, the Company entered into an
    irrevocable commitment to contribute $10,000,000 to a leading medical
    institution, supporting the development of a premier eye care research and
    surgical facility.

      On April 23, 1999, the Company issued a $10,000,000 promissory note
    bearing interest at 5% per annum in recognition of the commitment. Prior to
    this, the obligation was classified with other long-term liabilities in the
    consolidated balance sheet. The note requires a $5,000,000 principal payment
    to be made on April 23, 2004, and principal payments in the amount of
    $1,000,000 to be made on the anniversary date of the note each successive
    year through 2009. Interest will be paid at the end of each year for the
    first 5 years, and thereafter with each payment of principal.

     (4)   CREDIT FACILITY

           In August 1999, the Company's credit facility was amended and
    extended until January 31, 2003. Borrowings under the credit facility
    initially bear interest based on leverage ratios at a rate equal to, at the
    option of the principal operating subsidiaries of Cole National Group,
    either (a) the Eurodollar Rate plus 2% or (b) 1% plus the highest of (i) the
    prime rate, (ii) the three-week moving average of the secondary market rates
    for three-month certificates of deposit plus 1% and (iii) the federal funds
    rate plus .5%. Cole National Group pays a commitment fee of between .375%
    and .75% per annum on the total unused portion of the facility based on the
    percentage of revolving credit commitments used.

                                      -5-

<PAGE>   8


     (5)   SEGMENT INFORMATION

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

<TABLE>
<CAPTION>

                                                 13 Weeks Ended          26 Weeks Ended
                                             ----------------------    ----------------------
                                              July 31,    August 1,    July 31,     August 1,
                                                1999        1998         1999         1998
                                             ---------    ---------    ---------    ---------
<S>                                          <C>         <C>          <C>          <C>
       Net revenue:
           Cole Vision                       $ 198,634    $ 203,368    $ 416,865    $ 429,468
           Things Remembered                    68,868       64,243      117,269      109,971
                                             ---------    ---------    ---------    ---------
             Consolidated net revenue        $ 267,502    $ 267,611    $ 534,134    $ 539,439
                                             =========    =========    =========    =========

       Income or loss:
           Cole Vision                       $   4,077    $  15,102    $  18,404    $  35,958
           Things Remembered                    10,479        8,969        9,138        6,342
                                             ---------    ---------    ---------    ---------
             Total segment profit               14,556       24,071       27,542       42,300
       Unallocated amounts:
           Corporate expenses                   (1,884)      (1,404)      (3,630)      (2,810)
                                             ---------    ---------    ---------    ---------
             Consolidated operating income      12,672       22,667       23,912       39,490
       Interest and other expense, net          (5,895)      (6,233)     (11,984)     (12,520)
                                             ---------    ---------    ---------    ---------
             Income before income taxes      $   6,777    $  16,434    $  11,928    $  26,970
                                             =========    =========    =========    =========
</TABLE>

    (6)    RECLASSIFICATIONS

      Certain 1998 amounts have been reclassified to conform with the 1999
presentation.

                                      -6-

<PAGE>   9


    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 26 week periods
    ended July 31, 1999 and August 1, 1998 (the Company's second quarter and
    first six months) 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 30, 1999 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 30, 1999 is referred to as "fiscal 1998." The
    current fiscal year, which will end January 29, 2000, is referred to as
    "fiscal 1999."

    RESULTS OF OPERATIONS

           The following table sets forth certain operating information for the
    second quarter and first six months of fiscal 1999 and fiscal 1998 (dollars
    in millions):

<TABLE>
<CAPTION>
                                       Second Quarter               First Six Months
                                ---------------------------  ---------------------------
                                 Fiscal    Fiscal             Fiscal     Fiscal
                                  1999      1998     Change    1999       1998    Change
                                  ----      ----     ------    ----       ----    ------

Net Revenue-
<S>                            <C>       <C>         <C>    <C>       <C>         <C>
  Cole Vision                   $  198.6  $  203.4    (2.3%) $  416.8  $  429.4    (2.9%)
  Things Remembered                 68.9      64.2     7.2%     117.3     110.0     6.6%
                                --------  --------           --------  --------
    Total net revenue           $  267.5  $  267.6     0.0%  $  534.1  $  539.4    (1.0%)

Gross profit                    $  177.3  $  178.5    (0.7%) $  356.6  $  360.0    (0.9%)
Operating expenses                 155.8     147.7     5.5%     314.8     304.0     3.5%
Depreciation & amortization          8.8       8.1     8.7%      17.9      16.5     8.7%
                                --------  --------           --------  --------
    Operating income            $   12.7  $   22.7   (44.1%) $   23.9  $   39.5   (39.4%)
                                ========  ========           ========  ========


Percentage of Net Revenue-
  Gross margin                      66.3%     66.7%   (0.4)      66.8%     66.7%    0.1
  Operating expenses                58.3      55.2     3.1       58.9      56.4     2.5
  Depreciation & amortization        3.3       3.0     0.3        3.4       3.0     0.4
                                --------  --------           --------  --------
    Operating income                 4.7%      8.5%   (3.8)       4.5%      7.3%   (2.8)
                                ========  ========           ========  ========


Number of Retail Locations
  at the End of the Period-
    Cole Licensed Brands           1,176     1,161
    Pearle company-owned             462       461
    Pearle franchised                418       403
                                --------  --------
      Total Cole Vision            2,056     2,025
    Things Remembered                810       823
                                --------  --------
      Total Cole National          2,866     2,848
                                ========  ========

</TABLE>

                                      -7-

<PAGE>   10



           The softness in net revenue for the second quarter and first six
    months of fiscal 1999 was primarily attributable to decreases in
    consolidated comparable store sales, partially offset by growth in the
    number of locations since last year. Changes in comparable store sales by
    business were:

                                             Second Quarter     First Six Months
                                             --------------     ----------------

           Cole Licensed Brands (U.S.)            (4.5%)             (4.7%)
           Pearle company-owned (U.S.)            (4.0%)             (5.9%)
              Total Cole Vision                   (4.0%)             (4.8%)
           Things Remembered                       6.9%               7.0%
              Total Cole National                 (1.0%)             (2.0%)

    Sales at Cole Licensed Brands were negatively impacted by a competitive
    promotional environment to which Cole began responding at the end of the
    second quarter. This response produced an improvement in the sales trend
    during the last two weeks of the quarter. Sales at Pearle were impacted by
    the competitive promotional environment and Pearle's focus on long-term,
    brand-building in its advertising campaign, as well as operating issues the
    company is actively addressing. During the second quarter, Pearle refocused
    its marketing efforts to become more promotional, resulting in an improved
    trend in comparable store sales as compared to the first quarter. The second
    quarter sales decrease at Cole Vision reflected a decline in the number of
    spectacles sold as well as a lower average selling price for contact lenses
    at Cole Licensed Brands and a reduction in the average transaction amount at
    Pearle due to a change in promotions between years. At Things Remembered,
    the comparable store sales increase reflected increased sales of additional
    personalization and new merchandise at higher average unit retails, along
    with the benefits from marketing directly to its existing customer base. The
    number of transactions at Things Remembered in the second quarter was
    essentially flat compared to a year ago. During the first six months of
    fiscal 1999, Cole National Corporation opened 52 new locations and closed 70
    locations.

           The gross profit decreases for the second quarter and first six
    months of fiscal 1999 compared to those same periods in fiscal 1998 were
    primarily attributable to the lower revenue at Cole Vision, partially offset
    by the revenue increase at Things Remembered. Gross margin at Cole Vision
    declined 0.9 and 0.4 percentage points in the second quarter and first six
    months of fiscal 1999, respectively, compared to the same periods last year.
    The lower gross margin at Cole Vision was due in part to the impact of lower
    contact lens margins in the second quarter. Gross margin at Things
    Remembered improved 0.7 and 1.3 percentage points in the second quarter and
    first six months of fiscal 1999, respectively, reflecting increased sales of
    additional personalization and higher margins from new products.

           The unfavorable leverage in operating expenses in the second quarter
    was primarily attributable to a 1.2 percentage point increase in payroll
    costs, a 1.4 percentage point increase in net advertising expenditures and a
    0.7 percentage point increase in managed vision care expenses. The
    unfavorable leverage for the first six months was primarily attributable to
    a 1.2 percentage point increase in payroll costs, a 0.4 percentage point
    increase in net advertising expenditures and a 0.6 percentage point increase
    in managed vision care expenses. The unfavorable payroll leverages were due
    to the comparable store sales decreases at Cole Vision and to staffing
    increases in managed vision care and information systems, partly offset by
    payroll leverage gains on the sales increases at Things Remembered. The

                                      -8-
<PAGE>   11

    unfavorable advertising leverage was largely due to increased advertising at
    Cole Vision in the second quarter of fiscal 1999 in response to the
    competitive pricing environment. The increases in managed vision care
    expenses were primarily attributable to growth in call and claims volumes
    associated with increases in sponsor-funded programs. The depreciation and
    amortization expense increases were primarily attributable to the increases
    in amortization of systems development and software costs.

           See the notes to consolidated financial statements for information on
    the status of the Company's restructuring charge recorded in the fourth
    quarter of fiscal 1998.

           The decreases in income from operations were primarily the result of
    the decreases in net revenue and gross profit, and the increases in
    operating expenses and depreciation and amortization. Net interest and other
    expense in fiscal 1999 decreased slightly from the second quarter and first
    six months of fiscal 1998. An income tax provision was recorded in the first
    six months of fiscal 1999 and fiscal 1998 using the Company's estimated
    annual effective tax rate of 41% in both years.

    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
    available to them working capital commitments of $75.0 million, reduced by
    commitments under letters of credit, under a credit facility that was
    recently extended through January 2003. There were no working capital
    borrowings outstanding at any time during the first six months of fiscal
    1999 and 1998. As of July 31, 1999, availability under the credit facility
    totaled $59.8 million, after reduction for commitments under outstanding
    letters of credit.

           Operations for the first six months used $3.5 million of cash in
    fiscal 1999 compared to cash provided of $7.5 million in fiscal 1998. The
    primary reason for the additional $11.0 million in cash used by operations
    was the decrease in operating income in fiscal 1999, partially offset by not
    having the increase in accounts and notes receivable, prepaid expenses and
    other assets that was experienced in fiscal 1998.

           Cash used by investing activities included capital additions of $12.9
    million and $22.6 million for the first six months of fiscal 1999 and fiscal
    1998, respectively. The majority of capital expenditures were for store
    fixtures, equipment and leasehold improvements for new stores and the
    remodeling of existing stores. Capital expenditures in fiscal 1998 also
    included $9.5 million to purchase the office building now occupied by Cole
    Vision. Investments in systems development costs totaled $6.5 million and
    $10.2 million in the first six months of fiscal 1999 and fiscal 1998,
    respectively. In July 1999, the Company invested an additional $1.2 million
    in the form of 9% shareholder loans to Pearle Europe B.V. (Pearle Europe)
    and $0.2 million in additional equity in connection with Pearle Europe's
    acquisition of a retail optical chain in Italy. In February 1998, the
    Company repaid a $3.2 million note payable to a subsidiary of Pearle Europe
    and invested an additional $7.2 million in the form of 8% shareholder loans
    to Pearle Europe in connection with Pearle Europe's acquisition of optical
    operations in Germany and Austria.

                                       -9-
<PAGE>   12

           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.

    YEAR 2000

           The Company is proceeding with the implementation of its Year 2000
    Readiness Program, including ascertaining Year 2000 readiness of critical
    third parties. Management continues to believe that all critical programs
    and hardware will be Year 2000 ready, including testing, by the end of the
    third quarter of fiscal 1999 and expects that any necessary contingency
    plans will be completed at that time.

           Management estimates the total cost of the Year 2000 Readiness
    Program will be approximately $3.6 million, including $0.3 million of new
    hardware and software that has been capitalized. The remaining $3.3 million
    is being expensed as incurred (approximately $2.4 million in fiscal 1998 and
    $0.9 million in fiscal 1999, including $0.5 million during the first six
    months). These costs include only external costs as internal costs, which
    consist primarily of payroll-related costs of employees, are not tracked
    separately for the Year 2000 Readiness Program. The estimate of external
    costs does not include costs associated with addressing and resolving issues
    as a result of the failure of third parties to become Year 2000 ready. See
    the Company's Annual Report on Form 10-K for the fiscal year ended January
    30, 1999 for further discussion of Year 2000.

    RECENT DEVELOPMENTS AND FORWARD-LOOKING INFORMATION

           In the second half of fiscal 1999, the Company will continue to
    respond to the competitive pricing environment that exists in the retail
    optical market with the development and implementation of promotional
    messages in order to attract customers and improve comparable store sales.
    These actions may cause a negative impact on gross margin and may not
    significantly improve the recent trend in sales for the remainder of the
    year. Operating income for the second half of fiscal 1999 is expected to be
    below the same period of the prior year.

           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 forecast due to a variety of
    factors that can adversely affect 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 ability of Cole National Corporation and its suppliers, host
    stores, and managed vision care organization partners to achieve Year 2000
    readiness, the integration of acquired operations, the ability to select,
    stock and price merchandise attractive to customers, the implementation of
    its store acquisition program, economic and weather factors affecting
    consumer spending, operating factors affecting customer satisfaction,
    including manufacturing quality of optical and engraved goods, the
    relationships with host stores and franchisees, the mix of goods sold,
    pricing and other competitive factors, and the seasonality of the business.
    Forward-looking statements are made based upon management's expectations and
    beliefs concerning future events impacting Cole National Corporation. All
    forward-looking statements involve risk and uncertainty.

                                      -10-

<PAGE>   13


    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 in 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.


                                      -11-

<PAGE>   14


                           PART II - OTHER INFORMATION

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

           On June 10, 1999, the Company held its annual meeting of
    stockholders. At that meeting, the stockholders elected seven directors to
    serve until the next annual meeting of stockholders, approved the 1999
    Employee Stock Purchase Plan, approved the amended 1998 Equity and
    Performance Incentive Plan ("Omnibus Plan"), and confirmed the appointment
    of Arthur Andersen LLP as independent auditors of the Company for the fiscal
    year ending January 29, 2000.

           Of the total eligible votes of 14,879,243, stockholders cast votes of
    13,813,321 or 92.84% of the total eligible votes. The votes cast for the
    aforementioned matters were as follows:

           1)   Election of Directors
<TABLE>
<CAPTION>

                                                                             Abstentions
                                                                            and/or Broker
                                              For             Withheld        non-votes
                                           ----------         --------        ---------
<S>                                       <C>                 <C>                <C>
                Jeffrey A. Cole            13,243,549          569,772            0
                Timothy F. Finley          13,248,647          564,674            0
                Irwin W. Gold              13,250,382          562,939            0
                Peter V. Handal            13,248,832          564,489            0
                Charles A. Ratner          13,249,972          563,349            0
                Walter J. Salmon           13,249,882          563,439            0
                Brian B. Smith             13,244,559          568,762            0

           2)   1999 Employee Stock Purchase Plan

                                                                             Abstentions
                                                                            and/or Broker
                                              For             Withheld        non-votes
                                           ----------         --------        ---------
                Approval of Plan           13,449,128          359,054         5,139

           3)   Amendments to the 1998 Equity and Performance Incentive Plan ("Omnibus Plan")

                                                                             Abstentions
                                                                            and/or Broker
                                              For             Withheld        non-votes
                                           ----------         --------        ---------
                Approval of Plan           12,176,185        1,632,283         4,853

           4)   Confirmation of Independent Auditors

                                                                             Abstentions
                                                                            and/or Broker
                                              For             Withheld        non-votes
                                           ----------         --------        ---------
                Arthur Andersen LLP        13,560,912          250,310         2,099

</TABLE>

                                      -12-

<PAGE>   15

    ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

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

         27       Financial Data Schedule

         10.1     Fifth Amendment to the Credit Agreement, dated as of August
                  20, 1999, among Cole Vision Corporation, Things Remembered,
                  Inc., and Pearle Inc. and Canadian Imperial Bank of Commerce.

    (b)      Report on Form 8-K

         The Company has not filed any reports on Form 8-K for the quarterly
         period ended July 31, 1999.

                                      -13-

<PAGE>   16




                                    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/ Wayne L. Mosley
                                  ----------------------------------------
                                  Wayne L. Mosley
                                  Vice President and Controller
                                  (Duly Authorized Officer and Principal
                                  Accounting Officer)

                            Date: September 14, 1999

                                      -14-

<PAGE>   17


                            COLE NATIONAL CORPORATION
                                    FORM 10-Q
                           QUARTER ENDED JULY 31, 1999

                                  EXHIBIT INDEX



    Exhibit
    Number        Description
    ------        -----------

    27            Financial Data Schedule

    10.1          Fifth Amendment to the Credit Agreement, dated as of August
                  20, 1999, among Cole Vision Corporation, Things Remembered,
                  Inc., and Pearle Inc. and Canadian Imperial Bank of Commerce.


                                      -15-