Consolidated Statements of Earnings


Alberto-Culver Company and Subsidiaries





Year ended September 30,2002

2001

2000(In thousands, except per share data)Net sales

$
2,650,976

2,379,117

2,137,737Cost of products sold


1,356,530

1,228,509

1,120,079Gross profit


1,294,446

1,150,608

1,017,658Advertising, marketing, selling and administrative


1,060,018

961,542

853,425Non-recurring gain (note 9)






(9,257
)Operating earnings


234,428

189,066

173,490Interest expense, net of interest income of $3,377 in 2002, $5,479 in 2001 and $4,538 in 2000


22,636

21,830

19,209Earnings before provision for income taxes


211,792

167,236

154,281Provision for income taxes


74,127

56,860

51,097Net earnings

$
137,665

110,376

103,184Net earnings per share:Basic

$
2.40

1.96

1.85Diluted

$
2.32

1.91

1.83





See accompanying notes to consolidated financial statements.




---




Consolidated Balance Sheets


Alberto-Culver Company and Subsidiaries





September 30,2002


2001(In thousands, except share data)AssetsCurrent assets:Cash and cash equivalents

$
217,485


201,970Short-term investments





869Receivables, less allowance for doubtful accounts of $17,550 in 2002 and $11,387 in 2001 (note 3)


209,010


169,657Inventories:Raw materials


39,932


41,521Work-in-process


5,545


4,782Finished goods


476,731


432,008Total inventories


522,208


478,311Other current assets


35,514


26,142Total current assets


984,217


876,949Property, plant and equipment:Land


12,981


13,593Buildings and leasehold improvements


166,700


151,306Machinery and equipment


339,338


306,958Total property, plant and equipment


519,019


471,857Accumulated depreciation


271,169


236,035Property, plant and equipment, net


247,850


235,822Goodwill, net


343,431


264,339Trade names, net


79,681


79,532Other assets


74,312


59,859Total assets

$
1,729,491


1,516,501Liabilities and Stockholders EquityCurrent liabilities:Short-term borrowings

$
2,513


2,482Current maturities of long-term debt


1,189


404Accounts payable


233,942


191,410Accrued expenses


208,311


165,525Income taxes


14,492


30,482Total current liabilities


460,447


390,303Long-term debt


320,181


321,183Deferred income taxes


38,337


39,086Other liabilities


48,067


29,920Stockholders equity:Common stock, par value $.22 per share:Class A authorized 75,000,000 shares; 30,612,798 shares issued at September 30, 2002 and 2001


6,735


6,735Class B authorized 75,000,000 shares; 37,710,655 shares issued at September 30, 2002 and 2001


8,296


8,296Additional paid-in capital


205,470


190,368Retained earnings


897,106


779,792Unearned compensation


(5,849
)

(4,826
)Accumulated other comprehensive income  foreign currency translation


(77,603
)

(61,284
)1,034,155


919,081Less treasury stock, at cost (Class A common stock: 2002  4,765,673 shares and 2001  6,741,946 shares; Class B common stock: 2002  5,379,015 shares and 2001  4,753,184 shares)


(171,696
)

(183,072
)Total stockholders equity


862,459


736,009Total liabilities and stockholders equity

$
1,729,491


1,516,501





See accompanying notes to consolidated financial statements.




2




---




Consolidated Statements of Cash Flows


Alberto-Culver Company and Subsidiaries





Year ended September 30,2002


2001


2000(In thousands)Cash Flows from Operating Activities:Net earnings

$
137,665


110,376


103,184Adjustments to reconcile net earnings to net cash provided by operating activities:Depreciation


43,415


37,315


36,575Amortization of goodwill, trade names and other assets


3,799


14,090


13,063Non-recurring gain








(9,257
)Deferred income taxes


(6,011
)

738


73Cash effects of changes in (exclusive of acquisitions):Receivables, net


9,668


(14,582
)

(9,612
)Inventories


(20,286
)

(28,246
)

(5,056
)Other current assets


(1,913
)

43


(3,236
)Accounts payable and accrued expenses


66,050


37,771


(3,085
)Income taxes


(7,128
)

14,541


1,655Other assets


(6,654
)

(6,713
)

(4,644
)Other liabilities


13,088


(128
)

(530
)Net cash provided by operating activities


231,693


165,205


119,130Cash Flows from Investing Activities:Short-term investments


881


(538
)

1,538Capital expenditures


(55,464
)

(36,752
)

(37,527
)Payments for purchased businesses, net of acquired companies cash


(110,133
)

(18,791
)

(144,832
)Proceeds from sale of trademark








10,000Proceeds from disposals of assets


6,002


1,340


3,172Net cash used by investing activities


(158,714
)

(54,741
)

(167,649
)Cash Flows from Financing Activities:Short-term borrowings


(2
)

(1,073
)

464Proceeds from issuance of long-term debt


177


42


308,508Debt issuance costs








(1,544
)Repayments of long-term debt


(398
)

(20,512
)

(189,028
)Termination of interest rate swap


2,772





Proceeds from sale of accounts receivable








5,000Repurchase of previously sold accounts receivable


(40,000
)




Proceeds from exercise of stock options


36,771


15,490


2,712Cash dividends paid


(20,351
)

(18,215
)

(16,182
)Stock purchased for treasury


(35,650
)

(1,348
)

(3,460
)Net cash provided (used) by financing activities


(56,681
)

(25,616
)

106,470Effect of foreign exchange rate changes on cash


(783
)

2,485


755Net increase in cash and cash equivalents


15,515


87,333


58,706Cash and cash equivalents at beginning of year


201,970


114,637


55,931Cash and cash equivalents at end of year

$
217,485


201,970


114,637Supplemental Cash Flow Information:Cash paid for:Interest

$
26,704


27,673


16,687Income taxes

$
86,225


40,659


48,711Non-cash investing activities:Issuance of Class A common shares for acquisition

$
10,010





1,959





See accompanying notes to consolidated financial statements.




3




---




Consolidated Statements of Stockholders Equity


Alberto-Culver Company and Subsidiaries





Number of Shares


DollarsCommon Stock
Issued

Treasury Stock


Common Stock
Issued

Additional Paid-in Capital


Retained Earnings


Unearned Compensation


Accumulated Other Comprehensive Income (Loss)


Treasury Stock


Total Stockholders EquityClass A

Class B

Class A


Class B


Class A

Class B(In thousands)Balance at September 30, 1999

30,613

37,711

(7,845
)

(4,753
)

$6,735

$8,296

$191,063


$600,629


$(3,040
)

$(31,160
)

$(206,743
)

$565,780Comprehensive income (loss):Net earnings


















103,184











103,184Foreign currency translation
























(23,240
)




(23,240
)Total comprehensive income (loss)


















103,184





(23,240
)




79,944Cash dividends


















(16,182
)










(16,182
)Stock options exercised





193









(1,048
)










4,169


3,121Stock issued pursuant to employee     incentive plans





15









(19
)










317


298Stock issued for acquisition





75









343











1,616


1,959Restricted stock issued, net





101









(202
)




(2,104
)




2,183


(123
)Restricted stock amortization





















923








923Stock purchased for treasury





(170
)




















(3,460
)

(3,460
)Balance at September 30, 2000

30,613

37,711

(7,631
)

(4,753
)

6,735

8,296

190,137


687,631


(4,221
)

(54,400
)

(201,918
)

632,260Comprehensive income (loss):Net earnings


















110,376











110,376Foreign currency translation
























(6,884
)




(6,884
)Total comprehensive income (loss)


















110,376





(6,884
)




103,492Cash dividends


















(18,215
)










(18,215
)Stock options exercised





850









(117
)










18,382


18,265Stock issued pursuant to employee     incentive plans





17









65











371


436Restricted stock issued, net





67









283





(1,819
)




1,441


(95
)Restricted stock amortization





















1,214








1,214Stock purchased for treasury





(45
)




















(1,348
)

(1,348
)Balance at September 30, 2001

30,613

37,711

(6,742
)

(4,753
)

6,735

8,296

190,368


779,792


(4,826
)

(61,284
)

(183,072
)

736,009Comprehensive income (loss):Net earnings


















137,665











137,665Foreign currency translation
























(16,319
)




(16,319
)Total comprehensive income (loss)


















137,665





(16,319
)




121,346Cash dividends


















(20,351
)










(20,351
)Stock options exercised





1,820









8,596











39,468


48,064Stock issued pursuant to employee     incentive plans





43









505











932


1,437Stock issued for acquisition





221









5,076











4,934


10,010Restricted stock issued, net





78









925





(2,705
)




1,692


(88
)Restricted stock amortization





















1,682








1,682Stock purchased for treasury





(186
)

(626
)

















(35,650
)

(35,650
)Balance at September 30, 2002

30,613

37,711

(4,766
)

(5,379
)

$6,735

$8,296

$205,470


$897,106


$(5,849
)

$(77,603
)

$(171,696
)

$862,459





See accompanying notes to consolidated financial statements.




4




---




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.





Short-term 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 $336.9 million at September 30, 2002. 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 amounts of receivables to be collected. 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
of 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.





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 20-40 years. Leasehold
improvements are depreciated over the lives of the related leases. The depreciation of machinery and equipment is over periods of 5-15 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




---




Notes to the Consolidated Financial Statements (continued)


Alberto-Culver Company and Subsidiaries





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, cash discounts and doubtful accounts 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 on the advertising, marketing, selling and administrative line of the consolidated statements of earnings.





Costs of Products Sold





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





Advertising and Marketing





Advertising and marketing costs are expensed as incurred and amounted to $189.1 million, $179.0 million and $162.7 million in fiscal years 2002, 2001 and 2000, respectively.





Research and Development





Research and development costs are expensed
as incurred and amounted to $9.8 million in 2002, $9.6 million in 2001 and $8.5 million in 2000.





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:





2002

2001

2000(In thousands)Basic weighted average shares outstanding

57,380

56,176

55,790Assumed exercise of stock options

1,457

1,299

564Assumed vesting of restricted stock

377

363

Other





56Diluted weighted average shares outstanding

59,214

57,838

56,410





No stock options were anti-dilutive in fiscal years 2002 or 2001. Stock options for
722,200 shares were excluded from the computation of diluted net earnings per share in fiscal year 2000 as the options exercise prices were greater than the average market price and, therefore, were anti-dilutive.




6




---




Notes to the Consolidated Financial Statements (continued)


Alberto-Culver Company and Subsidiaries





Stock-Based Compensation





The company uses the intrinsic method of accounting for its stock-based compensation
plans.





New Accounting Standards





In November, 2001, the FASBs Emerging Issues Task Force (EITF) released Issue No. 01-09, Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendors Products. EITF No. 01-09
consolidates EITF No. 00-14, Accounting for Certain Sales Incentives, which addresses the recognition, measurement and income statement classification for various types of sales incentives including coupons, rebates and free products,
and EITF No. 00-25, Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendors Products, which addresses the income statement classification for various types of consideration paid by a vendor to a
retailer. EITF No. 01-09 does not change the accounting treatment set forth by EITF Nos. 00-14 and 00-25. As required, the company adopted the provisions of EITF No. 01-09 in the first quarter of fiscal year 2002. In accordance with EITF No. 01-09,
the company reclassified certain amounts for fiscal years 2001 and 2000 to conform to the current years presentation resulting in a $115.1 million reduction in net sales, an $11.1 million increase in cost of products sold and a $126.2 million
decrease in promotion expense for fiscal year 2001 and a $109.4 million reduction in net sales, a $14.3 million increase in cost of products sold and a $123.7 million decrease in promotion expense for fiscal year 2000. Consolidated net earnings were
not affected by these reclassifications.





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. Based on the results of the companys
transitional impairment testing, no impairment of indefinite-lived trade names existed at October 1, 2001. In addition, as required by SFAS No. 142, the company ceased the amortization of goodwill effective October 1, 2001. In accordance with the
adoption provisions of SFAS No. 142, the company has completed the required transitional goodwill impairment tests and has determined that goodwill was not impaired as of October 1, 2001, the date of adoption. Prospectively, goodwill and trade names
will be reviewed for impairment at least annually, with ongoing recoverability monitored 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 statements of earnings for fiscal years 2001 and 2000 have not been restated for the effects of ceasing
goodwill and trade name amortization. Had goodwill and trade name amortization been discontinued effective October 1, 1999, net earnings and net earnings per share for the fiscal years ended September 30, 2002, 2001 and 2000 would have been as
follows:





2002

2001

2000*(In thousands, except per share data)Reported net earnings

$
137,665

110,376

103,184Elimination of goodwill and trade name amortization, net of income taxes




8,759

7,832Pro-forma net earnings

$
137,665

119,135

111,016Reported basic net earnings per share

$
2.40

1.96

1.85Elimination of goodwill and trade name amortization, net of income taxes




.16

.14Pro-forma basic net earnings per share

$
2.40

2.12

1.99Reported diluted net earnings per share

$
2.32

1.91

1.83Elimination of goodwill and trade name amortization, net of income taxes




.15

.14Pro-forma diluted net earnings per share

$
2.32

2.06

1.97





|* |  | Fiscal year 2000 includes a non-recurring gain from the sale of a trademark. The non-recurring gain increased net earnings by $6.0 million and basic and
diluted net earnings per share by 11 cents.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



7




---




Notes to the Consolidated Financial Statements (continued)


Alberto-Culver Company and Subsidiaries





The change in the carrying amount of goodwill by operating segment for the fiscal year ended September 30, 2002 is as follows:





Consumer Products


Specialty Distribution-Sally


TotalNorth America


International(In thousands)Balance at September 30, 2001

$
69,379


79,648


115,312


264,339Additions, net of purchase price adjustments


(214
)




92,240


92,026Foreign currency translation effect





(12,906
)

(28
)

(12,934
)Balance at September 30, 2002

$
69,165


66,742


207,524


343,431





Indefinite-lived trade names by operating segment at September 30, 2002 and 2001 are as
follows:





2002

2001(In thousands)Consumer products:Alberto-Culver North America

$
45,414

45,414Alberto-Culver International


30,145

33,857Total consumer products


75,559

79,271Specialty distribution - Sally


4,122

261$
79,681

79,532





(2) Accrued Expenses





Accrued expenses consist of the following:





2002

2001(In thousands)Compensation and benefits

$
103,449

83,403Advertising and promotions


38,943

35,125Other


65,919

46,997$
208,311

165,525





(3) Long-Term Debt and Other Financing Arrangements





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





2002

2001(In thousands)8.25% notes due November, 2005

$
200,000

200,0006.375% debentures due June, 2028


120,000

120,000Other


181

1,183$
320,181

321,183





Maturities of long-term debt for the next five fiscal years are as follows (in thousands):
2003 - $1,189; 2004 - $96; 2005 - $63; 2006 - $200,021; 2007 - $1; 2008 and later - $120,000.





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.




8




---




Notes to the Consolidated Financial Statements (continued)


Alberto-Culver Company and Subsidiaries





The company has a $300 million, three-year revolving credit facility expiring in September, 2005. The previous credit facility, which was for $250 million, expired in September, 2002. No borrowings were outstanding under the
revolving credit facilities at September 30, 2002 or 2001. 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, 2002, the company was
in compliance with the covenants of the revolving credit facility.





The company also has a 400 million Swedish krona revolving credit
facility (approximately $43.2 million at September 30, 2002) which expires in April, 2003. The facility had no borrowings outstanding at September 30, 2002 or 2001. The interest rate for the facility is based on a fixed spread over the Stockholm
Interbank Offered Rate.





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 $2.6 million as of September 30, 2002.





The company had an agreement to sell, without recourse, up to $40 million of designated trade receivables on an ongoing basis. Costs related to this arrangement were included in administrative
expenses. In March, 2002, the company repurchased the $40 million of accounts receivable previously sold under this facility. The facility subsequently expired in September, 2002. The agreement involved the sale of accounts receivable to a
wholly-owned, consolidated special purpose entity (SPE), which in turn sold an undivided interest in a revolving pool of eligible receivables to a financial institution. The SPE was a separate corporate entity with its own creditors that were
entitled to be satisfied out of the SPEs assets prior to those assets becoming available to its parent. At September 30, 2001, the facility was fully utilized. As a result of the repurchase of receivables previously sold under the facility,
accounts receivable at September 30, 2002 increased $40 million compared to the prior year. As of September 30, 2002, the company has 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 2002, 2001 and
2000 were $11.4 million or $.3525 per share, $10.6 million or $.3225 per share and $9.6 million or $.29 per share, respectively. Cash dividends for Class A common stock in fiscal years 2002, 2001 and 2000 were $8.9 million or $.3525 per share, $7.6
million or $.3225 per share and $6.6 million or $.29 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.





During fiscal years 1998 and 1999, the Board of Directors authorized the company to purchase up to 9.0 million shares of its Class A common stock. Prior to the
fourth quarter of fiscal year 2002, the company had purchased 7.3 million Class A common shares under this program at a total cost of $162.9 million with the last purchase occurring in October, 1999. In July, 2002, the Board of Directors
re-authorized the company to purchase up to 1.7 million shares of Class A common stock remaining under this program. In the fourth quarter of fiscal year 2002, the company purchased 164,200 Class A shares at a total cost of $7.4 million. A total of
1,535,800 Class A shares remain available for purchase under this program as of September 30, 2002. During fiscal year 2002, the company also acquired $28.3 million 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.




9




---




Notes to the Consolidated Financial Statements (continued)


Alberto-Culver Company and Subsidiaries





(5) Stock Option and Restricted Stock Plans





Pursuant to its stock option plans, the company is authorized
to issue non-qualified options to employees and non-employee directors to purchase a limited number of shares of the companys Class A common stock at a price not less than the fair market value of the stock on the date of grant. 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 15.6 million shares have been authorized to be issued under the
plans, of which 5.1 million shares remain available for future grants at September 30, 2002.





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 these 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, 2002, 2001 and 2000 would have been as follows (in thousands, except per share amounts):





2002

2001

2000Net earnings:As reported

$
137,665

110,376

103,184Pro-forma

$
130,685

104,591

98,633Basic net earnings per share:As reported

$
2.40

1.96

1.85Pro-forma

$
2.28

1.86

1.77Diluted net earnings per share:As reported

$
2.32

1.91

1.83Pro-forma

$
2.21

1.81

1.75





The weighted average fair value of options at the date of grant in fiscal years 2002, 2001
and 2000 was $8.83, $7.49 and $5.77 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:





2002

2001

2000Expected life

5 years

5 years

5 yearsVolatility

25.5%

25.4%

24.8%Risk-free interest rate

3.5%-4.5%

4.6%-5.9%

5.8%-6.5%Dividend yield

0.8%-1.0%

1.0%-1.2%

1.1%-1.4%





Summarized information on the companys outstanding stock options at September 30,
2002 is as follows (options in thousands):





Options Outstanding

Options ExercisableRange of Exercise Prices

Number of Options

Average Remaining Contractual Life

Weighted Average Option Price

Number of Options

Weighted Average Option Price$  9.75-$13.38

394

2.6 years

$12.40

394

$12.40$19.75-$23.19

1,650

6.4 years

$20.39

1,280

$20.48$24.94-$26.19

1,598

7.6 years

$25.12

821

$25.28$29.44-$32.66

1,694

9.0 years

$32.64

420

$32.64$38.64-$42.46

31

9.6 years

$40.77








10




---




Notes to the Consolidated Financial Statements (continued)


Alberto-Culver Company and Subsidiaries





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





Number of Options


Weighted Average Option PriceOutstanding at September 30, 1999

3,710


$
19.01Granted

1,590


$
19.93Exercised

(193
)

$
14.05Canceled

(153
)

$
21.42Outstanding at September 30, 2000

4,954


$
19.42Granted

1,716


$
24.98Exercised

(850
)

$
18.22Canceled

(290
)

$
22.29Outstanding at September 30, 2001

5,530


$
21.18Granted

1,728


$
32.81Exercised

(1,820
)

$
20.20Canceled

(71
)

$
26.13Outstanding at September 30, 2002

5,367


$
25.19Exercisable at September 30:2000

2,912


$
18.402001

3,357


$
20.042002

2,915


$
22.50





The company is also authorized to grant up to 1,000,000 shares of Class A common stock to
employees under its restricted stock plan. The restricted shares vest on a cumulative basis in four equal annual installments commencing four years after the date of grant for grants made prior to July 26, 2001 and in four equal annual installments
commencing two years after the date of grant for all subsequent grants. 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 2002, employees were granted 85,800 restricted shares at a weighted average fair value of $32.66 per share on the date of grant. At September 30, 2002, there
were 363,950 restricted shares outstanding and 539,200 Class A shares remained authorized for future issuance. The unearned compensation balance included as a separate component of stockholders equity was $5.8 million at September 30, 2002.





The company is seeking authorization from shareholders at the January, 2003 annual meeting of shareholders for two new Class B stock
option plans and a new Class B restricted stock plan. If approved, the new plans will be authorized to grant up to 6.15 million non-qualified stock options to employees and non-employee directors to purchase the companys Class B shares and up
to 600,000 restricted shares of Class B common stock to employees. If these new plans are approved, the company will no longer be authorized to grant stock options or restricted shares of Class A common stock under the current stock option and
restricted stock plans.





(6) Income Taxes





The provision for income taxes consists of the following:





2002


2001


2000(In thousands)Current:Federal

$
67,802


45,989


35,739Foreign


9,193


7,624


12,000State


3,143


2,509


3,28580,138


56,122


51,024Deferred:Federal


(9,364
)

808


(874
)Foreign


3,008


134


1,327State


345


(204
)

(380
)(6,011
)

738


73$
74,127


56,860


51,097




11




---




Notes to the Consolidated Financial Statements (continued)


Alberto-Culver Company and Subsidiaries





The difference between the United States
statutory federal income tax rate and the effective income tax rate is summarized below:





2002


2001


2000U.S. statutory tax rate

35.0
%

35.0
%

35.0
%Effect of foreign income tax rates

(1.0
)

(.5
)

(2.6
)State income taxes, net of federal tax benefit

1.1


.9


1.2Tax exempt interest income

(.3
)

(.6
)

(.3
)Other, net

.2


(.8
)

(.2
)Effective tax rate

35.0
%

34.0
%

33.1
%





Significant components of the companys deferred tax assets and liabilities at
September 30, 2002 and 2001 are as follows:





2002

2001(In thousands)Deferred tax assets attributable to:Accrued expenses

$
20,653

15,052Long-term liabilities


7,555

1,757Other


2,057

1,288Total deferred tax assets


30,265

18,097Deferred tax liabilities attributable to:Depreciation and amortization


47,275

41,802Inventory adjustments


375

1,617State income taxes


674

329Total deferred tax liabilities


48,324

43,748Net deferred tax liabilities

$
18,059

25,651





Other current assets at September 30, 2002 and 2001 include $20.3 million and $13.4
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. Accordingly, there is no valuation
allowance recorded at September 30, 2002 and 2001.





Domestic earnings before provision for income taxes were $171.1 million, $140.7
million and $124.4 million in fiscal years 2002, 2001 and 2000, respectively. Foreign operations had earnings before provision for income taxes of $40.7 million, $26.5 million and $29.9 million (including the 2000 non-recurring gain) in fiscal years
2002, 2001 and 2000, respectively.





Undistributed earnings of the companys foreign operations amounting to $235.6 million at
September 30, 2002 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, 2002. Should such earnings be distributed, the company
estimates that the credits for foreign income taxes paid would substantially offset applicable U.S. income taxes.





(7) 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. The companys consumer products business includes two segments, Alberto-Culver North America and Alberto-Culver International, and includes
developing, manufacturing, distributing and marketing branded consumer products worldwide. The Alberto-Culver North America segment also includes the manufacturing of custom label products for other companies. The Specialty distribution -
Sally business segment consists of Sally Beauty Company, a distributor of professional beauty supplies through its Sally Beauty Supply stores and its Beauty Systems Group full-service operations.





The accounting policies of the segments are the same as those 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.




12




---




Notes to the Consolidated Financial Statements (continued)


Alberto-Culver Company and Subsidiaries





Segment data for the years ended
September 30, 2002, 2001 and 2000 is as follows:





Business Segments Information





(In thousands)

2002


2001


2000Net sales:Consumer products:Alberto-Culver North America

$
617,014


562,427


498,769Alberto-Culver International


398,983


392,795


386,851Total consumer products


1,015,997


955,222


885,620Specialty distribution - Sally


1,667,052


1,452,539


1,275,475Eliminations


(32,073
)

(28,644
)

(23,358
)$
2,650,976


2,379,117


2,137,737Earnings before provision for income taxes (1):Consumer products:Alberto-Culver North America

$
71,070


52,511


37,284Alberto-Culver International


16,710


15,945


15,874Total consumer products


87,780


68,456


53,158Specialty distribution - Sally


172,750


144,688


125,640Segment operating profit


260,530


213,144


178,798Non-recurring gain (note 9)








9,257Unallocated expenses, net (2)


(26,102
)

(24,078
)

(14,565
)Interest expense, net of interest income


(22,636
)

(21,830
)

(19,209
)$
211,792


167,236


154,281Identifiable assets:Consumer products:Alberto-Culver North America

$
330,188


324,495


316,656Alberto-Culver International


359,081


361,144


374,206Total consumer products


689,269


685,639


690,862Specialty distribution - Sally


835,026


655,825


589,955Corporate (3)


205,196


175,037


104,781$
1,729,491


1,516,501


1,385,598Depreciation and amortization expense (1):Consumer products:Alberto-Culver North America

$
13,197


14,849


14,587Alberto-Culver International


9,231


12,197


12,471Total consumer products


22,428


27,046


27,058Specialty distribution - Sally


21,972


22,132


20,527Corporate


2,814


2,227


2,053$
47,214


51,405


49,638Capital expenditures:Consumer products:Alberto-Culver North America

$
20,766


13,237


10,259Alberto-Culver International


11,553


5,785


10,337Total consumer products


32,319


19,022


20,596Specialty distribution - Sally


23,145


17,730


16,931$
55,464


36,752


37,527





|(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 years 2001 and 2000 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, short-term investments and equipment.
|--- |  | ---------------------------------------------------------------------------------------------------------



13




---




Notes to the Consolidated Financial Statements (continued)


Alberto-Culver Company and Subsidiaries





Geographic data for the years ended September 30, 2002, 2001 and 2000 is as follows:





Geographic Area Information





|
|

2002


2001


2000(In thousands)Net sales:United States

$
2,121,633


1,884,278


1,652,800Foreign


541,219


513,199


507,182Eliminations


(11,876
)

(18,360
)

(22,245
)$
2,650,976


2,379,117


2,137,737Segment operating profit (1):United States

$
216,931


178,177


147,021Foreign


43,599


34,967


31,777$
260,530


213,144


178,798Identifiable assets:United States

$
1,084,552


935,874


871,727Foreign


439,743


405,590


409,090Corporate (2)


205,196


175,037


104,781$
1,729,491


1,516,501


1,385,598





|(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 years 2001 and 2000 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, short-term investments and equipment.
|--- |  | ---------------------------------------------------------------------------------------------------------




(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, 2002, future minimum payments under
non-cancelable leases by fiscal year are as follows:





Operating Leases

Capital Leases(In thousands)2003

$
67,635

1152004


56,353

732005


41,750

582006


30,177

152007


16,212

2008 and later


34,030

Total minimum lease payments

$
246,157

261





Total rental expense for operating leases amounted to $92.3 million in 2002, $82.7 million
in 2001 and $74.9 million in 2000. Certain leases require the company to pay real estate taxes, insurance, maintenance and special assessments.





9) Non-Recurring Gain





In the first quarter of fiscal year 2000, the company sold a European trademark with
a nominal carrying value for $10.0 million. The transaction resulted in a non-recurring pre-tax gain of $9.3 million and an increase in net earnings of $6.0 million. The non-recurring gain added 11 cents to the companys basic and diluted net
earnings per share in fiscal year 2000.




14




---




Notes to the Consolidated Financial Statements (continued)


Alberto-Culver Company and Subsidiaries





(10) Quarterly Financial Data





Unaudited quarterly consolidated statement of earnings information for the
fiscal years ended September 30, 2002 and 2001 is summarized below (in thousands, except per share amounts):





1st Quarter

2nd Quarter

3rd Quarter

4th Quarter2002:Net sales

$
614,260

657,762

681,074

697,880Gross profit

$
300,672

317,838

332,396

343,540Net earnings

$
29,294

32,650

36,401

39,320Net earnings per share:Basic

$
.52

.57

.63

.68Diluted

$
.50

.55

.61

.662001:Net sales

$
563,867

592,942

605,047

617,261Gross profit

$
269,610

289,981

293,497

297,520Net earnings

$
23,626

25,892

29,071

31,787Net earnings per share:Basic

$
.42

.46

.52

.56Diluted

$
.41

.45

.50

.55





(11) Acquisitions





The company made acquisitions during fiscal years 2002, 2001 and 2000 which individually were insignificant to the consolidated financial statements. The total amount paid for the
acquisitions in fiscal years 2002, 2001 and 2000 were $120.1 million, $18.8 million and $146.8 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 $92.0 million, $11.6 million and $101.9 million was recorded in fiscal years 2002, 2001 and 2000, respectively, as a result of
the acquisitions. The company acquired $3.9 million and $16.5 million of trade names with indefinite lives in fiscal years 2002 and 2000, respectively. No trade names were acquired in fiscal year 2001.




15




---




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, 2002 and 2001 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, 2002. 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, 2002 and 2001 and the results of
their operations and their cash flows for each of the years in the three-year period ended September 30, 2002, 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 22, 2002




16




---




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


Alberto-Culver Company and Subsidiaries





Results of Operations





Fiscal year 2002 marked the companys eleventh consecutive year of record
sales and record operating earnings. Net sales for the year ended September 30, 2002 were $2.65 billion, an increase of 11.4% over prior year sales of $2.38 billion. Net sales in 2000 were $2.14 billion.





Record net earnings of $137.7 million in 2002 increased 24.7% from the prior years net earnings of $110.4 million. Basic net earnings per share of $2.40 in
fiscal year 2002 were 44 cents or 22.4% higher than 2001. Diluted net earnings per share increased 21.5% to $2.32 in fiscal year 2002 from $1.91 in fiscal year 2001.





As discussed later under New Accounting Standards, the company discontinued the amortization of goodwill and trade names at the beginning of fiscal year 2002. Had last years results
been restated to eliminate goodwill and trade name amortization, net earnings for the year ended September 30, 2002 would have increased $18.5 million or 15.6% compared to the prior year. Basic net earnings per share would have increased 28 cents or
13.2% versus the prior year while diluted net earnings per share would have increased 26 cents or 12.6%.





As described in note
9 to the consolidated financial statements, the company sold a European trademark for $10.0 million in fiscal year 2000. As a result, the company recognized a non-recurring pre-tax gain of $9.3 million and an increase in net earnings of $6.0
million. Accordingly, basic and diluted net earnings per share increased 11 cents as a result of the gain. Excluding the fiscal year 2000 non-recurring gain, fiscal year 2001 net earnings increased 13.6% and basic and diluted net earnings per share
were 12.6% and 11.0% higher than 2000, respectively. Fiscal year 2001 net earnings increased $7.2 million or 7.0% compared to fiscal year 2000 net earnings including the non-recurring gain.





Sales of Alberto-Culver North America consumer products in fiscal year 2002 increased 9.7% to $617.0 million from $562.4 million in 2001. The current year sales increase was primarily due to
higher sales of TRESemmé shampoos, conditioners and styling products, including TRESemmé Hydrology, 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. In fiscal year 2001, sales increased 12.8% compared to 2000 sales of $498.8 million primarily due to the Pro-Line business
acquired in March, 2000, the introduction of TRESemmé Hydrology and higher sales for St. Ives Swiss Formula facial products and body washes, the Motions line of hair care products and the Alberto VO5 line of shampoos and conditioners.





Alberto-Culver International consumer products sales increased 1.6% to $399.0 million in 2002 compared to $392.8 million in 2001. The
fiscal year 2002 results were negatively impacted by the effect of foreign exchange rates. Had foreign exchange rates in fiscal year 2002 been the same as 2001, Alberto-Culver International sales would have increased 3.1%, primarily due to sales
increases for the companys European and Latin American businesses. In fiscal year 2001, International sales increased 1.5% to $392.8 million from $386.9 million in fiscal year 2000.





Sales of the Specialty distribution - Sally business segment increased to $1.67 billion in fiscal year 2002, compared to $1.45 billion and $1.28 billion in 2001 and 2000,
respectively. The sales increases of 14.8% in 2002 and 13.9% in 2001 were attributable to the expansion of Sallys full-service operations, including acquisitions, higher sales for established Sally Beauty Company outlets and the addition of
stores during the year. The number of Sally stores increased 25.7% during the last three fiscal years to a total of 2,712, including 130 franchise stores, at September 30, 2002 compared to 2,428 and 2,325 at the end of fiscal years 2001 and 2000,
respectively.





Cost of products sold as a percentage of sales was 51.2% in fiscal year 2002 compared to 51.6% in 2001 and 52.4% in 2000.
The lower cost of products sold percentages in fiscal years 2002 and 2001 were primarily due to increased sales of higher margin products and lower costs.





Advertising, marketing, selling and administrative expenses increased 10.2% in fiscal year 2002 and 12.7% in 2001. The increases in fiscal years 2002 and 2001 primarily resulted from the higher selling and administration
costs associated with the growth of the Sally Beauty Company business, including acquisitions, and higher expenditures for advertising and marketing.




17




---




Managements Discussion and Analysis of Results of Operations and Financial Condition
(continued)


Alberto-Culver Company and Subsidiaries





Advertising and marketing expenditures were $189.1 million, $179.0 million and $162.7 million in fiscal years 2002, 2001 and 2000, respectively. The higher expenses in fiscal year 2002 were mainly attributable to increased
advertising expenditures for North America primarily related to TRESemmé, St. Ives Swiss Formula and Pro-Lines ethnic hair care products.





Interest expense, net of interest income, was $22.6 million, $21.8 million and $19.2 million in fiscal years 2002, 2001 and 2000, respectively. Interest expense was $26.0 million in fiscal year 2002 versus $27.3 million in 2001 and
$23.7 million in 2000. The decrease in interest expense in 2002 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 in fiscal year 2002 was $3.4 million compared to $5.5 million in 2001 and $4.5 million in 2000. The decrease in 2002 was principally due to lower interest rates on investments.





The provision for income taxes as a percentage of earnings before income taxes was 35.0% in 2002, 34.0% in 2001 and 33.1% in 2000. The higher tax rate in 2002 compared to the two previous
fiscal years was primarily due to the mix of foreign taxable earnings and the favorable settlements of certain tax years in 2001 and 2000. Other factors which influenced the effective tax rates for those years are described in note 6 to
the consolidated financial statements.





Financial Condition





Working capital at September 30, 2002 was $523.8 million, an increase of $37.1 million from the prior years working capital of $486.7 million. The resulting current ratio was 2.14 to 1.00 at
September 30, 2002 compared to 2.25 to 1.00 last year. The increase in working capital in fiscal year 2002 was primarily due to net working capital generated from the growth of the company, including acquisitions, substantially offset by cash
outlays for the purchases of full-service beauty supply distributors, capital expenditures, cash dividends and purchases of treasury stock.





Cash and cash equivalents increased $15.5 million during fiscal year 2002 primarily due to cash flow from operating activities and cash received from the exercise of stock options, partially offset by $110.1 million of cash paid for
acquisitions of full-service beauty supply distributors by Sally Beauty Company, $55.5 million of capital expenditures, the repurchase of $40.0 million of accounts receivable previously sold under the companys conduit facility and $35.7
million of treasury stock purchases, primarily related to shares surrendered by employees in connection with stock option exercises.





Accounts receivable increased 23.2% to $209.0 million from $169.7 million last year. The increase was due to the repurchase of $40.0 million of accounts receivable previously sold under the companys conduit facility. See
note 3 to the consolidated financial statements.





Inventories were $522.2 million at September 30, 2002, up 9.2% compared to
$478.3 million last year. The increase primarily resulted from the acquisitions of full-service beauty supply distributors and the growth of Sally Beauty Company.





Other current assets increased $9.4 million to $35.5 million at September 30, 2002 primarily due to an increase in net deferred tax assets principally resulting from an increase in accrued expenses.





Net property, plant and equipment increased $12.0 million to $247.9 million at September 30, 2002. The increase resulted primarily from
expenditures for additional Sally stores, acquisitions, office facilities, machinery and equipment and information systems, partially offset by depreciation during fiscal year 2002.





Net goodwill increased $79.1 million during fiscal year 2002 mainly due to goodwill resulting from acquisitions during the year, partially offset by the effects of foreign exchange rates.





Other assets increased $14.5 million to $74.3 million at September 30, 2002. The increase was primarily due to acquisitions of full-service beauty
supply distributors.





Accounts payable of $233.9 million at September 30, 2002 increased $42.5 million compared to 2001 primarily due to
increased inventory levels applicable to overall sales growth, including acquisitions, and the timing of vendor payments.





Accrued
expenses increased 25.8% to $208.3 million from $165.5 million last year. The increase was primarily attributable to the continued growth of Sally Beauty Company, including acquisitions, and higher accruals for compensation and benefits, insurance,
advertising and promotion expenditures.





Income taxes payable and deferred income taxes decreased $16.7 million to $52.8 million at
September 30, 2002 mainly due to the timing of tax payments and tax benefits realized from the exercise of employee stock options in fiscal year 2002.





Other liabilities were $48.1 million at September 30, 2002, an increase of $18.1 million compared to last year. The increase was primarily due to higher accruals for insurance, incentive and retirement plans and a deferred gain
resulting from the termination of an interest rate swap.




18




---




Managements Discussion and Analysis of Results of Operations and Financial Condition
(continued)


Alberto-Culver Company and Subsidiaries





Accumulated other comprehensive income  foreign currency translation increased $16.3 million to $77.6 million from $61.3 million last year. The increase was primarily attributable to the effect of the devaluation of the
Argentine peso, partially offset by the weakening of the U.S. dollar versus certain foreign currencies, primarily the British pound and Swedish krona.





Total stockholders equity increased $126.5 million to $862.5 million as of September 30, 2002. The increase was primarily due to net earnings for the fiscal year and proceeds from the exercise of employee stock options,
partially offset by dividend payments.





Liquidity and Capital Resources





The companys primary sources of cash over the past three years have been from funds provided by operating activities and the issuance of $200 million of 8.25% senior notes in April,
2000. Operating activities provided cash of $231.7 million, $165.2 million and $119.1 million in fiscal years 2002, 2001 and 2000, 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, 1997, the company obtained a five-year, $200 million revolving
credit facility, which was increased to $250 million in fiscal year 2000 and subsequently replaced with a three-year, $300 million revolving credit facility in fiscal year 2002. The current $300 million facility, which had no borrowings outstanding
at September 30, 2002, may be drawn in U.S. dollars or certain foreign currencies. Under debt covenants, the company has the ability to incur up to $969 million of additional borrowings.





The primary uses of cash during the three-year period ended September 30, 2002 were $273.8 million for acquisitions, $209.9 million for repayments of long-term debt, $129.7 million for
capital expenditures and $54.7 million for cash dividends.





Compared to 1999, cash dividends per share increased 38.2% over the
three-year period ended September 30, 2002. Cash dividends paid on Class A and Class B common stock were $.3525 per share in 2002, $.3225 per share in 2001 and $.29 per share in 2000.





The company anticipates that cash flows from operations and available credit will be sufficient to fund operating requirements in future years. During fiscal year 2003, the company expects that cash
will continue to be used for acquisitions, capital expenditures, new product development, market expansion and dividend payments. The company may also purchase shares of its common stock depending on market conditions. During fiscal years 1998 and
1999, the Board of Directors authorized the company to purchase up to 9.0 million shares of its Class A common stock. Prior to the fourth quarter of fiscal year 2002, the company had purchased 7.3 million Class A common shares under this program at
a total cost of $162.9 million with the last purchase occurring in October, 1999. In July, 2002, the Board of Directors re-authorized the company to purchase up to 1.7 million shares of Class A common stock remaining under this program. In the
fourth quarter of fiscal year 2002, the company purchased 164,200 Class A shares at a total cost of $7.4 million. A total of 1,535,800 Class A shares remain available for purchase under this program as of September 30, 2002. During fiscal year 2002,
the company also acquired $28.3 million 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.




19




---




Managements Discussion and Analysis of Results of Operations and Financial Condition
(continued)


Alberto-Culver Company and Subsidiaries





The
following table reflects a summary of contractual cash obligations and commitments outstanding by future payment date as of September 30, 2002:





Payments Due by Fiscal Year2003

2004

2005

2006

2007 and Later

Total(In thousands)Long-term debt, including current maturities (1)

$
1,189

96

63

200,021

120,001

321,370Operating leases (2)


67,635

56,353

41,750

30,177

50,242

246,157Other long-term obligations (3)


3,577

3,506

2,489

2,089

6,255

17,916Total

$
72,401

59,955

44,302

232,287

176,498

585,443





|(1) |  | The companys $120.0 million 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 other liabilities in the accompanying consolidated balance sheets.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




At September 30, 2002, the company had $15.7 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, 2002, 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, 2002, 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, 2002, the company had no variable rate long-term debt outstanding.




20




---




Managements Discussion and Analysis of Results of Operations and Financial Condition
(continued)


Alberto-Culver Company and Subsidiaries





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, 2002, 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 $2.6 million as of September 30, 2002.





The companys
quantitative information on market risk as of September 30, 2002 is as follows (in millions):





DebtExpected Maturities

Short-Term Fixed Rate

Long-Term Fixed Rate(1)

Total2003 (4.3% average rate)

$
3.7



3.72004 (8.5% average rate)




0.1

0.12005 (9.2% average rate)




0.1

0.12006 (8.3% average rate)




200.0

200.0Thereafter (6.4% average rate)




120.0

120.0Total

$
3.7

320.2

323.9Fair value

$
3.7

336.9

340.6





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




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. Concentrations of credit risk with respect
to trade receivables are limited due to the number of customers comprising the companys customer base. Although Wal-Mart is a significant customer of the companys consumer products segments, sales to Wal-Mart are less than 10% of the
companys consolidated net sales in fiscal year 2002. The company believes its allowance for doubtful accounts is sufficient to cover customer credit risks.





New Accounting Standards





In December, 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition. SAB No. 101 provides guidance in applying generally accepted accounting principles to revenue recognition. The company implemented SAB No. 101 in the first quarter of fiscal year
2001 and its adoption did not have a material effect on the consolidated financial statements.





In September, 2000, the Financial
Accounting Standards Boards (FASB) Emerging Issues Task Force (EITF) reached a consensus on Issue No. 00-10, Accounting for Shipping and Handling Fees and Costs. EITF No. 00-10 addresses the income statement classification of
shipping and handling fees and costs. The company implemented EITF No. 00-10 in the first quarter of fiscal year 2001 and its adoption did not have a material effect on the consolidated financial statements.





In September, 2000, the FASB issued Statement of Accounting Standards (SFAS) No. 140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities. SFAS No. 140 replaces SFAS No. 125 and revises the standards for accounting for securitizations and other transfers of financial assets and collateral. The company implemented SFAS No. 140 in the third quarter
of fiscal year 2001 and its adoption did not have a material effect on the consolidated financial statements.




21




---




Managements Discussion and Analysis of Results of Operations and Financial Condition
(continued)


Alberto-Culver Company and Subsidiaries





In
November, 2001, the FASBs EITF released Issue No. 01-09, Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendors Products. EITF No. 01-09 consolidates EITF No. 00-14, Accounting for
Certain Sales Incentives, which addresses the recognition, measurement and income statement classification for various types of sales incentives including coupons, rebates and free products, and EITF No. 00-25, Vendor Income Statement
Characterization of Consideration Paid to a Reseller of the Vendors Products, which addresses the income statement classification for various types of consideration paid by a vendor to a retailer. EITF No. 01-09 does not change the
accounting treatment set forth by EITF Nos. 00-14 and 00-25. As required, the company adopted the provisions of EITF No. 01-09 in the first quarter of fiscal year 2002. In accordance with EITF No. 01-09, the company reclassified certain amounts for
fiscal years 2001 and 2000 to conform to the current years presentation resulting in a $115.1 million reduction in net sales, an $11.1 million increase in cost of products sold and a $126.2 million decrease in promotion expense for fiscal year
2001 and a $109.4 million reduction in net sales, a $14.3 million increase in cost of products sold and a $123.7 million decrease in promotion expense for fiscal year 2000. Consolidated net earnings were not affected by these reclassifications.





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. Based on the results of the companys transitional impairment testing, no impairment
of indefinite-lived trade names existed at October 1, 2001. In addition, as required by SFAS No. 142, the company ceased the amortization of goodwill effective October 1, 2001. In accordance with the adoption provisions of SFAS No. 142, the company
has completed the required transitional goodwill impairment tests and has determined that goodwill was not impaired as of October 1, 2001, the date of adoption. Prospectively, goodwill and trade names will be reviewed for impairment at least
annually, with ongoing recoverability monitored 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 statements of earnings for fiscal years 2001 and 2000 have not been restated for the effects of ceasing goodwill and trade name amortization. Had
goodwill and trade name amortization been discontinued effective October 1, 1999, net earnings and net earnings per share for the fiscal years ended September 30, 2002, 2001 and 2000 would have been as follows:





2002

2001

2000*(In thousands, except per share data)Reported net earnings

$
137,665

110,376

103,184Elimination of goodwill and trade name amortization, net of income taxes




8,759

7,832Pro forma net earnings

$
137,665

119,135

111,016Reported basic net earnings per share

$
2.40

1.96

1.85Elimination of goodwill and trade name amortization, net of income taxes




.16

.14Pro forma basic net earnings per share

$
2.40

2.12

1.99Reported diluted net earnings per share

$
2.32

1.91

1.83Elimination of goodwill and trade name amortization, net of income taxes




.15

.14Pro forma diluted net earnings per share

$
2.32

2.06

1.97


|* |  | Fiscal year 2000 includes a non-recurring gain from the sale of a trademark. The non-recurring gain increased net earnings by $6.0 million and basic and
diluted net earnings per share by 11 cents.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




The change in the carrying amount of goodwill by operating segment
for the fiscal year ended September 30, 2002 is as follows:





Consumer Products


Specialty Distribution-Sally


TotalNorth America


International(In thousands)Balance at September 30, 2001

$
69,379


79,648


115,312


264,339Additions, net of purchase price adjustments


(214
)




92,240


92,026Foreign currency translation effect





(12,906
)

(28
)

(12,934
)Balance at September 30, 2002

$
69,165


66,742


207,524


343,431




22




---




Managements Discussion and Analysis of Results of Operations and Financial Condition
(continued)


Alberto-Culver Company and Subsidiaries





Indefinite-lived trade names by operating segment at September 30, 2002 and 2001 are as follows:





2002

2001(In thousands)Consumer products:Alberto-Culver North America

$
45,414

45,414Alberto-Culver International


30,145

33,857Total consumer products


75,559

79,271Specialty distribution - Sally


4,122

261$
79,681

79,532





In August, 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets, including the presentation of discontinued operations in the statement of earnings. The company is
required to adopt the provisions of SFAS No. 144 no later than the first quarter of fiscal year 2003 and does not expect its implementation to have a material effect on the consolidated financial statements.





In January, 2002, the FASBs EITF released Issue No. 00-23, Issues Related to the Accounting for Stock Compensation under APB Opinion No. 25,
Accounting for Stock Issued to Employees, and FASB Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation. 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. Most recently, in the spring of 2002, the board undertook a serious review of a possible declassification. Although no action or board
vote was undertaken in that regard, it was the sense of the board that a declassification would have significant merit, but that it may not have been advisable and in the best interests of the company and its shareholders at that time because of
EITF No. 00-23. Under Issue 41 of EITF No. 00-23, a declassification by the company may 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. The Board of Directors reserves the right to revisit this matter from time-to-time and at any time could conclude that it would be advisable and in the best interests of company and it shareholders to pursue a
declassification with or without a resolution of this accounting issue.





In July, 2002, the FASB issued SFAS No 146, Accounting for
Costs Associated with Exit or Disposal Activities. SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. The
company is required to adopt the provisions of SFAS No. 146 prospectively for exit or disposal activities initiated after December 31, 2002 and does not expect its implementation to have a material effect on the 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




---




Managements Discussion and Analysis of Results of Operations and Financial Condition
(continued)


Alberto-Culver Company and Subsidiaries





Allowance for Doubtful Accounts  The allowance for doubtful accounts requires management to estimate future amounts of receivables to be collected. 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 of
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.




24




---




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 2002 and 2001 are as follows:





Market Price Range

Cash Dividends Per Share2002

2001High

Low

High

Low

2002

2001Class A (NYSE Symbol ACVA):First Quarter

$
39.80

32.26

36.50

24.00

$
.0825

.0750Second Quarter

$
49.33

37.15

36.00

30.63


.0900

.0825Third Quarter

$
51.95

44.52

37.40

30.90


.0900

.0825Fourth Quarter

$
48.05

39.60

39.50

31.70


.0900

.0825$
.3525

.3225Class B (NYSE Symbol ACV):First Quarter

$
45.90

38.13

43.50

28.44

$
.0825

.0750Second Quarter

$
55.82

42.80

42.75

36.88


.0900

.0825Third Quarter

$
57.91

47.70

44.45

37.15


.0900

.0825Fourth Quarter

$
50.95

41.55

46.26

37.35


.0900

.0825$
.3525

.3225





Stockholders of record, which excludes a large number of stockholders with shares held in
street name, totaled 877 for Class A shares and 865 for Class B shares as of November 15, 2002.























The following trademarks and
servicemarks owned by Alberto-Culver Company and its subsidiaries appear in this report: 4+4, Alberto, Alberto European, Alberto VO5, Armstrong-McCall, Beauty Systems Group, BLIW, Botanicals, BSG, Cederroth International, FDS, Grilling Blends,
Hydrology, Indola, Just For Me, Molly McButter, Motions, Mrs. Dash, Pro-Line, Sally, Sally Beauty, Sally Beauty Supply, Soft & Beautiful, St. Ives, St. Ives Swiss Formula, Salvekvick, Static Guard, TCB, TRESemmé, TRESpac and VO5.





The following are trademarks and servicemarks of other companies which appear in this report:


Farouk (Farouk Systems, Inc.), Graham Webb (Graham Webb International, Inc.), LOreal (LOreal S.A.), Matrix (LLoreal USA Creative, Inc.), Paul Mitchell (John Paul Mitchell Systems),
Redken (LOreal USA Creative, Inc.), Sebastian (Sebastian International, Inc.), Shiseido (Shiseido Company Limited), TIGI (Toni & Guy (USA) Limited), Wal-Mart (Wal-Mart Stores, Inc.) and WELLA (The Wella Corporation).




25




---

Selected Financial Data


Alberto-Culver Company and Subsidiaries





As of or for the fiscal year ended September 30,2002

2001

2000


1999

1998

1997


1996

1995

1994

1993


1992(In thousands, except per share data)Operating Results:Net sales (1)

$
2,650,976

2,379,117

2,137,737


1,882,719

1,743,955

1,694,728


1,523,939

1,297,589

1,150,514

1,093,330


1,038,096Cost of products sold  (1)


1,356,530

1,228,509

1,120,079


990,568

916,499

896,152


816,343

689,793

605,900

572,770


541,153Interest expense


26,013

27,309

23,747


14,849

12,170

11,826


15,905

9,946

8,630

9,661


11,665Earnings before provision for income taxes (2)


211,792

167,236

154,281
(3)

133,783

132,378

136,121
(4)

100,014

84,242

71,078

65,129


61,356Provision for income taxes


74,127

56,860

51,097
(3)

47,493

49,311

50,704
(4)

37,270

31,591

27,010

23,857


22,740Net earnings (2)


137,665

110,376

103,184
(3)

86,290

83,067

85,417
(4)

62,744

52,651

44,068

41,272


38,616Net earnings per share (2)(5):Basic


2.40

1.96

1.85
(3)

1.53

1.46

1.53
(4)

1.13

.95

.79

.72


.68Diluted


2.32

1.91

1.83
(3)

1.51

1.37

1.41
(4)

1.06

.94

.79

.72


.68Weighted average sharesoutstanding (5):Basic


57,380

56,176

55,790


56,378

56,845

55,967


55,571

55,430

56,063

57,361


56,726Diluted


59,214

57,838

56,410


57,162

62,420

63,377


62,776

57,053

56,083

57,434


56,726Shares outstanding atyear end (5):Class A


25,847

23,871

22,982


22,768

24,063

22,610


22,097

21,926

21,826

23,126


23,491Class B


32,332

32,957

32,957


32,957

33,148

33,533


33,533

33,533

33,534

33,604


33,604Financial Condition:Current ratio


2.14 to 1

2.25 to 1

2.17 to 1


1.92 to 1

1.89 to 1

1.86 to 1


1.79 to 1

2.28 to 1

1.86 to 1

2.05 to 1


1.88 to 1Working capital

$
523,770

486,646

399,748


309,153

277,940

269,007


226,123

301,706

185,747

205,050


193,080Cash, cash equivalents and short-term investments


217,485

202,839

114,951


57,816

73,305

87,600


71,557

146,985

50,362

73,947


80,158Property, plant and equipment, net


247,850

235,822

240,091


238,753

223,476

190,998


175,920

157,791

132,881

124,449


121,703Total assets


1,729,491

1,516,501

1,385,598


1,181,494

1,065,343

998,056


908,412

814,757

610,208

593,046


610,400Long-term debt


320,181

321,183

340,948


225,173

171,760

149,441


161,548

183,094

42,976

80,184


84,549Stockholders equity


862,459

736,009

632,260


565,780

531,150

495,001


424,242

370,574

326,970

298,857


286,222Cash dividends


20,351

18,215

16,182


14,394

13,220

10,909


9,724

8,590

7,708

7,893
(6)

6,665Cash dividends pershare (5)(6)


.3525

.3225

.290


.255

.230

.195


.175

.155

.1375

.1375
(6)

.1175


|(1) |  | As required, the company implemented the Financial Accounting Standards Boards (FASB) Emerging Issues Task Force (EITF) Issue No. 01-09,
Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendors Products, in fiscal year 2002. In accordance with EITF No. 01-09, net sales and cost of products sold for fiscal years 1992 through 2001 have
been reclassified to conform to the current years presentation. Net earnings was not affected by these reclassifications.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | As required, 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 amortization of goodwill and trade names.
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|(3) |  | Fiscal year 2000 includes a non-recurring gain from the sale of a trademark (note 9). The non-recurring gain increased earnings before provision for income
taxes by $9.3 million, net earnings by $6.0 million and basic and diluted net earnings per share by 11 cents.
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|(4) |  | 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 provision for income taxes by $15.6 million, net earnings by $9.8 million and basic and diluted net earnings per share by 18 cents and 16 cents, respectively.
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|(5) |  | 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.
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|(6) |  | 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 net sales for the fiscal year ended September 30, 1992.
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