Exhibit-13 Portions of Annual Report to stockholders for the year ended September 30, 2003



Consolidated Statements of Earnings

Alberto-Culver Company and Subsidiaries



|                                                                                              |  | Year ended September 30,
|--------------------------------------------------------------------------------------------- |  | ------------------------
|(In thousands, except per share data)                                                         |  | 2003                    
|Net sales                                                                                     |  | $                       
|Cost of products sold                                                                         |  |                         
|                                                                                              |  |                         
|Gross profit                                                                                  |  |                         
|Advertising, marketing, selling and administrative expenses                                   |  |                         
|                                                                                              |  |                         
|Operating earnings                                                                            |  |                         
|Interest expense, net of interest income of $3,352 in 2003, $3,377 in 2002 and $5,479 in 2001 |  |                         
|                                                                                              |  |                         
|Earnings before provision for income taxes                                                    |  |                         
|Provision for income taxes                                                                    |  |                         
|                                                                                              |  |                         
|Net earnings                                                                                  |  | $                       
|                                                                                              |  |                         
|Net earnings per share:                                                                       |  |                         
|Basic                                                                                         |  | $                       
|Diluted                                                                                       |  | $                       
|                                                                                              |  |                         



See accompanying notes
to the consolidated financial statements.





---

Consolidated Balance Sheets

Alberto-Culver Company and Subsidiaries



|                                                                                                                                                                                |  | September 30, |          
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ---------
|(In thousands, except share data)                                                                                                                                               |  | 2003          |          
|Assets                                                                                                                                                                          |  |               |          
|Current assets:                                                                                                                                                                 |  |               |          
|Cash and cash equivalents                                                                                                                                                       |  | $             | 370,148  
|Receivables, less allowance for doubtful accounts of $19,111 in 2003 and $17,550 in 2002                                                                                        |  |               | 226,054  
|Inventories:                                                                                                                                                                    |  |               |          
|Raw materials                                                                                                                                                                   |  |               | 35,714   
|Work-in-process                                                                                                                                                                 |  |               | 4,633    
|Finished goods                                                                                                                                                                  |  |               | 490,810  
|                                                                                                                                                                                |  |               |          
|Total inventories                                                                                                                                                               |  |               | 531,157  
|Other current assets                                                                                                                                                            |  |               | 38,130   
|                                                                                                                                                                                |  |               |          
|Total current assets                                                                                                                                                            |  |               | 1,165,489
|Property, plant and equipment:                                                                                                                                                  |  |               |          
|Land                                                                                                                                                                            |  |               | 13,627   
|Buildings and leasehold improvements                                                                                                                                            |  |               | 180,648  
|Machinery and equipment                                                                                                                                                         |  |               | 382,590  
|                                                                                                                                                                                |  |               |          
|Total property, plant and equipment                                                                                                                                             |  |               | 576,865  
|Accumulated depreciation                                                                                                                                                        |  |               | 312,530  
|                                                                                                                                                                                |  |               |          
|Property, plant and equipment, net                                                                                                                                              |  |               | 264,335  
|Goodwill, net                                                                                                                                                                   |  |               | 355,285  
|Trade names, net                                                                                                                                                                |  |               | 84,463   
|Other assets                                                                                                                                                                    |  |               | 76,037   
|                                                                                                                                                                                |  |               |          
|Total assets                                                                                                                                                                    |  | $             | 1,945,609
|                                                                                                                                                                                |  |               |          
|                                                                                                                                                                                |  |              
|Liabilities and Stockholders Equity                                                                                                                                            |  |               |          
|Current liabilities:                                                                                                                                                            |  |               |          
|Short-term borrowings                                                                                                                                                           |  | $             |         
|Current maturities of long-term debt                                                                                                                                            |  |               | 295      
|Accounts payable                                                                                                                                                                |  |               | 220,633  
|Accrued expenses                                                                                                                                                                |  |               | 222,860  
|Income taxes                                                                                                                                                                    |  |               | 21,721   
|                                                                                                                                                                                |  |               |          
|Total current liabilities                                                                                                                                                       |  |               | 465,509  
|Long-term debt                                                                                                                                                                  |  |               | 320,587  
|Deferred income taxes                                                                                                                                                           |  |               | 39,759   
|Other liabilities                                                                                                                                                               |  |               | 57,625   
|Stockholders equity:                                                                                                                                                           |  |               |          
|Common stock, par value $.22 per share:                                                                                                                                         |  |               |          
|Class A authorized 150,000,000 shares; 30,612,798 shares issued at September 30, 2003 and 2002                                                                                  |  |               | 6,735    
|Class B authorized 150,000,000 shares; 37,710,655 shares issued at September 30, 2003 and 2002                                                                                  |  |               | 8,296    
|Additional paid-in capital                                                                                                                                                      |  |               | 215,777  
|Retained earnings                                                                                                                                                               |  |               | 1,035,513
|Unearned compensation                                                                                                                                                           |  |               | (4,487   
|Accumulated other comprehensive income  foreign currency translation                                                                                                           |  |               | (40,695  
|                                                                                                                                                                                |  |               |          
|                                                                                                                                                                                |  |               | 1,221,139
|                                                                                                                                                                                |  |              
|Less treasury stock, at cost (Class A common stock: 2003  3,997,747 shares and 2002  4,765,673 shares; Class B common
stock: 20035,352,230 shares and 20025,379,015 shares) |  |               | (159,010 
|                                                                                                                                                                                |  |               |          
|                                                                                                                                                                                |  |              
|Total stockholders equity                                                                                                                                                      |  |               | 1,062,129
|                                                                                                                                                                                |  |               |          
|Total liabilities and stockholders equity                                                                                                                                      |  | $             | 1,945,609
|                                                                                                                                                                                |  |               |          



See accompanying notes
to the consolidated financial statements.





2



---

Consolidated Statements of Cash Flows

Alberto-Culver Company and Subsidiaries



|                                                                                    |  | Year ended September 30, |        
|----------------------------------------------------------------------------------- |  | ------------------------ | -------
|(In thousands)                                                                      |  | 2003                     |        
|                                                                                    |  |                          |        
|Cash Flows from Operating Activities:                                               |  |                          |        
|Net earnings                                                                        |  | $                        | 162,153
|Adjustments to reconcile net earnings to net cash provided by operating activities: |  |                          |        
|Depreciation                                                                        |  |                          | 45,791 
|Amortization of goodwill, trade names and other assets                              |  |                          | 3,036  
|Deferred income taxes                                                               |  |                          | (3,637 
|Cash effects of changes in (exclusive of acquisitions):                             |  |                          |        
|Receivables, net                                                                    |  |                          | (6,236 
|Inventories                                                                         |  |                          | 3,459  
|Other current assets                                                                |  |                          | 2,852  
|Accounts payable and accrued expenses                                               |  |                          | (6,929 
|Income taxes                                                                        |  |                          | 14,447 
|Other assets                                                                        |  |                          | (1,242 
|Other liabilities                                                                   |  |                          | 4,869  
|                                                                                    |  |                          |        
|Net cash provided by operating activities                                           |  |                          | 218,563
|                                                                                    |  |                          |        
|                                                                                    |  |                          |        
|Cash Flows from Investing Activities:                                               |  |                          |        
|Short-term investments                                                              |  |                          |       
|Capital expenditures                                                                |  |                          | (61,351
|Payments for purchased businesses, net of acquired companies cash                  |  |                          | (1,574 
|Proceeds from disposals of assets                                                   |  |                          | 1,632  
|                                                                                    |  |                          |        
|Net cash used by investing activities                                               |  |                          | (61,293
|                                                                                    |  |                          |        
|                                                                                    |  |                          |        
|Cash Flows from Financing Activities:                                               |  |                          |        
|Short-term borrowings                                                               |  |                          | (2,710 
|Proceeds from issuance of long-term debt                                            |  |                          | 762    
|Repayments of long-term debt                                                        |  |                          | (1,260 
|Termination of interest rate swap                                                   |  |                          |       
|Repurchase of previously sold accounts receivable                                   |  |                          |       
|Proceeds from exercise of stock options                                             |  |                          | 22,482 
|Cash dividends paid                                                                 |  |                          | (23,746
|Stock purchased for treasury                                                        |  |                          | (10,693
|                                                                                    |  |                          |        
|Net cash used by financing activities                                               |  |                          | (15,165
|                                                                                    |  |                          |        
|Effect of foreign exchange rate changes on cash                                     |  |                          | 10,558 
|                                                                                    |  |                          |        
|Net increase in cash and cash equivalents                                           |  |                          | 152,663
|Cash and cash equivalents at beginning of year                                      |  |                          | 217,485
|                                                                                    |  |                          |        
|Cash and cash equivalents at end of year                                            |  | $                        | 370,148
|                                                                                    |  |                          |        
|                                                                                    |  |                          |        
|Supplemental Cash Flow Information:                                                 |  |                          |        
|Cash paid for:                                                                      |  |                          |        
|Interest                                                                            |  | $                        | 24,981 
|Income taxes                                                                        |  | $                        | 82,425 
|Non-cash investing activities:                                                      |  |                          |        
|Issuance of Class A common stock for acquisition                                    |  | $                        | 541    
|                                                                                    |  |                          |        



See accompanying notes
to the consolidated financial statements.



3



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Consolidated Statements of Stockholders Equity

Alberto-Culver Company and Subsidiaries



|                                                  |  | Number of Shares    |  |                | Dollars |        
|------------------------------------------------- |  | ------------------- |  | -------------- | ------- | -------
|                                                  |  | Common Stock Issued |  | Treasury Stock |         |        
|(In thousands)                                    |  | Class A             |  | Class B        |         | Class A
|Balance at September 30, 2000                     |  | 30,613              |  | 37,711         |         | (7,631 
|                                                  |  |                     |  |                |         |        
|Comprehensive income (loss):                      |  |                     |  |                |         |        
|Net earnings                                      |  |                     |  |                |         |        
|Foreign currency translation                      |  |                     |  |                |         |        
|                                                  |  |                     |  |                |         |        
|Total                                             |  |                     |  |                |         |        
|Cash dividends                                    |  |                     |  |                |         |        
|Stock options exercised                           |  |                     |  |                |         | 850    
|Stock issued pursuant to employee incentive plans |  |                     |  |                |         | 17     
|Restricted stock issued, net                      |  |                     |  |                |         | 67     
|Restricted stock amortization                     |  |                     |  |                |         |        
|Stock purchased for treasury                      |  |                     |  |                |         | (45    
|                                                  |  |                     |  |                |         |        
|Balance at September 30, 2001                     |  | 30,613              |  | 37,711         |         | (6,742 
|                                                  |  |                     |  |                |         |        
|Comprehensive income (loss):                      |  |                     |  |                |         |        
|Net earnings                                      |  |                     |  |                |         |        
|Foreign currency translation                      |  |                     |  |                |         |        
|                                                  |  |                     |  |                |         |        
|Total                                             |  |                     |  |                |         |        
|Cash dividends                                    |  |                     |  |                |         |        
|Stock options exercised                           |  |                     |  |                |         | 1,820  
|Stock issued pursuant to employee incentive plans |  |                     |  |                |         | 43     
|Stock issued for acquisition                      |  |                     |  |                |         | 221    
|Restricted stock issued, net                      |  |                     |  |                |         | 78     
|Restricted stock amortization                     |  |                     |  |                |         |        
|Stock purchased for treasury                      |  |                     |  |                |         | (186   
|                                                  |  |                     |  |                |         |        
|Balance at September 30, 2002                     |  | 30,613              |  | 37,711         |         | (4,766 
|                                                  |  |                     |  |                |         |        
|Comprehensive income (loss):                      |  |                     |  |                |         |        
|Net earnings                                      |  |                     |  |                |         |        
|Foreign currency translation                      |  |                     |  |                |         |        
|                                                  |  |                     |  |                |         |        
|Total                                             |  |                     |  |                |         |        
|Cash dividends                                    |  |                     |  |                |         |        
|Stock options exercised                           |  |                     |  |                |         | 968    
|Stock issued pursuant to employee incentive plans |  |                     |  |                |         | 32     
|Stock issued for acquisition                      |  |                     |  |                |         | 12     
|Restricted stock issued, net                      |  |                     |  |                |         | (16    
|Restricted stock amortization                     |  |                     |  |                |         |        
|Stock purchased for treasury                      |  |                     |  |                |         | (228   
|                                                  |  |                     |  |                |         |        
|Balance at September 30, 2003                     |  | 30,613              |  | 37,711         |         | (3,998 
|                                                  |  |                     |  |                |         |        



See accompanying notes
to the consolidated financial statements.



4



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Notes to the Consolidated Financial Statements

Alberto-Culver Company and Subsidiaries



(1) Summary of Significant Accounting Policies



Principles of Consolidation and Use of Estimates



The consolidated financial statements include the accounts of Alberto-Culver Company and its subsidiaries (company). All significant intercompany accounts and
transactions have been eliminated. Certain amounts for prior periods have been reclassified to conform to the current years presentation.



The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses in the financial statements. Actual results may differ from these estimates. Management believes these estimates and assumptions are reasonable.



Financial Instruments



All highly liquid investments purchased with an original maturity of three months or less
are considered to be cash equivalents. These investments are stated at cost which approximates market value.



The carrying amounts of accounts receivable, accounts payable and short-term borrowings approximate fair value due to the short maturities of these financial instruments.



The fair value of long-term debt was approximately $340.1 million at September 30, 2003. Fair
value estimates are calculated using the present value of the projected debt cash flows based on the current market interest rates of comparable debt instruments.



Allowance for Doubtful Accounts



The allowance for doubtful accounts requires management to estimate future collections of accounts receivable. Management records allowances for doubtful accounts based
on historical collection statistics and current customer credit information.



Inventories



Inventories are stated at the lower of cost
(first-in, first-out method) or market (net realizable value). When necessary, the company provides allowances to adjust the carrying value of inventories to the lower of cost or market, including costs to sell or dispose, and for estimated
inventory shrinkage. Estimates of the future demand for the companys products, anticipated product re-launches, changes in formulas and packaging and reductions in stock-keeping units are some of the key factors used by management in assessing
the net realizable value of inventories. The company estimates inventory shrinkage based on historical experience.



Property, Plant and Equipment



Property, plant and equipment are carried at cost. Depreciation is recorded primarily on the straight-line method over the estimated useful lives of the respective
classes of assets. Buildings and building improvements are depreciated over periods of twenty to forty years. Leasehold improvements are depreciated over the shorter of the estimated useful lives of the assets or the lives of the related leases. The
depreciation of machinery and equipment is over periods of two to fifteen years. Expenditures for maintenance and repairs are expensed as incurred.



Goodwill and Trade Names



Prior to October 1, 2001, the cost of goodwill and trade names was amortized on a straight-line basis over periods ranging from ten to forty years. As required, the
company implemented the Financial Accounting Standards Boards (FASB) Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, for previously acquired intangibles and discontinued the
amortization of goodwill effective October 1, 2001. In accordance with SFAS No. 142, the company determined that its trade names have indefinite lives and, therefore, ceased amortization of trade names effective October 1, 2001.



Goodwill and trade names are tested for impairment annually or more frequently if significant
events or changes indicate possible impairment in accordance with the provisions of SFAS No. 142. For impairment testing purposes, fair values of reporting units are estimated based on the companys best estimate of the present value of
expected future cash flows and are compared with the corresponding carrying value of the reporting unit, including goodwill.



5



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Notes to the Consolidated Financial Statements

Alberto-Culver Company and Subsidiaries



The change in the carrying amount of goodwill by operating segment for the fiscal year ended September 30, 2003 is as
follows:



|(In thousands)                      |  | GlobalConsumerProducts |         | SpecialtyDistribution- Sally |         | Total
|----------------------------------- |  | ---------------------- | ------- | ---------------------------- | ------- | -----
|Balance at September 30, 2002       |  | $                      | 135,907 |                              | 207,524 |      
|Purchase price adjustments          |  |                        |        |                              | 1,384   |      
|Foreign currency translation effect |  |                        | 6,533   |                              | 3,937   |      
|                                    |  |                        |         |                              |         |      
|Balance at September 30, 2003       |  | $                      | 142,440 |                              | 212,845 |      
|                                    |  |                        |         |                              |         |      



Indefinite-lived trade names by
operating segment at September 30, 2003 and 2002 are as follows:



|(In thousands)                 |  | 2003 |        | 2002
|------------------------------ |  | ---- | ------ | ----
|Global Consumer Products       |  | $    | 79,950 |     
|Specialty distribution  Sally |  |      | 4,513  |     
|                               |  |      |        |     
|                               |  |      | 84,463 |     
|                               |  |      |        |     



Foreign Currency Translation



Foreign currency balance sheet accounts are translated at the rates of
exchange in effect at the balance sheet date. Results of operations are translated using the average exchange rates during the period.



Revenue Recognition



The company recognizes revenue on merchandise sold at the time products are shipped to customers. The companys specialty distribution segment also recognizes revenue when a customer consummates a point-of-sale
transaction in a store. Appropriate provisions for sales returns and cash discounts are made at the time sales are recorded.



Sales Incentives



Sales incentives primarily include trade promotion activities and consumer coupons. The company records accruals for sales incentives based on estimates of the ultimate cost of each program. The company tracks its
commitments for sales incentive programs and, using historical experience, records an accrual at the end of each period for the estimated incurred, but unpaid costs of these programs.



Shipping and Handling



Amounts invoiced to customers for shipping and handling are included in net sales with the related expense reported in advertising, marketing, selling and administrative
expenses in the consolidated statements of earnings.



Cost of Products Sold



Cost of products sold for the companys consumer products segment
includes direct material costs and direct and indirect expenses incurred to manufacture products. The companys specialty distribution segment includes the cost of merchandise purchased from suppliers in the cost of products sold.



Vendor Allowances



Vendor allowances received by the company as reimbursement for specific, incremental costs incurred by the company to sell a vendors
product are recorded as a reduction of the corresponding costs in advertising, marketing, selling and administrative expenses in the consolidated statements of earnings. All other vendor allowances are reflected as a reduction of the purchase price
of the vendors product.



Certain vendor allowances are in the form of
rebates which are earned based upon purchase volumes over a specified period of time. Rebates are accrued on purchases when it is probable the rebates will be earned and the amounts can be reasonably estimated.



6



---

Notes to the Consolidated Financial Statements

Alberto-Culver Company and Subsidiaries



Advertising and Marketing



Advertising and marketing costs are expensed as incurred and amounted to $212.4 million, $189.1 million and $179.0 million in fiscal years
2003, 2002 and 2001, respectively.



Research and Development



Research and development costs are expensed as incurred and amounted to $10.9 million in
2003, $9.8 million in 2002 and $9.6 million in 2001.



Income Taxes



Deferred income taxes are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in
the years in which temporary differences are estimated to be recovered or settled.



Weighted Average Shares Outstanding



The following table
provides information about basic and diluted weighted average shares outstanding:



|(In thousands)                              |  | 2003   |  | 2002   |  | 2001  
|------------------------------------------- |  | ------ |  | ------ |  | ------
|Basic weighted average shares outstanding   |  | 58,351 |  | 57,380 |  | 56,176
|Assumed exercise of stock options           |  | 1,334  |  | 1,457  |  | 1,299 
|Assumed vesting of restricted stock         |  | 286    |  | 377    |  | 363   
|                                            |  |        |  |        |  |       
|Diluted weighted average shares outstanding |  | 59,971 |  | 59,214 |  | 57,838
|                                            |  |        |  |        |  |       



No stock options were anti-dilutive in
fiscal years 2003, 2002 or 2001.



Stock-Based Compensation



SFAS No. 123, Accounting for Stock-Based Compensation, requires either the
adoption of a fair value based method of accounting for stock-based compensation or the continuance of the intrinsic value method with pro-forma disclosures as if the fair value method was adopted. The company has elected to continue measuring
compensation expense for its stock-based plans using the intrinsic value method prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly, no compensation cost related to
stock options has been recognized in the consolidated statements of earnings.



Had compensation expense for stock option plans been determined based upon the fair value of stock options on the dates of grant and recognized over the vesting period consistent with SFAS No. 123, the companys pro-forma net earnings
and net earnings per share for the fiscal years ended September 30, 2003, 2002 and 2001 would have been as follows (in thousands, except per share amounts):



|                                                                                                                                      |  | 2003 |         |   | 2002 |         |   | 2001 |        
|------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | ------- | - | ---- | -------
|Reported net earnings:                                                                                                                |  | $    | 162,153 |   |      | 137,665 |   |      | 110,376
|Add: Stock-based compensation expense included in reported net earnings, net of related income tax effects                            |  |      | 933     |   |      | 1,036   |   |      | 739    
|Less: Stock-based compensation expense determined under the fair value based method for all awards, net of related income tax
effects |  |      | (9,593  | ) |      | (8,016  | ) |      | (6,524 
|                                                                                                                                      |  |      |         |   |      |         |   |      |        
|Pro-forma net earnings                                                                                                                |  | $    | 153,493 |   |      | 130,685 |   |      | 104,591
|                                                                                                                                      |  |      |         |   |      |         |   |      |        
|Basic net earnings per share:                                                                                                         |  |      |         |   |      |         |   |      |        
|As reported                                                                                                                           |  | $    | 2.78    |   |      | 2.40    |   |      | 1.96   
|Pro-forma                                                                                                                             |  | $    | 2.63    |   |      | 2.28    |   |      | 1.86   
|Diluted net earnings per share:                                                                                                       |  |      |         |   |      |         |   |      |        
|As reported                                                                                                                           |  | $    | 2.70    |   |      | 2.32    |   |      | 1.91   
|Pro-forma                                                                                                                             |  | $    | 2.56    |   |      | 2.21    |   |      | 1.81   
|                                                                                                                                      |  |      |         |   |      |         |   |      |        



7



---

Notes to the Consolidated Financial Statements

Alberto-Culver Company and Subsidiaries



New Accounting Standards



In June, 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 addresses financial accounting and reporting for business combinations. SFAS No. 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets, requires companies to discontinue the
amortization of goodwill and certain other intangible assets and requires an impairment test of existing goodwill and certain other intangible assets based on a fair value method. As required, the company adopted SFAS No. 141 in the fourth quarter
of fiscal year 2001. The company also adopted SFAS No. 142 as required in the fourth quarter of fiscal year 2001 for new acquisitions and in the first quarter of fiscal year 2002 for previously acquired intangibles. In accordance with SFAS No. 142,
the company determined that its trade names have indefinite lives and, therefore, the amortization of trade names was discontinued effective October 1, 2001. In addition, as required by SFAS No. 142, the company ceased the amortization of goodwill
effective October 1, 2001. As required by the provisions of SFAS No. 142, goodwill and trade names are reviewed for impairment at least annually with ongoing recoverability evaluated based on applicable reporting unit performance and consideration
of significant events or changes in the overall business environment.



In
accordance with SFAS No. 142, the consolidated statement of earnings for fiscal year 2001 has not been restated for the effects of ceasing goodwill and trade name amortization. Had goodwill and trade name amortization been discontinued effective
October 1, 2000, net earnings and net earnings per share for the fiscal years ended September 30, 2003, 2002 and 2001 would have been as follows:



|(In thousands, except per share data)                                    |  | 2003 |         | 2002 |         | 2001
|------------------------------------------------------------------------ |  | ---- | ------- | ---- | ------- | ----
|Reported net earnings                                                    |  | $    | 162,153 |      | 137,665 |     
|Elimination of goodwill and trade name amortization, net of income taxes |  |      |        |      |        |     
|                                                                         |  |      |         |      |         |     
|Pro-forma net earnings                                                   |  | $    | 162,153 |      | 137,665 |     
|                                                                         |  |      |         |      |         |     
|                                                                         |  |      |        
|Reported basic net earnings per share                                    |  | $    | 2.78    |      | 2.40    |     
|Elimination of goodwill and trade name amortization, net of income taxes |  |      |        |      |        |     
|                                                                         |  |      |         |      |         |     
|Pro-forma basic net earnings per share                                   |  | $    | 2.78    |      | 2.40    |     
|                                                                         |  |      |         |      |         |     
|                                                                         |  |      |        
|Reported diluted net earnings per share                                  |  | $    | 2.70    |      | 2.32    |     
|Elimination of goodwill and trade name amortization, net of income taxes |  |      |        |      |        |     
|                                                                         |  |      |         |      |         |     
|Pro-forma diluted net earnings per share                                 |  | $    | 2.70    |      | 2.32    |     
|                                                                         |  |      |         |      |         |     



(2) Accrued Expenses



Accrued expenses consist of the following:



|(In thousands)             |  | 2003 |         | 2002
|-------------------------- |  | ---- | ------- | ----
|Compensation and benefits  |  | $    | 106,318 |     
|Advertising and promotions |  |      | 43,202  |     
|Other                      |  |      | 73,340  |     
|                           |  |      |         |     
|                           |  | $    | 222,860 |     
|                           |  |      |         |     



(3) Long-Term Debt and Other
Financing Arrangements



Long-term debt, exclusive of current
maturities, consists of the following:



|(In thousands)                   |  | 2003 |         | 2002
|-------------------------------- |  | ---- | ------- | ----
|8.25% notes due November, 2005   |  | $    | 200,000 |     
|6.375% debentures due June, 2028 |  |      | 120,000 |     
|Other                            |  |      | 587     |     
|                                 |  |      |         |     
|                                 |  | $    | 320,587 |     
|                                 |  |      |         |     



Maturities of long-term debt for the
next five fiscal years are as follows (in thousands): 2004- $295; 2005 - $252; 2006 - $200,172; 2007 - $99; 2008 - $64; 2009 and later - $120,000.



8



---

Notes to the Consolidated Financial Statements

Alberto-Culver Company and Subsidiaries



In June, 1998, the company issued $120 million of 6.375% debentures due June 15, 2028. The debentures are subject to
repayment, in whole or in part, on June 15, 2008 at the option of the holders. In addition, the company has the option to redeem the debentures at any time, in whole or in part, at a price equal to 100% of the principal amount plus accrued interest
and, if applicable, a make-whole premium.



In April, 2000, the company issued
$200 million of 8.25% senior notes due November 1, 2005. The company has the option to redeem the notes at any time, in whole or in part, at a price equal to 100% of the principal amount plus accrued interest and, if applicable, a make-whole
premium.



The company has a $300 million, three-year revolving credit facility
expiring in September, 2005. No borrowings were outstanding under the revolving credit facility at September 30, 2003 or 2002. The revolving credit facility has an interest rate based on a fixed spread over LIBOR and may be drawn in U.S. dollars or
certain foreign currencies.



The $300 million revolving credit facility imposes
restrictions on such items as total debt, liens and interest expense. At September 30, 2003, the company was in compliance with the covenants of the revolving credit facility.



In May, 2002, the company entered into an interest rate swap agreement with a notional amount of $100 million in order to convert a portion
of its fixed rate 8.25% senior notes into a variable rate obligation. In July, 2002, the company terminated the interest rate swap resulting in a gain of $2.8 million, which is being amortized over the remaining term of the 8.25% senior notes as a
reduction of interest expense. The unamortized portion of the gain is included in other liabilities and totaled $1.8 million and $2.6 million as of September 30, 2003 and 2002, respectively.



At September 30, 2003 and 2002, the company had no off-balance sheet financing arrangements
other than operating leases incurred in the ordinary course of business as disclosed in note 8.



(4) Stockholders Equity



The company has two classes of common stock, both of which are listed on the New York Stock Exchange. Except for voting, dividend and conversion rights, the Class A and Class B common stock are identical. Class A has one-tenth vote per
share and Class B has one vote per share. No dividend may be paid on the Class B unless an equal or greater dividend is paid on the Class A, and dividends may be paid on the Class A in excess of dividends paid, or without paying dividends, on the
Class B. All, and not less than all, of the Class A may at any time be converted into Class B on a share-for-share basis at the option of the company. The Class B is convertible at any time into Class A on a share-for-share basis at the option of
the holders.



Cash dividends for Class B common stock in fiscal years 2003,
2002 and 2001 were $13.1 million or $.405 per share, $11.4 million or $.3525 per share and $10.6 million or $.3225 per share, respectively. Cash dividends for Class A common stock in fiscal years 2003, 2002 and 2001 were $10.6 million or $.405 per
share, $8.9 million or $.3525 per share and $7.6 million or $.3225 per share, respectively. Class A common stock dividends per share have been equal to those of Class B common stock since the Class A shares were issued in April, 1986.



In July, 2002, the Board of Directors authorized the company to purchase up to 1.7 million
shares of Class A common stock. As of September 30, 2003, the company had purchased 331,700 Class A shares under the authorization at a total cost of $15.1 million. A total of 1,368,300 Class A shares remain available for purchase under this program
as of September 30, 2003. During fiscal years 2003, 2002 and 2001, the company also acquired $2.9 million, $28.3 million and $1.3 million, respectively, of Class A and Class B common shares surrendered by employees in connection with the exercises
of stock options and the payment of withholding taxes as provided under the terms of certain incentive plans. Shares acquired under these plans are not subject to the companys stock repurchase program.



See note 11 for discussion of a subsequent event related to the companys
conversion to one class of common stock.



9



---

Notes to the Consolidated Financial Statements (continued)

Alberto-Culver Company and Subsidiaries



(5) Stock Option and Restricted Stock Plans



At the annual stockholders meeting in January, 2003, shareholders approved two new
Class B stock option plans. Under the new plans, the company is authorized to issue non-qualified stock options to employees and non-employee directors to purchase a limited number of shares of the companys Class B common stock at a price not
less than the fair market value of the stock on the date of grant. Generally, options under the plans expire ten years from the date of grant and are exercisable on a cumulative basis in four equal annual increments commencing one year after the
date of grant. A total of 6.15 million shares have been authorized to be issued under the plans, of which 4.9 million shares remain available for future grants at September 30, 2003.



Prior to January, 2003, the company had been authorized to issue non-qualified stock options to employees and non-employee directors to
purchase a limited number of shares of the companys Class A common stock. After the approval of the Class B plans, the company is no longer authorized to issue options to purchase Class A common stock.



The weighted average fair value of options at the date of grant in fiscal years 2003, 2002
and 2001 was $13.12, $8.83 and $7.49 per option, respectively. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:



|                        |  | 2003        |  | 2002      |  | 2001     
|----------------------- |  | ----------- |  | --------- |  | ---------
|Expected life           |  | 5 years     |  | 5 years   |  | 5 years  
|Volatility              |  | 24.8%-25.3% |  | 25.5%     |  | 25.4%    
|Risk-free interest rate |  | 3.0%-3.2%   |  | 3.5%-4.5% |  | 4.6%-5.9%
|Dividend yield          |  | 0.8%        |  | 0.8%-1.0% |  | 1.0%-1.2%
|                        |  |             |  |           |  |          



Summarized information on the
companys outstanding stock options at September 30, 2003 is as follows (options in thousands):



|                         |  |                     |  | Options Outstanding |  | Options Exercisable            
|------------------------ |  | ------------------- |  | ------------------- |  | -------------------------------
|Range of Exercise Prices |  | Class ofCommonStock |  | NumberofOptions     |  | AverageRemainingContractualLife
|$9.75-$13.38             |  | A                   |  | 319                 |  | 1.5 years                      
|$19.75-$23.19            |  | A                   |  | 1,151               |  | 5.5 years                      
|$24.94-$26.19            |  | A                   |  | 1,253               |  | 6.6 years                      
|$29.44-$32.66            |  | A                   |  | 1,501               |  | 8.0 years                      
|$38.64-$47.55            |  | A                   |  | 44                  |  | 8.8 years                      
|$51.34                   |  | B                   |  | 1,217               |  | 9.3 years                      
|                         |  |                     |  |                     |  |                                



Stock option activity under the plans
is summarized as follows (options in thousands):



|                                  |  | NumberofOptions |   |  | WeightedAverageOptionPrice
|--------------------------------- |  | --------------- | - |  | --------------------------
|Outstanding at September 30, 2000 |  | 4,954           |   |  | $                         
|                                  |  |                 |   |  |                           
|Granted                           |  | 1,716           |   |  | $                         
|Exercised                         |  | (850            | ) |  | $                         
|Canceled                          |  | (290            | ) |  | $                         
|                                  |  |                 |   |  |                           
|Outstanding at September 30, 2001 |  | 5,530           |   |  | $                         
|                                  |  |                 |   |  |                           
|Granted                           |  | 1,728           |   |  | $                         
|Exercised                         |  | (1,820          | ) |  | $                         
|Canceled                          |  | (71             | ) |  | $                         
|                                  |  |                 |   |  |                           
|Outstanding at September 30, 2002 |  | 5,367           |   |  | $                         
|                                  |  |                 |   |  |                           
|Granted                           |  | 1,250           |   |  | $                         
|Exercised                         |  | (973            | ) |  | $                         
|Canceled                          |  | (159            | ) |  | $                         
|                                  |  |                 |   |  |                           
|Outstanding at September 30, 2003 |  | 5,485           |   |  | $                         
|                                  |  |                 |   |  |                           
|Exercisable at September 30:      |  |                 |   |  |                           
|2001                              |  | 3,357           |   |  | $                         
|2002                              |  | 2,915           |   |  | $                         
|2003                              |  | 3,334           |   |  | $                         
|                                  |  |                 |   |  |                           





10



---

Notes to the Consolidated Financial Statements (continued)

Alberto-Culver Company and Subsidiaries



Outstanding stock options and exercisable stock options for Class A and Class B common shares were as follows as of
September 30, 2003 (in thousands):



|        |  | OutstandingStock Options |  | ExercisableStock Options
|------- |  | ------------------------ |  | ------------------------
|Class A |  | 4,268                    |  | 3,039                   
|Class B |  | 1,217                    |  | 295                     
|        |  |                          |  |                         
|Total   |  | 5,485                    |  | 3,334                   
|        |  |                          |  |                         



At the annual stockholders
meeting in January, 2003, shareholders also approved a new Class B restricted stock plan. Under the new plan, the company is authorized to grant up to 600,000 restricted shares of Class B common stock to employees. The restricted shares generally
vest on a cumulative basis in four equal annual installments commencing two years after the date of grant. The total value of restricted shares is recorded as unearned compensation at the time of grant based on the fair market value of the shares on
the date of grant. The unearned compensation balance is amortized into expense over the vesting period. During fiscal year 2003, employees were granted 8,600 Class B restricted shares at a weighted average fair value of $51.34 per share on the date
of grant.



Prior to January, 2003, the company was authorized to issue
restricted shares of Class A common stock that vest on a cumulative basis in four equal installments commencing four years after the date of grant for grants made prior to July 26, 2001 and in four equal installments commencing two years after the
date of grant for all subsequent grants. After approval of the Class B plan, the company is no longer authorized to grant Class A restricted shares.



At September 30, 2003, there were 267,900 restricted Class A shares and 8,600 restricted Class B shares outstanding and 591,400 Class B shares remained authorized for
future issuance. The unearned compensation balance included as a separate component of stockholders equity was $4.5 million at September 30, 2003.



See note 11 for discussion of a subsequent event related to the companys conversion to one class of common stock.



(6) Business Segments and Geographic Area Information



The presentation of segment information reflects the manner in which management organizes
segments for making operating decisions and assessing performance. Effective October 1, 2002, the companys consumer products business was reorganized into two divisions. A new division, Alberto-Culver Consumer Products Worldwide, includes the
former Alberto-Culver North America business segment and the former Alberto-Culver International business segment excluding the operations of Cederroth International. This division includes developing, manufacturing, distributing and marketing
branded consumer products worldwide and the manufacturing of custom label products for other companies. The second division is Cederroth International, which manufactures, markets and distributes beauty and health care products throughout
Scandinavia and in Europe. Beginning in fiscal year 2003, the company has two segments for external financial reporting purposes: Global Consumer Products, which includes the two aforementioned consumer products divisions, and Specialty distribution
 Sally, which is the same segment as previously reported, consisting of Sally Beauty Company, a distributor of professional beauty supplies through its Sally Beauty Supply stores and its Beauty Systems Group full-service operations. Prior year
information has been reclassified to conform to the new segment presentation.



The accounting policies of the segments are the same as described in the summary of significant accounting policies in note 1. The company accounts for sales between segments as if the sales were to a third party, however, sales
between segments are eliminated in consolidation.



11



---

Notes to the Consolidated Financial Statements (continued)

Alberto-Culver Company and Subsidiaries



Segment data for the years ended September 30, 2003, 2002 and 2001 is as follows:



Business Segments Information (In thousands)



|                                                |  | 2003 |           |   | 2002 |           |   | 2001 |          
|----------------------------------------------- |  | ---- | --------- | - | ---- | --------- | - | ---- | ---------
|Net sales:                                      |  |      |           |   |      |           |   |      |          
|Global consumer products                        |  | $    | 1,098,328 |   |      | 1,015,997 |   |      | 955,222  
|Specialty distribution - Sally                  |  |      | 1,824,009 |   |      | 1,667,052 |   |      | 1,452,539
|Eliminations                                    |  |      | (30,920   | ) |      | (32,073   | ) |      | (28,644  
|                                                |  |      |           |   |      |           |   |      |          
|                                                |  | $    | 2,891,417 |   |      | 2,650,976 |   |      | 2,379,117
|                                                |  |      |           |   |      |           |   |      |          
|Earnings before provision for income taxes (1): |  |      |           |   |      |           |   |      |          
|Global consumer products                        |  | $    | 102,553   |   |      | 87,780    |   |      | 68,456   
|Specialty distribution  Sally                  |  |      | 193,425   |   |      | 172,750   |   |      | 144,688  
|                                                |  |      |           |   |      |           |   |      |          
|Segment operating profit                        |  |      | 295,978   |   |      | 260,530   |   |      | 213,144  
|Unallocated expenses, net(2)                    |  |      | (22,187   | ) |      | (26,102   | ) |      | (24,078  
|Interest expense, net of interest income        |  |      | (22,391   | ) |      | (22,636   | ) |      | (21,830  
|                                                |  |      |           |   |      |           |   |      |          
|                                                |  | $    | 251,400   |   |      | 211,792   |   |      | 167,236  
|                                                |  |      |           |   |      |           |   |      |          
|Identifiable assets:                            |  |      |           |   |      |           |   |      |          
|Global consumer products                        |  | $    | 753,444   |   |      | 689,269   |   |      | 685,639  
|Specialty distribution  Sally                  |  |      | 902,401   |   |      | 835,026   |   |      | 655,825  
|Corporate(3)                                    |  |      | 289,764   |   |      | 205,196   |   |      | 175,037  
|                                                |  |      |           |   |      |           |   |      |          
|                                                |  | $    | 1,945,609 |   |      | 1,729,491 |   |      | 1,516,501
|                                                |  |      |           |   |      |           |   |      |          
|Depreciation and amortization expense (1):      |  |      |           |   |      |           |   |      |          
|Global consumer products                        |  | $    | 24,369    |   |      | 22,428    |   |      | 27,046   
|Specialty distribution - Sally                  |  |      | 21,542    |   |      | 21,972    |   |      | 22,132   
|Corporate                                       |  |      | 2,916     |   |      | 2,814     |   |      | 2,227    
|                                                |  |      |           |   |      |           |   |      |          
|                                                |  | $    | 48,827    |   |      | 47,214    |   |      | 51,405   
|                                                |  |      |           |   |      |           |   |      |          
|Capital expenditures:                           |  |      |           |   |      |           |   |      |          
|Global consumer products                        |  | $    | 27,168    |   |      | 32,319    |   |      | 19,022   
|Specialty distribution - Sally                  |  |      | 34,183    |   |      | 23,145    |   |      | 17,730   
|                                                |  |      |           |   |      |           |   |      |          
|                                                |  | $    | 61,351    |   |      | 55,464    |   |      | 36,752   
|                                                |  |      |           |   |      |           |   |      |          



|(1) | As required, the company implemented SFAS No. 142 in fiscal year 2002 and, accordingly, discontinued amortization of goodwill and trade names. In accordance with
SFAS No. 142, earnings before provision for income taxes and depreciation and amortization expense for fiscal year 2001 have not been restated and, therefore, include amortization of goodwill and trade names. See note 1 for further
discussion.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Unallocated expenses, net principally consists of general corporate expenses.
|--- | -------------------------------------------------------------------------------



|(3) | Corporate identifiable assets are primarily cash, cash equivalents and equipment.
|--- | ---------------------------------------------------------------------------------



12



---

Notes to the Consolidated Financial Statements

Alberto-Culver Company and Subsidiaries



Geographic data for the years ended September 30, 2003, 2002 and 2001 is as follows:



|Geographic Area Information (In thousands) |  | 2003 |           |   | 2002 |           |   | 2001 |          
|------------------------------------------ |  | ---- | --------- | - | ---- | --------- | - | ---- | ---------
|Net sales:                                 |  |      |           |   |      |           |   |      |          
|United States                              |  | $    | 2,235,743 |   |      | 2,121,633 |   |      | 1,884,278
|Foreign                                    |  |      | 665,079   |   |      | 541,219   |   |      | 513,199  
|Eliminations                               |  |      | (9,405    | ) |      | (11,876   | ) |      | (18,360  
|                                           |  |      |           |   |      |           |   |      |          
|                                           |  | $    | 2,891,417 |   |      | 2,650,976 |   |      | 2,379,117
|                                           |  |      |           |   |      |           |   |      |          
|Segment operating profit (1):              |  |      |           |   |      |           |   |      |          
|United States                              |  | $    | 242,588   |   |      | 216,931   |   |      | 178,177  
|Foreign                                    |  |      | 53,390    |   |      | 43,599    |   |      | 34,967   
|                                           |  |      |           |   |      |           |   |      |          
|                                           |  | $    | 295,978   |   |      | 260,530   |   |      | 213,144  
|                                           |  |      |           |   |      |           |   |      |          
|Identifiable assets:                       |  |      |           |   |      |           |   |      |          
|United States                              |  | $    | 1,136,521 |   |      | 1,084,552 |   |      | 935,874  
|Foreign                                    |  |      | 519,324   |   |      | 439,743   |   |      | 405,590  
|Corporate(2)                               |  |      | 289,764   |   |      | 205,196   |   |      | 175,037  
|                                           |  |      |           |   |      |           |   |      |          
|                                           |  | $    | 1,945,609 |   |      | 1,729,491 |   |      | 1,516,501
|                                           |  |      |           |   |      |           |   |      |          



|(1) | As required, the company implemented SFAS No. 142 in fiscal year 2002 and, accordingly,
discontinued amortization of goodwill and trade names. In accordance with SFAS No. 142, segment operating profit for fiscal year 2001 has not been restated and, therefore, includes amortization of goodwill and trade names. See note 1 for
further discussion.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Corporate identifiable assets are primarily cash, cash equivalents and equipment.
|--- | ---------------------------------------------------------------------------------



(7) Income Taxes



The provision for income taxes consists of the following:



|(In thousands)                                                                                                                    |  | 2003 |        |   | 2002 |        |   | 2001 |       
|--------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | ------ | - | ---- | ------
|Current:                                                                                                                          |  |      |        |   |      |        |   |      |       
|Federal                                                                                                                           |  | $    | 71,057 |   |      | 67,802 |   |      | 45,989
|Foreign                                                                                                                           |  |      | 16,255 |   |      | 9,193  |   |      | 7,624 
|State                                                                                                                             |  |      | 5,572  |   |      | 3,143  |   |      | 2,509 
|                                                                                                                                  |  |      |        |   |      |        |   |      |       
|                                                                                                                                  |  |      | 92,884 |   |      | 80,138 |   |      | 56,122
|                                                                                                                                  |  |      |        |   |      |        |   |      |       
|Deferred:                                                                                                                         |  |      |        |   |      |        |   |      |       
|Federal                                                                                                                           |  |      | (2,805 | ) |      | (9,364 | ) |      | 808   
|Foreign                                                                                                                           |  |      | (264   | ) |      | 3,008  |   |      | 134   
|State                                                                                                                             |  |      | (568   | ) |      | 345    |   |      | (204  
|                                                                                                                                  |  |      |        |   |      |        |   |      |       
|                                                                                                                                  |  |      | (3,637 | ) |      | (6,011 | ) |      | 738   
|                                                                                                                                  |  |      |        |   |      |        |   |      |       
|                                                                                                                                  |  | $    | 89,247 |   |      | 74,127 |   |      | 56,860
|                                                                                                                                  |  |      |        |   |      |        |   |      |       
|                                                                                                                                 
|The difference between the United States statutory federal income tax rate and the effective income tax rate is summarized below:
|                                                                                                                                  |  |      |       
|                                                                                                                                  |  | 2003 |        |   | 2002 |        |   | 2001 |       
|U.S. statutory income tax rate                                                                                                    |  |      | 35.0   | % |      | 35.0   | % |      | 35.0  
|Effect of foreign income tax rates                                                                                                |  |      | (.3    | ) |      | (1.0   | ) |      | (.5   
|State income taxes, net of federal tax benefit                                                                                    |  |      | 1.3    |   |      | 1.1    |   |      | .9    
|Tax exempt interest income                                                                                                        |  |      | (.3    | ) |      | (.3    | ) |      | (.6   
|Other, net                                                                                                                        |  |      | (.2    | ) |      | .2     |   |      | (.8   
|                                                                                                                                  |  |      |        |   |      |        |   |      |       
|Effective income tax rate                                                                                                         |  |      | 35.5   | % |      | 35.0   | % |      | 34.0  
|                                                                                                                                  |  |      |        |   |      |        |   |      |       



13



---

Notes to the Consolidated Financial Statements

Alberto-Culver Company and Subsidiaries



Significant components of the companys deferred tax assets and liabilities at September 30, 2003 and 2002 are
as follows:



|(In thousands)                            |  | 2003 |        |   | 2002 |       
|----------------------------------------- |  | ---- | ------ | - | ---- | ------
|Deferred tax assets attributable to:      |  |      |        |   |      |       
|Accrued expenses                          |  | $    | 17,987 |   |      | 20,653
|Long-term liabilities                     |  |      | 10,962 |   |      | 7,555 
|Foreign loss carryforwards                |  |      | 8,374  |   |      | 9,011 
|Inventory adjustments                     |  |      | 5,035  |   |      |      
|Other                                     |  |      | 2,561  |   |      | 2,057 
|Valuation allowance                       |  |      | (8,374 | ) |      | (9,011
|                                          |  |      |        |   |      |       
|Total deferred tax assets                 |  |      | 36,545 |   |      | 30,265
|                                          |  |      |        |   |      |       
|Deferred tax liabilities attributable to: |  |      |        |   |      |       
|Depreciation and amortization             |  |      | 53,176 |   |      | 47,275
|Inventory adjustments                     |  |      |       |   |      | 375   
|State income taxes                        |  |      | 106    |   |      | 674   
|                                          |  |      |        |   |      |       
|Total deferred tax liabilities            |  |      | 53,282 |   |      | 48,324
|                                          |  |      |        |   |      |       
|Net deferred tax liabilities              |  | $    | 16,737 |   |      | 18,059
|                                          |  |      |        |   |      |       



Other current assets at September 30,
2003 and 2002 include $23.0 million and $20.3 million, respectively, of net deferred tax assets. Management believes that it is more likely than not that results of future operations will generate sufficient taxable income to realize the deferred
tax assets, net of the valuation allowance.



The tax benefit realized upon the
exercise of stock options is recorded in additional paid-in capital and amounted to $8.3 million, $11.3 million and $2.8 million in fiscal years 2003, 2002 and 2001, respectively.



Domestic earnings before provision for income taxes were $203.5 million, $171.1 million and $140.7 million in fiscal years 2003, 2002 and
2001, respectively. Foreign operations had earnings before provision for income taxes of $47.9 million, $40.7 million and $26.5 million in fiscal years 2003, 2002 and 2001, respectively.



Undistributed earnings of the companys foreign operations amounting to $217.6 million at September 30, 2003 are intended to remain
permanently invested to finance future growth and expansion. Accordingly, no U.S. income taxes have been provided on those earnings at September 30, 2003.



14



---

Notes to the Consolidated Financial Statements (continued)

Alberto-Culver Company and Subsidiaries



(8) Lease Commitments



The major portion of the companys leases are for Sally Beauty Company stores. Other leases cover certain manufacturing and warehousing
properties, office facilities and data processing equipment. At September 30, 2003, future minimum payments under non-cancelable leases by fiscal year are as follows:



|(In thousands)               |  | OperatingLeases |         | CapitalLeases
|---------------------------- |  | --------------- | ------- | -------------
|2004                         |  | $               | 80,169  |              
|2005                         |  |                 | 68,690  |              
|2006                         |  |                 | 55,000  |              
|2007                         |  |                 | 39,202  |              
|2008                         |  |                 | 25,422  |              
|2009 and later               |  |                 | 54,359  |              
|                             |  |                 |         |              
|Total minimum lease payments |  | $               | 322,842 |              
|                             |  |                 |         |              



Total rental expense for operating
leases amounted to $102.0 million in 2003, $92.3 million in 2002 and $82.7 million in 2001. Certain leases require the company to pay real estate taxes, insurance, maintenance and special assessments.



(9) Quarterly Financial Data



Unaudited quarterly consolidated statement of earnings information for the fiscal years
ended September 30, 2003 and 2002 is summarized below (in thousands, except per share amounts):



|                        |  | 1stQuarter |         | 2ndQuarter |         | 3rdQuarter |         | 4thQuarter
|----------------------- |  | ---------- | ------- | ---------- | ------- | ---------- | ------- | ----------
|2003:                   |  |            |         |            |         |            |         |           
|Net sales               |  | $          | 696,776 |            | 706,956 |            | 736,057 |           
|Gross profit            |  | $          | 344,488 |            | 357,888 |            | 364,168 |           
|Net earnings            |  | $          | 36,016  |            | 37,855  |            | 42,564  |           
|Net earnings per share: |  |            |         |            |         |            |         |           
|Basic                   |  |            | $.62    |            | .65     |            | .73     |           
|Diluted                 |  |            | $.60    |            | .63     |            | .71     |           
|                        |  |            |         |            |         |            |         |           
|2002:                   |  |            |         |            |         |            |         |           
|Net sales               |  | $          | 614,260 |            | 657,762 |            | 681,074 |           
|Gross profit            |  | $          | 303,675 |            | 320,940 |            | 336,074 |           
|Net earnings            |  | $          | 29,294  |            | 32,650  |            | 36,401  |           
|Net earnings per share: |  |            |         |            |         |            |         |           
|Basic                   |  |            | $.52    |            | .57     |            | .63     |           
|Diluted                 |  |            | $.50    |            | .55     |            | .61     |           
|                        |  |            |         |            |         |            |         |           



15



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Notes to the Consolidated Financial Statements (continued)

Alberto-Culver Company and Subsidiaries



(10) Acquisitions



The company made acquisitions during fiscal years 2003, 2002 and 2001 which individually were insignificant to the consolidated financial
statements. The total amount of cash paid and Class A common stock issued for acquisitions in fiscal years 2003, 2002 and 2001 were $2.1 million, $120.1 million and $18.8 million, respectively. The acquisitions were accounted for using the purchase
method and, accordingly, the results of operations of the acquired businesses have been included in the consolidated financial statements from the dates of acquisition. Total goodwill of $1.4 million, $92.0 million and $11.6 million was recorded in
fiscal years 2003, 2002 and 2001, respectively, as a result of the acquisitions. The company acquired $390,000 and $3.9 million of trade names with indefinite lives in fiscal years 2003 and 2002, respectively. No trade names were acquired in fiscal
year 2001.



In September, 2003, the company announced its plans to acquire West
Coast Beauty Supply, a full-service distributor of professional beauty products, with an expected closing in December, 2003. The company estimates that the cash purchase price will be about $140 million with approximately $14 million of this amount
payable in future years.



(11) Subsequent Event  Conversion of
Class A Common Stock into Class B Common Stock



On October 22, 2003,
the Board of Directors approved the conversion of all of the issued shares of Class A common stock into Class B common stock on a one share-for-one share basis in accordance with the terms of the companys certificate of incorporation. Such
conversion became effective after the close of business on November 5, 2003. The single class of shares continues to trade on the New York Stock Exchange under the symbol ACV. Following the conversion, all outstanding options to purchase shares of
Class A common stock became options to purchase an equal number of shares of Class B common stock.



The company accounts for its stock compensation expense in accordance with APB No. 25. Under these rules, the conversion to one class of stock requires a remeasurement of the intrinsic value of all Class A stock
options outstanding. As a result, the company will record a non-cash charge against pre-tax earnings of $105.9 million, of which $63.2 million will be recognized in the first quarter of fiscal year 2004, another $23.6 million will be recognized
during the remainder of fiscal year 2004 and the final $19.1 million will be recognized over the following three fiscal years in diminishing amounts. The non-cash charges will reduce operating earnings, provision for income taxes, net earnings and
basic and diluted net earnings per share. The balance sheet effect of the options remeasurement will increase total stockholders equity by $22.1 million in the first quarter of fiscal year 2004 and will result in the recognition of a deferred
tax asset of the same amount. Thereafter, the remaining non-cash charges will increase total stockholders equity and result in the recognition of additional deferred tax assets of $8.3 million during the remainder of fiscal year 2004 and $6.6
million over the following three fiscal years in diminishing amounts.



In
addition, on October 22, 2003, the Board of Directors authorized the company to purchase up to 1,368,300 shares of Class B common stock. This authorization replaced the Class A repurchase program disclosed in note 4.



16



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Independent Auditors Report

Alberto-Culver Company and Subsidiaries



The Board of Directors and Stockholders

Alberto-Culver Company:



We have audited the
accompanying consolidated balance sheets of Alberto-Culver Company and Subsidiaries as of September 30, 2003 and 2002 and the related consolidated statements of earnings, cash flows and stockholders equity for each of the years in the
three-year period ended September 30, 2003. These consolidated financial statements are the responsibility of the companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.



We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Alberto-Culver Company and Subsidiaries as of September 30, 2003 and 2002 and the results of their
operations and their cash flows for each of the years in the three-year period ended September 30, 2003, in conformity with accounting principles generally accepted in the United States of America.



As discussed in note 1 to the consolidated financial statements, in the year
ended September 30, 2002, the company changed its method of accounting for goodwill and trade names.



|                                                                                                 
|-------------------------------------------------------------------------------------------------
|/s/ KPMG LLP                                                                                     
|KPMG LLP Chicago, Illinois October 21, 2003, except as to note 11, whichis as of November 5, 2003



17



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Managements Discussion and Analysis of Results of Operations and Financial Condition

Alberto-Culver Company and Subsidiaries



Results of Operations



Fiscal year 2003 marked the companys twelfth consecutive year of record sales and record operating earnings. Net sales for the year ended September 30, 2003 were $2.89 billion, an increase of 9.1% over the prior
year. Fiscal year 2002 net sales of $2.65 billion increased 11.4% from $2.38 billion in 2001. Foreign exchange rates increased fiscal year 2003 sales by 2.0% and decreased fiscal year 2002 sales by 0.4%.



Record net earnings of $162.2 million in 2003 increased 17.8% from the prior years net
earnings of $137.7 million. Basic net earnings per share of $2.78 in fiscal year 2003 were 38 cents or 15.8% higher than 2002. Diluted net earnings per share increased 16.4% to $2.70 in fiscal year 2003 from $2.32 in fiscal year 2002.



Effective October 1, 2002, the companys consumer products business was reorganized into
two divisions. A new division, Alberto-Culver Consumer Products Worldwide, includes the former Alberto-Culver North America business segment and the former Alberto-Culver International business segment excluding the operations of Cederroth
International. The second division is Cederroth International, which manufactures, markets and distributes beauty and health care products throughout Scandinavia and in Europe. Beginning in fiscal year 2003, the company has two segments for external
financial reporting purposes: Global Consumer Products, which includes the two aforementioned consumer products divisions, and Specialty distribution  Sally, which is the same segment as previously reported. Prior year information has been
reclassified to conform to the new segment presentation.



Sales of Global
Consumer products in fiscal year 2003 increased 8.1% to $1.10 billion from $1.02 billion in 2002. The current year sales increase was primarily due to higher sales of TRESemmé shampoos, conditioners and styling products, St. Ives Swiss
Formula apricot scrubs, lotions and body washes, Alberto V05 shampoos and conditioners, TCB and Motions ethnic hair care products and Mrs. Dash salt-free seasonings and the effect of foreign exchange rates which increased sales by 3.9%. In fiscal
2002, sales increased 6.4% compared to 2001 sales of $955.2 million primarily due to higher sales of TRESemmé shampoos, conditioners and styling products, St. Ives Swiss Formula apricot scrubs, lotions and body washes, Alberto VO5 shampoos
and conditioners and Pro-Lines ethnic hair care products including Soft & Beautiful, TCB and Motions, along with increased sales for custom label filling operations.



Sales of the Specialty distribution  Sally business segment increased to $1.82 billion in fiscal year 2003, compared to $1.67 billion
and $1.45 billion in 2002 and 2001, respectively. The sales increases of 9.4% in 2003 and 14.8% in 2002 were attributable to the expansion of Sallys full-service operations, including acquisitions, higher sales for established Sally Beauty
Company stores and the opening of new stores during the year. The number of Sally stores increased 21.1% during the last three fiscal years to a total of 2,815, including 139 franchise stores, at September 30, 2003 compared to 2,712 and 2,428 at the
end of fiscal years 2002 and 2001, respectively.



Cost of products sold as a
percentage of sales was 50.1% in fiscal year 2003 compared to 50.7% in 2002 and 51.2% in 2001. The lower cost of products sold percentages in fiscal years 2003 and 2002 were primarily due to cost savings programs and increased sales of higher margin
products for Alberto-Culver Consumer Products Worldwide and improved vendor pricing and lower store inventory shrinkage for Sally.



Advertising, marketing, selling and administrative expenses increased 8.8% in fiscal year 2003 and 10.4% in 2002. The increases in fiscal years 2003 and 2002 primarily
resulted from the higher selling and administrative costs associated with the growth of the Sally Beauty Company business and higher expenditures for advertising and marketing.



Advertising and marketing expenditures were $212.4 million, $189.1 million and $179.0 million in fiscal years 2003, 2002 and 2001,
respectively. The higher expenses in fiscal year 2003 were mainly attributable to Alberto-Culver Consumer Products Worldwides increased advertising for Alberto VO5 hair care products and St. Ives Swiss Formula skin care products and Sally
Beauty Companys increased retail advertising and marketing costs.



Interest expense, net of interest income, was $22.4 million, $22.6 million and $21.8 million in fiscal years 2003, 2002 and 2001, respectively. Interest expense was $25.7 million in fiscal year 2003 versus $26.0 million in 2002 and $27.3
million in 2001. The decrease in interest expense in 2002 versus the prior year was primarily attributable to the elimination of borrowings under the companys Swedish krona revolving credit facility and lower interest resulting from an
interest rate swap. Interest income was $3.4 million in fiscal years 2003 and 2002 and $5.5 million in 2001. The decrease in interest income in 2002 compared to 2001 was principally due to lower interest rates on investments.



18



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Managements Discussion and Analysis of Results of Operations and Financial Condition

Alberto-Culver Company and Subsidiaries



The provision for income taxes as a percentage of earnings before income taxes was 35.5% in 2003, 35.0% in 2002 and
34.0% in 2001. The higher tax rate in 2003 compared to the two previous fiscal years was primarily due to the mix of foreign taxable earnings and the favorable settlement of certain tax matters in prior years. Other factors which influenced the
effective tax rates for those years are described in note 7 to the consolidated financial statements.



Financial Condition



Working capital at September 30, 2003 was $700.0 million, an increase of $176.2 million from the prior years working capital of $523.8 million. The resulting current ratio was 2.50 to 1.00 at September 30, 2003
compared to 2.14 to 1.00 last year. The increase in working capital in fiscal year 2003 was primarily due to net working capital generated from operations, partially offset by cash outlays for capital expenditures and cash dividends.



Cash and cash equivalents increased $152.7 million during fiscal year 2003 primarily due to
cash flow from operating activities and cash received from the exercise of stock options, partially offset by $61.4 million of capital expenditures, $23.7 million of cash dividends and $10.7 million of stock purchased for treasury.



Accounts receivable, less allowance for doubtful accounts, increased 8.2% to $226.1 million
from $209.0 million last year primarily due to higher sales compared to the prior year and the weakening of the U.S. dollar versus certain foreign currencies. This increase was partially offset by a higher allowance for doubtful accounts for certain
foreign receivables.



Net property, plant and equipment increased $16.5 million
to $264.3 million at September 30, 2003. The increase resulted primarily from expenditures for additional Sally stores, warehouse expansions, office facilities, machinery and equipment and information systems, partially offset by depreciation during
fiscal year 2003.



Net goodwill increased $11.9 million during fiscal year 2003
mainly due to the effects of foreign exchange rates.



Accounts payable of
$220.6 million at September 30, 2003 decreased $13.3 million compared to 2002 primarily due to lower advertising payables, lower chemical and packaging material purchases and the timing of vendor payments.



Accrued expenses increased 7.0% to $222.9 million at September 30, 2003 from $208.3 million
last year. The increase was primarily attributable to higher accruals for incentive plans, insurance and promotion expenditures and the effects of foreign exchange rates.



Income taxes payable and deferred income taxes increased $8.7 million to $61.5 million at September 30, 2003 mainly due to higher taxable
earnings partially offset by the timing of tax payments and tax benefits realized from the exercise of employee stock options.



Other liabilities were $57.6 million at September 30, 2003, an increase of $9.6 million compared to last year. The increase was primarily due to higher accruals for
insurance and retirement plans and the effect of foreign exchange rates.



Total
stockholders equity increased $199.7 million to $1.06 billion as of September 30, 2003. The increase was primarily due to net earnings for the fiscal year, proceeds from the exercise of employee stock options and a decrease in accumulated
other comprehensive income  foreign currency translation, partially offset by dividend payments and the repurchase of shares for treasury. Accumulated other comprehensive income  foreign currency translation decreased $36.9 million to
$40.7 million from $77.6 million last year. The decrease was attributable to the weakening of the U.S. dollar versus certain foreign currencies, primarily the Swedish krona, British pound and Australian dollar.



19



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Managements Discussion and Analysis of Results of Operations and Financial Condition

Alberto-Culver Company and Subsidiaries



Liquidity and Capital Resources



The companys primary sources of cash over the past three years have been from funds provided by operating activities which provided
cash of $218.6 million, $231.7 million and $165.2 million in fiscal years 2003, 2002 and 2001, respectively.



The company has obtained long-term financing as needed to fund acquisitions and other growth opportunities. Funds also may be obtained prior to their actual need in order to take advantage of opportunities in the debt
markets. In April, 2000, the company issued $200 million of 8.25% senior notes due November, 2005. In June, 1998, the company issued $120 million of 6.375% debentures due June, 2028. In September, 2002, the company obtained a three-year, $300
million revolving credit facility, which replaced an expiring five-year, $250 million credit facility. The current $300 million facility, which had no borrowings outstanding at September 30, 2003 or 2002, may be drawn in U.S. dollars or certain
foreign currencies. Under debt covenants, the company has the ability to incur up to $1.27 billion of additional borrowings.



The primary uses of cash during the three-year period ended September 30, 2003 were $153.6 million for capital expenditures, $130.5 million for acquisitions and $62.3
million for cash dividends.



Compared to 2000, cash dividends per share
increased 39.7% over the three-year period ended September 30, 2003. Cash dividends paid on Class A and Class B common stock were $.405 per share in 2003, $.3525 per share in 2002 and $.3225 per share in 2001.



The company anticipates that cash flows from operations and available credit will be
sufficient to fund operating requirements in future years. During fiscal year 2004, the company expects that cash will continue to be used for acquisitions, capital expenditures, new product development, market expansion and dividend payments. In
September, 2003, the company announced its plans to acquire West Coast Beauty Supply, a full-service distributor of professional beauty products, with an expected closing in December, 2003. The company estimates that the cash purchase price will be
about $140 million with approximately $14 million of this amount payable in future years. The company may also purchase shares of its common stock depending on market conditions. In July, 2002, the Board of Directors authorized the company to
purchase up to 1.7 million shares of Class A common stock. As of September 30, 2003, the company had purchased 331,700 Class A shares at a total cost of $15.1 million. A total of 1,368,300 Class A shares remain available for purchase under this
program as of September 30, 2003. During fiscal years 2003, 2002 and 2001 the company also acquired $2.9 million, $28.3 million and $1.3 million, respectively, of Class A and Class B common shares surrendered by employees in connection with the
exercises of stock options and the payment of withholding taxes as provided under the terms of certain incentive plans. Shares acquired under these plans are not subject to the companys stock repurchase program. See note 11 for
discussion of a subsequent event related to the companys conversion to one class of common stock.



The companys primary contractual cash obligations are long-term debt and operating leases. A major portion of the operating leases are for Sally Beauty Company stores, which typically are located in strip
shopping centers. The operating leases allow the company to expand its business to new locations without making significant up-front cash outlays for land and buildings.



The following table is a summary of contractual cash obligations and commitments outstanding by future payment dates as of September 30,
2003:



|                                                |  | Payments Due by Fiscal Year
|----------------------------------------------- |  | ---------------------------
|(In thousands)                                  |  | 2004                       
|Long-term debt, including current maturities(1) |  | $                          
|Operating leases(2)                             |  |                            
|Other long-term obligations(3)                  |  |                            
|                                                |  |                            
|Total                                           |  | $                          
|                                                |  |                            



|(1) | The companys $120.0 million of 6.375% debentures are due in June, 2028, but are subject to repayment, at the option of
the holders, in June, 2008.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | In accordance with accounting principles generally accepted in the United States of America, these obligations are not
reflected in the accompanying consolidated balance sheets.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Other long-term obligations represent commitments under various acquisition-related agreements including non-compete,
consulting and severance agreements. These obligations are included in accrued expenses and other liabilities in the accompanying consolidated balance sheets.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



At September 30, 2003 and 2002, the company had no off-balance sheet financing arrangements other than operating leases incurred in the
ordinary course of business as disclosed in note 8.



20



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Managements Discussion and Analysis of Results of Operations and Financial Condition

Alberto-Culver Company and Subsidiaries



At September 30, 2003, the company had $17.2 million in outstanding standby letters of credit related to various
insurance programs. The company does not have other unconditional purchase obligations or significant other commercial commitments.



The company is in compliance with all covenants and other requirements of its revolving credit agreement and public debt securities. Additionally, the revolving credit
agreement and the indenture for the public debt securities do not include rating triggers or subjective clauses that would accelerate maturity dates.



Inflation



The company was not significantly affected by inflation during the past three years. Management continuously attempts to resist cost increases and counteract the effects of inflation through productivity improvements,
cost reduction programs and price increases within the constraints of the highly competitive markets in which the company operates.



Market Risk



As a multinational corporation that manufactures and markets products in countries throughout the world, the company is subject to certain market risks including foreign currency fluctuations, interest rates and
government actions. The company considers a variety of practices to manage these market risks, including, when deemed appropriate, the occasional use of derivative financial instruments. The company uses derivative financial instruments only for
risk management and does not use them for trading or speculative purposes. As of September 30, 2003, the company had no material derivative financial instruments outstanding.



The company is exposed to potential gains or losses from foreign currency fluctuations affecting net investments and earnings denominated in
foreign currencies. The companys primary exposures are to changes in exchange rates for the U.S. dollar versus the Swedish krona, British pound sterling, Canadian dollar, Euro, Australian dollar, Argentine peso and Mexican peso.



The companys various currency exposures often offset each other, providing a natural
hedge against currency risk. Periodically, specific foreign currency transactions (e.g. inventory purchases, intercompany transactions, etc.) are hedged with forward contracts to reduce the foreign currency risk. Gains and losses on these foreign
currency hedges are included in the basis of the underlying hedged transactions. As of September 30, 2003, the company had no material outstanding foreign currency contracts.



The company considers combinations of fixed rate and variable rate debt, along with varying maturities, in its management of interest rate
risk. At September 30, 2003, the company had no variable rate long-term debt outstanding.



The company has periodically used interest rate swaps to manage interest rate risk on debt securities. These instruments allow the company to exchange variable rate debt into fixed rate or fixed rate debt into
variable rate. Interest rate differentials paid or received on these arrangements are recognized as adjustments to interest expense over the life of the agreement. At September 30, 2003, the company had no interest rate swaps outstanding.



In May, 2002, the company entered into an interest rate swap agreement with a
notional amount of $100 million in order to convert a portion of its fixed rate 8.25% senior notes into a variable rate obligation. In July, 2002, the company terminated the interest rate swap resulting in a gain of $2.8 million, which is being
amortized over the remaining term of the 8.25% senior notes as a reduction of interest expense. The unamortized portion of the gain is included in other liabilities and totaled $1.8 million as of September 30, 2003.



The companys quantitative information on market risk as of September 30, 2003 is as
follows (in millions):



|                               |  | Debt                
|------------------------------ |  | --------------------
|Expected Maturities            |  | Short-TermFixed Rate
|2004 (7.9% average rate)       |  | $                   
|2005 (8.2% average rate)       |  |                     
|2006 (8.3% average rate)       |  |                     
|2007 (9.2% average rate)       |  |                     
|Thereafter (6.4% average rate) |  |                     
|                               |  |                     
|Total                          |  | $                   
|                               |  |                     
|Fair value                     |  | $                   
|                               |  |                     



|* | The companys $120.0 million of 6.375% debentures are due in June, 2028, but are subject to repayment, at the option of the holders, in June, 2008.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------



21



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Managements Discussion and Analysis of Results of Operations and Financial Condition

Alberto-Culver Company and Subsidiaries



The company is exposed to credit risk on certain assets, primarily cash equivalents, short-term investments and
accounts receivable. The credit risk associated with cash equivalents and short-term investments is mitigated by the companys policy of investing in a diversified portfolio of securities with high credit ratings.



The company provides credit to customers in the ordinary course of business and performs
ongoing credit evaluations. The companys exposure to concentrations of credit risk with respect to trade receivables is mitigated by the companys broad customer base. Although Wal-Mart is a significant customer of the companys
global consumer products segment sales to Wal-Mart were less than 10% of the companys consolidated net sales in fiscal year 2003. The company believes its allowance for doubtful accounts is sufficient to cover customer credit risks.



New Accounting Standards



In June, 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141,
Business Combinations, and Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 addresses financial accounting and reporting for business combinations. SFAS No. 142
addresses financial accounting and reporting for acquired goodwill and other intangible assets, requires companies to discontinue the amortization of goodwill and certain other intangible assets and requires an impairment test of existing goodwill
and certain other intangible assets based on a fair value method. As required, the company adopted SFAS No. 141 in the fourth quarter of fiscal year 2001. The company also adopted SFAS No. 142 as required in the fourth quarter of fiscal year 2001
for new acquisitions and in the first quarter of fiscal year 2002 for previously acquired intangibles. In accordance with SFAS No. 142, the company determined that its trade names have indefinite lives and, therefore, the amortization of trade names
was discontinued effective October 1, 2001. In addition, as required by SFAS No. 142, the company ceased the amortization of goodwill effective October 1, 2001. As required by the provisions of the SFAS No. 142, goodwill and trade names are reviewed
for impairment at least annually, with ongoing recoverability evaluated based on applicable reporting unit performance and consideration of significant events or changes in the overall business environment.



In accordance with SFAS No. 142, the consolidated statement of earnings for fiscal year 2001
has not been restated for the effects of ceasing goodwill and trade name amortization. Had goodwill and trade name amortization been discontinued effective October 1, 2000, net earnings and net earnings per share for the fiscal years ended September
30, 2003, 2002 and 2001 would have been as follows:



|(In thousands, except per share data)                                    |  | 2003 |         | 2002 |         | 2001
|------------------------------------------------------------------------ |  | ---- | ------- | ---- | ------- | ----
|Reported net earnings                                                    |  | $    | 162,153 |      | 137,665 |     
|Elimination of goodwill and trade name amortization, net of income taxes |  |      |        |      |        |     
|                                                                         |  |      |         |      |         |     
|Pro-forma net earnings                                                   |  | $    | 162,153 |      | 137,665 |     
|                                                                         |  |      |         |      |         |     
|                                                                         |  |      |        
|Reported basic net earnings per share                                    |  | $    | 2.78    |      | 2.40    |     
|Elimination of goodwill and trade name amortization, net of income taxes |  |      |        |      |        |     
|                                                                         |  |      |         |      |         |     
|Pro-forma basic net earnings per share                                   |  | $    | 2.78    |      | 2.40    |     
|                                                                         |  |      |         |      |         |     
|                                                                         |  |      |        
|Reported diluted net earnings per share                                  |  | $    | 2.70    |      | 2.32    |     
|Elimination of goodwill and trade name amortization, net of income taxes |  |      |        |      |        |     
|                                                                         |  |      |         |      |         |     
|Pro-forma diluted net earnings per share                                 |  | $    | 2.70    |      | 2.32    |     
|                                                                         |  |      |         |      |         |     



22



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Managements Discussion and Analysis of Results of Operations and Financial Condition

Alberto-Culver Company and Subsidiaries



In January, 2002, the FASBs Emerging Issues Task Force (EITF) released Issue No. 00-23, Issues Related to
the Accounting for Stock Compensation under APB Opinion No. 25 and FASB Interpretation No. 44. Issue 41 of EITF No. 00-23 addresses the accounting consequences of converting any class of stock into a surviving class of stock and, in connection
therewith, converting outstanding stock options in that class of stock into stock options in the surviving class of stock. Issue 41 of EITF No. 00-23 is effective for any elimination of a class of stock occurring after January 24, 2002. As described
in note 4 to the consolidated financial statements, the company has two classes of common stock, Class A and Class B. All, but not less than all, of the Class A shares may at any time be converted into Class B on a share-for-share basis
at the option of the company. From time-to-time, the Board of Directors has considered the question of whether it would be advisable and in the best interests of the company and its shareholders to declassify its classes of common stock and revert
to the single class capital structure which existed before 1986. Under Issue 41 of EITF No. 00-23, a declassification by the company would result in a material non-cash charge in the period of declassification and in each subsequent quarter of the
remaining vesting periods of outstanding Class A stock options and restricted stock. As discussed in note 11, the Board of Directors on October 22, 2003 approved the conversion of all of the issued shares of Class A common stock into
Class B common stock on a one share-for-one share basis in accordance with the terms of the companys certificate of incorporation. Such conversion became effective after the close of business on November 5, 2003. Following the conversion, all
outstanding options to purchase shares of Class A common stock became options to purchase an equal number of shares of Class B common stock. As a result, the company will record a non-cash, pre-tax charge of $105.9 million, of which $63.2 million
will be recognized in the first quarter of fiscal year 2004, another $23.6 million will be recognized during the remainder of fiscal year 2004 and the final $19.1 million will be recognized over the following three fiscal years in diminishing
amounts. The non-cash charges will reduce operating earnings, provision for income taxes, net earnings and basic and diluted net earnings per share. The balance sheet effect of the options remeasurement will increase total stockholders equity
by $22.1 million in the first quarter of fiscal year 2004 and will result in the recognition of a deferred tax asset of the same amount. Thereafter, the remaining non-cash charges will increase total stockholders equity and result in the
recognition of additional deferred tax assets of $8.3 million during the remainder of fiscal year 2004 and $6.6 million over the following three fiscal years in diminishing amounts.



In December, 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure  an
amendment of SFAS No. 123. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value method of accounting for employee
stock-based compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 regarding the method of accounting for employee stock-based compensation and the effect of the method used on reported results. The company
implemented the annual disclosure requirements of SFAS No. 148 in its financial statements for the year ended September 30, 2003. The company complied with the interim disclosure requirements of SFAS No. 148 in the second quarter of fiscal year
2003.



In January, 2003, the FASBs EITF finalized Issue No. 02-16,
Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor, which addresses the accounting by a customer for consideration given by a vendor. EITF Issue No. 02-16 standardizes the accounting
treatment for these types of arrangements by requiring that consideration received from a vendor be reflected as a reduction in the purchase price of the item, except for reimbursement of specific, incremental expenses incurred by the customer to
sell a vendors products, which should be reflected as a reduction in the applicable expense item (Issue 1). EITF Issue No. 02-16 also requires that rebates or refunds from vendors that are earned based upon a specified level of
purchases, or continued purchases over a specified period of time, should be accrued if it is probable they will be earned and can be estimated (Issue 2). As required by EITF Issue No. 02-16, the company implemented Issue 1 in the second
quarter of fiscal year 2003 and Issue 2 for arrangements entered into or modified after November 21, 2002. The adoption of EITF No. 02-16 did not have a material effect on the companys consolidated financial statements.



Critical Accounting Policies



The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses in the financial statements. Actual results may differ from these
estimates. Management believes these estimates and assumptions are reasonable.



Accounting policies are considered critical when they require management to make assumptions about matters that are highly uncertain at the time the accounting estimate is made and when different estimates that management reasonably could
have used have a material impact on the presentation of the companys financial condition, changes in financial condition or results of operations.



The companys critical accounting policies relate to the calculation and treatment of sales incentives, allowance for doubtful accounts and the valuation of
inventories.



Sales Incentives  Sales incentives primarily include
trade promotion activities and consumer coupons. The company records accruals for sales incentives based on estimates of the ultimate cost of each program. The company tracks its commitments for sales incentive programs and, using historical
experience, records an accrual at the end of each period for the estimated incurred, but unpaid costs of these programs. Actual costs differing from estimated costs could significantly affect these estimates and the related accruals.



23



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Managements Discussion and Analysis of Results of Operations and Financial Condition

Alberto-Culver Company and Subsidiaries



Allowance for Doubtful Accounts  The allowance for doubtful accounts requires management to estimate
future collections of accounts receivable. Management records allowances for doubtful accounts based on historical collection statistics and current customer credit information. These estimates could be significantly affected as a result of actual
collections differing from historical statistics or changes in a customers credit status.



Valuation of Inventories  When necessary, the company provides allowances to adjust the carrying value of inventories to the lower of cost or market, including costs to sell or dispose, and for estimated
inventory shrinkage. Estimates of the future demand for the companys products, anticipated product re-launches, changes in formulas and packaging and reductions in stock-keeping units are key factors used by management in assessing the net
realizable value of inventories. The company estimates inventory shrinkage based on historical experience. Actual results differing from these estimates could significantly affect the companys inventories and cost of products sold.



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Market Price of Common Stock and Cash Dividends Per Share

Alberto-Culver Company and Subsidiaries



The high and low sales prices of both classes of the companys common stock on the New York Stock Exchange and cash dividends per share in each quarter of fiscal
years 2003 and 2002 are as follows:



|                            |  | Market Price Range |       | Cash Dividends Per Share
|--------------------------- |  | ------------------ | ----- | ------------------------
|                            |  | 2003               |       | 2002                    
|                            |  | High               |       | Low                     
|Class A (NYSE Symbol ACVA): |  |                    |       |                         
|First Quarter               |  | $                  | 49.92 |                         
|Second Quarter              |  | $                  | 51.00 |                         
|Third Quarter               |  | $                  | 50.45 |                         
|Fourth Quarter              |  | $                  | 57.75 |                         
|                            |  |                    |       |                         
|                            |  |                    |       |                         
|                            |  |                    |       |                         
|Class B (NYSE Symbol ACV):  |  |                    |       |                         
|First Quarter               |  | $                  | 53.05 |                         
|Second Quarter              |  | $                  | 53.13 |                         
|Third Quarter               |  | $                  | 51.95 |                         
|Fourth Quarter              |  | $                  | 59.26 |                         
|                            |  |                    |       |                         
|                            |  |                    |       |                         
|                            |  |                    |       |                         



Stockholders of record, which excludes
a large number of stockholders with shares held in street name, totaled 1,384 as of November 17, 2003.

















The following trademarks and servicemarks owned by Alberto-Culver Company and its
subsidiaries appear in this report: Alberto VO5, Armstrong-McCall, Beauty Systems Group, BSG, Cederroth International, CPR, Critical Protection & Repair, Grilling Blends, Indola, Ion, Motions, Mrs. Dash, Pro-Line, Sally, Sally Beauty, Sally
Beauty Supply, Silk Elements, Soft & Beautiful, St. Ives, St. Ives Swiss Formula, TCB, TRESemmé, TRESspray, West Coast Beauty Supply, Whipped Silk and VO5.



The following are trademarks and servicemarks of other companies which appear in this report: Creative Nail Design (Creative Nail Design,
Inc.), Dove (Chesebrough-Ponds, Inc.), Farouk (Farouk Systems, Inc.), Fructis (Laboratoire Garnier & Cie), Graham Webb (Graham Webb International, L.P.), LOreal (LOreal S.A.), Matrix (LOreal USA Creative, Inc.), OPI (OPI
Products, Inc.), Paul Mitchell (John Paul Mitchell Systems), Redken (LOreal USA Creative, Inc.), Sebastian (Sebastian International, Inc.), Shiseido (Shiseido Company Ltd.), TIGI (Toni & Guy (USA) Limited), Wal-Mart (Wal-Mart Stores, Inc.)
and WELLA (The Wella Corporation).



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Selected Financial Data

Alberto-Culver Company and Subsidiaries



|Year ended September 30,                        
|------------------------------------------------
|(In thousands,except per share data)            
|                                                
|Operating Results:                              
|Net sales                                       
|Cost of products sold                           
|Interest expense                                
|Earnings before provisionfor income taxes (1)   
|Provision for income taxes                      
|Net earnings (1)                                
|Net earnings per share (1)(4):                  
|Basic                                           
|Diluted                                         
|                                                
|Weighted average shares outstanding (4):        
|Basic                                           
|Diluted                                         
|Shares outstanding atyear end (4):              
|Class A                                         
|Class B                                         
|                                                
|Financial Condition:                            
|Current ratio                                   
|Working capital                                 
|Cash, cash equivalents and short-terminvestments
|Property, plant and equipment, net              
|Total assets                                    
|Long-term debt                                  
|Stockholders equity                            
|Cash dividends                                  
|Cash dividendsper share (4)(5)                  
|                                                



|(1) | The company implemented the FASBs Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other
Intangible Assets, in fiscal year 2002 and, accordingly, discontinued the amortization of goodwill and trade names. In accordance with SFAS No. 142, earnings before provision for income taxes, net earnings and net earnings per share for fiscal
years 1992 through 2001 have not been restated and, therefore, include the amortization of goodwill and trade names.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Fiscal year 2000 includes a non-recurring gain from
the sale of a trademark. The non-recurring gain increased earnings before income taxes by $9.3 million, net earnings by $6.0 million and basic and diluted net earnings per share by 11 cents.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Fiscal year 1997 includes a non-recurring gain from
an insurance settlement for the loss of the companys corporate airplane. The non-recurring gain increased earnings before income taxes by $15.6 million, net earnings by $9.8 million and basic and diluted earnings per share by 18 cents and 16
cents, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Net earnings per share, shares outstanding and cash
dividends per share have been restated to reflect the 100% stock dividend on the companys Class A and Class B outstanding shares in February, 1997.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Cash dividends per share on Class A common stock and
Class B common stock have been equal since the Class A shares were issued in April, 1986. Cash dividends paid in fiscal 1993 included a one-time extraordinary dividend of one cent per share in recognition of the company surpassing one billion
dollars in sales for the fiscal year ended September 30, 1992.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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